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Breakfast Report - 20 February 2017

• • Nigeria’s total debt profile as at the end of the 2016 fiscal year stood at ₦17.36 trillion with the Federal Government accounting for ₦14.54 trillion (c.80%) of the total debt. This represents a 37% y/y increase in the FG debt profile – spurred by a 25% y/y increase in domestic borrowing in 2016. Also, pressured by the impact of the naira devaluation (c.50% in 2016), the country’s external debt profile rose 65% y/y in naira terms albeit a more modest rise in dollar terms. Given that the FG already raised ₦370 billion through Local bond auctions so far this year, coupled with the recent $1 billion Eurobond issue (which amounts to ₦305 billion at the current CBN rate) in a bid to fund the budget deficit, we expect even more pressure on the Government’s debt profile by the end of 2017.
• Fitch Ratings assigned a final rating of ‘B+’ to Nigeria’s $1 Eurobond issue, in line with the Long-Term Foreign-Currency Issuer Default Rating (IDR) of 'B+', which has a negative outlook. Also, the outlook on Zenith Bank Plc, Guaranty Trust Bank Plc, Diamond Bank Plc and FBN Holdings Plc was revised to Negative from Stable. The Rating agency also affirmed the Long Term Issuer Default Rating of 10 banks – all in the ‘B’ range reflecting the highly speculative fundamental credit quality, the banks’ weakened credit profiles as a result of a number of macro-economic headwinds.
• Bearish sentiment persisted on the Nigerian bourse as the NSE ASI lost 69bps w/w, stretching ytd return to -6.36%. The market traded lower in the first two sessions, particularly pressured by sell-offs across Consumer Goods sector heavyweights. After a brief rebound at mid-week, supported by advances across blue-chip stocks, the NSE ASI returned to the red on Thursday as the Consumer Goods sector resumed its downtrend. At week close, the market trended higher bolstered by bargain hunting in beaten down Consumer Goods stocks and gains in select Banking names.
• We expect mixed closes to persist across key sectors in the coming week as a mix of bargain hunting (particularly in Consumer Goods stocks) and reactions to earnings releases dictate overall market direction.
• Stock Watch: UCAP announced a 169% y/y PAT growth and declared dividend of ₦0.50/share (div. yield of 13%) for 2016. Following announcement, the stock notched 352bps on Friday and could extend its uptrend this week.