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The Market Today - 10 November 2017

Nigeria to raise ₦710 billion in oil asset restructuring                                              

As part of 2018 Budget funding, the Federal Government (FG) is targeting to raise a sum of ₦710 billion through restructuring of its equity stake in Joint Venture (JV) arrangements with oil majors. We recall that at the end of 2016, the Nigerian National Petroleum Commission (NNPC) had signed off agreements with its JV partners to enable it pay off its cash call arrears, exit the cash call funding system and slowly transit into an Incorporated Joint Venture (IJV). In line with this, the FG plans to reduce its equity stake in some of these JVs in 2018, shifting more of the funding burden to the private sector. We consider this a welcome development as the challenges with JV cash call funding has stalled upstream investment. Moreover, with non-oil revenues to account for as much as 63% of 2018 Budget revenues, efforts to raise funding through partial asset sales could be a fruitful method of meeting this target.

                                     

ASI loses 24bps in another mixed session

Maintaining the trend in recent sessions, the Nigeria Equity market persisted mixed yesterday albeit with a bearish bias – NSE ASI down 24bps. Despite the negative market close, market sentiment was mixed – evidenced by flat market breadth and mixed closes across key sectors. We anticipate another session of sideways trading at week close.

Stock Watch: CADBURY has risen 11% in the past four sessions to ₦11.20. The Consumer Goods company recently released 9M’17 result, reporting a Q3’17 PAT of ₦702 million, up from a LAT of ₦766 million as at H1’17. At ₦11.20, the stock currently trades above Consensus target price of ₦10.81 and has returned 32% ytd.

Mixed trading despite OMO maturity boost                                          

Following yesterday’s ₦234 billion OMO maturity inflow, the CBN conducted an OMO auction – offering ₦200 billion on the 105DTM and 196DTM bills. The apex bank however sold ₦83 billion on both bills at respective stop rates of 16.00% and 17.80% (effective yields: 16.77% and 19.68%). Trading in the T-bills market was mixed yesterday albeit with a slightly bearish tilt. Meanwhile, sell pressure softened in the bond market yesterday as yields trended in opposite directions. We expect yesterday’s net liquidity inflow from the OMO to support some buying in the T-bills market today, barring any significant CBN mop up. Meanwhile, we expect another mixed session in the bond space as investors cherry pick across the curve.