EUR 45.24 For Business Accounts Only

Breakfast Report - 30 January 2017

• Following the Monetary Policy Committee’s (MPC) decision to retain all monetary policy levers at their previous levels, the CBN reiterated its key objectives of maintaining price stability, providing cheap credit to priority sectors of the economy, promoting exports, and minimizing the impact of currency weakness on the wider population. We see the decision and comment as a business-as-usual stance. Critically, we highlight that the effect of monetary policy has been limited – particularly as it relates to tightening or easing. Moreover, whilst high lending rates may slightly stifle growth, the MPC has little room to ease given the knock-on effect that would have on inflationary pressure and currency weakness. Nevertheless, the MPC has offered string hints that the next direction of monetary policy will be less hawkish.
  
  
• Meanwhile, Fitch Ratings revised the outlook on Nigeria’s Long-term Foreign and Local Currency Issuer Default Ratings (IDRs) from ‘stable’ to ‘negative’. Also, the agency maintained its actual ratings for the IDRs, issue ratings on Nigeria’s senior unsecured foreign currency bonds, and Country Ceiling at ‘B+’ and the Short-term Foreign and Local Currency IDR at ‘B’. The agency cited liquidity constraints and lack of credibility in the FX market, low oil production owing to Niger Delta militant disruptions and limited economic recovery prospect as reasons for the outlook revision.
• The Nigerian equity market traded feeble last week as the NSE ASI hovered round the flat line throughout the week and finally settled 40bps higher week-on-week. Although the market posted gains for four consecutive sessions after a decline at week open, we highlight that this was on the back of late gains across bellwether stocks as broad market sentiment still remains mixed. Notably, the Oil & Gas sector recorded a week long positive run, recording an impressive 379bps w/w gain - buoyed by firm gains in OANDO and FO.
  
  
• Amidst a number of earnings release last week and notice of FY’16 earnings scheduled for this week (including FO), we anticipate increased market activity as investors take positions. Overall, we foresee mixed trading ahead, with increased volatility.