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Breakfast Report - 09 September 2019

As part of its efforts to diversify the Nigerian economy from oil sales, the government is offering private firms a 50% tax incentive to share the cost of infrastructure projects, according to the Chairman of the Federal Inland Revenue Service (FIRS), Mr. Tunde Fowler. The Chairman stated that 10 local companies have applied for the program, and that the Dangote Conglomerate was one of the two firms which had been granted the tax credit. The tax credit program had been signed into law following an executive order by President Muhammadu Buhari in January. Mr. Fowler stated that although the program would reduce revenue receipts for 2019, the additional infrastructure would boost the revenue generated by the FIRS. The tax authority generated ₦5.3 trillion in revenue in 2018, with this year’s target being set at ₦8.9 trillion. According to the Mr. Fowler, the number of tax payers is expected to rise to 45 million in 2019, due the addition of people under the tax amnesty program which expired in 2018.

Equity: With profit-taking activities dragging the market, as well as the weak sentiment which dominated trading in the past week, investors appear less optimistic on the performance of the bourse. Therefore, we foresee further negative trading at the start of next week, barring any market catalyst to spur positive activity.

Stock Watch: Gains on UACN can be attributed to the perceived positive announcement made by the company, leading the other 15 gainers to close on full bid at ₦6.05 (+21.00% w/w) last week Friday.

Fixed Income: With system liquidity being consistently robust over the course of the week, we expect the CBN to conduct an OMO auction at week open. As such, we expect the T-bills market to trade negatively at the start of the week. In the bond space, with no drivers to turn sentiment positive, we expect another negative session at the start of the week.