Breakfast Report - 14 December, 2020
Since the introduction of border closure measures in August 2019, Nigeria has recorded four consecutive trade deficits as the border-closure effects reflected in Q4’19 trade figures. Recent deficits were however reinforced by the pandemic-induced plunge in crude exports as OPEC+ production limits, including compensation for earlier overproduction, constrained the country’s export capacity. Despite recovering by 34.8% q/q from pandemic lows of Q2’20, total exports in Q3’20 stood 43.41% lower y/y as crude oil production (Q3’20:1.6mb/d, Q3’19: 2.0mb/d) and prices (Q3’20: $42, Q3’19: $61) stayed below pre-pandemic levels. On the other hand, imports grew sharply by 33.8% q/q and 38.0% y/y driven majorly by demand for machines, chemical & allied products, and mineral products as well as a drop in the value of the Naira. China was responsible for 30.5% of total imports while India outpaced Spain as our major export partner. We expect an extension of the deficits into Q4’20 while in 2021, the relaxation of border restrictions could abate supply-side inflationary pressures, improve trade volumes, and fast-track recovery in trade, which has been on a five-year recessionary path
Equity: This week, we expect further mixed trading activity, with profit-taking and bargain hunting to remain the norm for the rest of the year. Amid continued uncertainty in the Fixed Income market, we expect equity activity levels to remain elevated, as investors position in anticipation of further capital gains and attractive dividend yields.
Stock Watch: FTNCOCOA was the top gainer in Friday’s session, after seeing significant interest in recent sessions, appreciating by 10.00% to close at ₦0.44. The stock is has returned 120% YTD just behind LIVESTOCK which has been the best performer on the index returning 158% YTD.
Fixed Income: We expect the market to open on a muted note, with investors maintaining a risk-averse approach in the bonds and NTBs spaces. Meanwhile, we expect the improvement in oil prices to help support buy-side activity in the OMO space.
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