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Breakfast Report - 02 December, 2019

The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, has stated that the 2020 Finance Bill will come into effect on January 2, 2020. The bill aims to eliminate all avenues for regressive taxation as well as reform the domestic tax environment, in line with global best practices. The bill also aims to provide incentives for the capital market environment, incentives for infrastructural investments alongside the rise in the VAT rate from 5.0% to 7.5%- a move to help boost government receipts. The 2020 bill takes all taxes which are similar and consolidates them, with the aim of creating an easy to understand system of taxation, in order to boost private sector investment. Furthermore, the bill also increases the number of items exempted from VAT and shifts this burden to the middle/high income brackets. Should the reforms be implemented properly, it could boost the country’s operating environment, while also improving the ease with which citizens and business owners can pay their taxes at local, state and federal levels. However, the proposed higher VAT rate could pressure general price levels and possibly result in weaker consumer spend in 2020.

 Equity: We expect the Equity market to continue to benefit positively from the restriction placed by the CBN on local investors in the fixed income (OMO) space, as prices and dividend yields remain attractive in the Equity market.

 Stock Watch: AGLEVENT continued with its impressive performance gaining 909bps in Friday's session, to close at its highest price in 52 weeks (₦0.36). The counter gained 20.00% WTD, while increasing its YTD return to 33.33%.

 Fixed Income: We expect demand in the both the T-bills and bond markets to remain strong at the start of the week, driven by excess liquidity in the market.