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The Market Today - 27 March 2018

Export route provides volume upside for Cement Industry                                     

Consolidating on the ramp-up in cement exports in 2016, Cement Company of Northern Nigeria (CCNN) reportedly exported over ₦154 million worth of cement (estimated volume of c.3700 tonnes) to neighboring countries in 2017. We note that this follows the trend observed amongst the cement majors, with Lafarge Africa and Dangote Cement Nigeria already establishing themselves as export hubs to West African countries. This comes as a reversal from the previous trend few years ago when Nigeria still had to partly rely on importation of cement to meet up with local demand. At the center of the renaissance has been key FG policies, such as the pioneer tax status scheme, that encouraged new investments in the sector as well as restriction of foreign exchange supply for cement importation. Nurtured by these policies, the industry has grown sufficiently to meet local demand (FY’17 estimate: 18 MT) with ample spare capacity (Industry capacity: c.44 MT) to supply cement in neighboring nations. The evolution of the cement industry serves as a pointer to the potential of other nascent sectors in the Nigerian economy wherewith supportive government policies and an enabling environment can encourage investment and accelerate growth.                           

Nigerian bourse starts the week with a marginal loss                                              

The Nigerian Stock Exchange started the week with a marginal loss extending the pullback at the end of last week; ASI down 4bps. While market traded up most of the day, a last minute dip in GUARANTY dragged the bourse into negative territory at the close of market. We expect another mixed session today and foresee continued interest in Tier-1 banking names.           

Stock Watch: GLAXOSMITH has gained 34% over the last nine sessions. The company recently declared a special dividend of ₦7.10 per share, while also declaring a final dividend of ₦0.40 per share for FY’17. The stock currently trades at 12-month high of ₦28.50 and has returned 30% ytd.                                 

Sentiment in Fixed Income market mixed at week open                                          

The Central Bank of Nigeria refrained from conducting an OMO auction yesterday, despite this, Interbank Call rate advanced to 43.33% (previous: 20.83%) in the session. Sentiment in the T-bills market was majorly mixed with yields trending in opposite directions and declining 3bps on average. Meanwhile, trading in the bond market was subdued with mild sell pressure weighted towards the short-mid end of the curve – yields on benchmark bonds advanced 1bp on average. Given that system liquidity is currently tightened (evidenced by Interbank Call rate of 43%), we foresee limited buying in the fixed income market today. Meanwhile, we expect a liquidity inflow from FAAC allocations later this week.