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The Market Today - 29 September 2017

Nigeria seeks to raise $5.5 billion external debt by year-end                                                     

In a bid to reduce its finance cost and finance fiscal activities, the Federal Government of Nigeria could sell as much as $5.5 billion in Eurobonds by the end of the year. According to the Director General of the Debt Management Office, Patience Oniha, the debt raise would come in two tranches; the first being a $2.5 billion in October as part of planned borrowing to fund the 2017 budget and $3 billion before the end of the year to refinance naira-denominated short-term debt. We note that the Federal Government raised $1.5 billion in Eurobonds in the first half of the year and increased efforts to ramp up foreign borrowing are in line with its plan to diversify its debt portfolio towards long-term external debt. We consider this a positive development as government borrowing continues to crowd out credit to the private sector in the domestic debt market. However, we highlight the inevitable currency risk that accompanies external borrowing. Finally, we are cautiously optimistic that successful funding efforts would strengthen 2017 budget execution and further spur Nigeria’s economic recovery.                                                             

Large Cap stocks lift ASI up 93bps                                                            

Following gains in large cap stocks, the Nigerian bourse sustained positive trend with the NSE ASI up 93bps. Following recent selloffs, demand has resurfaced on a number of large cap stocks. Consequently, we anticipate another positive session at week close.                                                  

Stock Watch: WAPCO released the terms of its Rights Issue yesterday with the Rights Price of ₦42.50 coming at a discount to current market price of ₦49.78. Following the announcement, the stock gained 84bps and brining its ytd return to 22%.                                                  

Bullish sentiment dominates bond market following PMA                                                         

Ahead of a N123 billion OMO inflow yesterday, the CBN conducted an OMO auction, offering ₦10 billion and ₦50 billion on the 98DTM and 196DTM bills respectively. Supported by the net cash inflow, Interbank Call rate declined 966bps to 13.67%. In the currency market, the naira appreciated ₦0.04 at the I&E FX window to close at ₦359.96. The T-bills market was mixed as yields trended in opposite directions. Notably, whilst yields on the 21DTM and 28DTM bills advanced 78bps and 39bps to settle at 15.07% and 16.94% respectively, yields on the 126DTM and 272DTM bills declined 54bps and 39bps to settle at 19.71% and 19.26% respectively. Amidst continued OMO auctions, we expect buying to remain subdued in the T-bills market. However, we maintain our bullish outlook for the bond market as yields continue to moderate in anticipation of lower rates in the medium to long term.