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The Market Today - 13 March 2018

Inflation to moderate further despite fuel price pressure                                                           

The National Bureau of Statistics data release calendar indicates that Nigeria’s inflation figures for February would be published today. We recall that annual inflation moderated from 15.4% y/y in December 2017 to 15.1% in January 2018 as base effects from high H1’17 inflation kicked in, despite a notable uptick in energy prices at the turn of the year. We anticipate further moderation in inflation, driven by base effects and milder pressure on food prices in recent times. However, energy prices should be a sour spot once again as higher global crude oil prices weigh on the landing cost of petroleum products. Amid this, we forecast the first above-1% month-on-month inflation since July 2017 (1.21% m/m) – 1.15% m/m – bringing our annual inflation forecast for February 2018 to 14.7% y/y (Consensus: 14.5% y/y).                                                                

Bears sway market at week open                                                            

The Nigerian Stock Exchange started the week on a negative note as the ASI dipped 26bps. Although the ASI closed lower yesterday, we highlight the improvement in sentiment towards market close. We believe this could fuel a turnaround in today’s session spurred by positive corporate earnings from the banking sector.                                                 

Stock Watch: ZENITHBANK released better than expected FY’17 results before the close of market yesterday. The company reported a top and bottom line of ₦745 billion and ₦178 billion, 10% and 14% above our respective estimates. The stock currently trades at a price of ₦31.00 and has returned 21% ytd.                                                            

Yields fall on the release of Q2’18 T-bills calendar                                                          

The CBN began the week with an OMO auction, offering ₦100 billion and selling ₦89 billion across the 87DTM and 227DTM bills at respective stop rates of 12.60% and 14.40% (effective yields: 12.99% and 15.82%). Yesterday, the CBN released the Q2’18 T-bills issue programme, indicating that only ₦482 billion will be rolled over out of the ₦964 billion scheduled for maturity over the course of the quarter. With traders pricing in the impact of the potential robust liquidity, the T-bills market commenced the week on a positive with yields falling across most traded instruments. The positive sentiment also filtered into the bond market as yields on benchmark FGN maturities moderated 5bps on average. We foresee further compression in yields today as market reacts further to the reduced supply in Q2’18 T-bills issue programme.