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The Market Today - 20 March 2018

Nigeria begins consultations on CFTA                                                   

President Muhammadu Buhari recently stated that the Federal Government has begun consultations on the Continental Free Trade Area (CFTA), a multilateral agreement that seeks to create a single market for factors of production within a regional bloc i.e. near-free movement of goods & services, labour, and capital. The CFTA is a step towards the establishment of an African Customs Union, similar to the European Union Customs Bloc, and part of efforts to deepen regional trade on the continent. We note that even as Africa’s biggest economy, Nigeria’s trade with the rest of Africa accounts remains small – imports and exports stood at 4% and 12% respectively at the end of 2017. Whilst we hold the view that higher levels of formal intra-Africa trade would likely boost employment and output in Nigeria, we stress the importance of developing an appropriate structure for trading relationships in order to mitigate the negative externalities of free trade.                                                             

Consumer Goods sector weighs on Nigerian bourse                                                      

Dragged by the Consumer Goods sector, the Nigerian bourse extended its losing streak at week open with the ASI down 21bps. Despite the turnaround in the banking sector, trading sentiment remains tilted towards the bearish side across other counters. As such, we foresee mixed trading in today’s session as tepid sentiment across other key sectors is met with further profit taking in banking stocks.                                                           

Stock Watch: JBERGER released its FY’17 results, reporting a top and bottom line of ₦142 billion and ₦3 billion, 5% behind and 297% ahead of estimates respectively. The stock currently trades at ₦24.80 and has declined 11% ytd.                                                               

Liquidity tightening dampens week open trading                                                           

The Central Bank of Nigeria resumed with OMO auctions yesterday selling ₦116 billion across the 100DTM and 226DTM bills at stop rates of 12.60% and 14.40% respectively (effective yields: 13.05% and 15.81%).  In spite of liquidity constraints and accompanying sell pressure, buy sentiment was observed on select T-bills maturities yesterday. The bond market was more quiet yesterday, with some sell pressure at the long end of the curve. We expect CBN liquidity tightening to continue to constrain buying in the T-bills market. However, we anticipate more activity in the bond space ahead of the March bond auction, at which supply will be lower (₦70 billion) than at the previous auction (₦100 billion).