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The Market Today - 09 March 2018

IMF - Nigeria still vulnerable despite recovery                                                 

The IMF Executive Board, after concluding the 2018 Article IV consultation with Nigeria, highlighted the vulnerability of the Nigerian economy despite recently exiting recession. The introduction of the Investors’ & Exporters window, rising oil prices, attractive yields on government securities, and a tighter monetary policy all contributed to improving FX liquidity, stronger reserves and moderating inflation. However, the Fund noted that weak growth in the non-oil and non-agricultural sectors, double digit inflation, rising unemployment and high poverty rates remain huge concerns. The IMF believes stronger growth in the non-oil sector in the near-term is necessary to cement Nigeria’s exit from the recession. Whilst the Fund expects real GDP to rise 2.1% y/y in 2018, it forecasts a moderation in growth in 2019 to 1.9%. Other economic factors projected by the IMF include Oil & Gas GDP growth - 2018E: 10.8%; 2019F: 5.7%, Non-Oil GDP - 2018E: 1.3%; 2019F: 1.5%).                                                       

Bulls prevail in mixed trading session                                                   

Yesterday, the Nigerian equity market recovered from its midweek dip, with the NSE ASI up 33bps following mixed closes across key sectors. We foresee further mixed trading on the Nigerian bourse today, with the possibility of profit taking (across stocks that have surged in recent sessions) weighing on the NSE ASI.                                                        

Stock Watch: UNIC gained 600bps yesterday to close at ₦0.20. This comes after it shed 64% over following the implementation of the NSE’s new pricing methodology. Overall, the Insurance stock has declined 58% ytd, underperforming a 14% ytd positive return from the Insurance sector.                 

OMO auction erodes effect of ₦150 billion maturity                                                     

Amid a ₦150 billion T-bill maturity, the CBN conducted an OMO auction, offering ₦250 billion across the 91DTM and 250DTM bills. While no sale was made on the short-dated bill, the apex bank sold the amount offered on the 250DTM bill (₦150 billion) at a stop rate of 14.40% (effective yield: 15.76%). Sentiment in the T-bills space was mixed with a bearish tilt as yields moved in opposite directions across the curve. In the bond space, buying activity was concentrated at the short to mid end of the curve, with yields on the 12.098% FGN JAN 2020 and 11.277% FEB 2021 bonds declining 11bps and 9bps to settle at 13.74% and 13.70%. We foresee further mixed trading in the fixed income market as buying momentum remains dampened by expected CBN liquidity mop ups.