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Breakfast Report - 29 December 2020

2020 has been a worrisome year for consumers, having to cope with the socio-economic effects of the lockdowns and inflationary impact of subsidy removals and adjustments in the naira. According to the Consumer Expectations Survey (CES) report of the Central Bank of Nigeria (CBN), consumers remained pessimistic on the economy over the final quarter of 2020. However, consumers remain optimistic over 2021 due to the anticipated improvements in economic conditions, net household income and savings in the new year. However, consumers expressed unwillingness to purchase big-ticket items (e.g. motor vehicles and houses) in 2021 given higher inflation expectations. Also worthy of mention is the anticipated increase in borrowing rates despite the expansionary stance of the CBN underscoring high lending rates faced by households and small-scale enterprises. Finally, consumers expect the Naira to appreciate in the new year mirroring the scenario that played out in 2017, where the Naira appreciated by 25% in the parallel market following a year of declining output and currency weakness. 2020 has been a worrisome year for consumers, having to cope with the socio-economic effects of the lockdowns and inflationary impact of subsidy removals and adjustments in the naira. According to the Consumer Expectations Survey (CES) report of the Central Bank of Nigeria (CBN), consumers remained pessimistic on the economy over the final quarter of 2020. However, consumers remain optimistic over 2021 due to the anticipated improvements in economic conditions, net household income and savings in the new year. However, consumers expressed unwillingness to purchase big-ticket items (e.g. motor vehicles and houses) in 2021 given higher inflation expectations. Also worthy of mention is the anticipated increase in borrowing rates despite the expansionary stance of the CBN underscoring high lending rates faced by households and small-scale enterprises. Finally, consumers expect the Naira to appreciate in the new year mirroring the scenario that played out in 2017, where the Naira appreciated by 25% in the parallel market following a year of declining output and currency weakness.

Equity: With no significant upward movement in large cap stocks as seen in recent sessions, the Nigerian equity market closed in the red on Friday, due to profit taking in the Industrial goods (-0.28%) and Banking (-0.22%) sectors. As the year runs to an end, we expect the market to be majorly driven by portfolio rebalancing upon resumption from the Christmas break.

Stock Watch: FTNCOCOA topped the gainers table on Friday, increasing 988bps to end the week at up price of ₦0.89. The counter traded just about 2.1 million units today, with most of the trades going through at its higher band (Avg price: ₦0.89). The ticker has seen the most upward movement during the year, posting a YTD return of +345.00%.

Fixed Income: We expect the market to open the final trading week of the year in a mixed manner, as fund managers begin to rebalance portfolios. Also, with oil prices expected to remain stable at $50/bbl. levels, this could prop sentiment in the OMO space, while we expect bond investors to maintain the sell-side sentiment observed in recent sessions.