The Market Today - 8 June 2017
₦513 billion spent on debt servicing in Q1’17
According to the Debt Management Office, Nigeria spent ₦474.06 billion to service domestic debt and $127.92 million (₦39.02 billion) to service foreign debt. Total FY’17 debt servicing budget estimate is ₦1.66 trillion, higher than the FY’16 spend of ₦1.23 trillion and FY’15 spend of ₦1.02 billion. The rise in debt servicing spend is a direct consequence of the increase in Federal Government borrowing, the impact of currency devaluation of foreign debt – debt profile rose by ₦7 trillion in two years – as well as higher interest rates in the domestic market in recent times. We recall that planned borrowing in FY’17 is ₦2.3 trillion (Domestic: ₦1.25 trillion, Foreign: ₦1.07 trillion) and ₦750 billion has been raised so far. Therefore, we expect debt servicing spend to remain a significant proportion of government budget going forward even as the government looks to raise more debt in a bid to fund infrastructure gaps.
ASI rebounds at mid-week, up 151bps
With all key sectors save for the Banking sector advancing yesterday, the NSE ASI resumed its bullish trend after Tuesday’s red close, this time recording a 151bps gain. Whilst market sentiment remains high, we note that other heavyweights have advanced significantly in recent sessions and remain susceptible to profit taking today. We therefore expect modest gains amidst mixed trading on the exchange today.
Stock Watch: After rising 69% in a fourteen-session streak, FBNH has declined 10% in the past two sessions. We highlight that the stock now trades around our target price of ₦6.55.
Slight resurgence in bond market?
The bond market remained relatively quiet with slight buying interest observed on select maturities. Meanwhile, the bills market continued bullish, with yields dipping at the mid to long end of the curve. Whilst we foresee cautious trading at market open ahead of the currency sale today, we expect the OMO maturity of ₦73 billion to spur some buying in the T-bills market.
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