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The Market Today - 17 April 2018

All levers point to economic growth for the country                                                      

Indicative of an improved outlook for economic expansion in Nigeria, respondents to the CBN’s March 2018 Business expectations survey expressed greater optimism on economic conditions for the month of April and beyond. This sentiment is echoed by several international organizations who expect a stronger pace of expansion for the Nigerian economy in 2018, with the IMF, World Bank and Institute of International Finance (IIF) respectively forecasting 1.9%, 2.5% and 2.2% real GDP growth rates for the economy – a modest recovery from the 0.8% recorded in 2017. Whilst we note the underlying factors responsible for these expectations – stronger oil prices and production levels, relative FX stability, improving business environment, as well as anticipated economic boost from fiscal spending – respondents to the survey believe that age old constraints such as power supply and high interest rates among others could cap the pace of expected growth. In line with the general optimism for the year, we forecast a 2.4% real GDP growth for 2018.                                                              

Mixed trading sentiment to start off the new week                                                       

In an even split between sector gainers and losers, the Nigerian bourse notched 14bps, starting the week on a positive note. Despite the positive close, sentiment in the market remains varied as evidenced by the choppy intraday trading and even split between sector gainers and losers. We expect the varied trading to persist as the market remains devoid of a catalyst strong enough to sustain ample gains.

Stock Watch: PRESCO released its FY’17 earnings results recording a top and bottom line of ₦22 billion (+42% y/y) and ₦25 billion (+17% y/y) respectively. The strong bottom line can be partly attributed to the high tax credit recorded in the period. The stock currently trades at a price of ₦70.00 and has returned 2% ytd.                                                       

Healthy liquidity spurs steep decline in yields                                                 

With the CBN refraining from any liquidity mop up at week open, Interbank Call rate declined 67bps to settle at 2.33%. Buoyed by healthy system liquidity, bulls ruled the T-bills space yesterday, driving yields 101bps lower on average. Bullish sentiment was similarly strong in the bond market as yields on benchmark notes moderated 21bps on average. We expect healthy system liquidity (₦476 billion) to support further bullish sentiment today, albeit tempered by any CBN liquidity mop up.