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The Market Today - 17 August 2017

Nigeria needs $40 bilion to boost Oil & Gas infrastructure                                       

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu stated that Nigeria needs over $40 billion to fund the infrastructure deficit in the oil and gas sector. According to the minister, the investment would be needed to fix the infrastructural gap in the midstream and upstream segments of the sector as well as to increase crude oil production from 2.2mbpd to 3.0mbpd. We note that a few international oil companies such as Shell and Agip are currently undertaking various dedicated projects, which should improve the performance of the oil sector in the long run and expect investments in this sector to be private sector driven as indicated by the Economic Recovery and Growth Plan (ERGP) of the government. That said however, we believe the lower for longer oil prices would continue to cap investment in this sector in the near term.                                 

Bears dominate Nigerian bourse                                    

The Nigerian bourse declined further in yesterday’s session, with the NSE ASI down 268bps following red closes across all key sectors. Considering widespread bearish sentiment and pressure on bellwethers, we anticipate another negative trading session today.                   

Stock Watch: According to media reports, core investor Dangote Industries Limited plans to sell about 5.5% (852 million shares) of its stake in DANGCEM, and has reportedly secured regulatory approval for the block divestment. The cement maker has lost 11% over the last three sessions and currently trades at ₦214.00 (Ytd: 23%).                                      

Demand reemerges in fixed income market amidst PMA                                         

The CBN conducted a Primary Market Auction yesterday, offering ₦62.44 billion and selling ₦67.79 billion across the 91DTM and 182DTM bills at stop rates of 13.35% and 17.35% (effective yields: 13.81% and 19.09%). Trading turned bullish on T-bills yesterday following the PMA as yields in the secondary market declined 15bps on average to converge towards auction levels. The bond market also turned bullish yesterday as yields moderated 10bps on average. With an overall upbeat sentiment in the market yesterday, we expect sustained modest demand in today’s trading session, amidst liquidity improvement given the ₦230.48 billion maturity today.