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The Market Today - 17 July 2017

Federally collected revenue slows 13% in May

According to the CBN economic report, Federally collected revenue was estimated at ₦458 billion for the month of May, 49% below the monthly budget estimate (₦895 billion) and 13% lower than April receipts (₦529 billion). The shortfall, we gather was due to declines in both oil and non-oil revenues in the month under review. Gross oil receipts in the month stood at ₦238 billion (52% of income), lower than the budget estimate of ₦450 billion and April receipt of ₦303 billion whilst non-oil receipts came in at ₦220 billion (48% of income), also lower than the budget estimate of ₦445 billion and April receipt of ₦225.71. The CBN attributed the decline in oil revenue to shortfalls in revenue from crude oil, gas exports and PPT/Royalties whilst the decline in non-oil revenue was attributed to residual effects of economic slowdown. We note that the economic recovery and growth prospect is largely hinged on the performance of the government’s ₦7.44 trillion record budget. With revenue consistently falling short of target, we highlight the possible negative impact on budget implementation and foresee likely increase in debt financing which could in turn keep interest rates high.

Nigerian bourse opens week in the green

The Nigerian bourse opened the week to mixed trading across key sectors, with the NSE ASI gaining marginal 12bps having traded lower for most part of the session. We see the mixed intra-day trading pattern, diverse closes across key sectors, and the weakening market breadth as signals of waning buying momentum. We expect this to drive the market to another mixed session today with the ASI most likely closing lower. We however highlight that the better-than-expected H1’17 earnings from UNILEVER could keep appetite for Consumer Goods’ names resilient.

Stock Watch: UNILEVER’s H1’17 results showed a 40% and 236% rise in revenue and PAT to ₦45.1 billion and ₦3.7 billion respectively, partly supported by a low base. UNILEVER closed limit-up yesterday and currently trades at ₦36.38, above consensus target price of ₦28.00. The stock has returned 3.94% ytd.

T-bills market opens bullish despite another OMO auction

The CBN opened the week with an OMO auction, offering ₦5.0 billion and ₦50.0 billion on the 184DTM and 346DTM bills respectively. Despite the liquidity mop-up, trading in the T-bills market was quite bullish. However, trading in the bond space remained tepid, with yields closing flat across the benchmark bonds. Whilst we expect bullish trading to persist in the T-bills market today, we believe another mop-up by the CBN would cap demand in the space. We expect yields to remain flat in the bond market as the tepid trading pattern persists.