The Market Today - 05 October 2018

Modular refineries making steady progress                                                       

According to the Minister of State for Petroleum, about 40 modular refineries have been licensed so far, with a combined capacity estimated to exceed 650,000 bpd. Over ten of these are said to be in advanced stages of construction, with an estimated completion date of 2019. To support investment in the space, the Bank of Industry also secured a $500 million loan from the Export Import Bank of China (CEXIM) to finance the purchase of equipment and machinery, which would expedite the process of building these refineries. Whilst Nigeria currently has four refineries, with an estimated installed capacity of 445,000 bpd, output from these refineries have been unreliable as the country remains largely reliant on import. According to the NBS, Nigeria imported c.17 billion liters of PMS in 2017. With the improving investment in the Modular refineries as well as the anticipated 650,000 bpd capacity from Dangote refinery, we expect the country to reach a level of self-sufficiency in the near term.                    

Tepid trading continues, bourse slips 9bps                                                         

"The NSE ASI closed marginally lower (-9bps) following a negative performance from the Consumer Goods sector (-71bps) that outweighed mild gains across the other key sectors.  Market breadth remained positive with 19 advances and 18 declines. Despite the slightly positive market breadth, market activity remained tepid with low turnover and little interest in large-cap names. We expect the market to remain marginally in the red at week close as market sentiment remains weak.                      

Stock Watch: DANGCEM slid 239bps to reach a new year-low of ₦200.10. The stock is trading 28% below our target price of ₦276.28 and has shed 13% of its value YTD.                                                        

Yields advance as CBN ends OMO break                                                              

"The CBN conducted its first OMO auction in two weeks yesterday, selling ₦553 billion (₦400 billion offered) across the 182DTM and 364DTM bills at respective stop rates of 12.50% and 13.50% – in line with previous OMO stop rates. Amid this, the interbank call rate advanced 742bps to 11.67%. Trading sentiment across the secondary market was bearish yesterday. Yields advanced 11bps on average across treasury bills, with the yield on the 28DTM bill notably advancing 81bps to settle 12.92%. The bond market was likewise bearish with yields on benchmark bonds advancing 6bps, although there was some notable interest on select maturities. As system liquidity is less buoyant and rates at yesterday’s OMO were unchanged (in line with market expectations), we foresee continued tepid activity in today’s session.