Breakfast Report - 03 August, 2020
According to the National Bureau of Statistics (NBS), the Federal Government of Nigeria had generated ₦651.8 billion in tax revenue from 28 sectors of the economy in H1’20. The growth in tax receipts represents an 8.45% y/y increase, with the professional services sector generating the highest amount at ₦95.92 billion, followed by the manufacturing sector which contributed ₦67.63 billion in tax revenue. With the nation’s economy stalled by the slowdown in economic activity, lower oil prices and rising inflation, the government is faced with a difficult task of driving economic growth as it is grappling with the rising cost of governance and debt servicing. Nigeria has one of the world’s lowest tax-to-GDP ratios, according to the Organization for Economic Co-operation and Development (OECD); this number currently stands at 6%, whereas in South Africa, Ghana and Egypt, this rate is 29%, 18% and 15% respectively. In order to grow its tax revenue, the nation will need to implement clear and investment-friendly policy measures aimed at boosting tax remittances across the country.
Equity: We attribute last week’s positive performance to the significant movement recorded in the Industrial goods sector on Monday, due to the better than expected earnings results posted by some companies in the sector. We expect the market to continue to react to some of the earnings results that will be posted by other bellwether stocks in the coming week.
Stock Watch: After dropping about 19.00% in the last two sessions, SEPLAT saw a reversal on Wednesday, gaining 10.00% to close at ₦310.20. The positive performance resulted from bargain hunting in the counter which had dropped significantly in recent times thereby pushing the stock significantly below its fair value as investors continue to price in their pessimism in their valuations.
Fixed Income: Amid decent liquidity levels, we expect the market to open on a positive note, as investors continue to seek safety amid a slowdown in economic activity and rising COVID cases around the world
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