FREE

The Market Today - 16 June 2017

​9M’16 budget performance falls short

The Budget Office of the Federation recently released the 9M’16 Federal Government (FG) 2016 budget implementation report. Cumulative 9M’16 revenue registered at ₦1.35 trillion, way below nine months budget target of ₦2.89 trillion as all revenue line items underperformed during the period. The biggest drag was independent revenues which came in at ₦0.21 trillion compared to the ₦1.23 trillion target. Non-oil revenues also lagged – ₦0.64 trillion vs. ₦1.12 trillion target – as Company Income Tax (performance: 57%), VAT (performance: 54%), and Customs revenue (performance: 68%) all fell below expectations. Meanwhile, of the ₦4.55 trillion expenditure target for the first nine months, the FG spent ₦3.30 trillion. Whilst ₦1.68 trillion was spent on non-debt recurrent expenses, 18% below target, ₦1.12 trillion was spent on debt servicing, 76% of total 2016 budgeted debt expenditure. Finally, capital spending was the most disappointing line item during the period as only ₦0.16 trillion (₦1.19 trillion target) was disbursed, although more recent news updates suggest this figure rose past the ₦1 trillion mark by the end of 2016. With reports of better capital disbursements, stronger oil earnings, and some external finance inflows at the end of 2016, we expect Q4’16 budget performance to have been the strongest in the year. Nonetheless, we highlight the impact of the delays to budget passage and financing in these numbers and stress the need to ramp up funding and implementation of the recently passed 2017 budget.

ASI advances 59bps amidst mixed trading

Despite mixed trading across key sectors on the exchange, the Nigerian equity market held on to gains for the second day in a row, with the ASI rising 59bps yesterday. We expect further mixed trading in today’s session albeit with modest gains.

Stock Watch: SKYEBANK moved up 952bps yesterday. The bank, whose last earnings release was FY’15 result, posted an update on the NSE about its plans to release its 2016 results before the end of this quarter. The stock opened the year at the price floor and seldom moved before trading actively over the past nine sessions, rising 38% over the period to trade at a 2017-high of ₦0.69.

Liquidity injection sustains bullish T-bills market

With the liquidity injection from the OMO maturity driving demand, the T-bills market sustained bullish trading with yields moderating 81bps on average at the short end. Whilst the bond market is expected to remain relatively muted at week close, we foresee sustained bullish trading in the T-bills given ample liquidity although the CBN announced its intention to conduct a special OMO of ₦200 billion at a rate of 16%.