Breakfast Report - 12 June, 2017
According to data from the Nigerian National Petroleum Corporation and the Ministry of Petroleum Reources, Nigeria’s daily oil production has averaged 1.83 million barrels per day in the first five months of the year. On a quarterly basis, oil production was 1.78 million barrels per day in Q1’17 (Q4’16: 1.76 mbpd; Q1’16: 2.05 mbpd), weighed down by seasonal field maintenance and ongoing shut-ins at Forcados and Bonga terminals at the time. Average oil production rose to 1.98 mbpd in May 2017 (Qtd: 1.92 mbpd) amidst the conclusion of Turn Around Maintenance and increased security of production infrastructure. We also highlight that the Force Majeure on Forcados exports has been lifted, opening the door for an additional c.250,000 millions barrels per day. We consider this a positive development for Nigeria’s fiscal position considering the 2017 Budget is based on an oil production target of 2.2 mbpd. The consequent improvement in dollar earnings as oil earnings grow should also support Central Bank of Nigeria efforts to maintain adequate liquidity in the foreign exchange market.
Recording another week of strong performances on the exchange, the ASI closed 607bps higher w/w. The ASI was mostly positive during the past week save for a downtick on Tuesday following significant pressure from market leader, DANGCEM. Buying sentiment and activity on the exchange were largely strong with value traded (₦29 billion) outweighing the prior week’s turnover (₦24 billion).
Whilst we expect the strong buying sentiment to filter into trading today, we emphasize caution on select stocks that have risen significantly in the past weeks.
Stock Watch: In contrast to the emergence of profit taking on larger Tier I names, STERLNBANK has held on to gains, advancing 47% over eight sessions to close the week at a 2017-high of ₦1.06. The bank has returned 39% ytd.
In the fixed income market, amidst pressured system liquidity, we expect trading in the bills space to remain cautious ahead of this week’s Primary Market Auction to be held on Wednesday.
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