The Market Today - 29 June 2018
World Bank approves $2.1 billion loans for 2018 Budget
The International Development Association (IDA), the arm of the World Bank in charge of helping the world’s poorest countries, has reportedly approved a total of $2.1 billion in concessionary loans to majorly fund power and climate change projects, and to also improve fiscal transparency in Nigeria. We recall that Nigeria’s ₦9.1 trillion 2018 Budget, which was recently ratified by the Presidency, projects ₦850 billion ($2.8 billion) in foreign borrowings to partly fund the budget. Whilst the delayed budget passage remains a downside to effective implementation, rapidity in accessing external borrowing to fund government spending is a positive development and will be supportive of a swift ramp-up in fiscal stimulus in H2’18.
ASI closes in the red after mixed sector performances
Dragged by another mixed session, the Nigerian equity market lost 61bps yesterday, extending losses to three sessions. We expect the underlying weak sentiment to drive trading today and anticipate a tepid trading session.
Stock Watch: ZENITHBANK has shed 9% over the last eleven sessions. The stock currently trades at a price of N24.90 lower than our target price of N34.22 and has declined 3% YTD, worse than the Banking sector’s flat YTD performance.
CBN maintains loose liquidity stance amidst maturity
In spite of a ₦183 billion maturity, the CBN refrained from conducting an OMO auction today. Boosted by this, Interbank Call rate moderated to 14.50% (previous: 48.33%). Notwithstanding, momentum in the T-bills space was mixed yet again with a bearish tilt, with yields rising 3bps on average. Notably, whilst yields on the 35DTM (-48bps to 12.80%) and 231DTM (-33bps to 13.39%) bills declined, yields on the 7DTM (+77bps to 13.50%) and 105DTM (+37bps to 12.94%) bills advanced. In contrast, trading in the bond space was largely upbeat, with demand observed on most tenors. Yields on benchmark bonds shrank 8bps on average. Notably, yields on the 15.54% FGN FEB 2020 and 14.50% FGN JUL 2021 bonds declined 104bps and 40bps to settle at 12.34% and 13.30% respectively. Barring a mop up at week close, we expect the improvement in system liquidity to support demand across the fixed income market.
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