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The Market Today - 22 December 2017

More support for rice production, on track for 2018 target
In a continued effort to improve productivity of the agriculture sector, the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, yesterday highlighted the apex bank’s readiness to provide fresh funding for investment in agriculture equipment – particularly for rice – at interest rate of no more than 5%. We note that several forms of support have been directed to the commodity in recent times, key amongst which is via the Anchors Borrower Programme – helping in cutting the commodity’s import from 500,000MT in 2015 to 58,000MT in 2016, and to around 20,000 MT in 2017 according to the Minister of Agriculture and Rural Development; we believe FX scarcity further contributed to this. Another ongoing CBN effort in conjunction with FMARD and Rice Farmers Association of Nigeria (RIFAN) to mobilize 300,000 rice farmers should further bode well for rice, albeit the target to add two million tons of rice to the national output in 2018 seems ambitious. Nonetheless, barring any unforeseen shock, we expect all these moves to deliver Nigeria’s rice self-sufficiency target in 2018.

DANGCEM lifts the Nigerian Stock Market
The Nigerian bourse continued in positive territory yesterday as the ASI gained 110bps following a last minute rally in heavyweight DANGCEM. Although the ASI was once again lifted by a late rally in DANGCEM, overall sentiment was slightly positive – evident in widely positive market breadth. As such, we anticipate a mildly positive close to the week.

Stock Watch: DANGSUGAR has lost 12% over the last six sessions. The stock currently trades at ₦19.34, coming off a year-high of ₦21.95 and above Vetiva’s target price of ₦16.75. The stock has returned 217% Ytd and was the top loser yesterday.

Buy sentiment emerges following OMO inflow
The CBN conducted an OMO auction yesterday, offering N350 billion and eventually selling N355 billion across the 84DTM and 315DTM bills at stop rates of 13.00% and 14.80% respectively (effective yields: 13.40% and 16.97%). Despite the OMO mop-up, trading in the fixed income market was visibly upbeat supported by inflow from T-bills maturity (₦136 billion). Yields in the T-bills market moderated 18bps on average. Likewise, yields across benchmark bonds declined 13bps on average. We expect the momentum to soften in today’s session as constrained system liquidity caps buying.