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The Market Today - 17 May 2018

Senate signs off on increased 2018 budget                                                         

After increasing the proposed expenditure from ₦8.6 trillion to ₦9.1 trillion and the oil price benchmark from $47.00/bbl to $50.50/bbl, the Nigerian Senate approved the 2018 Budget, leaving it to the President to sign. This development raises the likelihood that the budget would be passed this month before the end of the 2017 Budget cycle (June 2017-May 2018), ensuring no gap in fiscal policy. We recall that the 2018 Budget was initially submitted to the National Assembly in early December 2017, but a series of controversies and disputes between the Legislature, Executive, and Civil Service had delayed budget passage. We are hopeful that the President would act speedily to assent the 2018 Budget, paving the way for implementation and providing further fiscal support for Nigeria’s economic recovery.                                                            

DANGCEM boosts ASI at session close                                                  

After a relatively mixed session, the Nigerian bourse jumped 93bps at the end, boosted by a sizeable gain in DANGCEM. Market traded sideways for most of the day, save for the late spike in DANGCEM. We expect trading to remain soft today, given consistently negative market breadth and pressure on a number of bellwethers.

Stock Watch: HMARKINS has shed 21% over the last eleven sessions. The insurance stock trades at a price of N0.27 and has declined 46% ytd.                                                           

Rates moderate at Primary Market Auction                                                       

The CBN conducted a Primary Market Auction yesterday, offering and selling N34 billion across the 91DTM, 182DTM and 364DTM bills at respective stop rates of 10.00%, 10.50% and 10.70% (effective yields: 10.26%, 11.08% and 11.98%). Rates on the mid and long dated bills came in lower than at the previous PMA – 10.95% and 11.15% respectively, while the rate on the short dated bill stayed flat. Trading in the T-bills market was mixed with modest buying on short-dated bills contrasting with sell pressure on longer-tenured bills. Overall, T-bills yields rose 14bps on average. The bond market followed a similar pattern with selling weighted at the long end. Amidst a ₦263 billion maturity and with yields at yesterday’s PMA coming in below secondary market levels, we expect stronger demand in today’s session. However, this would be dampened by any CBN liquidity mop up - in line with recent trend of mopping up following OMO maturities.