FREE

Breakfast Report - 22 May, 2017

At the end of last week, the Acting President Yemi Osinbajo signed three executive orders aimed at improving the efficiency of government operations. The respective orders are in regards to promoting transparency and efficiency in the business environment through Ministries, Departments and Agencies (MDAs); support for local content in Federal Government (FG) procurement; timely budget submissions from all relevant FG bodies. On promoting transparency and efficiency, the order stipulates that all MDAs publish a complete list of requirements and timelines for obtaining products or services within their scope including fees, permits, etc. For public procurement, MDAs are to express an explicit preference for Made in Nigeria goods and services in official procurement documents and earmark at least 40% of their procurement expenditure on local goods for a stipulated list of products that include uniforms and motor vehicles. Finally, MDAs are expected to submit a three-year budget to the Minister of Finance every May and an annual budget to the Minister of Budget and Planning every July. MDAs will receive no capital allocation until their annual budget is approved. Overall, we are optimistic about these directives issued by the Acting President as they should streamline MDA activities and improve the ease of doing business in Nigeria. We highlight that effective monitoring is key to ensure that MDAs adhere to the rules in order to reap the full rewards.

Although extending its consecutive sessions of modest gains to four, momentum slowed on the Nigerian bourse at week close (NSE ASI up 4bps) as persistent profit taking across Consumer Goods names depressed gains across other key sectors. The ASI was however down 28bps w/w largely due to the broad market profit-taking at week open. Whilst we note the emergence of profit taking on select stocks in the last week, overall sentiment in the market was bullish – largely positive market breadth.

Whilst the slowing appetite across most key sectors (amidst profit taking) spell a weak start to this week, we believe sentiment will strengthen during the week as the key drivers behind the market rally persist.

Stock Watch: Since losing 549bps at week open, FBNH has gone on a four-session gaining streak, rising 572bps in the process. The stock has gained 19.70% ytd, currently trading at ₦4.01.

Notwithstanding re-emerging demand on bills at week close, we expect cautious trading in the fixed income market at the start of this week as all eyes turn towards the MPC meeting on Monday and Tuesday