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The Market Today - 01 March 2019

Nigeria complied with OPEC cut in February                                             

The Minister of State for Petroleum Resources, Dr Ibe Kachikwu, stated that Nigeria complied with the production cut agreed in December. The minister also called on the OPEC to maintain efforts to keep the price of crude stable amid increasing pressure from the U.S. Implementation of the production cut has been uneven across OPEC and its allies, with Russia sluggish to reduce production. However, the minister expressed fears over the possibility of further cuts, citing the activation of the Egina oil field which is expected to produce crude at its full capacity of 0.2mb/d sometime in March. The OPEC is scheduled to meet again in April to discuss whether to sustain cuts into H2’19 with the expectation that the group could maintain cuts going forward. Meanwhile, benchmark Brent crude firmed at $67.04 on Thursday amid news that the U.S. Department of Energy (DOE) plans to sell up to 6 million barrels of crude from their Strategic Petroleum Reserve (SPR), with deliveries expected around the time when U.S. waivers for Iranian oil customers are due to expire. Despite this, Brent prices are expected to remain stable above $60/bbl for the rest of the year.                                               

Sell-off intensifies despite Industrial Goods uptick                                              

The ASI dipped a further 162bps yesterday as sell-offs intensified on the index, with three of four key sectors closing in the red. Market activity was also up, with market turnover reaching ₦5.3 billion. Market breadth remained negative with 10 advances and 34 declines. With sell pressure showing no signs of slowdown at market close, we foresee further sell-offs in the equity market today               

Stock Watch: After dropping 5% yesterday, ACCESS hit a multi-year low price of ₦5.70, its lowest price since December 2016. The stock has declined 10% this week alone to trade at a 37% discount to its Consensus target price of ₦9.08.                        

FI yields plunge amid ₦1 trillion OMO sale                                    

With ₦399 billion hitting the system via an OMO maturity, the CBN conducted an OMO auction, offering ₦400 billion and selling ₦1.08 trillion across the 91DTM, 182DTM and 364DTM bills at stop rates of 11.90%, 13.50% and 14.30% (Effective rates:  12.26%, 14.47% and 16.68%). Meanwhile, trading in the secondary T-bills market remained positive, with buy sentiment especially prevalent at the longer-end of the curve. Demand was similarly strong across the bond market, with benchmark yields declining 17bps on average.  With market liquidity dampened by the heavy OMO sale, we expect a less active day in the T-bills space. Meanwhile, we foresee further buy-side activity in the bond space as investors continue to target longer-dated securities.