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The Market Today - 12 July 2017

Oil prices and depreciated Naira pressure PMS landing cost                                               

According to a National Bureau of Statistics (NBS) report for the week ending 5th July 2017, the average landing cost of Premium Motor Spirit (PMS) was ₦126.20 per litre for NNPC imports and ₦128.79 per litre for other marketers. Accounting for subsequent margins (Transporters’ margins, Bridging Fund, etc.), the estimated pump prices were ₦145.57 per litre for NNPC products and ₦148.16 per litre for other marketers – compared to the regulated pump price of ₦145.00 per litre. We recall that earlier this year, NNPC revealed that it had begun importing most of the PMS consumed in the country as higher oil prices and a depreciated currency had pushed up the landing cost of the product. We further highlight that the NBS has reported marginal rises in actual PMS prices in the country – ₦150.69 per litre in May vs. ₦148.70 in January.                                    

Banking sector lifts ASI further – up 65bps                                         

Bulls prevailed in the Nigerian bourse yesterday with all key sectors closing in the green as the ASI ended the session 65bps higher. We expect another green close today given healthy market demand, evidenced by the number of stocks on full bid at the end of yesterday’s session. However, the consistently weak trading activity (volume and value traded) continues to give a cautious sign.                                

Stock Watch: After shedding 32% over nine consecutive sessions of losses, NEIMETH gained 938bps yesterday. The stock currently trades at ₦0.70, and has returned -10% ytd.            

Liquidity constraint dampens activity in secondary market                                     

Trading in the secondary market was muted yesterday given relatively tight liquidity. The T-bills market turned mixed albeit with modest buying at the short end of the space. Though the bond market was largely quiet, sell pressure was observed on 16.2884% FGN MAR 2027 (10-year bond) to be sold at today’s auction. With the DMO set to offer ₦135 billion across the 5-yr, 10-yr and 20-yr bonds at today’s auction, we expect trading activity to remain cautious in the bond market as investors await results of the auction. We recall that sales at Q2 auctions consistently lagged offers (especially on the 5-year and 10-year tenors) and believe this trend could persist in today’s auction.