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The Market Today - 28 February 2018

2.4% GDP growth forecast for 2018
Following the 0.8% year-on-year (y/y) growth posted in 2017 as the country exited recession (2016 GDP growth: -1.6% y/y), we expect Nigeria’s economy to grow by 2.4% y/y in 2018. This view is driven by a positive outlook for the oil sector given the recovery in production volumes (2017: 1.88 mb/d, 2018F: 2.05 mb/d). Also, we anticipate a minor recovery across the manufacturing as services sectors, supported by the combined weight of lower inflation and lower interest rates, as well as continued stability in the foreign exchange market and another dose of fiscal stimulus. The primary headwind to this outlook stems from heightened political instability and insecurity ahead of the 2019 Elections. For reference, the International Monetary Fund and World Bank project Nigeria’s economy to grow by 1.9% y/y and 2.6% y/y respectively, whilst the Medium-Term Expenditure Framework forecasts growth of 3.5% for the year. Meanwhile, our bear and bull growth projections are 0.7% y/y and 3.2% y/y respectively.

NSE stutters to red close on bearish trading day
The Nigerian bourse closed in negative territory yesterday, with most key sectors closing in the red, as the NSE ASI declined 66bps. Market sentiment was broadly bearish, seen in widely negative market breadth and down-trending intraday trading. We foresee a similar start to trading today, but highlight the possibility of market being swayed by positive earnings releases.

Stock Watch: SEPLAT released FY’17 earnings this morning, with all line items printing ahead of Vetiva estimates. The upstream oil & gas company also reported FY’17 profit of ₦81 billion compared to a ₦45 billion loss in 2016. The stock has returned 5% ytd.

T-bill sentiment turns amid liquidity mop up
The CBN resumed its OMO auctions yesterday, offering ₦350 billion on the 93DTM and 254DTM bills. Whilst no sale was made on the shorter dated bill, the apex bank sold ₦250 billion on the longer dated bill at a stop rate of 14.40% (effective yield: 16.00%). Sentiment in the T-bills space turned a bit sour amid the liquidity mop up as yields advanced 5bps on average. Meanwhile, the bond market was relatively quiet once again with no change on average in the yields of benchmark maturities. Trading sentiment would be guided by activities at today’s primary market auction where the CBN would offer ₦260 billion across the 91DTM, 182DTM and 364DTM bills. We expect stronger interest on the longer-dated bill given its lack of supply in the secondary market at present.