21 June 2018 ( Lagos ) :President Buhari signed the 2018 Budget into law yesterday, drawing a close to the most drawn-out budget saga in the democratic era in recent years, with the budget signed over six months after it was first summited to the National Assembly. We note that the most recent delay stemmed from alterations made to the budget by the National Assembly, most notably in hiking planned expenditure by N 500 billion to N 9.1 trillion. 

President Buhari spoke out against the changes made by the legislature, highlighting the range and importance of altered projects, and the effect such late changes would have on budget execution. Whilst we are pleased that the budget has finally been passed, we are perturbed by the deteriorating relationship between the Executive and Legislature in the run up to the 2019 elections. 

Financial Market Update

Tepid trading in fixed income market 

The CBN conducted a Primary Market Auction yesterday offering N66 billion and selling N39 billion across the 91DTM, 182DTM and 364DTM bills at respective stop rates of 10.00%, 10.30% and 11.50%, the same rates as the last PMA. Amidst this, Interbank call rate advanced to 12.50% (previous: 9.83%). 

Meanwhile, trading across the T-bills market was mixed with a bearish bias, with yields advancing 3bps on average. In particular, whilst yields on the 134DTM (-60bps to 12.24%) and 267DTM (-50bps to 13.36%) bills declined, yields on the 15DTM (+99bps to 12.30%) and 92DTM (+46bps to 12.19%) bills advanced. On the other hand, trading in the bond space was very quiet, with yields on benchmark bonds closing flat on average. The only material change was observed on the 16.2499% FGN APR 2037 bond, which advanced 18bps to settle at 13.83%. 

In line with recent trend, analysts anticipate an OMO auction as N378 billion hits the system via an OMO maturity. Thus, they expect mixed trading in the market today. 

Losses soften at mid-week 

The Nigerian bourse shed 15bps in a mixed session yesterday, with all but one key sector closing in the red. 

The Banking (+20bps) sector was the sole gainer on the exchange yesterday, after sizeable advances in ZENITHBANK (+196bps), UBA (+142bps) and ETI (+100bps) outweighed declines in UBN (-420bps) and GUARANTY (-85bps). 

Meanwhile, the Oil & Gas (-236bps) sector shed the most points after a dip in SEPLAT (-499bps) overshadowed gains in ETERNA (+893bps) and FO (+185bps). Likewise, the Consumer Goods (-25bps) and Industrial Goods (-13bps) sectors closed in the red, with losses in DANGFLOUR (-142bps), NB (-100bps) and CCNN (-308bps) weighing on both sectors. 

Market breadth turned positive with 23 advances and 19 declines. 

Market Outlook 

In spite of yesterday’s red close, market indicators suggested a mixed sentiment in the market – positive market breadth, red closes across key sectors and choppy intraday trading. Analysts foresee another mixed session in todays session. 

Stock Watch

JAPAULOIL has gained 105% over the last twelve sessions. The stock currently trades at a price of N0.43 and has declined 14% YTD, compared to the positive 3% YTD return for the Oil & Gas sector. 

Company Disclosure

Seplat announced that the Board of Director of the company will meet to discuss the Half Year Financial Results on Thursday, 19th July, 2018 as the SEPLAT London office. 

Ekocorp Plc announced that an Extraordinary General Meeting of the company will be held at 11.30 am on Thursday 5, July, 2018 at Lagos Champer of Commerce and Industry Conference and exhibition Centre. 

The Board of Directors of UAC of Nigeria Plc announced that at the Annual General Meeting of the Company held on Wednesday June 20, 2018, the share holders approved the sum of N1,872,842,776.00, that is N0.65 per ordinary share was approved as dividend for the year ended 31st December, 2018. 

Source: Analysts from Vetiva Capital Management.