Refinery refurbishment key to Nigeria’s self-sufficiency
According to the Minister of State for Petroleum Resources, Dr. Ibe Kachikuwu, the Federal Government has no plan to sell its four refineries until they are revamped, in order to optimize returns from any potential sale. We note that refinery capacity utilization has improved in 2017 – 25% ytd vs. 5-year average of 15%, on track for the 6-year target of revamping them to optimal levels. Meanwhile, in line with its co-location initiatives, the Nigerian National Petroleum Corporation has identified the Port Harcourt and Warri refineries as potential sites for greenfield privately-funded refinery projects. These two developments should aid Nigeria in its quest for self-sufficiency.
Nigerian stock market bounces back
The Nigerian bourse staged a mini revival in yesterday’s session, gaining 59bps on the day following a strong close in heavyweight DANGCEM. Despite the positive close, we highlight that negative market breadth and varied performances across key sectors show persistent mixed sentiment in the market. Whilst we expect this to continue, we note that resurgent demand for premium stocks could tilt market momentum.
Stock Watch: At the start of August, NAHCO rallied 35% across six sessions to settle at a year high of ₦3.75. Since then, the stock has lost 17% and currently trades at ₦3.12 (Ytd: -1.27%).
Liquidity inflow supports buying in Fixed Income market
Amidst yesterday’s maturity (PMA: ₦62.4 billion, OMO: ₦168.0 billion), the CBN conducted an OMO auction, offering ₦80.00 billion and selling ₦99.5 billion across the 175DTM and 364DTM bills, maintaining stop rates of 17.95% and 18.55% (effective yields: 19.82% and 22.76%). Trading turned mixed in the T-bills market yesterday with yields moving in opposite directions. Meanwhile, the bond market persisted relatively bullish, particularly at the long end of the curve. We see possibility of another OMO auction today and thus anticipate more tepid trading in the fixed income market particularly in the T-bills space.
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