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The Market Today - 24 January 2018

NNPC reaffirms drive for refining self sufficiency                                                           

Sequel to the government’s drive to improve the nation’s refining capacity, media reports have confirmed ground breaking across 13 modular refineries recently licensed by the Department of Petroleum Resources (DPR). Also, according to the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru, the selected financiers for the revamp of the Port Harcourt Refining Company Limited (PHRC), Warri Refining and Petrochemical Company Limited (WRPC) and the Kaduna Refining and Petrochemical Company Limited would be presented to the Corporation’s board at its next meeting – scheduled to hold before the end of the month. We note that this would be a notable milestone for the drive to improve refining capacity as the rehabilitation of the refineries would commence, paving the way for the corporation to achieve its ambitious 90% capacity utilization target for the end of 2019. Overall, the outlook for Nigeria’s refining sector in the medium to long term remains positive, noting other conventional private refineries that are scheduled to come on-stream in the period – 650,000 bpd Dangote Refinery (2019) and 150,000 bpd Agip Oil (2020).                               

Bears continue to dominate Nigerian bourse                                                    

The Nigerian stock exchange continued to trend lower in yesterday’s session as profit takers steered the NSE ASI to a 116bps loss. Evident from negative market breadth, sentiment on the market remains largely bearish as profit-taking continued to dominate trading activities. We expect this sentiment to filter into today’s session.

Stock Watch: Coming off a 12-month high of ₦19.42, UACN has shed 12% in the last eight sessions. The stock currently trades at ₦17.10, below Vetiva target price of ₦24.26 and has returned 0.65% ytd.

Downbeat sentiment dominates ahead of January Bond PMA                                                  

The CBN continued with its OMO auctions yesterday, offering ₦100 billion across the 93DTM and 205DTM bills. The apex bank sold c.₦88 billion across both bills at respective stop rates of 12.60% and 14.40% (effective yield: 13.02% and 15.67%). Trading on the T-bills market remained mixed with a mildly bearish bias as yields advanced 4bps on average. Sentiment in the bond space was similarly downbeat as yields on benchmark bonds advanced 6bps on average. With continued liquidity mop ups, we expect sentiment on T-bills space to remain modestly bearish in today’s session. Meanwhile, we expect investors to tread cautiously in the bonds space amidst today’s Primary Market Bond auction in which the DMO is offering ₦110 billion on the 5-yr and 10-yr bonds.