FREE

Breakfast Report - 18 September, 2017

Nigeria’s inflation declined for the eighth consecutive month this year, dipping to 16.0% y/y in August (July: 16.1%), in line with both Vetiva and Consensus estimates. The modest decline came on the back of persistent base effects and a first sub-1.0% m/m inflation reading in August – 0.97% m/m to be precise, compared to 1.21% in July and YTD average of 1.43%. Despite the recent flooding in the Benue region which decimated substantial swathes of arable land and food storage facilities in the state, Annual Food Inflation dipped 33bps in August, holding at 20.3% y/y, following a decline in m/m Food Inflation from 1.52% to 1.14%. Also, notwithstanding the continuous rise in prices across clothing & footwear and household furnishing & maintenance, the Core sub-index declined though at a slower pace m/m, registering at 0.93% vs. 1.00% in July as Energy prices continued to fall. Following this, whilst we expect Core Inflation to moderate further, we do not see this outweighing the likely pressure on food prices in the coming months, at least until the respite of the peak harvest season. Thus, we increase our September inflation forecast to 16.1% y/y (previous: 16.0% y/y).

With all key sectors closing in the red, the Nigerian stock market shed 184bps at last week close to bring w/w loss to 265bps.

We note that market sentiment remained tepid all through last week, indicated by the consistently negative market breadth. We expect this sentiment to filter into this week and anticipate a negative week open.

Stock Watch: ZENITHBANK has shed 7% in a bearish streak over the past seven sessions. The stock trades at ₦22.10 below consensus target price of ₦27.60. The stock has returned 50% ytd.

Taking a cue from last Wednesday’s PMA yields, we expect continued moderation in yields across the fixed income market. Also, the CBN would be offering ₦141 billion across the 91DTM, 182DTM and 364DTM bills this Wednesday.