The Market Today - 24 January 2019

President forwards minimum wage bill to National Assembly                                                  

President Buhari yesterday forwarded the National Minimum Wage Bill to the National Assembly following its approval by the National Council of State. This comes after the council proposed a lower wage of ₦27,000 for the Nigerian worker, including state workers, while the Federal Government retained the minimum for federal workers at ₦30,000. Whilst the minimum wage increase was expected to be implemented this year, it remains to be seen whether both houses of the National Assembly would be able to approve the bill and transmit it back to the President before the general election on 16 February. We highlight that some states have expressed difficulty with their current wage bills, stressing that a more than 100% increase in minimum wage would significantly impact their already overburdened wage bills. With current wage expenditure accounting for almost 70% of government revenue, analysts anticipate that the Federal Government may be compelled to increase tax rates in order to increase revenue to match the higher minimum wage, a decision which is likely to be unpopular among the working class and the organized private sector.                                                                

Banking sector drives positive market performance                                                      

Despite negative closes in three of the four key sectors, the NSE closed 48bps higher, as gains in the Banking sector boosted the All-share index. Market breadth remained positive with 21 advances and 10 declines. With continued bargain hunting driving mildly positive investor sentiment, we anticipate another mixed trading session today with a positive bias.                                                     

Stock Watch: Following a 10% gain in yesterday’s session, FIDELITYBK has advanced 15% in the last four sessions. The stock currently trades at ₦2.29, 13% above its year-open price and is outperforming the Banking sector (-3% ytd).                                                               

Bulls emerge in T-bills space despite CBN mop-up                                                         

"Yesterday, the CBN held an OMO auction where it sold c.₦65 billion (₦150 billion offered) across the 92DTM, 176DTM and 330DTM bills at stop rates of 11.90%, 13.50% and 15.00% respectively (effective yields: 12.27%, 14.44% and 17.35%). The DMO also released the long-awaited January Bond Auction Circular indicating an offer of ₦150 billion across the 5-year, 7-year and 10-year maturities at next week’s auction. Amid this, the Interbank Call rate declined 250bps to settle at 15.00%. With ₦382 billion maturing today, we foresee another mop-up by the CBN to keep liquidity tight, and thus, expect tepid trading in the T-Bills space. Meanwhile, we expect continued investor interest in the bond market pending the bond auction next week.