NIGERIA | Daily Market Wrap | 14-Feb-2018 | Elixir Research

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14 Feb NIGERIA | Daily Market Wrap | 14-Feb-2018 | Elixir Research

Market Wrap | January inflation rate moderates to 15.1% as Equities rebound after a 7-day decline

January inflation rate moderates to 15.1%

The Nigerian Bureau of Statistics today published the inflation number for January 2018 which showed a moderation in the headline index for the 12th consecutive month since 2017. The consumer price index fell to 15.1% year on year (y/y) faster than our 15.00% forecast but slower than the 15.37% y/y in December 2017. We note that the slowdown was mainly driven by the high base effect of 2017 which was more noticeable on the Food sub-index where prices inched up 18.92% y/y in January 2018 against 19.42% in December 2017. Month on month (m/m), headline inflation inched up 21 basis points (bps) to 0.80% on the back of the increase in both the Food subindex, +29bps m/m to 0.87%, and the Core sub-index, up 17 bps m/m to 0.68%.

Bond market flat as T-Bill auction stole the shine

  • Banking system balance opened jumped to ₦301.113 billion from ₦92.44 billion while the standing lending window (SLF) balance fell marginally to ₦61.25 billion from ₦62.29 billion. With the rise in system liquidity, the overnight rate and OBB contracted by 6.33 and 5.67 percent points to 9% and 8.67% respectively. At the OMO auction on Tuesday, the CBN offered ₦60 billion across the 93DTM and 247DTM but no sale was made. 
  • The CBN held a primary market auction (PMA) today, selling ₦170 billion across the 182DTM and 364DTM bills. The average T-Bill yield expanded by 4 basis points to 15.40%, given the upturn at today’s PMA. At the bond market, the average yield was flat at 14.01%. 
  • We expect CBN’s liquidity mop to put a lid on buying though there is a planned T-bill primary market auction on Wednesday.

Naira weakens further at I&E window

  • The Naira was weakened further by 0.04% against the Dollar at the IEW whilst it closed flat at parallel market respectively to ₦360.37/$ and ₦363/$. At the CBN window, the local currency was unchanged at ₦305.90/$. 
  • At the IEW, transaction volume improved to $151.55 million from $111.03 million on Tuesday

Equities rebound after 7-day decline

  • After seven days consecutive sell-off, stocks bounced back today on the back of renewed interest in the banking and consumer goods sector. The benchmark index added 1.11% to close at 42,171.80 points, bringing the year-to-date return to 10.27%. 
  • Sector performance was mostly positive though the Oil & gas index posted a negative close. The banking index rose by +2.74% on the back of interest in SKYEBANK (+10.00%), FCMB (+9.80%), DIAMONDBNK (+7.78%) and UBA (+6.28%). The consumer goods index closed higher by +0.96%, driven largely by the gains from DANGFLOUR (+4.97%), FLOURMILL (+2.86%), NESTLE (+1.89%) and NB (+0.94%). The industrial index gained +0.19%, following the rally in BETAGLAS (+4.95%). However, the oil & gas index shed -0.29%, depressed by FO (-1.75%), TOTAL (-0.43%) and ETERNA (-0.35%). The insurance index was up by 1.27% on the day. 
  • Market breadth index was positive as the session recorded 25 gainers and 19 losers. SKYEBANK topped activity chart by volume, accounting for 21.74% of the market while GUARANTY, NESTLE, and UBA accounted for 56.35% of market value. 
  • Much in line with our expectation, we see today’s rebound as a confirmation of the normalcy of the correction. We anticipate further stability in the sessions ahead.

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