FREE

The Market Today - 29 March 2019

President Buhari launches Pension Plan for the informal sector                                                              

The President yesterday, formally launched a pension plan initiative of the National Pension Commission (PenCom) called the Micro Pension Plan (MPP). The MPP is expected to significantly expand pension coverage to the informal sector by including self-employed persons and organizations with less than three staff. This is in line with the goal of the Federal Government to achieve financial inclusion and create a diversified and inclusive economy. The contributors may make contributions daily, weekly, monthly or as may be convenient to them. Every contribution will also be split into two, comprising 40% for contingent withdrawal and 60% for retirement benefits. Given the size of the informal sector (estimated to contribute 41% to the Nigerian economy as at 2015), this initiative holds significant potential to considerably increase current total pension assets of the country which stood at ₦8.3 trillion as of Q3’18. However, we expect the efficacy of this policy to be hinged on robust implementation as well as adequate sensitization of informal sector participants on the benefits of this initiative.                  

Market closes flat despite Industrials sell-off                                                   

The NSE ASI traded sideways, inching up 1bp despite negative closes in three of four key sectors. Although sentiment remained negative, evidenced by negative market breadth, market turnover improved to ₦2.8 billion, albeit below the 30-day average (₦3.1 billion). Market breadth remained negative with 13 advances to 17 declines. Despite the flat close, poor investor sentiment persistent. Thus, we expect market activity to remain mixed with a negative tilt.                                                      

Stock Watch: Where other banking stocks continue to underperform, GUARANTY has remained the most resilient, gaining 250bps in yesterday’s session to close at ₦36.90. The tier I bank has returned 7% YTD and currently trades 23% below Consensus target price of ₦47.70%.                                                

Market trades quietly positive as CBN refrains from mop-up                                                    

In spite of the ₦309 billion system liquidity at market open, the CBN once again held off from conducting an OMO auction, even as ₦61 billion hit the system via OMO maturities. Supported by the net inflow, the Interbank Call rate declined 507bps to settle at 10.07%. Meanwhile, although trading in the T-bills space was largely quiet, yields declined 3bps on average, with mild buy-side activity observed at the mid-to-longer end. Concurrently, the bond market also traded positive, with average benchmark yields declining 11bps once again. Barring an OMO auction today, we expect the buoyant liquidity to support demand in the T-bills space. We also foresee mild yield adjustment in the bond space, as investors continue to buy following the recent bond auction.