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Breakfast Report - 29 June 2020

With nations around the world, slowly easing lockdown restrictions amid the COVID-19 pandemic, the International Monetary Fund (IMF) on Wednesday released its forecast for the global economy, expecting it to contract by 4.9% in 2020. In addition, the fund’s forecast for Nigeria sees the nation’s economy contracting by 5.4%, as a downturn in crude prices, coupled with the lockdown has put pressure on tax receipts for the government. With crude earnings accounting for 60% of government revenue, and 80% of exports, the sharp drop in prices will ultimately trigger a recession in the nation. Furthermore, with the nation’s informal sector accounting for a significant portion of employment and nation’s GDP, the effects of slowdown in economic activity experienced in Q1’20 - which is expected to persist until a medical solution to the virus is found- should lead to a fall in labour productivity and economic output.

Equity: The domestic market remained pressured as the fear of the second wave of the Coronavirus took a toll on investors' confidence (evidenced by four of the five trading sessions of the week closing south). We expect the market to start the week on a positive note, amidst portfolio re-balancing for Q2 by portfolio/fund managers.

Stock Watch: AIRTELAFRI saved the domestic bourse from another bearish performance on Friday, after the 997bps rise pushed the index north. The telecommunication stock rose to ₦328.70 after a trade of over 100k units during the day went through at its intra-day maximum price, while pushing the stock to full bid.

Fixed Income: This week, we expect more demand in the bond space as investors continue to trade regularly. Market activity will potentially be buoyed by the over ₦100 billion in NTB and OMO maturities expected to enter the system, expected to be reinvested primarily towards the longer-end of the yield curve.