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Breakfast Report - 20 November, 2017

The Week Ahead                                                                            

The Nigerian National Petroleum Corporation (NNPC) disclosed that in partnership with Chevron Nigeria Limited (CNL), it has successfully executed the second and final phase of an Alternative Financing Agreement expected to increase Nigeria’s oil and gas production capacity by 39,000 barrels per day and 283 mmscfd respectively. The project, expected to cost $1.7 billion, is another step taken in a bid to achieve the Federal Government’s strategic domestic gas-to-power aspirations and boost the country’s crude oil production.                                                                             

Nigeria’s Q3’17 GDP registered at 1.4% y/y, below Vetiva and Consensus estimates of 2.5% and 1.5% respectively. Nevertheless, this is still above Q2’17 revised GDP growth of 0.7% y/y and Q3’16 GDP growth of -2.3% y/y.                                                                         

After a positive start to the week, the Nigerian bourse turned at midweek following the announcement of the downgrade of notable stocks from the MSCI Frontier Market Index to the MSCI Small Cap Index, the deletion of FO from the Index and the downgrade of credit ratings of some Nigerian banks. Despite some buying on Friday, the NSE ASI eventually returned -112bps w/w.

We note the mostly-sideways trading pattern on the exchange last week, indicated by mixed closes across sectors and erratic market breadth. With Q3’17 GDP out on Monday and the final Monetary Policy Committee meeting of the year concluding on Tuesday, we expect key macroeconomic development to drive market activity at the start of this week.                                                                  

Stock Watch: AGLEVENT has been on an uptrend, rising 27% last week (highest w/w gains) and 30% over the last six sessions. Notably, the company released its 9M’17 last month, reporting a ₦1.1 billion LAT, worse than the ₦0.6 billion LAT in 9M’16. The conglomerate, which advanced 488bps on Friday, currently trades at ₦0.70 and has returned -27% ytd.                                                                       

In the fixed income market, we expect to see sustained demand across the bond market at week open and expect the anticipated ₦201 billion OMO auction (due on Thursday) to support demand in the T-bills space.