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The Market Today - 27 February 2018

Oil sector to remain toast of Nigeria yet again?                                                

The National Bureau of Statistics will be releasing Q4’17 GDP data today. We recall that the Q3’17 GDP growth (+1.4% y/y) though below market expectation, came in higher than the 0.7% notched in Q2’17, with the improvement in the oil sector providing the main support. The oil sector (+26% y/y) was buoyed by the steady ramp up in oil production volumes, with Q3’17 hitting a quarterly average production of 2.03mb/d versus Q3’16 average of 1.61 mb/d. Away from the oil sector however, the economy seemed to retain a sluggish pace, with non-oil sector receding by 0.8% over the quarter. Meanwhile, looking ahead to Q4’17, we anticipate a slowdown in economic growth to 1.0% y/y, translating to FY’17 growth of 0.6% y/y (2016: -1.5% y/y), mainly on the back of the persistent weakness in the non-oil sector and a higher oil production base from Q4’16 (average production: 1.76 mb/d vs. 1.61 mb/d in Q3’16). The oil sector would remain the saving grace even as oil production remained stable over the quarter. The combination of still-rising oil production, receding inflation, and strengthening consumer wallets should further boost the economy in 2018. Meanwhile, as we anticipate monetary easing towards the end of the first half of 2018, we see this supporting aggregate demand during the year – propelling the economy to annual growth of 2.0% in 2018 (IMF: 1.9%, MTEF: 3.5%).                                                            

Choppy trading leaves ASI flat at week open                                                     

The Nigeria Stock Exchange opened the week on a choppy note as mixed closes across key sectors left the ASI relatively flat. Whilst we believe overall market sentiment remains mixed with a mildly negative bias, we expect market reaction to further earnings releases to moderately steer trading activities in today’s session. 

Stock Watch: Since the announcement made on the 20th of February, 2018 that JAPAULOIL will receive $350 million in funding from an American based private equity firm Milost Global Inc., the stock has rallied 31% and currently trades at ₦0.46 (Ytd: -8%).                                                        

T-bills open the week buoyant on improved liquidity                                                   

The T-bills market began the week positive as healthy liquidity conditions spurred buying. In particular, yields on the 94DTM and 178DTM bills declined 65bps and 24bps to settle at 14.35% and 15.34% respectively. Meanwhile, yields on benchmark bond were flat on average during a quiet trading day. Whilst yield on the 16.2884% FGN MAR 2027 bond advanced 7bps to 13.75%, yields on the 15.44% FGN FEB 2020 and 14.20% FGN MAR 2024 bonds moderated 4ps and 3bps to 13.96% and 13.71% respectively. Barring any CBN liquidity mop up, demand in the fixed income market should be supported by relatively healthy liquidity and today’s incoming FAAC disbursement.