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The Market Today - 27 June 2018

Q2’18 Credit Conditions Survey shows improved environment                                                

According to the Central Bank of Nigeria (CBN) credit conditions survey, lending conditions improved in the second quarter of the year. The CBN revealed that both secured and unsecured credit to households increased q/q, supported by slightly healthier banking liquidity and strengthening risk appetite in the economy. Amid this, demand for credit also ticked up during the period, an understandable trend given the gradual improvements observed in the Nigerian economy. However, the apex bank revealed that loan pricing remained flat as the spread between lending rates and the monetary policy rate stayed unchanged q/q. We highlight that any improvement in Nigeria’s credit market would be a boon for the economy, and we expect this trend to persist in H2’18 amid a healthier macroeconomic picture.               

Flat close amidst mixed trading on the bourse                                                 

Amidst mixed closes across the key sectors, the Nigerian bourse traded sideways, closing flat as the ASI dipped 1bp. Although trading pattern was mixed yesterday underlying sentiment remained negative. As such, we expect another session of bearish trading today.                                                             

Stock Watch: NEM has gained 27% in the last nine sessions. The stock currently trades at a year high of N3.34 and has returned 101% YTD, compared to the Insurance sector’s 9% YTD return. It is currently the second best performing stock on the exchange.                                                                

Bears hold sway in the T-bills space                                                       

Despite the absence of a liquidity mop-up by the CBN, Interbank Call rate advanced to 31.57% (previous: 11.33%). Sentiment in the T-bills space was markedly bearish, with yields advancing 11bps on average. Meanwhile, sentiment in the bond space turned mixed with a positive bias, with demand weighted on shorter tenors. All in, yields moderated 3bps on average across benchmark bonds. We anticipate further mixed trading in the Fixed Income market driven by liquidity contraints. Also, the DMO would be conducting a Primary Market Auction today, offering N60 billion across the 5-yr, 7-yr and 10-yr bonds.