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The Market Today - 04 September 2017

Nigeria seeks to restore fiscal year to January - December                                                         

The Minister of Budget and National Planning, Senator Udo Udoma at the meeting of the Joint Senate Committee on Appropriation and Finance on the implementation of the 2017 Appropriation Act said that the federal government plans to restructure its fiscal year to January to December. According to him, plans are underway to present the proposed 2018 budget to the Senate this month, thereby fast tracking the implementation process. According to the Minister MDAs have been told to rollover 50% to 60% of their projects to next year in a bid to achieve this aim. The Federal Government team also clarified that capital expenditure has not been withheld in any form, stating that by next week ₦440.9 billion would have been released for capital projects from the 2017 Appropriation Act. This is in addition to the ₦1.2 trillion released between January and June this year from the 2016 capital budget. According to the federal government team also, revenue for H1’2017 amounted to ₦2.3 trillion, indicating a 9% shortfall from the ₦2.5 trillion expected. Thus, the team urged the National Assembly to fast-track the processing and approval of requests for external borrowings, which would be used to fund the 2017 budget deficit.                                                              

Bears pull Nigerian Bourse downwards                                                                

The Nigerian Equity Market opened the trading week to losses yesterday with the NSE ASI declining 38bps. We expect investors will continue to cherry pick across stocks on the Nigerian bourse in today’s session and foresee mixed closes across the key sectors on the exchange.                                                              

Stock Watch: PZ released its Q1’17/18 results yesterday, with top line up 13% y/y. However, the company made a loss after tax of ₦123 million, compared to Vetiva’s N958 million PAT estimate. Having lost 681bps yesterday, the stock currently trades at ₦24.23 and has returned 67% Ytd.                                                    

Yields trend southwards in Fixed Income market                                                            

The CBN conducted an OMO auction yesterday, offering ₦20 billion and ₦50 billion across the 107DTM and 191DTM bills respectively. Whilst no bids were placed on the 107DTM bill, the apex bank sold c.₦96 billion on the 178DTM bill at a stop rate of 17.92% (effective yield: 19.636%). Sentiment in the T-bills market turned bullish at week open with yields moderating 18bps on average across the space. Demand was similarly healthy across the bond space with yields across benchmark bonds moderating 33bps on average. As CBN continues aggressively mopping up liquidity, we foresee a slight reduction in demand for fixed income securities. We however expect demand to remain healthy and yields to consequently moderate as investor appetite remains high.