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Breakfast Report - 23 December, 2019

In September, Nigeria closed off its land borders with its neighbours, Benin Republic, Niger and Cameroon. The FG has long decried the rate of smuggling that occurs across Nigeria’s porous borders, citing its negative impact on local production as the products smuggled in are usually cheaper than local counterparts. Notably, while rice importation has fallen 27% since the launch of the Anchor Borrowers’ Programme to stimulate production of priority crops, rice imports into Benin, Niger and Cameroon combined accelerated by 50% in the same period, even as population has expanded at a rate slower than 4%. The closure has had an immediate impact on food prices, amidst a shortage of food supply since the border closure. Speaking at the post-MPC briefing, the CBN governor expressed the committee’s expectation that food prices would subsequently stabilize as food supply increases to plug the shortage. However, we take a more conservative approach and expect food inflation to creep up even further until February, when the border is expected to have been re-opened.

Equity: Going into the holiday week, we expect market activity to reduce further. As such, we foresee a red open to the new week but do not rule out the possibility of bargain hunting on recently deflated counters.

 Stock Watch: NB led gainers last session after rising 996bps to settle at ₦57.95. The brewery company saw its first price movement in six sessions.

 Fixed Income: We expect OMO maturities worth c.₦900 billion to drive buy-side activity in the bond and OMO spaces, while we foresee demand being sustained in the T-bills market this week