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The Market Today - 18 July 2018

President Buhari seeks Budget virement                                                            

President Buhari has made a request to the National Assembly to vire ₦229 billion ($750 million) of the ₦9.12 trillion ($30 billion) 2018 Budget passed in June 2018. Early reports suggest that of the virements amount, ₦189 billion would be used to support the Independent National Electoral Commission (INEC) ahead of the 2019 Elections while ₦65 billion would be to reinstate project funding initially cut by the National Assembly. Finally, we note that in the accompanying letter sent to the National Assembly, President Buhari said implementing the 2018 Budget would be “extremely challenging”, a sentiment we attribute to the late passage of the budget and the expected disruptive effect of electioneering on planned expenditure.                                                           

Equity market continues slide on negative sentiment                                                  

Driven by losses across all key sectors, the Nigerian equity market slid 81bps yesterday, dragging YTD return to -3.35%. With market sentiment still weak – indicated by negative market breadth, red closes, weak trade volumes – we anticipate another negative trading session today.                                          

Stock Watch: WEMABANK has released its H1’18 results reporting a top-line of N32 billion (+5% y/y) and bottom-line of N1.5 billion (+29% y/y). The stock saw an 8% jump on the back of their positive results. The stock currently trades at a price of ₦0.68.                                                         

Healthy system liquidity spurs buying in F.I market                                                       

With the CBN holding off on mopping up liquidity, the Interbank Call Rate declined to 7.50% (previous: 9.50%). Meanwhile, the buoyant system liquidity (N265 billion) supported demand in the T-bills space, with yields moderating 23bps on average. Particularly, yields on the 23DTM (-83bps to 10.41%), 100DTM (-39bps to 11.22%) and 177DTM (-23bps to 12.50%) bills declined. In contrast, trading in the bond space was tepid, with yields on benchmark bonds advancing a mere 1bp on average. Whilst sell pressure was observed on the mid-long dated maturities, demand was prevalent on shorter dated tenors. Specifically, while yield on the 15.54% FGN FEB 2020 bond declined 7bps to settle at 13.38%, yield on the 13.98% FGN FEB 2028 bond rose 30bps to settle at 14.14%. Despite the liquidity surplus, we expect a muted trading session in the fixed income space as investors tread cautiously ahead of the T-bills PMA scheduled for today at which the CBN is offering N216 billion across the 91DTM, 182DTM and 364 DTM bills.