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The Market Today - 26 June 2018

Herdsmen clashes pose threat to agriculture and livelihoods                                                   

The increasing scarcity of fertile land due to climate change and population growth is fueling conflicts in Nigeria. Violent clashes between farmers and semi-nomadic herders in the Middle Belt have led to the loss of lives and affected agriculture output in the region. According to media reports, at least 86 people were killed recently in Plateau State as the intermittent conflict reached a new crescendo. We note that Nigeria’s agriculture sector grew by just 3.0% y/y in the first quarter of 2018 (Vetiva estimate: 3.8%), the slowest growth in four years, as the conflict began to weigh on supplies. In addition, average food prices rose by 1.1% m/m in May, the quickest pace since mid-2017. The prevailing crisis and the difficulty in quelling the violence portends tough times for Nigeria’s agriculture sector in the near-term, even as it thrusts thousands of Nigeria’s deeper into insecurity.                                                               

DANGCEM lifts the bourse at week open                                                            

Notwithstanding the array of red closes across key sectors, the Nigerian equity market closed the session 34bps higher, thanks to a mid-session spike in market behemoth, DANGCEM. Save for the uptick in heavyweight, DANGCEM, sentiment in the market is still largely bearish. Thus we foresee another negative performance by the ASI today.                                                        

Stock Watch: FCMB has shed 9% over the last eight sessions. The stock currently trades at a price of N2.11 and has returned 43% YTD, compared to the Banking sector’s 1% YTD return.                                                     

Mixed sentiment persists in fixed income market                                                          

The CBN conducted an OMO auction at the start of the week, offering ₦250 billion and selling ₦207 billion across the 87DTM and 213DTM bills at respective stop rates of 11.05% and 12.15% (effective yields: 11.35% and 13.08%). Meanwhile, trading in the T-bills market turned mixed with a positive tilt, with yields moderating 3bps on average. However, sentiment in the bond space remained negative, with yields on benchmark bonds advancing 11bps on average as sell pressure was weighted towards shorter tenors. Driven by weak investor sentiment, we expect mixed trading to persist in the T-bills market today. Meanwhile, we anticipate tepid trading in the bond space ahead of tomorrow’s bond PMA.