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The Market Today - 18 May 2018

Fitch maintains Nigeria’s B+ rating, negative outlook                                                    

Global credit rating agency, Fitch ratings, confirmed Nigeria’s long-term foreign currency issuer default rating at B+ with a negative outlook. Fitch forecasts a 2.4% real GDP growth for Nigeria in 2018, as the country continues to come out of the oil price induced recession of 2016. The agency further noted that Nigeria’s external reserves have increased to a four-year high due to stronger oil receipts and inflow from Eurobond sales. However, the negative outlook is on the back of the general elections scheduled for February 2019 which the ratings agency worries could weaken progress on reform agenda and increase ongoing security challenges. We are unsurprised by the ratings action as we also see the impending elections as the primary threat to Nigeria’s economic recovery and reform agenda.                         

Previous gains erased by dips in Large Caps                                                       

Following a largely negative session led by large caps, the ASI shed 77bps yesterday. Given the predominantly negative sentiment on the exchange – indicated by negative sector closes, market breadth and downtrending intraday chart – We foresee another downbeat session.                                              

Stock Watch: Yesterday, FLOURMILL announced a partnership with Corteva Agriscience for maize hybrid seed development in Nigeria. Following this, the stock gained 86bps yesterday bringing the current trading price to N35.00, returning 21% ytd.                                                          

Mixed sentiment continues to permeate F.I market                                                      

Following the ₦263 billion OMO maturity, the CBN conducted an OMO Auction yesterday, selling ₦41 billion (offer: ₦300 billion) across the 112DTM and 182DTM bills at respective stop rates of 11.05% and 12.15% (effective yields: 11.44% and 12.93%). Amidst the net inflow, Interbank call rate declined to 13.33% (previous: 23.33%). Meanwhile, trading in the T-bills market was mixed albeit yields rose 4bps on average. The bond market was similarly mixed, with demand weighted on the short end while selling was more prevalent at the long end. As the MPC meeting scheduled for next week comes into focus, we expect investors to tread cautiously and trading to be quiet in the fixed income market today.