Breakfast Report -16 October, 2017
The Week Ahead
Speaking at the joint-meeting between the International Monetary Fund (IMF) and the World Bank, the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele highlighted the improvement in the foreign exchange market in recent months and pointed to further appreciation in the naira in the near-term. The Governor argued that as foreign exchange reserves and economic fundamentals improve, he expects the naira to strengthen, even as market liquidity improves further. With OPEC reporting Nigeria’s September 2017 oil production at 1.86 mbpd (excl. condensates), a 20-month high, and oil prices waxing strong above $55/bbl in recent times, we similarly expect a strong close to the year in Nigeria’s foreign exchange market. Meanwhile, the apex bank governor assuaged concerns over the domestic banking sector, reiterating that the CBN would continue to monitor financial stability and work to ensure that banks work towards the prudential thresholds of key indicators.
Gains deepened modestly on the Nigerian bourse at last week’s close with the NSE ASI up 32bps. Despite the bearish performance on Tuesday and Wednesday last week, sustained bullish performance from Thursday and Friday stretched w/w gains to 145bps.
As the third quarter earnings season approaches, we expect increased activity on the Nigerian bourse in this week and foresee a mixed trading pattern through the week, albeit with a bullish bias.
Stock Watch: After staying flat for eight consecutive sessions, MANSARD has rallied in recent sessions – up 26% to ₦2.51. The stock currently trades close to its year high of ₦2.62, returning 50% ytd.
Whilst the buying bias in the fixed income market is expected to persist in this week, sustained tight system liquidity may cap the pace of yield moderation. However, we expect cautious trading going to mid-week amidst the ₦90.26 billion T-bills Primary Market Auction scheduled for Wednesday.
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