Breakfast Report - 02 March, 2020
Last week Thursday, the Lagos State Ministry of Health reported that an Italian international who arrived the country on Tuesday, had been confirmed to have the COVID-19 virus. The equities market opened Friday on a somber note as the NSEASI trended lower in the early hours of trading; furthermore, crude prices traded lower as global investors become increasingly concerned about the impact of the virus on global trade activity. In its 2020 Finance bill, the Federal Government of Nigeria set a benchmark oil price of $57/bbl, however current crude prices are at $50/bbl, 14% lower than the government’s benchmark. The drop in crude prices raises pressures on the government’s revenue as it plans to generate ₦2.64 trillion in revenue from oil output; the nation’s current output sits at two million barrels per day. In addition, should oil price remain lower than the benchmark price for a considerable amount of time, the nation could face increased pressure on its exchange rate as well as increasing uncertainties in the fiscal space.
Equity: With 55 countries confirming cases of the Coronavirus at the end of last week, the global market recorded its worst weekly performance since the global recession in 2008 (London Stock Exchange (LSE): -9.78%; Shanghai Stock Exchange (SSE): -5.24%; Dow Jones Industrial Average (DJIA): -1.39%: Nigerian Stock Exchange (NSE): -4.28%). With no proven cure and the imminent spread of the virus to other countries, we see no deviation from this bearish pattern this week.
Stock Watch: VITAFOAM (+588bps) closed Friday as the highest gainer for the day, followed closely by FLOURMILL which appreciated by 476bps. The two counters were the only counters positively patronized in a session that saw most bellwethers closed under.
Fixed Income: With system liquidity currently constrained we expect the T-bills market to trade in a tepid manner at the start of next week. Meanwhile, we expect further yield moderations in the bond space as investors seek safety.
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