The Market Today - 19 May, 2017
Nigeria to raise $3.5 billion in foreign loans to fund budget
The Nigerian National Petroleum Corporation (NNPC) is set to finalize a $6 billion deal to swap c.330,000 bpd (2016: c.450,000 bpd) of Crude oil for imported gasoline and diesel. 10 oil companies are expected to sign these contracts – up from seven last year – with each supplying 33,000 bpd to partner companies in Nigeria. The contracts, initially billed to begin in April, were moved to July 1 as the 2016 deals were extended in order to give NNPC room to negotiate. We recall that one of NNPC’s major targets for 2017 is to improve local refining capacity utilization to 60% as the Corporation looks to reduce reliance on importation.
ASI on the track for another rally, up 72bps
Amidst persistent positive market sentiment, the Nigerian equity market extended gains in yesterday’s session, with the NSE ASI rising 72bps. Whilst we anticipate another positive close for the NSE ASI today as overall market sentiment remains upbeat, we highlight that profit taking could possibly cap market gains as most top Consumer Goods names remain pressured.
Stock Watch: After a sharp drop amidst profit taking, NESTLE has gained 459bps in three sessions. The stock currently trades at a ten-month high of ₦835 and has returned 3.09% ytd.
Fixed income market persists bearish amidst mop up
Despite yields at Wednesday’s Primary Market Auction closing below secondary market levels, the T-bills market persisted bearish yesterday with yields closing 23bps higher on average. Sell pressure was most evident on the 70DTM, 175DTM and 336DTM bills as their yields rose 161bps, 101bps and 74bps to close at 20.74%, 22.67% and 22.59% respectively. Similarly, the bond market traded bearish with sell offs concentrated at the short to mid end of the space. In particular, yields on the 16.00% FGN JUN 2019 and 14.50% FGN JUL 2021 bonds advanced 14bps and 16bps to settle at 16.48% and 16.45% respectively. We expect more cautious trading at week close, weighed by tight system liquidity and anticipation of the Monetary Policy Committee meeting which commences on Monday.
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