Market Watch

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…for the week ended February  24, 2017

Nigeria’s external buffer received a further boost as foreign exchange reserves increased week-on-week by 1.28 per cent to & 29.37bn as of Wednesday, February 22. The country’s external reserves   increased year-to-date by 13.65 per cent or $3.53bn, occasioned by increased domestic crude oil production, an improvement from about 1.8 million barrels per day in December 2016 to about 2.00 million barrels per day currently, coupled with recovery in global crude oil prices.

The weekly boost in the external sector followed increase in global crude oil prices, with the ICE Brent crude oil price and OPEC’s reference basket price appreciating by 1.18 per cent and 1.52 per cent to $56.47 a barrel and &53.95 a barrel, respectively as of Thursday, February 23, 2017. Earlier in the week, on Monday, the Central Bank of Nigeria reviewed its foreign exchange rate policy in order to increase the availability of foreign exchange in the economy.

Equity market – Listed securities on NSE

The broad index (NSE ASI) vacillated during the week, owing to bargain hunting as well as profit-taking activities by investors. Week-on-week, the NSE All-Share Index and market capitalisation appreciated marginally by 0.34 per cent (week-on-week) to close at 25,250.37 points and N8.738tn, respectively. With this, the NSE ASI has now delivered a year-to-date return of -6.04 per cent.

A turnover of 765.656 billion shares worth N9.717bn in 12,468 deals were traded in the past week by investors in contrast to a total of 1.073 billion shares valued at N8.608bn that exchanged hands in the previous week in 14,486 deals.

Elsewhere, Transcorp Hotels Plc (12 months, December 2016) recorded a 9.53 per cent increase in revenue to N15.31bn and recorded N4.095bn in profit after tax representing a 17.10 per cent increase from the previous period.

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In the coming week, we expect a mix of bargain hunting and profit-taking activities by investors.

NASD unlisted securities

The NASD OTC market retreated from the loss recorded the previous week as the twin market gauges closed in the green. Consequently, the Unlisted Securities Index and market capitalisation appreciated significantly by 0.67 per cent to close the week at 588.11 points and N397.99bn, respectively.

Money market

Liquidity at the interbank market tightened at the end of the week due to OMO and bond auction. Consequently, the OBB and Overnight rates opened at 16 per cent but rose to close at 20 per cent.

In the just concluded week, the Federation Account Allocation Committee disbursed N465.15bn (N65.15bn higher than N400bn disbursed in December 2016) to be shared by the three tiers of government for January 2017.

Despite the net outflow from treasury bills, we expect rates to trend downward due to elevated system liquidity from FAAC disbursements and OMO maturity this week.

Treasury bills market

The treasury bills market in the past week was full of volatility and rate swings caused by the illiquidity in the interbank market (net debit of over N300bn all through the week) as well as debits from forex interventions sold by the CBN.

Yields on the short dated papers initially gained over 350bps with some papers hitting new highs of between 18.30 per cent and 18.50 per cent levels. However, this interesting “highs” saw demand interest from participants, leading to aggressive demand on these securities. Week-on-week, the March 2017 papers, which started at 14.90 per cent and peaked at 17.00 per cent, closed at 13.05 per cent; while the May 2017 and January 2018 papers gained an average of 20bps – 200bps to close at 16.90 per cent levels from 14.70 per cent and 18.55 per cent from 18.45 per cent.

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In the new week, there will be treasury bills auctions worth N310.226bn via primary market, viz: 91-day bills worth N26.143bn; 182-day bills worth N62bn and 364-day bills worth N222.083bn, which will more than offset maturing treasury bills worth N248.226bn via primary market, viz: 91-day bills worth N26.143bn and 364-day bills worth N222.083bn.

With inflows of N194.00bn from SRA expected to hit the system market this week, we anticipate a bullish posture by investors on the short and mid dated papers. However, we may see some moderation if the CBN continues to intervene in the FX market

  • Dr. Bernard Ilori, CEO, Mutual Alliance Investment & Securities Limited, [email protected] 09030004477 (SMS/WhatsApp only)

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