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The Market Today - 3 August 2017

Weak government revenues may curtail 2017 spending                                          

Nigeria’s Minister of Budget and National Planning, Udoma Udo Udoma, recently suggested that the country may consider a downward adjustment to 2017 expenditure projections rather than resort to extra borrowing. Amidst a tepid recovery in Federal Government revenues, budget deficit registered at ₦1.8 trillion in the first five months of the year, over 75% of initially projected budget deficit for 2017. We note that downward revisions to government expenditure would most likely hit capital expenditure the hardest. Fiscal stimulus is required to recharge Nigeria’s economy following the recession which has lasted till at least Q1’17. In a recent visit to the country, the International Monetary Fund (IMF) maintained its 0.8% GDP growth estimate (Vetiva: 2.0%) and reiterated rising fiscal pressures as a threat to Nigeria’s economic recovery.                                  

Blue chips lift the ASI 50bps                                            

Despite trading lower for most of the session, the Nigerian equity market eked out a modest 50bps gain on the back of a late recovery in DANGCEM.                          

Stock Watch: CILEASING has gained 52% over the last ten trading sessions, rallying to a record high of ₦0.88. The company released impressive H1’17 results, showing a 281% growth in PAT to ₦508 million. The stock is now up 76% ytd.                                    

Sentiment in fixed income market remains lukewarm                                              

The CBN conducted a Primary Market Auction yesterday, offering ₦229.14 billion and selling ₦306.97 billion across the 91DTM, 182DTM and 364DTM bills at stop rates of 13.422%, 17.400% and 18.530% (effective yields: 13.89%, 19.05% and 22.73%). With the three-day suspension of the two-way quote system still in place as at yesterday’s trading session, the lull in the fixed income market persisted. We foresee increased activity in the fixed income market broadly today as it marks the first trading session after the suspension. However we note that with yields at yesterday’s PMA settling at expected levels, we do not foresee significant buying in the T-bills market, as participants would have filled their demand at the PMA.