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Breakfast Report - 16 November, 2020

The preferential access given to large cement players to export their products through the and borders was met with unpleasant reactions from Nigerians. We recall that the borders had been closed since August 2019, contributing to the extended recession in the trade sector. Despite the sincere intentions to curb the smuggling of goods and people through the country's borders, the border closure has also restrained legitimate exports and attracted retaliatory actions from neighbouring countries. In addition, the continued closure of land borders has contributed to the persistent rise in food inflation. The restrictive border policy exposed the magnitude of food insecurity in the country. With the sluggish rise in investment in the agriculture sector - no thanks to incessant ethnic clashes, and adverse weather conditions - the agriculture output gap is yet to be bridged, and the impact of this on food prices is further aggravated by the restricted access to FX. A review of the border policy would be needed to effectively assess its cost and benefits on the economy and reduce the adverse spillover effects on SMEs and the overall economy. By so doing, trade could recover from its four-year-long recession, which has been recently hit by the pandemic. Ultimately, a review of the border policy could strengthen Nigeria’s ties with with its neighbouring countries, and help it position favourably to take advantage of the Africa Continental Free Trade Agreement (AfCFTA) - whose operational phase is scheduled to kick off in 2021.

Equity: The domestic bourse saw a significant boost during the week driven largely by the influx of liquidity from the fixed income market amidst unattractive/low yields. We anticipate a continued bullish performance in the coming week, as more funds continue to chase attractive counters in the equities market in the face of lower yields in fixed income instruments. However, the possibility of profit taking cannot be overruled given the significant upward movement recorded this week.

Stock Watch: Though the ASI ended Friday's trading session in the red, a number of counters were again positively patronized, leading to gains in stocks like; AIRTELAFRI (+999bps), PZ (+952bps), DANGSUGAR (+398bps), OANDO (+178bps), BUACEMENT (+166bps), MRS (+73bps) and WAPCO (+63bps) among others.

Fixed Income: This week, we expect the NTB space to remain the most active in the secondary market, primarily at the short to mid-ends of the market, given the result rates printed at the last auction. Meanwhile we expect bond investors to remain on the sidelines, as they await the next primary bond auction. Finally, we foresee another quiet session in the OMO segment, as investors respond to the grim outlook for oil demand