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The Market Today - 24 October 2017

Refining self-sufficiency on the horizon                                                              

The Bayelsa State Government has signed a memorandum of understanding with Rehoboth refinery for the construction of a 60,000bpd modular refinery. According to news sources, the project has an estimated completion timeline of 18-24 months. This is the latest of a series of Private sector investments in Nigeria’s midstream oil sector. So far, Dangote Industries limited has broken ground on a c.650,000 bpd refinery and ENI E&P (parents of Nigerian Agip)  has signaled intentions to begin the construction of a c.150,000bpd refinery in Southern Nigeria. We note that whilst the total installed refining capacity (c.445,000bpd) is sufficient to meet our current local demand, Nigeria remains heavily reliant on importation of refined petroleum products due to the poor state of the refineries (Ytd average capacity utilization: below 30%). With the Dangote and ENI E&P refineries tentatively due for 2019 coupled with other modular refineries coming upstream, we expect Nigeria to be a net exporter of refined petroleum products in the near term – easing demand for foreign exchange (importation of petroleum products accounts for c.30% of import bill).                                                      

Bears retain dominance on NSE at week open                                                  

With all key sectors save for the Oil and Gas sector declining yesterday, the NSE ASI sustained the bearish trend from previous week, down 48bps. With earnings season officially underway, we foresee heightened activity on the exchange. However, we expect market sentiment to remain dampened as investors continue to cherry pick across stocks.                                                                 

Stock Watch: SEPLAT released 9M’17 results yesterday with revenue rising 31% y/y to ₦85 billion. Notably, the company reported its first quarterly PAT since Q3’15 – ₦6.8 billion. The stock currently trades at ₦480.00 (consensus estimate: ₦670.36) and has returned 26% ytd.                                                  

FIDELITYBK also released 9M’17 results yesterday with Revenue and PAT up 18% and 65% y/y to ₦130.1 billion and ₦14.5 billion respectively. The stock currently trades at ₦1.50 (consensus estimate: ₦1.55) and has returned 79% ytd.                  

Fixed Income market posts bearish start to trading week                                                            

The CBN conducted an OMO auction yesterday, offering ₦30 billion across the 87DTM and 192DTM bills. The apex bank sold c.₦18 billion on both bills at stop rates of 16.00% (87DTM) and 17.81% (192DTM) - effective yields: 16.63% and 19.65% respectively. Sentiment in the T-bills market remained bearish at week open as yields trended 49bps higher on average. Likewise, trading turned bearish in the bond market as yields rose 11bps on average across the benchmark bonds. We expect bearish sentiment to persist today as tight liquidity keeps a lid on buying activities in the market. Also, we anticipate tepid sentiment in the bond market as investors position for Bond Auction scheduled for tomorrow.