FREE

The Market Today - 11 May, 2017

AGIP to build oil refinery in Nigeria

Minister of State for Petroleum, Ibe Kachikwu recently disclosed that the Federal Government (FG) has reached an agreement with Nigerian Agip Oil Company to build a refinery with an estimated capacity of 150,000 barrels per day (bpd). The timeline for the construction of the refinery, which is to be situated in Rivers State, was however not revealed. We recall that while Nigeria’s four domestic refineries have a combined capacity of 445,000 bpd, the Dangote refinery (capacity c.650,000 bpd) is also expected to come onstream by 2019. Though domestic refining installed capacity is sufficient to cover local demand (300,000 to 400,000 bpd), age and neglect have hampered the refineries from producing at full capacity – 2016 capacity utilization was under 14%. As a result, Nigeria imports most of its refined petroleum products (Q1’17 Premium Motor Spirit imports: 4 billion litres), a situation that the FG has pledged to rectify. According to the Economic Recovery & Growth Plan, the FG plans to reduce petroleum product imports by 60% over the next two years, on the path of turning the country into a net exporter of refined petroleum products by 2020. Given the state of existing refineries, the construction of these private refineries may be vital to achieving these targets.

Bulls maintain grip on NSE, ASI up 295bps

Riding on the longest rally so far this year, the NSE ASI surged to its best daily performance for the year, up 295bps amidst broad-market advances. With this, ytd returns for the All-share Index swung into the green – up 2.5%. Noting the heightened positive market activity – indicated by the high market turnover and increased number of stocks on the bid cart – we expect the bull run on the exchange to persist in today’s session.

Stock Watch: Following ten consecutive sessions of gains, ZENITHBANK has returned 17.42% this year and currently trades at N17.32 - highest price in 10 months.

Bond yields rise amidst May auction

At the May Bond Auction held yesterday, the Debt Management Office (DMO) offered ₦140 billion and eventually sold N110 billion across the 5-year, 10-year and 20-year bonds at respective stop rates of 16.300%, 16.290% and 16.299%. In the secondary market, sell pressure emerged on select bond maturities as market participants anticipated the outcome of the auction. Meanwhile, trading in the bills market remained mixed with yields moving in opposite directions. We foresee renewed demand in the bond space, especially on auction bonds, as market participants adjust their positions to primary market levels. Amidst this, we expect more cautious trading in bills on account of today’s expected FX sale.