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The Market Today - 15 August 2017

Lagos state completes ₦85 billion infrastructure bond issue                                              

On Monday, the Lagos state Government announced the completion of an ₦85.14 billion bond issue for the financing of infrastructure and environment projects. The capital raised consists of a ₦46.37 billion 16.75% seven-year note and a ₦38.77 billion 17.25% ten-year note. The bonds were issued under the state’s ₦500 billion debt issuance program and the intention is to give facelifts to several key business districts in Lagos as well as to revive tourism in the state. We expect the successful completion of the issue to further support infrastructure ramp up in the state, which like many other states in Nigeria is in dire need of infrastructure upgrades. Also, we see the clearing rates as a rate guide for other sub-nationals and corporates that might be willing to raise capital in the near term.                                      

Week begins with bearish sentiment                                        

The Nigerian bourse opened the week in the red – ASI down 65bps – with all key sectors closing in the red save for the Consumer Goods sectoron the day. With negative market breadth and pressure on large cap stocks, we anticipate sustained mixed trading albeit with a bearish bias.                                      

Stock Watch: DANGSUGAR has shed 14% in the last six sessions after initially rallying to a five-year high of ₦14.91 following a positive H1’17 earnings release. The stock currently trades at ₦12.80 and has returned 109.49%ytd.                                     

Continuous mop-ups dampen sentiment in T-bills market                                        

The CBN conducted an OMO auction today, offering ₦5 billion and ₦20 billion on the 192DTM and 360DTM bills respectively. Inter-Bank Call rate advanced in yesterday’s session, settling at 96.67% (Previous: 55.83%). Trading in the T-bills market was quite mixed at week open as yields trended in varied directions across board. The bond market however traded bearish as yields notched 8bps on average, driven by selloffs across the curve. Particularly, yields on the 12.50% FGN JAN 2026 and 12.40% FGN MAR 2036 bonds advanced 27bps and 15bps to close at 16.52% and 16.54% respectively. We expect the overarching bearish sentiment in the fixed income market to persist in today’s session, even as system liquidity remains constrained, amidst further OMO auctions.