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The Market Today - 09 August 2018

Dangote Refinery to generate 12,000mw from LNG                                                        

According to media reports, Dangote refinery is expected to have a 650,000 b/pd crude oil refining capacity (31% of Nigeria’s current average daily production) as well as sufficient gas supply to support as much as 12,000MW of power generation. Group Executive Director, Devakumar Edwin, in an interview also stated that the largest ever sub-sea pipeline, with a length of 1,100km, is being built by the refinery in addition to a 570MW power plant being constructed. Notably, the refinery is projected to save Nigeria an estimated $7.5 billion through import substitution. We highlight Nigeria’s current over-dependence on imported refined petroleum products due to the near defunct state of the country’s refineries. Though the Dangote Refinery, alongside a few other private refinery projects, are projected to come onstream in the near term, we look forward to more concrete progress updates on these projects and their expected timelines.                                                       

 Apathy sets in as bourse continues to slide                                                       

"The NSE ASI remained in negative territory at mid-week, down 9bps amidst sustained investor apathy across all sectors. Notably, value traded fell to its lowest in 15 months at ₦730 million (30-Day Avg: ₦3.3 billion). Market sentiment remains downbeat with significantly weak trading activity levels and muted movement across large caps, as such, we foresee another tepid trading session given no discernible signs of improvement.                                                  

Stock Watch: GUARANTY released its H1’18 results yesterday. The company showed a 6% y/y increase in revenues and a 15% increase in PAT y/y. The stock currently trades at ₦39.00 and has seen a ytd loss of 4.29%.                                                     

Bears prevail in the T-bills space                                                             

"In spite of healthy system liquidity (N234 billion) and and a continued halt in Open Market Operations, the Interbank Call rate advanced 17bps to 7.75%. Meanwhile, the healthy system liquidity supported demand in the T-bills market, with yields declining 10bps on average. Notably, yields on the 36DTM (-100bps to 10.71%) and 218DTM (-30bps to 12.90%) bills dipped yesterday. However, trading in the bond space stayed mixed, with sell pressure heavier on the longer-dated tenors, even as yields on benchmark bonds closed flat on average yet again. Of note were the 16.00% FGN JUN 2019 bond which moderated 12bps to settle at 12.61% and the 12.1493% FGN JUL 2034 bond which advanced 10bps to settle at 14.30%. Ahead of the ₦452 billion OMO inflow today, we expect the CBN to conduct an OMO auction. Thus, we expect yields to reverse direction in the T-bills space. Meanwhile, amidst fresh supply from off-shore investors, we expect sentiment in the Bond space to remain mixed, albeit with a bearish tilt today.