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Breakfast Report - 04 May, 2020

On Wednesday, President Muhammadu Buhari stated that the nation will tap the domestic market for to finance the 2020 budget rather than seeking loans from the international market. Before a downturn in oil prices, as a result of the COVID-19 outbreak, Nigeria had planned to seek $3.3 billion from the international market to help plug its 2020 budget deficit, in addition to the refinancing of a $500 million Eurobond due in January. The nation has slashed c$5 billion from its 2020 budget, as it struggles to find buyers for its Bonny Light crude variant, even at historically low prices; as it close of business, Bonny Light was trading at $14.85/bbl, 51% below the $30/bbl benchmark set in the 2020 budget. With the DMO slated to offer 800 billion in government debt, to the local market, yields ought to see a moderation over the duration of the year, as market participants seek to lock-in higher returns amid an uncertain macroeconomic environment.

Equity: With the gradual easing of the lock down imposed by the Federal government starting this week, we anticipate a gradual improvement in economic activities and as such expect fundamentally sound stocks to continue to enjoy positive patronage in the near time.

Stock Watch: ARDOVA PLC extended its bullish performance into Thursday’s session, gaining 10.00% to close at its intra-day high price of ₦11.55. The positive performance is on the back of buying interest by investors in the counter which trades at a significant discount to its expected fair value.

Fixed Income: With the lockdown restrictions expected to ease this week, we expect to see increased participation in the space. In addition, the level of system liquidity should continue to support buy-side activity in the secondary market.