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The Market Today - 20 June 2018

Moody’s stresses need for swift diversification efforts                                                

Supported by an improved oil price and production outlook, Moody’s Investors Services recently affirmed a B2 stable outlook for the Nigerian economy. The ratings agency however expressed concerns over the country’s overdependence on oil revenues as recent diversification efforts by the government have not taken off. With the passage of the PIB pending, the agency also foresees challenges in attracting new investment to the oil sector as the industry reform has been slow and implementation remains weak. This has been a recurring concern by the IMF, World Bank and now Moody’s. We also reiterate that greater diversification efforts are needed to strengthen economic growth and mitigate against potentials shocks to oil price and production.                                                       

Bearish sentiment filters into week open                                                           

With all key sectors save for the Consumer Goods sector closing in the red, the Nigerian equity market opened the week with a negative performance (ASI down 66bps). Given the largely bearish session yesterday – all key market indicators were negative – we foresee another negative performance today.                                                   

Stock Watch: ZENITHBANK has shed 9% over the last seven sessions. The stock currently trades at a price of ₦25.50 and has declined 0.6% YTD, compared to the positive 0.9% YTD return for the Banking sector. We highlight that the Banking sector traded high volumes and value yesterday, accounting for over half of the trades on the exchange.                                                               

Yields trend south at week open                                                            

The CBN conducted an OMO auction yesterday, offering ₦350 billion and selling ₦137 billion across the 93DTM and 219DTM bills at respective stop rates of 11.05% and 12.15% (effective yields: 11.37% and 13.11%). Following the mop up, Interbank OBB rate advanced 616bps to 9.83%. Meanwhile, trading in the T-bills space was mixed yesterday, with yields trending in opposite directions. However, sentiment in the bond space was largely negative, with yields on benchmark bonds advancing 12bps on average. Despite the OMO auction and consequent mixed sentiment in yesterday’s session, we anticipate a relatively positive session today as system liquidity remains buoyant (estimated at ₦377 billion) barring a CBN liquidity mop-up.