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The Market Today - 05 April 2018

March Oil output at 11-month low according to survey                                                 

According to a survey conducted by Reuters, OPEC oil output fell to an 11-month low in March 2018. OPEC reportedly pumped 32.19 million bpd in March, 90,000 bpd less than the previous month. This dip in oil output has been attributed to declining Angolan exports, Libyan outages and a slide in Venezuelan output – thus setting a record for compliance to the cartel’s elongated output cut deal (159% adherence in March vs 104 % 2017 average). Whilst oil prices advanced notably at the start of this year – Brent Crude topped $71/barrel for the first time since 2014 – OPEC has decided to maintain a cautious stance and believes supply restraints should be maintained in the short term to ensure a complete dissolution of the glut that had built up since 2014. While most OPEC countries have been recording declining oil output levels, Nigeria continued to shore up volumes from the prior low base, extending its run of stable supply, albeit still within the OPEC’s prescribed band. The country has reportedly stated that output in 2018 will not exceed 2017 levels.                                                                 

Banking sector weighs on Nigerian bourse                                                         

The Nigerian bourse shed 26bps in yesterday’s session, following an early market dip in the Banking sector, after which the market struggled to improve despite notable recovery in the Industrials sector. Whilst market sentiment remains markedly bearish, turnarounds across select blue chips and milder losses support our expectation for more mixed trading activities, albeit with bears maintaining the upper hand.

Stock Watch: FCMB released its FY’17 results reporting bottom line of ₦9 billion, 18% behind our estimate and 34% lower y/y. The Company declared a final dividend per share of ₦0.10 (Vetiva: ₦0.09). The stock currently trades at a price of ₦2.38 and has returned 61% ytd.                                                             

Buoyant liquidity spurs buying amidst T-bills PMA, MPC                                                             

The CBN conducted a primary market auction yesterday offering and selling ₦95 billion across the 91DTM, 182DTM and 364DTM bills at stop rates of 11.75%, 12.70% and 13.04% (effective yields: 12.10%, 13.56% and 14.99%) respectively, all lower than the previous PMA. The Monetary Policy Committee (MPC) held the first meeting of the year where it decided to leave all policy levers unchanged. Supported by buoyant system liquidity, buying was visible in the fixed income market even as some market participants priced in possible easing, yields in the T-bills market declined 27bps on average. The bond market was similarly positive, with buying spread across the curve – yields on benchmark bonds declined 4bps on average. Whilst we expect the ₦325 billion OMO maturity inflow to support demand, we foresee the possibility of the CBN issuing an OMO auction in today’s session. Also, noting that the MPC held interest rates constant (contrary to some expectations), we foresee sell pressure dominating trading activities in the market today.