The Market Today - 9th March 2017
​Crude oil exports to drive 2017 surplus
We take a deeper look at the Nigeria Q4’16 Trade Report released earlier in the week, wherein current account position returned to a surplus (strongest in six quarters) on the back of a simultaneous jump in exports and moderation in imports. We recall that prior deficits were driven by lower oil prices, currency depreciation (FY’16: c.55%), a fall in exports due to heightened militancy in the Niger Delta region and slowing economic activity. To sustain the Q4’16 improvement in 2017, crude exports remain critical. The improvement in oil prices (Ytd average: $56/bbl, 2016: $45/bbl) as a result of OPEC output cuts enacted at the start of 2017 provides some upside in this regard. Also, oil volumes appear to be on a recovery path (January production: 1.9 mbpd) amidst reduced attacks on pipeline installations. The expected return of the Forcados terminal (c.0.3 mbpd capacity) in H2’17 is a further bonus. Of course, we highlight the latent risk of resurgent militancy in curbing oil production.
NSE ASI slides back into the red, down 54bps
Coming off the rally on Tuesday, the Nigerian bourse pulled back at mid-week as NSE ASI declined 54bps following reversals across all key sectors save for the Consumer Goods sector. Whilst we note the fairly strong appetite for select Consumer Goods stock, we believe the weakened sentiment across other key sectors could keep the NSE ASI suppressed in the session ahead.
Stock Watch: GUARANTY announced a 33% growth in PAT for FY’16, however. Whilst this was largely in line with market expectation, we believe the stock could attract modest buying interest in coming sessions given a ₦1.75 final dividend announcement by the Board of Directors - dividend yield: 7%. Closure date is slated at March 29, 2017.
Modest demand drive yields lower at mid-week
The T-bills market traded mixed with a bullish tilt as yields declined 9bps on average. Meanwhile, the bond market remained relatively quiet as yields remained mostly unchanged on the short-mid end of the space. We expect the modest demand, particularly on the short of the space to filter into today’s trading session barring any intervention by the CBN.
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