The Market Today - 20 December 2017
Higher oil earnings narrow fiscal deficit
As an indication of the improvement in the Federal Government’s (FG) finances in 2017, data from the Central Bank of Nigeria (CBN) shows that FG revenues in the first nine months of the year totaled ₦3.1 trillion, compared to ₦2.2 trillion in 9M’16. This improvement is on the back of higher oil revenues – which have already surpassed FY’16 numbers – as a result of stronger oil prices (9M’17 Brent crude average: $52.53/bbl, 9M’16 Brent crude average: $43.16/bbl) and higher oil production (9M’17 average: 1.88 mb/d, 9M’16 average: 1.82 mb/d). Amidst a stronger revenue performance, FG spending has been little changed on a year-on-year basis, with ₦3.9 trillion spent in 9M’17 compared to ₦3.8 trillion in the corresponding period of 2016. As a result, the fiscal deficit has narrowed from ₦1.7 trillion in 9M’16 to ₦0.8 trillion in 9M’17, the lowest 9M deficit since 2013. Given our outlook of stable oil prices through 2018 and a full-year of recovered oil production, we expect even stronger FG earnings in 2018 and believe this may support government spending, pending a timely passage of the FG Budget.
Nigerian stock market weighed by bearish sentiment
"The Nigerian bourse continued the week in the red (NSE ASI: -46bps) as all key sectors closed under. With market sentiment visibly bearish, we foresee another downbeat trading session today.
Stock Watch: INTBREW has lost 13% over the last eleven sessions. The stock currently trades at ₦51.96, coming off its year-high of ₦60.00 and below consensus target price of ₦58.25. It has returned 181% Ytd.
CBN persists with OMO mop-ups, bears dominate
The CBN continued with its OMO auctions yesterday, offering ₦150 billion and selling ₦130 billion across the 72DTM and 247DTM bills at stop rates of 13.10% and 14.90% respectively (effective yields: 13.45% and 16.57%). Bears continued to dominate the fixed income market amidst the renewed pressure on system liquidity. Though trading was quieter than in previous sessions, yields in the T-bills market advanced 9bps on average. Sell pressure was also observed in the bond market, with yields across benchmark bonds up 22bps on average. We expect trading to turn mixed with a bearish tilt as traders weigh chances of another OMO auction today even as maturities hit the system on Thursday.
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