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The Market Today - 21 February 2018

PMS importation falls in Q4’17                                                 

According to the Petroleum Product Import Statistics released by the National Bureau of Statistics, 22.5 billion liters of white products were imported into the country in 2017, with PMS expectedly taking the lion share of 77%. Notably, PMS import in Q4’17 was lowest in the year, down 30% q/q to 3.5 billion liters (Quarterly average: 4.3 billion liters). Import in November was particularly dismal, printing at 0.9 billion liters for the month compared to the monthly average of 1.4 billion liters. We note that crude oil prices hit their 2017 peak in Q4’17 (avg Brent price: $61/bbl vs avg FY price: $55/bbl), and undoubtedly played a big part in pressuring PMS import by further stretching the already uneconomic PMS landing costs. Although there has been visible improvement in PMS supply in Q1’18, intermittent queues across some regions continue to indicate underlying shortages in the product supply; not really surprising given that NNPC remains the sole importer of the product. With crude prices widely forecast to remain fairly strong over the course of the year, we believe landing costs will remain relatively uneconomic for independent marketers, thus keeping NNPC as the main supplier to the market and also potentially keeping a lid on improvement in PMS supply.                                                     

Industrials save the day, ASI up 38bps                                                  

Despite a largely bearish trading session, the NSE ASI closed 38bps higher on the day, lifted by advances in heavyweight DANGCEM. The positive in DANGCEM overshadowed bearish trading on the exchange – evidenced by widely negative market breadth and negative closes in key sectors. We anticipate a similar trading pattern in today’s session. 

Stock Watch: WEMABANK has shed 16% over the last six sessions. The stock currently trades at a price of ₦1.11 and has returned 113% ytd.                                                

Demand emerges in FI market pre-PMA                                                              

With the CBN refraining from conducting an OMO auction yesterday, Interbank Call rate declined 584bps to 19.33%. In the absence of any liquidity mop up, buying sentiment was apparent in the T-bills space as yields declined 14bps on average. Sentiment was similarly positive in the bond market, albeit to a lesser degree. We foresee further buying in the T-bills space today, barring any CBN liquidity mop up. Meanwhile, we expect investors to trade cautiously amid today’s bond auction where the DMO will be offering ₦50 billion on the 14.50% FGN JUL 2021 bond and ₦50 billion on a new issue FGN FEB 2028 bond.