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The Market Today - 21 June 2018

President Buhari signs controversial 2018 Budget into law                                            

President Buhari signed the 2018 Budget into law yesterday, drawing a close to the most drawn-out budget saga in the democratic era in recent years, as the budget was signed over six months after it was first summited to the National Assembly. We note that the most recent delay stemmed from alterations made to the budget by the National Assembly, most notably in hiking planned expenditure by ₦500 billion to ₦9.1 trillion. President Buhari spoke out against the changes made by the legislature, highlighting the range and importance of altered projects, and the effect such late changes would have on budget execution. Whilst we are pleased that the budget has finally been passed, we are perturbed by the deteriorating relationship between the Executive and Legislature in the run up to the 2019 elections.

                                               

Losses soften at mid-week                                      

The Nigerian bourse shed 15bps in a mixed session yesterday, with all but one key sector closing in the red. In spite of yesterday’s red close, market indicators suggested a mixed sentiment in the market – positive market breadth, red closes across key sectors and choppy intraday trading. We foresee another mixed session in today’s session.

                                               

Stock Watch: JAPAULOIL has gained 105% over the last twelve sessions. The stock currently trades at a price of N0.43 and has declined 14% YTD, compared to the positive 3% YTD return for the Oil & Gas sector.                                                

 

Tepid trading in fixed income market                                             

Despite the absence of an OMO mop-up yesterday, Interbank call rate advanced to 12.50% (previous: 9.83%). Meanwhile, trading across the T-bills market was mixed with a bearish bias, with yields advancing 3bps on average. In particular, whilst yields on the 134DTM (-60bps to 12.24%) and 267DTM (-50bps to 13.36%) bills declined, yields on the 15DTM (+99bps to 12.30%) and 92DTM (+46bps to 12.19%) bills advanced. On the other hand, trading in the bond space was very quiet, with yields on benchmark bonds closing flat on average. The only material change was observed on the 16.2499% FGN APR 2037 bond, which advanced 18bps to settle at 13.83%. In line with recent trend, we anticipate an OMO auction as N378 billion hits the system via an OMO maturity. Thus, we expect mixed trading in the market today.