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Breakfast Report - 12 February, 2018

The Week Ahead                                                                            

There are general concerns that as elections approach, governments of developing countries shift focus and funds from relevant economic projects to driving political agenda. The Minister of Finance, Mrs. Kemi Adeosun, at a lecture delivered to the National Defense College (NDC) Course however reassured citizens that the government will ensure funds are not diverted from capital projects to electioneering. According to the minister, the Federal Government’s 2018 capital budget of ₦2.4 trillion will be strictly for funding infrastructural projects across the country, particularly the completion of ongoing projects. Amidst a still fragile recovery path, we note that improvement in infrastructure and economic security remains vital to Nigeria’s economic growth, human security improvement and realization of national defense and security objectives. Whilst this is a positive statement, it remains important to keenly watch how the government follows through on its pledge to eliminate misappropriation of funds that could occur as the 2019 elections draw closer.                                                                      

The Nigerian equity market rounded off the week on a negative note, losing 46bps to mark the first all-red week in 2018 (-339bps w/w) – cutting ytd returns to 12.8%. With sell pressure persisting at session close, we expect that the negative sentiment will filter into week open trading.

Stock Watch: It was an all red week for FIDELITYBK as investors swooped in to take profit on the stock, pushing it 12% downwards. The stock trades at ₦3.26, above consensus target price of ₦2.52 and has returned 33% ytd.                                                                            

Whilst we expect FI trading to remain bearish at week open, we anticipate a pickup in buying activity from Tuesday, with liquidity expected to be buoyed by the incoming coupon on the 15.54% FGN FEB 2020 note. We expect strong participation at next week’s T-bills primary market auction, where the CBN would offer ₦170 billion across the mid-dated (182DTM) and long-dated (364DTM) T-bills. Also, we expect the anticipated OMO maturity of ₦74.7 billion scheduled for next Thursday to support demand towards week close.