The Market Today - 20 December 2018

Unemployment rate rises, President presents 2019 budget                                                        

The National Bureau of Statistics in its unemployment and underemployment report released yesterday said that Nigeria’s rate of unemployment has increased 28% y/y to 23.1% of the work force. The bureau reported a y/y rise in the working age population (15 to 64 years) of 4% y/y to 115.5 million but noted that the number of people in employment had only increased 0.4% y/y to 68.7 million. The report was released on the same day President Buhari appeared before the National Assembly to present the ₦8.8 trillion 2019 budget. As expected, the spending plan assumes a crude production plan of 2.3 mb/d at an oil price of $60/bbl and an exchange rate of ₦305 to $1. The budget allocates ₦2.3 trillion to capital expenditure and ₦2.1 trillion for debt servicing. We note the potential of actual revenues falling below the budgeted estimate given the expected bearish trend in oil prices in the coming year, we forecast a price range of $50 - $60/bbl for Brent Crude in 2019                                                     

ASI reverses performance, closes in the red                                                       

Resuming the negative trend, the Nigerian Bourse lost 35bps in yesterday’s session with the Consumer Goods sector posting the only positive performance. Market turnover remained high, recording ₦4 billion worth of trades amid persistent activity on ZENITHBANK. Market breadth remained positive with 23 advances and 19 declines. With market sentiment remaining bearish despite positive market breadth and elevated activity levels, we foresee another negative trading session today. However, we do note the potential for increased investor interest in depressed stocks as the year reaches a close.                               

Stock Watch: After eleven quiet sessions, UNITYBNK has gained 16% in the last two sessions. The stock currently trades at ₦0.80, outperforming its year-open price by 51% (Banking Sector: -15%).                         

DMO sells only ₦6 billion at bond auction, lowers rates                                               

"The DMO sold ₦6 billion at yesterday’s auction (₦70 billion offered) across the 5-year, 7-year and 10-year bonds at stop rates of 15.25%, 15.50% and 15.50% respectively, with the stop rate on the 10-yr bond declining from 15.83% in November. Continuing with recent OMO trend, the CBN sold c.₦40 billion (₦100 billion offered) on the 99DTM, 211DTM and 309DTM bills at stop rates of 11.90%, 13.50% and 15.00% respectively (effective yields: 12.30%, 14.64% and 17.18%). Amid this, the Interbank Call rate declined 238bps to settle at 21.71%. Following the lower stop rates and weak sale at the bond auction yesterday, we anticipate stronger demand in the bond market as investors turn to the secondary market.