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The Market Today - 23 January 2018

Fuel queues re-emerge as product supply dwindles
Reminiscent of the fuel shortage situation towards the end of 2017, fuel queues have resurfaced once more across different parts of Nigeria. According to the Depot and Petroleum Products Marketers Association (DAPPMA), the situation has re-emerged due to supply shortages from the Nigerian National Petroleum Corporation (NNPC), the sole supplier of PMS to the Nigerian market. According to media reports, this has led to some marketers selling above the official pump price of ₦145.00/liter, further fanning the flames of sticky inflation. The news is however not very surprising as higher global crude prices (Brent currently $69.47/bbl) has fed through to PMS landing costs, making it more expensive for the NNPC to import the product. Given the current structure of the downstream sector, we believe that the risk of intermittent fuel shortages will remain high through 2018, especially as a full downstream liberalization is unlikely in the short term.

Bearish session to kick off the week, ASI down 40bps
After a very strong start to 2018, the Nigerian equity market kicked off this week in the red as the NSE ASI dipped 40bps. Whilst demand remains strong, we note more aggressive profit-taking in yesterday’s session and we expect this trend to continue in today’s session.

Stock Watch: In October last year, the NSE notified OANDO that the SEC issued a directive to impose a technical suspension on the stock, pending a forensic audit of the shareholding of the company, amongst other issues. Yesterday, OANDO announced that it had resolved the issues raised by one of its substantive shareholders, part of which had initially led to the SEC action.

Mixed trading as CBN cancels MPC meeting
The CBN conducted another OMO auction yesterday, offering ₦30 billion and ₦50 billion across the 94DTM and 192DTM bills respectively. The apex bank eventually sold ₦75 billion across both bills at respective stop rates of 12.60% and 14.40% (effective yield: 13.02% and 15.58%). Sentiment in the T-bills market turned mixed albeit with a slightly bearish bias as yields advanced 8bps on average. Trading was more positive, albeit mixed, in the bond market as yields on benchmark maturities declined 2bps on average. We expect CBN liquidity mop ups to continue to constrain buying on T-bills in today’s session. Meanwhile, with monetary policy rates unchanged, we expect mixed trading to persist in bond space.