The Market Today - 21 September 2018

NCC, CBN set up committee on fintech regulations                                                        

The Central Bank of Nigeria (CBN) may soon change mobile money regulations, allowing mobile network operators (MNOs) to increase their presence in the provision of financial solutions. According to the Executive Vice Chairman of the NCC, Umar Danbatta, the commission has set up a joint committee with the apex bank to assess the potential of issuing mobile money licenses to telecommunications companies. We note that under the current regulatory structure, mobile money services in Nigeria are bank-led and MNOs interested in providing these services would have to partner with banks. This operating model has been cited as a major reason for the dismal penetration of mobile money in Nigeria, estimated at 1% and paling in comparison to higher levels in other African countries – particularly East Africa. We believe introducing new regulations that allow for MNO-led partnerships in mobile money services could be a positive step in deepening financial inclusion in Nigeria given the much wider reach that telcos possess.                                                              

Late bargain hunting boosts market                                                       

After another mixed trading session, the Nigerian equity market closed 33bps higher following a late bargain-hunting spree on large-caps across three of the four key sectors. Market breadth remained positive with 25 advances and 15 declines. Whilst intraday trading remains tepid, we note increased investor appetite for under-valued stocks in recent sessions – evidenced by more frequent bargain-hunting. Thus, we anticipate a mixed close to the week with a positive tilt.                                                        

Stock Watch: SEPLAT fell 110bps to settle at a year-low yesterday, it’s lowest price since December 2017. The stock has lost 4% of its value ytd, outperforming the Oil and Gas sector (-13%) and currently trades at ₦600.00.                                                            

High OMO stop rates point towards higher yields                                                           

Yesterday, the CBN conducted its first OMO auction since last Monday, mopping up ₦338 billion (₦550 billion offered). The apex bank sold the 182DTM and 364DTM bills at respectvie stop rates of 12.50% and 13.50%, higher than rates at the most recent PMA and OMO auctions – with no sale on the 91DTM. Despite this, the Interbank call rate declined 58bps to 4.17%, whilst system liquidity moderated to ₦677 billion. Trading across the Fixed Income market was positive yesterday with demand supported by healthy system liquidity. Buying was most prominent in the T-bills space with yields declining 26bps on average. Notably, yields declined across short, mid and long tenored bills – yields on the 21DTM, 105DTM and 315DTM moderating 34bpd, 61bps, and 47bps to settle at 9.27%, 13.16%, and 15.20% respectively. Meanwhile, although yields on benchmark bonds declined 4bps on average, acticity was mixed across tenors. Whilst yield on the 14.20% FGN MAR 2024 bond declined 10bps to close at 15.05%, yield on the 16.39 FGN JAN 2022 advanced 3bps to settle at 15.11%. Although market sentiment was been fairly positive as healthy system liquidity has boosted demand for short-term instruments in particular, we note the increase in stop rates at yesterday’s OMO auction and expect yields in the secondary market to adjust upwards to OMO levels.