Breakfast Report - 30 May, 2017
According to the Nigerian Bureau of Statistics, banking sector credit dipped slightly (0.7%) q/q to ₦16.0 trillion in the first quarter of 2017. The Oil & Gas, Manufacturing, and Government sectors accounted for 22.3%, 13.4%, and 8.6% of the total credit portfolio respectively. Notably, although Agricultural sector accounts for just 3.5% of total loans, credit to the sector grew 6% q/q, second only to Power & Energy (9% q/q). Looking at the major economic sectors, Agricultural, Industry, and Services accounted for 3.5%, 38.7%, and 57.8% respectively. We highlight that as part of the Economic Recovery & Growth Plan, the Federal Government is pushing for commercial banks to diversify their credit further, expecially by increased lending to priority sectors such as Agriculture, Constructuon, and Creative Industries. This is partly in response to the relatively high exposure of Nigerian banks to specific sectors such as Oil & Gas and Power which has resulted in a deterioration in asset quality (industry non-performing loans rising from 4.9% in December 2015 to 14.0% in 2016) as a result of negative economic shocks in those particular sectors.
The Nigerian bourse rose 210bps on Friday to close the week 338bps up. The gain on Friday also saw the ASI cross the 29,000 points. The strong w/w performance was driven by a 4-session bull run on the exchange after profit-taking activities at week open.
With many bellwethers remaining on the bid cart at the close of the market on Friday, buying momentum remains strong on the exchange and we foresee another green close for the ASI today.
Stock Watch: GUARANTY is on a five-session gaining streak, rising 12% over the period. However, the banking giant advanced 500bps today and currently trades at a record high of ₦35.28. We therefore emphasize cautious trading as profit taking could arise. GUARANTY has returned 43% ytd.
Barring mop ups at week open, we expect the improved system liquidity to support demand in the fixed income market at the start of this week.
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