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The Market Today - 14 February 2018

Inflation clocks in at 15.1% in January                                     

Nigeria’s inflation clocked in at 15.1% y/y in January, in line with Vetiva forecast, following a month-on-month rise of 0.8%. This compares favorably to 15.4% y/y recorded in December 2017. Annual food inflation declined from 19.4% y/y in December 2017 to 18.9% y/y in January 2018 whilst annual core inflation remained flat at 12.1% y/y. The moderation in inflation comes despite a further spike in average national premium motor spirit prices – from ₦172 to ₦191 and above regulated price of ₦145 – on the back of higher global crude oil prices and intermittent product shortages in recent months. We foresee further moderation in inflation in the coming months as base effects bear on headline inflation.                           

Nigerian equity market nearing correction territory                                     

For the seventh session in a row, the All Share Index remained in negative territory as sizeable losses across key sectors pulled the index 241 basis points lower. As losses continue to deepen on the exchange, we foresee the sluggish sentiment persisting in today’s session with the ASI closing in the red. As such, we expect the equity market to technically enter correction territory in the coming sessions (that is, a 10% decline from the last high as at 18 Jan 2018). 

Stock Watch: FBNH has shed 21% over the last seven sessions. The stock currently trades at ₦11.00 below Vetiva’s target price of ₦14.22 and has returned 25% ytd.                            

Fixed Income market posts mixed session                                          

The CBN conducted another OMO auction yesterday, offering ₦60 billion across the 93DTM and 247DTM bills, however, no sale was made at the auction. Trading in the T-bills market was tepid with yields trending in opposite directions – yields advanced 6bps on average. Whilst the release of the February Bond offer circular spurred buying on the longer end of the bond space at market open, sell pressure dominated on the shorter dated maturities as the session went on. We expect trading in the bills space to be relatively muted ahead of today’s primary market auction at which the CBN will be offering ₦170 billion across the 182DTM and 364DTM bills.