The Market Today - 27 September 2018

Labour unions strike over minimum wage hike The Nigeria Labour Congress (NLC) has directed all members and affiliate unions to begin a nationwide strike today. Workers are demanding a minimum wage increase from ₦18,000/month to over ₦50,000/month, pointing to Federal Government (FG) promises that the wage would be reviewed upwards. Despite initially indicating that a new minimum wage would be in effect by the end of the year, the FG has stalled and a breakdown in the latest talks has led to the strikes. Although a minimum wage hike would be a boon to Nigerian workers—and could stimulate aggregate demand—we note Nigeria’s still precarious fiscal position, with data from the 2017 Budget Implementation report showing that personnel costs swallowed 70% of 2017 government revenues.  Trading turns negative as sellers dominate It was a negative day on the exchange as sell-side activity dominated to send the market 46bps down. Despite sustained interest in Financial stocks, all other key sectors closed in negative territory.  Market breadth turned negative with 16 advances and 24 declines. The market continues to show signs of bargain-hunting, especially in the Banking sector, however, overall sentiment remains negative, therefore we anticipate another negative session. Stock Watch: Despite the recent interest on financial stocks on the exchange, UNITYBNK has shed 10% of its value in the last 7 sessions to settle at ₦0.84. Nonetheless, the stock has returned 58% ytd and is outperforming other banking stocks so far this year. Market turns mixed amid bond auction The bond auction conducted yesterday saw a sale of ₦97 billion (₦90 billion offered) across all tenors. ₦17 billion was sold on the 12.75% FGN APR 2023 bond at 15.00%, ₦7 billion was sold on the 13.53% FGN MAR 2025 at 15.15% ₦72 billion was sold on the 13.98% FGN FEB 2028 bond at 15.2459%. In addition, system liquidity remained tight at following the Paris refund reversal. However, the Interbank call rate declined 133bps to settle at 16.67%. The fixed income market traded mixed yesterday amid the bond auction as yields trended in opposite directions. The T-bills market saw a mildly positive tilt as yields declined a mere 1bp on average. Notably, yields on the 22DTM bill advanced 89bps to 12.74% while the 141DTM bill declined 41bps to 13.21%. The bond market had a more bearish tilt as yields on benchmark bonds advanced 1bp on average. Whilst the yield on the 14.50% FGN JUL 2021 bond moderated 13bps to close at 15.04%, the yield on the 14.20% FGN MAR 2024 bond advanced 9bps to close at 15.13%. We highlight that stop rates at yesterday’s auction came roughly in line with secondary market but note recent tepid sentiment as a result of liquidity constraints. Amid this, we foresee weak buy sentiment in today’s session.