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The Market Today - 05 March 2019

Morocco's OCP plans to build Ammonia plant in Nigeria                                            

According to media reports, Morocco’s OCP group, the largely state-owned fertilizer plant, plans to build a 1 million MTa Ammonia plant in Nigeria as part of a larger plan to expand operations in Africa. Reports have also indicated that the fertilizer giant already signed a protocol agreement with the Nigerian Sovereign Investment Authority in June to facilitate this expansion. Ammonia is a key component of Urea fertilizer in Nigeria and we note that this would add to Nigeria’s current Urea production capacity of 1.9 million MTa (Notore: 0.5 million MT, Indorama: 1.4 million MT). Notably, Indorama Eleme also plans to expand its capacity by another 1.4 million MTa. We note that these companies are looking to tap into the long-term potential for fertilizer consumption in Nigeria as consumption/ha remains abysmal compared to global average.                                    

Equity market opens positive as Banks surge 266bps                                               

The Nigerian Bourse rose 95ps at week open as three of four key sectors performed positively, led by the Banking sector. Amidst this, market activity moderated with value of trades printing below the 30-day average at ₦2.6 billion. Market breadth remained positive with 24 advances and 9 declines. With indications of bearish sentiment following the Presidential election easing off, we expect to see continued demand on select stocks in today’s session leading to another positive close.                                       

Stock Watch: WEMABANK gained 9% yesterday to close at a share price of ₦0.84. The stock has gained 14% in the past two sessions and has recorded a year-to-date return of 33%, outperforming the Banking sector (+6%).

Treasury bills market turn mixed as OMO auctions resume                                    

At the start of the week, the CBN conducted an OMO auction, selling ₦184 billion (Offer: ₦200 billion) across the 94DTM and 192DTM bills at stop rates of 11.90% and 13.48% respectively (effective yields: 12.28% and 14.51%). Notably, whilst the rate on the 94DTM bill was unchanged, the stop rate on the 192DTM bill moderated 2bps from previous levels. Meanwhile, the Interbank Call rate advanced 233bps to 14.00%.  We foresee continued sell-offs in the bond space as demand from foreign participants taper off and investors continue to take profit. Meanwhile, we expect the CBN to refrain from conducting another OMO auction today, leading to improved demand in the T-bills space as system liquidity improves.