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The Market Today - 16 November 2017

Fitch assigns rating to Nigeria’s upcoming Eurobond                                                     

Following the Senate’s approval of the Federal Government’s (FG) plans to raise $5.5 billion in Eurobonds, Fitch Ratings has assigned Nigeria's upcoming senior unsecured USD-denominated notes an expected rating of 'B+(EXP)'. This rating is in line with Nigeria’s Long-Term Foreign-Currency Issuer Default Rating of B+. The ratings action follows reports that Nigeria has commenced an international roadshow to tap investor interest on the proposed Eurobond offer. Given this, we are cautiously optimistic that Nigeria would be able to conclude the Eurobond sale before the end of the year, as initially intended. As $2.5 billion is stipulated for 2017 Budget funding, this development could aid effective budget implementation.                                                             

Nigerian bourse continues the week in the red                                               

The Nigerian bourse posted another negative session yesterday as a dip in DANGCEM swayed market to close 91bps under. With the market still reeling from negative international news flows – Moody’s ratings downgrade and the MSCI Index decision – we anticipate another bearish trading session today.                                                       

Stock Watch: PZ has shed 11% in the last two sessions following the downgrade from the MSCI Frontier Market Index to the MSCI Frontier Market Small Cap index. The stock currently trades at ₦20.40, slightly below our target price of ₦20.97, and has returned 41% Ytd.                                                         

Quiet trading session for T-bills amidst PMA                                                     

The Central Bank of Nigeria conducted a Primary Market Auction yesterday, in which it offered and sold c.₦120 billion across the 91DTM, 182 DTM and 364DTM bills at 13.00%, 15.25% and 15.60% (effective yield: 13.44%, 16.51% and 18.46%) respectively – mostly coming in lower than the last PMA. Trading was relatively quiet across the T-bills market yesterday as investors treaded cautiously whilst awaiting results of the PMA. Overall, yields stayed flat on average across the space. Buying however remained dominant in the bond market, as market participants continue to react to the Senates’ Eurobond approval. We expect the CBN to continue with liquidity mop-ups even as ₦133.16 billion worth of OMO bills is scheduled to mature today. Notwithstanding, we foresee a more upbeat session for T-bills today as yields converge to auction levels.