The All-share index closed at a new 12 month high (+2.9% w/w) at 25,875.31, building on last week’s gains and a YTD run of 24.8%. With the introduction of market making, trade for the week was appreciably higher than average, at NGN 15.7bn. Sectors driving the market higher were Breweries (+6.9%), Consumers (+4.2%), and Building (+1.3%). The week’s top five traders (61% of the market) were Zenith Bank, First Bank Of Nig., Guaranty Trust Bank, FCMB, and Nigerian Breweries. Significant gainers over the week were Fidson Healthcare (+41.0%), Union Bank Nig. (+27.2%), TransCorp Nigeria (+24.2%), National Salt Co. Nig. (+18.8%), and Aiico Insurance (+16.0%). Significant decliners this week were Zenith Bank (-2.4%), Dangote Sugar Refinery (-1.8%), UBA (-1.7%), and First Bank Of Nig. (-0.3%).
The news driving many of the market movers, and active trading stocks, was the introduction of market making, starting with sixteen blue-chip shares, and relaxed restrictions on price swings for those stocks. The move is meant to boost liquidity. A new rule allowing prices of stocks selected for market making to move up 10% a day, from its current 5%. Stocks eligible for market making were selected from mostly banks and consumer goods. They included Guaranty Trust Bank, Zenith Bank, Lafarge Wapco Cement and Nigerian Breweries.
Nigeria’s economy expanded by 6.3% in 2Q12, down from a 7.6% growth recorded in the 2Q11. The oil sector contracted by 0.7% in the 2Q12, verses a 1.0% growth in the 1Q11, due to lower oil output (2.38mbpd versus 2.45mbpd in the 2Q11). Non-oil growth also slowed to 7.5% compared to 8.9% in the 2Q12 on the back of a decline in trade, telecoms, and agricultural activities.
The Bank of Nigeria decided to kept the policy rate on hold at 12% for the sixth consecutive time with a +/- 200bps corridor. The central bank also decided to keep its cash reserve requirement at 12%. Annual inflation dropped to 11.7%y/y in August compared to 12.8% y/y in July as inflation in both the food and non-food segments slowed. The composite food index increased by 9.9% y/y versus 12.1% y/y in July while the all items less farm produce index rose by 14.7% y/y in August against 15.0% y/y in July.
In a move aimed at strengthening financial stability and instilling discipline in the banking sector, the CBN has barred banks in the country from extending further credit to 113 companies and 419 directors/shareholders, including those belonging to Femi Otedola, Alhaji Sayyu Dantata, Sir Johnson Arumemi-Ikhide, former Power Minister, Prof. Bart Nnaji, Elizabeth Ebi and Dr. Wale Babalakin. The CBN arrived at this decision as a result of the reluctance by the debtors to pay back their loans despite the purchase of the debts at an agreed price by the Asset Management Corporation of Nigeria (AMCON).
Extracted from Africa Weekly Report by African Alliance.