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Breakfast Report - 10 July, 2017

The Week Ahead                                                    

The Central Bank of Nigeria Governor, Godwin Emefiele has maintained once again that the apex bank would continue to implement “home-grown” strategies that would help bring Nigeria out of recession. Speaking on the strategies, he stated that over $2.5 billion transactions have been recorded in the I&E FX Window since inception and the CBN would continue to intensify its intervention in the wider foreign exchange market. Also touching on agriculture, he said that over ₦2 trillion has been invested in the sector as the Bank continues to develop finance initiatives which would help in diversifying the economy and ensuring self-sufficiency in food production. In line with this, he maintained his view that the 41 items banned from accessing the CBN FX window would continue to save the country foreign exchange, preserve reserves and also encourage local sourcing.                                              

The Nigerian bourse rebounded from the downtrend recorded earlier last week with the NSE ASI up 32bps last Friday. However, the ASI shed 199bps for the week with key sectors closing the week mixed as the Banking, Oil & Gas and Consumer Goods sectors closed the market in the red while the Industrial Goods sector was up week on week.                                              

With market breadth turning positive on Friday albeit amidst relatively weaker volume and value traded, we expect the market to trade higher today.                                             

Stock Watch: Following its removal from the NSE 30 Index last week, CONOIL lost 19% last trading week. The stock currently trades at ₦36.31 and has returned -3.12% ytd.                                            

In the fixed income market, with the CBN expected to continue with its OMO interventions this week, we foresee more mixed trading in the T-bills space with a bearish bias as tight liquidity continues to weigh on the market. We however expect the OMO maturity of ₦90 billion at week close to improve buying sentiment in the space. Whilst we expect tepid trading to persist in the bond space, we believe trading on the auction bonds (5-year, 10-year and 20-year) would be guided by anticipation and eventual outcome of the monthly bond auction scheduled for Wednesday.