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Breakfast Report - 18 December, 2017

The Week Ahead                                                                            

The Central Bank of Nigeria (CBN) released its Q1’18 T-bills issue calendar, showing that it plans to sell ₦1.080 trillion to refinance maturities worth ₦1.067 trillion during the period. We recall that the apex bank cancelled the final two primary market auctions of the year, choosing stead to settle ₦198 billion of maturing T-bills with Eurobond proceeds and sparking further yield moderation in the fixed income market. We believe that the apex bank’s return to rolling over maturing T-bills in Q1’18 is indicative of their continued focus on price and foreign exchange stability, even as they look to loosen monetary policy in the near future. We expect the apex bank to adopt a conservative stance towards system liquidity in the coming months. At the same time, we foresee further T-bill settlements, pending another Eurobond issue by the Federal Government.                                                                   

Nigeria’s inflation for November came in flat at 15.9% y/y, unchanged from October but above Vetiva estimate of 15.8% y/y.                                                                          

Lifted by heavyweight DANGCEM (+435bps), the Nigerian equity market eked out a 132bps gain on Friday, despite bearish sentiment across the rest of the market. However, earlier losses ensured that the ASI closed 209bps lower w/w. Notwithstanding the green close on Friday, market sentiment remains tepid – indicated by negative market breadth as well as notable losses across several stocks. Consequently, we foresee further bearish trading today.

Stock Watch: ACCESS has lost 10% over the last six sessions. The stock currently trades at ₦10.40, above Vetiva’s target price of ₦9.46, and has returned 77% ytd.                                                                           

Given market expectation of a continued halt in daily mop ups by the CBN as well as anticipation of lower rates in the longer term, we expect a positive start to the week in the fixed income space, further supported by healthy system liquidity.