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The Market Today - 30 January 2018

Nigeria plans $5.8 Billion power project for 2018                                                             

In line with the aim of expanding the nation’s power generating capacity, the Power, Works and Housing Minister Babatunde Fashola revealed plans to start build a $5.8 billion hydro-power plant in 2018. Pending an agreement, the project would be 85% financed and fully constructed by the China Export-Import Bank, with the Federal Government providing 15% in counterpart funding. The project is expected to take about five years and expand Nigeria’s generation capacity by just over 3000MW. We consider this a positive development, and one consistent with recent efforts to boost Nigeria’s power generation – now estimated at about 7000MW. Nevertheless, we highlight the need to extend efforts to other parts of the power value chain, particularly power transmission. We note that in line with this, the Federal Government is looking to partner with private companies to invest in mini-grid projects to strengthen the country’s transmission network.                                                              

Equity market opens to bullish sentiment, ASI up 122bps                                                           

Following the positive close at the end of last week, positive sentiment filtered into the beginning of the week as the Nigerian bourse gained 122bps on the day. Though most of yesterday’s trading was choppy (visible from the intraday chart), market sentiment ultimately remained bullish, notable in the widely positive market breadth. As such, we expect the positive sentiment to persist in today’s session and foresee another green close.                                                     

Stock Watch: Coming off a five-year high of ₦54.71, GUARANTY has shed 11% over the last six sessions. The stock currently trades at ₦48.70, below Vetiva’s target price of ₦53.48 and has returned 20% ytd.       

FI market begins week with mixed trading                                                         

Though the CBN did not conduct an OMO auction yesterday, the Interbank Call rate advanced 133bps to 5.83%. The bond market commenced the week with mixed trading as buying at the short end was tempered by sell pressure on mid to long-dated maturities. Trading in T-bills market was similarly mixed albeit with a slightly bearish tilt as yields advanced 3bps on average. Amid a general expectation of lower yields in the medium-term, we expect demand to strengthen in the fixed income market today – barring any CBN liquidity mop up.