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The Market Today - 31 October 2017

Nigeria signs nuclear power deal with Russia                                                    

Federal Government has signed a Project Development Agreement with Rosatom, Russia’s state-owned nuclear company to build and operate a nuclear power plant and research center in Nigeria. With Nigeria’s current installed power generation capacity at 12,500MW and average power generation below 4,000MW, there is a crucial need to ramp up alternative means of power generation in a bid to bridge the demand gap which was estimated at about 31,210MW as at 2015. Whilst we note the need to create additional capacity, we highlight that a major bane to electricity distribution in Nigeria is transmission capacity, currently estimated at c.7200 MW. This under-capacity has often led to electricity wastage, with Egbin power plant (Nigeria’s largest) reporting output loss of 50% at some points due to inadequate transmission facilities. It is yet unclear how the nuclear plant would tie into the current system. That said, we expect more capital investment into the entire value chain of the power sector in the medium to long run.                                                

NSE ASI inches into the green at week open                                                      

As earnings continued to trickle in, the Nigerian bourse recorded a marginally positive close – ASI up 6bps. We expect another day of mixed trading as more company earnings trickle in.                                                         

Stock Watch: NESTLE released its 9M’17 earnings, with revenue coming in at ₦185 billion (9M’16: ₦129 billion). Though PAT came in at ₦23 billion for the period (9M’16: ₦485 million), it lagged our estimate by 9%. The stock currently trades at ₦1,230.00 and has returned 52% ytd.                                                                

Bonds market records flat trading session                                                          

The CBN conducted another OMO auction yesterday, offering ₦20 billion and ₦30 billion across the 115DTM and 192DTM bills respectively. The apex bank sold c.₦9 billion across both bills at respective stop rates of 16.00% and 17.80% (effective yields: 16.85% and 19.64%). The T-bills market was largely bullish as yields moderated 12bps on average. . In contrast, trading across the bonds space was largely muted as benchmark bonds closed flat albeit with a slightly bullish bias. We expect persistently tight liquidity to constrain further buying sentiment on T-bills and another mixed session in the bond space as investors remain cautious.