The Market Today - 7 June 2017
​Current account surplus increases in Q1’17
According to the National Bureau of Statistics, Nigeria’s current account surplus improved further in Q1’17, registering at ₦719 billion (Q4’16: ₦671 billion), a significant improvement on the deficits of ₦253 billion and ₦290 billion recorded in Q1’16 and FY’16 respectively. Improving current account balance is driven by the impact of currency depreciation on export (majorly crude oil) as well as import substitution – which counteracts the effect of currency depreciation on imports. As a result, exports have risen faster that imports – 109% y/y vs 35% y/y. With stronger global oil prices this year (Average Brent price ytd: $53.60/bbl vs. $45.10/bbl in 2016) and domestic crude production on the uptrend (January daily production: 1.87 mbpd, May daily production: 1.98 mbpd), we expect exports to remain buoyant for the rest of 2017 as crude products constitute the largest share of Nigeria’s exports (79%). Meanwhile, we expect improving refinery output (Ytd capacity utilization: 33% vs. 14% in 2016) and a strengthening agriculture sector to weigh on imports, though increased foreign exchange liquidity in recent months could dampen this effect. Overall, we expect even stronger current account numbers as crude exports recover.
Market halts nine-session gaining streak
Following strong profit taking activities across select stocks which had advanced significantly in recent sessions, the Nigerian bourse halted a nine-session bull run, falling 116bps on the day. Despite the red close on the exchange yesterday, we note the rebounding demand at session close. We therefore foresee renewed demand for select stocks today.
Stock Watch: INTBREW gave notice of a merger proposal with Intafact Beverages Limited and Pabod Breweries Limited. The merger between the three Anheuser Busch Inbev subsidiaries was approved by INTBREW’s board on June 2. INTBREW lost 25bps yesterday and has returned 30% ytd.
Liquidity sustains bullish momentum in bills space
The bond market remained muted albeit with modest buying interest observed on select maturities. Meanwhile, buoyant liquidity continued to drive demand in the bills space with yields moderating 15bps on average. Barring further mop ups, we expect liquidity to continue to support buying interest in the bills space whilst the bond market remains relatively quiet.
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