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The Market Today - 22 May 2018

Force Majeure on Bonny Light exports may hamper output                                                      

Exports of Bonny Light remain shut-in as a result of the Force Majeure placed by Royal Dutch Shell following the shutdown of the Nembe Creek Trunk Line, a development which threatens nearly 200,000 barrels a day of Nigeria’s oil. We note that oil production averaged 2 mb/d in the first four months of the year, below the 2018 Budget benchmark of 2.3 mb/d, as the country has tried to maintain its crude production within the OPEC threshold. The ongoing challenges with Bonny Light (Nigeria’s third largest crude oil stream) could pose a further threat to Nigeria achieving its oil production objectives, but we expect strong oil prices (hovering around $80/bbl) to support government earnings.                                            

Banking sector losses weigh on bourse                                                

The NSE ASI shed 12bps on the back of a red close in the Banking sector. Key market indicators give a mixed view of trading activity: market breadth was narrowly positive and many key sectors closed higher but intraday trading momentum was mostly negative. We expect this mixed pattern to persist in today’s session.                                                    

Stock Watch: FBNH has shed 13% in the last seven sessions. The stock currently trades at a price of N10.75 (below Vetiva target price of N12.82) and has returned 22% ytd.                                                             

Market opens mixed, albeit with notable sell pressure                                               

Interbank call rate advanced 867bps to 16.50%, even in the absence of any liquidity mop up by the CBN. Trading in the T-bills market persisted mixed at the start of the week as yields dipped 6bps on average. Trading in the bond market was similarly mixed albeit with a more beaish bias as yields rose 5bps on average. Whilst some buying was observed on short-dated bonds, sell pressure dominated the mid-long end of the space. We expect market participants to tread cautiously ahead of today’s MPC decision. We expect the committee to maintain all policy tools at their current levels.