Breakfast Report - 04 January 2021
Ending 2020 on a high note, President Muhammadu Buhari signed the 2021 budget into law on the 31st of December. Last week, the National Assembly had raised the proposed budget by ₦500 billion to ₦13.58 trillion (Proposal: ₦13.08 trillion), 25.7% above the revised 2020 budget. The oil production and price benchmark was pegged at 1.86mb/d and $40/b. With improved OPEC+ compliance and vaccine rollouts, there is a bullish expectation for oil prices in 2021. This could help buoy revenues, which are largely dependent on global oil market dynamics. We recall the pandemic-induced slump in oil revenues necessitated re-prioritization of expenditure in 2020, including the phasing out of energy subsidies. With the projected budget deficit at ₦5.2 trillion, the country is set for another year of fiscal expansion. Thus, the government has to step-up infrastructure spending to reap the multiplier effects of improved capital expenditure – revival in economic activity, job creation and poverty reduction.
Equity: The bullish run witnessed in the latter half of the year was largely due to the significant drop in yields in the fixed income market which led to the migration of funds into the equity space, coupled with the attractive dividend yields and better than expected earnings results released during the year. We maintain our positive projection into the first quarter of 2021, however, with the gains recorded in the last few sessions, the possibility of profit taking cannot be overruled in the coming week.
Stock Watch: With gains recorded in a number of mid/large cap stocks such as, BUACEMENT (+987bps), MTNN (+619bps), UBA (+117bps) and WAPCO (+24bps) among others. The domestic bourse maintained its weekly bullish run, closing all of the three trading sessions in the green.
Fixed Income: We expect market participants to monitor ongoing COVID-related news, as well as the pace of pandemic recovery, to help guide their trading strategies at the resumption of market activities in the New Year.
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