The Market Today - 07 March 2019

CBN imposes forex restriction on textile imports                                      

Consolidating on the 42-items ineligible for foreign exchange from official channels, the Central Bank of Nigeria yesterday announced forex restrictions on the importation of textile and textile materials into the country. As such, textile importers would no longer be able to access foreign exchange from banks and all other forex dealers. While the CBN Governor, Mr.Godwin Emefiele in his statement stated that the apex bank will adopt strategies to restrain smuggling and simultaneously support domestic textile producers, we expect near-term production constraints to force current textile traders and businesses to source forex from the parallel market which could possibly lead to a higher exchange rate in that market. Depending on the quantum of this demand, we foresee inflationary pressure on this particular sector as well as efficiency losses from a policy that would possibly not put a dent in Nigeria’s import bill, noting that textiles currently make up c.1.3% of Nigeria’s total imports  as at 9M’18.                       

Market sheds 14bps after losses in three key sectors                                          

Posting a negative performance yesterday, the Nigerian Bourse moderated 14bps after recording red closes in three of the four key sectors. Amidst this, market turnover declined on the day with value of trades at ₦2.8 billion. Market breadth widened with 8 advances and 19 declines. Notably, yesterday’s advances consisted majorly of banking stocks. We expect the positive performance of the banking sector to persist today as investors maintain interest. However, we still foresee another mixed session overall     

Stock Watch: SEPLAT released its FY’18 results yesterday showing a topline and bottom line of ₦228.4 billion and ₦44.9 billion respectively (FY’17: ₦138.3 billion and ₦81.1 billion). The stock lost 3.57% yesterday to close at ₦596.90.                                                                     

Bond market turns quiet as sell-offs lessen                                              

Yesterday, the CBN refrained from conducting an OMO auction. Meanwhile, the Interbank Call rate declined 50bps to 8.83%. Despite the improved liquidity levels, the T-bills market was mixed, with bearish sentiments still lingering across the curve. Meanwhile, sell pressure in the bond market diminished, with benchmark yields advancing 5bps on average. With ₦129 billion expected to hit the system today, we expect the CBN to conduct another OMO auction, driving a tepid T-bills market. Meanwhile, we foresee mild sell-offs in the bond space in accordance with recent trends.