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The Market Today - 08 January 2019

NLC plans protest against minimum wage delay

According to media reports, the Nigerian Labour Congress (NLC) is gearing up for a nationwide protest over the FG’s inability to transmit the approved ₦30,000 new minimum wage policy to the National Assembly for approval. We recall that sometime in December, the FG-appointed National Minimum Wage Tripartite Committee approved a national minimum wage increase from ₦18,000 to ₦30,000, applicable across all Federal, State and Local government MDAs. Following this, there have been concerns raised over State governments’ abilities to meet this new obligation given the high rate of salary defaults seen at the current wage level. The increase would also affect FG expenditure at a time when government revenue is expected to be weak due to the lower price of crude. Should it persist below $60/bbl, the federal government would struggle to meet its current obligations, let alone a hefty wage increase. That said, our base expectation for the year is that the minimum wage will be increased to ₦30,000 sometime in 2019, although we do not foresee an implementation before the general election.

Key sector sell-offs persist on first Monday of 2019                                             

Weak sentiment and continued sell-offs saw the ASI decline 78bps on Monday, driven largely by sell-offs in the consumer Goods sector as investor sentiment stayed tepid. Market breadth remained negative with 14 advances and 33 declines. As the general elections draw closer, we expect investor sentiment to remain weak and anticipate low trading volumes. Therefore, we foresee another tepid session today with a negative tilt.                                   

Stock Watch: With no positive closes since the turn of the year, FCMB has lost 15% in the last 5 sessions to settle at ₦1.60. The stock gained 27% last year but is currently underperforming the Banking index (-390bps).                                        

CBN pauses OMO auctions, secondary market remains mixed                                         

Whilst the CBN halted its regular OMO auctions, the Interbank Call rate advanced 583bps to settle at 25.83%. In spite of the improved liquidity, trading stayed mixed in the T-bills market, with average yields declining a mere 2bps yesterday. Notably, whilst the yield on the 332DTM bill declined 44bps to settle at 17.25%, the yield on the 73DTM bill advanced 39bps to settle at 14.16%. The bond space was similarly mixed with a bullish tilt, with yields declining 3bps on average across benchmark bonds. Particularly, whilst yield on the 14.20% FGN MAR 2024 bond declined 9bps to close at 15.03%, the yield on the 12.1493% FGN JUL 2034 bond advanced 6bps to settle at 15.58%. We anticipate a resumption in OMO activities today and foresee another mixed trading session in the secondary FI market.