Breakfast Report - 20 June, 2020
The Central Bank of Nigeria (CBN) on Wednesday announced a ₦65 billion stimulus package aimed at jump-starting the economy as well as mitigating the impact of the COVID-19 pandemic on the nation’s economy. According to the Minister of Industry, Trade, and Investment, Otunba Adeniyi Adebayo, the package is aimed at providing support to the Organized Private Sector by making funds available to Micro, Small and Medium Enterprises (MSMEs), in a bid to save about 500,000 jobs. Earlier in the year, the CBN announced its Targeted Credit Facility (TCF) program -a ₦50 billion stimulus plan - aimed at helping households, and small and medium sized enterprises who had been dramatically impacted by the COVID-19 pandemic. The latest round of stimulus measures come as the country, and much of the rest of the world, continue to deal with a pandemic-induced dramatic slowdown in economic activity. With economic growth for Nigeria projected to contract by 5.4% (IMF), and inflation reaching a 10-month high in June (12.56% y/y), we believe that consumption spending will be strained and the effects will spill over into other parts of the economy. The anticipated cushioning impact of the stimulus programs by the CBN remains to be seen, however, in the absence of a COVID-19 vaccine.
Equity: The equities market maintained its bearish weekly performance amidst weak investor confidence and persistent uncertainties in the global and domestic space. In the absence of any positive market catalyst, we expect the market to remain pressured in the near term, though the attractiveness of a number of fundamentally sound stocks may spur some buying interest.
Stock Watch: GLAXOSMITH led the other 9 gainers in Friday's session, increasing by 920bps while settling the day at ₦4.75. The counter has been significantly pressured in recent times, dropping 44.78% from its year high price of ₦8.60 in May to ₦4.75.
Fixed Income: We expect the improvement in system liquidity to trigger some level of buy-side activity by market participants. As such, investor interest ought to the skewed towards the bond market, given the yields offered in the space, amid a lack of investment alternatives.
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