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The Market Today - 19 January 2018

PIGB one step away from legal status

The House of Representatives yesterday passed the Petroleum Industry Governance Bill (PIGB), eight months after the Senate approved the said Bill. The PIGB, the first derivative of the original Petroleum Industry Bill (PIB), seeks to unbundle the regulatory and commercial functions of the Nigerian National Petroleum Corporation (NNPC) and create a new National Oil Company. According to Senate President Bukola Saraki, the bill will promote openness and transparency in the industry by clarifying the rules, processes, and procedures that govern the oil and gas sector. The PIGB now needs to be signed into law by the Executive arm of government. We note that the passage of the bill would be significantly positive for transparency and governance in the oil & gas sector and may pave the way for further reforms – particularly the passage of the other elements of the original PIB.

ASI dips 8bps on a mixed trading day                                     

The Nigerian bourse ended its gaining streak as the ASI shed 8bps on the day. We note that strong profit-taking surfaced in the market yesterday despite resilient demand. We foresee further profit-taking at week close as investors crystallize ytd gains.

Stock Watch: Coming off a five-year high of ₦21.95, DANGSUGAR has lost 5% in the last six sessions. The stock now trades at ₦20.75, above Vetiva target price of ₦19.63, and has returned 3.75% ytd.                 

Bond yields head south on weaker supply expectations                                        

With a ₦69 billion OMO maturity, the CBN conducted an OMO auction yesterday, offering ₦150 billion and selling ₦194 billion across the 91DTM and 203DTM bills at stop rates of 12.60% and 14.40% (effective yields: 13.01% and 15.65%). Despite the ₦229.85 billion PMA maturity, trading in the T-bills space was mildly bearish, particularly at the short end of the curve as liquidity remained constrained given the OMO auction. Meanwhile, the bond market traded more positively following the release of the Q1’18 bond calendar on Wednesday as yields on benchmark bonds moderated 5bps on average. We expect CBN liquidity mop ups to constrain buying on T-bills in today’s session. Meanwhile, demand for bonds should remain resilient given the expectation of lower bond supply this year.