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The Market Today - 26 July 2017

NNPC shuts down Trans Niger Pipeline                                                 

According to reports, Shell Nigeria shut down its operations on the Trans Niger Pipeline on 21st July, 2017 due to a leak. The pipeline is one of two supply pipelines that feed the Bonny Light Export Terminal, the other being the Nembe Creek Trunk Pipeline which was also closed earlier this month. Thus, the recent action on the Trans Niger Pipeline effectively shuts off Bonny Light exports (c.225,000 barrels a day). This negative shock to Bonny Light loadings is concerning for Nigeria considering domestic oil production is still recovering from heightened militant activity in 2016. According to the Department of Petroleum Resources, crude oil production was 2.05 mbpd in June.  We highlight the risk to budget performance as the shutdown pulls crude oil production farther away from the budget benchmark of 2.2 mbpd.                                   

MPC maintains Monetary Policy Rate at 14%                                      

At the conclusion of its bi-monthly two-day meeting, the MPC decided to retain all key policy tools at the current levels – MPR: 14% (+2%/-5%); CRR: 22.5% and Liquidity Ratio: 30%.                                       

Nigerian stock market stretches Bull Run, ASI up 254bps                                       

Bolstered by green closes across all key sectors, the Nigerian bourse rose 254bps yesterday, stretching gains to fourteen sessions. We highlight the positive market breadth and strong green closes across key sectors as indication of underlying positive sentiment in the market. We therefore expect a repeat performance in today’s session amidst expectations of further positive corporate earnings releases.

Stock Watch: ZENITHBANK is a stock to keep an eye out for. It currently trades at a one-year high of ₦24.00 after gaining 9% in five consecutive sessions and it has returned 63% ytd. We foresee further demand for the stock as investors await the expected positive H1’17 results.

T-bills trades bullish amidst liquidity mop-up                                      

The CBN conducted an OMO auction yesterday, offering ₦60.0 billion across the 191DTM and 338DTM bills. The apex bank eventually sold ₦45.3 billion across both bills at respective stop rates of 17.945% and 18.550% (effective yields: 19.80% and 22.40%).The T-bills market maintained recent trend and continued to trade bullish yesterday, with buying activities recorded across most maturities in the space. Meanwhile, the bond market continued bearish as yields trended further north. Given the consistent trading pattern across the two spaces in the fixed income market, we foresee another bullish close for the T-bills market and a sustained bearish trading in the bond space.