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The Market Today - 23 February 2018

January FAAC disbursement up 7% m/m                                        

According to the National Bureau of Statistics, the Federation Account Allocation Committee (FAAC) disbursed the sum of ₦655 billion to the three tiers of government in January 2018 from the revenue generated in December 2017. The figure represents a 7% increase over the disbursements in November, supported by modest m/m improvement in both flows from Statutory Account (up 2% to ₦538 billion) and Value Added Tax (up 4% to ₦84 billion).  Further supporting the month’s disbursements are flows from FOREX Equalization and Excess bank charges totaling ₦33 billion – no flows recorded in the prior month. We highlight that the persistently strong oil prices particularly kept distributions from the December Statutory Account decent (December average Brent Price: up 2% m/m to $64/bbl), and expect further slight increase in January numbers (to be disbursed in February) even as average oil prices climbed further over the course of the month (up 8% m/m to $69/bbl). Post-February distributions could however pull back slightly given the pressure on oil prices in more recent times (February average: $66/bbl), even as oil prices are widely forecast to retrace to around $60/bbl going forward.                                   

Nigerian bourse continues to show signs of recovery                                            

Sell-offs simmered down on the Nigerian Stock Exchange in yesterday’s session as increased bargain hunting led three out of four key sectors to a green close. The NSE ASI gained 24bps on the day, cutting week-to-date losses to 0.89%. With market breadth positive for the first time in five sessions, market sentiment turned visibly positive as investors hunted bargains across beaten down stock prices. We believe this sentiment will drive another positive session for the All-Share Index at week close.                                   

Stock Watch: LIVESTOCK has gained 20% over the last five sessions. The agro-allied company currently trades at a price of ₦1.15 and has returned 39% ytd.    

Buying persists on T-bills despite OMO resumption                                  

After a two-day break, the CBN conducted an OMO auction yesterday, offering ₦80 billion on the 98DTM and 182DTM bills. Whilst no sale was made on the 98DTM bill, the apex bank eventually sold ₦68 billion on the 182DTM bill at a stop rate of 14.40% (effective yield: 15.51%). Buoyed by still-healthy liquidity, trading in the T-bills space was largely positive as yields declined 7bps on average. Trading was more mixed in the bond space with yields heading in opposite directions. Demand for T-bills should be supported by healthy liquidity, barring any liquidity mop up by the CBN. However, we expect the bond market to continue to trade sideways absent any catalysts in the space.