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The Market Today - 28 September 2018

Oil exports to reach six-month high in November                                                           

Nigerian oil exports are set to reach their highest level in six months in November. According to loading programmes, this is due in large part to an increase in supply of the four largest crude grades. Total loadings will rise to 1.88 million/bpd from October’s planned 1.65 million/bpd, a 17% y/y increase from last November. Exports on Forcados, Bonga, Bonny Light and Qua Iboe are set to rise to 822,967 bpd in November, the largest export programme for the four since June. Following the lifting of the force majeure on Bonny Light Export in July, production has increased steadily, however, Nigerian oil production has not met its target of producing 2.2 million bpd this year with production falling as low as 1.5 million bpd in June. With Brent Crude prices surpassing $80 per barrel, we believe that it is essential for the sake of oil revenue that production levels continue to improve.                                                     

Negative activity persists, bourse slides further                                                              

The Nigerian equity market slid a further 61bps yesterday, with three of the four key sectors closing in the red. Market activity also remained weak, with turnover coming in at ₦2.7 billion, as tepid sentiment persisted.  Market breadth remained negative with 13 advances and 21 declines. We note the current tepid sentiment pervading the equity market, and expect this sentiment to be carried on to week close. However, we highlight the favourable pricing of select investor favorites and anticipate a bit of bargain hunting to temper the current tepid mood.                                                         

"Stock Watch: UACN has gained 20% in the last 8 sessions to settle at ₦11.85. The stock is trailing its year-open value by 30% and has a target price of ₦20.86.                                               

Mixed trading sentiment permeates fixed income market                                                         

"Following a ₦261 billion OMO maturity, system liquidity rose to c.₦378 billion. Consequently, the Interbank call rate declined from 16.67% to 5.00%. Meanwhile, trading stayed mixed in the T-bills market yesterday, albeit with yields advancing 5bps on average across the space. Whilst the 7DTM bill advanced 115bps to settle at 13.00%, the 84DTM bill declined 27bps to settle at 12.44%. In contrast, trading was positive in the bond market, with benchmark yields declining 8bps on average. Notably, yields on the 16.2499% FGN APR 2037 bond and 12.50% FGN JAN 2026 bond moderated 21bps and 14bps to close at 15.22% and 15.18% respectively. Following Thursday’s liquidity injection, we see an increased probability of a follow-on OMO auction from the CBN at week close. That said, we expect trading to stay mixed across the FI market as liquidity remains relatively healthy.