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The Market Today - 8 June 2018

LNG potential offers Nigeria a stake in global energy future                                                      

Nigeria’s dependence on crude oil for government revenues and export earnings is well-documented, but another energy resource may be a part-remedy for this. Nigeria is the world’s 4th largest exporter of liquified natural gas (LNG) and has the largest LNG reserves (5.7 trillion cubic meters) on the continent. Despite this, the resource remains relatively under-utilized in the country, a counter-productive trend given the gradual global shift from crude oil and other dirty energy sources. One of the major operators in the industry, Nigeria LNG Ltd. would decide this year whether to invest more than $10 billion to boost capacity by 40%, which would increase the export capacity of the Bonny Island terminal to 66 million cubic meters (46 million cubic meters shipped in 2017). Global LNG demand is on the rise – projected to double to 1.28 billion cubic meters by 2030 – and we see this as an attractive area of growth for Nigeria’s energy industry.                                                           

Bulls continue to dominate equity market                                                         

The Nigerian Stock Exchange recorded another positive performance yesterday, rising 158bps after a mid-session spike in DANGCEM. Following positive performances in all but one key sector, market sentiment remained positive, with bargain hunting observed on previously beaten down stocks. Thus, we foresee continued bullish trading in today’s session.                                                               

Stock Watch: NB has advanced 15% to ₦118.00 in the last four sessions, from a year low of ₦103.00 after eights straight sessions of declines. The stock trades below our ₦130.68 target price and has shed 13% YTD, compared to the Consumer Goods sector’s YTD loss of 6%.                                                            

Quiet trading session amidst undersale at OMO auction                                                             

The CBN conducted an OMO auction yesterday, selling N191 billion (offer: N400 billion) across the 112DTM and 238DTM bills at respective stop rates of 11.05% and 12.15% (effective yields: 11.44% and 13.20%). Sentiment in the T-bills space was mixed albeit with a bearish bias as yields advanced 5bps on average. Trading in the bond space was likewise mixed with yields trending in opposite directions. Specifically, buying momentum was weighted towards the short-dated bonds. Meanwhile, sell offs were concentrated on the long-dated maturities. We foresee the CBN conducting another OMO auction at week close in line with the recent pattern of OMO auctions at the end of the week. With this, we expect trading in the fixed income space to be quiet with a bearish tilt.