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The Market Today - 06 February 2018

Working group for ERGP to be inaugurated by FG                                                           

The FG is set to inaugurate a joint working group to aid implementation of the Economic Recovery and Growth Plan. We note that the initial unveiling of the strategy document was met with much acclaim, albeit, with foreign and domestic investors maintaining a skeptical stance due to FG’s prior poor implementation record. To address this, the working group, which would comprise senior officers from several ministries, would be tasked with removing inter-agency bottlenecks, fostering private sector collaboration and formulating policies to remove inhibitions to priority investments. We believe the creation of this committee would be a statement of FG’s intent to execute on their medium-term plans and expect the actions of the committee to boost investment and private sector confidence in the market.                                                       

Bearish sentiment re-emerges at week open                                                   

Sentiment on the Nigerian stock exchange turned bearish at week open (ASI down 85bps) amidst weightier losses across the Industrial Goods and Oil & Gas sectors. Noting the varied sentiment across key sectors on the exchange, we foresee a more mixed trading sentiment in today’s session, albeit with the ASI mildly in negative territory.

Stock Watch: Following the implementation of the new pricing methodology by the Nigerian stock exchange last week, AIICO has gained 54% over the last seven sessions. The stock currently trades at ₦0.88 and has returned 69% ytd.                                                                                                                               

Mixed trading in fixed income market to open the week                                                            

The CBN conducted an OMO auction yesterday, offering ₦110 billion and selling ₦116 billion across the 94DTM and 234DTM bills at respective stop rates of 12.60% and 14.40% (effective yields: 13.02% and 15.86%). Despite the liquidity mop up, trading in the T-bills space began the week on a positive note, with yields declining 5bps on average. Trading in the bond market was more tepid as yields on benchmark maturities inched up. We expect CBN liquidity tightening to constrain buying on T-bills today while trading remains tepid in the bond space, absent any significant news inflow.