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Breakfast Report - 09 December, 2019

Last week Thursday, the National Assembly passed a ₦10.59 trillion budget for 2020, higher than the ₦10.33 trillion budget proposal initially presented by the President in October. According to the budget, the National Assembly forecasts a deficit of ₦2.18 trillion, which it and expects the government to finance the deficit through a mix of local and foreign borrowings. Key assumptions for the budget include an oil price benchmark of $57/bbl and an average crude production of 2.18 mb/d, a more realistic assumption compared to the 2019 benchmark of 2.3 mb/d. With the government aiming to operate on regular budget cycle, following the selection of the President’s cabinet, we are optimistic that the budget would be signed into law before the end of the year, making it effective from January 2020. Furthermore, given the improved relationship between the National Assembly and the Presidency, we expect a stronger budget implementation next year compared to 2019. However, with increased pressure expected on government revenue in 2020, stemming from weaker oil prices, we expect this weigh on the implementation strategy of the government.

Equity: We expect the sectors (Industrial Goods and Banking) which declined last week to receive renewed interest at the start of this week. While we expect some profit-taking on Consumer Goods stock which gained last week.

Stock Watch: UACN once again closed on Friday as one of the top gainers, rising 683bps to close at ₦8.60. Initial selloffs at the beginning of the week however limited the impact of the consecutive upward movement recorded at the last two trading sessions of the week, leading to a 7.50% gain w/w.

Fixed Income: Despite system liquidity remaining at healthy levels, we expect a lack of attractive yielding securities to weigh on demand in the T-bills space. As such we expect demand to remain focused at the long-end of the curve, leading to a positive session in the bond space, with activity at the short end remaining mixed.