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Breakfast Report - 26 March, 2018

The Week Ahead                                                                            

According to the National Bureau of Statistics, Internally Generated Revenue from the 36 states of the Federation grew 12% y/y to ₦931 billion in 2017. Out of the 36 states, 31 recorded growth in IGR while 5 states (Akwa Ibom, Anambra, Bauchi, Osun and Taraba) recorded declines at the end of the fiscal year. Meanwhile, Lagos state was once again the highest earner, generating ₦334 billion, with Rivers (₦89 billion) coming in a distant second. We point out that FAAC allocation (₦1.7 trillion) once again outstripped IGR in many states, with only Lagos and Ogun state generating more money internally. Although IGR to GDP ratio across most states remain unimpressive, a y/y growth in IGR across most states indicates some level of progress.                                                                         

Equity: The Nigerian equity market rounded off last week on a negative note, losing 39bps today (-111bps w/w) to further trim ytd returns to 8.4%. Notwithstanding the reversal at the close of last week, we highlight that market sentiment remained much better than earlier sessions last week, even as market breadth remained positive (33 advances vs 24 declines). Consequently, we foresee a turnaround today even as renewed appetite for banking stocks remain strong                                                                   

Stock Watch: UBA released its FY’17 results with top and bottom line up 20% to ₦462 billion and 9% to ₦79 billion - coming in line with our expectations. The Group proposed a final dividend of ₦0.65 (2016: ₦0.55; Vetiva: ₦0.65). The stock currently trades at a price of ₦11.50 and has returned 12% ytd.                     

Fixed Income: With system liquidity put at c.₦77 billion at last week's close, we anticipate another OMO mop up by the CBN today. We expect this to cap buying momentum in the fixed income market.