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The Market Today - 05 February 2019

Minister for budget reiterates FG’s optimistic outlook for 2019                                      

Speaking at the Nigerian Economic Outlook for 2019, Nigeria’s Minister for Budget and National Planning, Senator Udoma Udo Udoma, expressed optimism about Nigeria’s economic recovery in 2019. Notably, the minister expects real GDP growth to expand to 3.0% in 2019, exceeding IMF forecast of 2.0%. Whilst the IMF cited weak commodity prices as the basis for its lower GDP expectations, Senator Udoma expects continued currency management, single digit inflation and improved oil production to drive more robust growth in the fiscal year. Although we anticipate quicker growth in the Nigerian economy in 2019, we believe that the FG’s growth target might be a little ambitious especially considering the sizeable internal and external headwinds expected in the year. Thus, we forecast a more conservative but fair 2.7% growth in Real GDP for 2019 to be driven by higher aggregate demand – spurred by government spending and a minimum wage hike – and a 12.6% average inflation forecast.                                            

Consumer Goods sector leads mild market recovery                                            

The NSE ASI advanced 35bps yesterday, led by a mild recovery in Consumer Goods stocks. Meanwhile, market sentiment was tepid, with total market turnover reported at ₦1.0 billion, below 30-Day average of ₦3.0 billion. With the market reacting to the previous week’s selloffs with some buying activity, we expect mild interest, driven by bargain hunters, to persist in today’s session amid still weak trading volumes.                                         

Stock Watch: With an 889bps decline in yesterday’s session, UNITYBNK has lost 23% ytd, to settle at ₦0.82. The stock is the second-worst performer on the exchange and has underperformed the Banking sector (-0.4% ytd).                            

OMO auction at week open drives T-bill yields upward                                         

At the start of the week, the CBN sold c.₦133 billion (₦150 billion offered) at an OMO auction, across the 108DTM, 192DTM and 360DTM bills at stop rates of 11.00%, 13.50% and 15.00% respectively (effective yields: 11.37%, 14.53% and 17.60%). Meanwhile, the Interbank Call rate advanced 576bps to settle at 16.83%. Whilst we expect dampened activities in the T-bills space as a result of successive liquidity mop-ups, we foresee another mixed trading session in the bond market with a negative tilt as buy interest wanes.