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The Market Today - 05 December 2017

NNPC assures of adequate petrol stock as queues build                                                              

The Nigerian National Petroleum Corporation (NNPC) has assuaged fears over an impending fuel scarcity as queues formed in major cities at the start of the week. In Lagos, reportedly just 8 of 35 functional depots stocked fuel, and the weak product supply resulted in many filling stations shutting down. We recall that a severe fire incident hit the Apapa jetty in September and may have affected the pipelines that transport fuel from import vessels to the depots. Other reports have suggested that the Independent Petroleum Marketers Association of Nigerian (IPMAN) directed filling stations to strike over a purported increase in the ex-depot price.  Nigeria has been reliant on NNPC imports for most of 2017 as private marketers shunned importation due to low margins – driven by high oil prices and regulated petrol retail price. The NNPC has stressed that it has enough reserves (c.1 billion litres) to last through to January. Whilst we are pleased with the response, we note that distributing the products may be a challenge during a period of heightened transport activity and consumers’ panic buying may worsen the situation. Nevertheless, given the group’s ability to maintain adequate supply through the year, we are cautiously optimistic that swift action would be taken to remove the specter of product scarcity.                                                             

Nigerian bourse opens the week mixed                                                              

After the strong demand seen at last week’s close, buying sentiment waned in the Nigerian equity market as mixed closes across key sectors saw the bourse close marginally (8bps) higher. Despite negative market breadth and choppy intraday trading, we expect another mildly positive close for the market today given resurgent demand at the close of the session.                                                 

Stock Watch: Pan Ocean Oil Corporation on Friday announced that the 160,000 bpd Amukpe-Escravos Pipeline Project is scheduled to come on stream before the end of 2017, earlier than previous guidance of H1'18. The project will be available to SEPLAT as an alternative crude evacuation route, thus, mitigating against risks of further attack to the 240,000 bpd Trans Forcados terminal.                                                    

Sentiment remains mixed in the T-bills market                                                               

With the CBN pausing its OMO auctions, Interbank Call rate declined to 21.50% (Previous: 25.83%) at week open. Meanwhile, the naira appreciated ₦0.33 and ₦1.00 at the I&E FX window and parallel market to settle at ₦360.32 and ₦361.50 respectively against the dollar. The T-bills market traded mixed as yields across maturities in the space trended in opposite directions. Meanwhile, trading sentiment dampened in the bond market with yields on most tenors closing the day unchanged. We expect trading to remain mixed today amidst still constrained system liquidty. However, we note that the expected FAAC inflow could spur mild buying sentiment in the space.