08 June 2018 ( Lagos)

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 analysts see this as an attractive area of growth for Nigeria’s energy industry. 

Latest Financial Market Update

Quiet trading session amidst under sale 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%). Following this, Interbank Call rate advanced 17bps to 3.00%. 

Positive Market sentiments, with T-bills possessing a bearish bias.

Sentiment in the T-bills space was mixed albeit with a bearish bias as yields advanced 5bps on average. Notably, while yields on the 28DTM (- 35bps to 13.08%) and 98DTM (-118bps to 11.95%) bills declined, yields on the 84DTM (+27bps to 12.41%) and 252DTM (+56bps to 13.78%) bills advanced. Trading in the bond space was likewise mixed with yields trending in opposite directions. Specifically, buying momentum was weighted towards the short-dated bonds as yield on the 16.00% FGN JUN 2019 bond declined 51bps to settle at 12.03%. Meanwhile, sell offs were concentrated on the long-dated maturities as yields on the 12.1493% FGN JUL 2034 and 16.2499% FGN APR 2037 bonds advanced 4bps and 7bps to 13.53% and 13.54% respectively.

Analysts 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, analysts expect trading in the fixed income space to be quiet with a bearish tilt.

Bulls continue to dominate equity market 

The Nigerian Stock Exchange recorded another positive performance yesterday, rising 158bps after a mid-session spike in DANGCEM. 

The Industrial Goods (+372bps) sector held its spot as the leading gainer following strong showings in WAPCO (+474bps) and DANGCEM (+400bps). Similarly, the Consumer Goods (+251bps) sector closed up, on the back of advances in INTBREW (+381bps), DANGSUGAR (+208bps) and NB (+103bps). The Banking sector notched a 14bps gain after upticks in ETI (+447bps) and GUARANTY (+24bps) overshadowed declines in UBA (-133bps) and ZENITHBANK (-71bps). Meanwhile, the Oil & Gas (-46bps) sector was the sole loser thanks to losses in ETERNA (-496bps) and SEPLAT (-68bps). 

Market breadth remained positive with 30 advances and 20 declines. 

Market Outlook 

Following positive performances in all but one key sector, market sentiment remained positive, with bargain hunting observed on previously beaten down stocks. Thus, analysts 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 the analyst’s ?130.68 target price and has shed 13% YTD, compared to the Consumer Goods sector’s YTD loss of 6%. 

Corporate Disclosures 

Thomas Wyatt Nigeria Plc. notified the Nigerian Stock Exchange, Shareholders and other stakeholders that the Audited Financial Statement of the Company year ended 31 March 2018 will be filed out of the regulatory due date of 30 June 2018 occasioned by unanticipated delays in the audit exercise of the financials. 

Source: Analysts from Vetiva Capital Management Limited.