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Breakfast report - 23 September 2019

The Nigeria National Petroleum Corporation (NNPC) on Saturday announced that it would commence the restoration process of its three state-owned refineries in January 2020. The refineries in Port Harcourt, Warri and Kaduna have been operating under their 445,000bpd capacity, in large part due to mismanagement and neglect. In March, Italian firm Maire Tecnimont was awarded a $50 million contract to conduct a “complete integrity check” and inspect equipment at Port Harcourt, with oil giant ENI overseeing the work. However, the NNPC did not disclose which firms would conduct the upgrades on the other facilities. The NNPC expects all refineries to operate at full capacity by 2022, with GMD Mele Kyari, stating the third parties would maintain and operate the refineries once the upgrades and repairs have been completed. Meanwhile, the Corporation also announced that it had secured an alternative financing deal of $875.75 million for the development of OML 65, which is expected to yield an average output of 40 kb/d over its lifetime.

Equity: Trading in the equity market was mixed last week, thus leading to a negative w/w performance (-0.29%) dragged by losses in AIRTELARFI (-19% w/w). While we highlight that sentiment towards the equity market remains frail, we do not rule out the possibility of bargain hunting on fundamentally sound stocks trading at multi-week lows.

Stock Watch: On Friday CUTIX was the best performing stock in the session gaining 986bps to close at ₦1.56. Investors subsequently took positions in the counter, which opened the day near its lowest price in 52 weeks (₦1.42).

Fixed Income: At current liquidity levels, we expect the T-bills market to continue to trade mixed, with a bearish tilt at the start of the week. In the bond space, we foresee positive trading at the start of the week, as crude prices continue to trade at decent levels.