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The Market Today - 13 September 2017

OPEC records Nigeria’s oil production at 1.86 mbpd                                      

According to OPEC data, Nigeria’s oil production (excl. condensates) rose from 1.72 mbpd in July to 1.86 mbpd in August, by far the largest increase across OPEC member countries. Despite this, total OPEC production fell marginally to 32.76 mbpd (July: 32.83 bpd), largely driven by declines in Libyan output. Though Nigeria and Libya remain exempt from the output cut deal that stretches to March 2018, resurgent production from either or both of these countries would reduce the margin for error on cuts made by participating countries, and slightly blunt the impact of the production quota on global oil prices. Whilst we consider it unlikely that OPEC will lift Nigeria’s exemption – given it was renewed as recently as May – we note that the country may not enjoy similar privileges if the current agreement is extended beyond March 2018. Nevertheless, we note that the recovery of oil production in Nigeria amidst relatively strong price is a huge positive for Federal Government revenues, liquidity in the foreign exchange market, and economic activities.                                            

Nigerian bourse persists in negative territory                                    

The Nigerian bourse persisted in the red yesterday as the NSE ASI lost 75bps with most key sectors closing under water. Given the prevalent tepid market sentiment – evidenced by consistently negative market breadth and red closes across key sectors – we foresee another mixed trading session, albeit with a bearish bias.                              

Stock Watch:  UNILEVER has gained 11% over the last five sessions. We note that whilst the company recently closed a ₦58 billion Rights Issue (Rights price: ₦30.00/share), the stock currently trades at ₦42.00 and has returned 20% ytd.                              

Bond activity remains tepid, bulls rule the bills                                               

Continuing with its liquidity tightening stance, the CBN conducted an OMO Auction yesterday, offering ₦40.00 billion across the 86DTM and 191DTM bills. Bulls prevailed in the T-bills market yesterday as yields declined across the curve. Notably, yields on the 23DTM and 275DTM bills moderated 207bps and 93bps to close at 17.47% and 20.48% respectively. We foresee cautious trading in the secondary market today amidst the ₦174 billion T-bills Primary Market Auction to be held during the trading day. Likewise, we expect trading to remain muted in the bond space, albeit with minor interest on short-dated maturities.