The Market Today - 06 March 2018
External reserves continue to climb
Nigeria’s gross external reserves (30-day moving average) recently broke beyond the $42 billion mark, the highest point in five years. We note that the recovery in crude oil production and relatively stronger oil prices in recent quarters have boosted reserve accretion. In addition, extensive external borrowing by the Federal Government (c.$7.3 billion in the last 12 months) and autonomous inflows through the “Investors & Exporters” window would have supported gross reserve position. Based on recent current account data by the National Bureau of Statistics, gross external reserves would provide over 14 months of import cover. This healthy reserve position should deepen confidence in Nigeria’s exchange rate policy and ensure continued liquidity in the foreign exchange market.
ASI opens the week in good cheer
The Nigerian bourse started the week on a positive note, with the NSE ASI gaining 149bps, helped by an early session spike in DANGCEM. Last week’s positive close was followed by a strong start to this week with healthy interest on several blue chip stocks. Considering this, we anticipate another positive session today.
Stock Watch: SEPLAT has gained 16% in the last four sessions following the release of strong FY’17 earnings. The stock currently trades at ₦760.00, below Vetiva target price of ₦977.22, and has returned 21% ytd.
Trading in F.I market remains flat at week open
The CBN conducted an OMO auction yesterday, offering ₦200 billion but selling ₦90 billion across the 94DTM and 227DTM bills at stop rates of 12.60% and 14.40% (effective yields: 13.02% and 15.82%) respectively. Trading in the T-bills market was flat on average, with yields across securities trending in opposite directions. Likewise, trading in the bond space was mixed with yields across benchmark bonds remaining unchanged on average. With the CBN maintaining its liquidity tightening stance at week open, we expect trading activity to remain tepid in the fixed income market in today’s session. We however believe eventual inflow from the FAAC credit (expected this week) will buoy buying momentum in the market.
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