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The Market Today - 12 April 2018

March CPI registers fourteenth consecutive decline 
Exactly in line with our estimate, the National Bureau of Statistics reported inflation for March at 13.3% y/y, a sharp drop from the 14.3% y/y recorded in February. Food inflation was a major driver of the moderation, coming in at 16.1% y/y in March (February: 17.6% y/y). Also, with the Bureau earlier reporting sizeable drops in energy prices in the month under review, core inflation unsurprisingly moderated over the month (11.2% y/y from 11.7% y/y). Whilst we laud the drop in inflation rates, we highlight that it was mostly driven by the high base of 2017 as month-on-month inflation has remained sticky (0.84% from 0.79%). We however believe that relatively stable m/m inflation can be positive as it can aid economic and financial planning.

Large caps sustain market recovery 
Lifted by all key sectors, save for the Banking sector, the Nigerian equity market ended yesterday’s session 86bps higher, canceling out losses from prior sessions. Amidst bargain hunting interests and sustained upbeat sentiment across several large cap stocks, we foresee a mildly positive session today.

Stock Watch: After trading at a stationary price of ₦5.99 since October 2017, the technical suspension on OANDO shares has been lifted. We recall that in October, SEC placed a technical suspension on shares of OANDO while the company was being investigated by forensic auditors. Following the lifting of the suspension yesterday, interest in the stock surged, with intraday price notably hitting ₦6.30 before reversing to ₦6.00 by session close. The stock has returned 0.17% ytd.

Bond yields venture south as liquidity strengthens 
Amidst a continued pause in Open Market Operations (OMO), Interbank Call rate declined further, down 16bps to 2.67% yesterday. Interestingly, despite the buoyant system liquidity and overarching positive sentiment, yields on T-bills trended in opposite directions, closing the session 2bps higher on average. Meanwhile, buying intensified in the bond market, with yields on benchmark bonds moderating 7bps on average. Whilst we expect buying interest to be supported by today’s ₦476 billion OMO maturity, we foresee slower yield moderation as we expect the CBN to conduct an OMO auction to rein in liquidity.