Breakfast Report - 31 August 2020
Last week Monday, the National Bureau of Statistics released the much anticipated Q2 GDP numbers. Nigeria recorded its worst contraction since the GDP was rebased amounting to a -6.10% slump year-on-year. This is attributed to the preventive measures taken to curb the spread of the virus, which warranted a full 5-week long lockdown. This had significant impact on both oil (-6.63%) and non-oil (-6.05%) sectors. Broadly speaking, 13 out of 19 sectors contracted with Transport & Storage (-49.23%), Accommodation & Food (-40.19%) and Construction (-31.77%) being the most hit by the pandemic due to reduced economic activity. Our attribution analysis reveals that 5 broad sectors were responsible for the slowdown, jointly contributing 40.75% to the GDP - Trade (-16.59%), Mining (-6.60%), Manufacturing (-8.78%), Real Estate (-21.99%) and Construction (-31.77%) sectors. Trade (-16.59%) remained in the woods as travel bans and border closure disrupt supply chains. Agriculture (+1.58%) was spared the onslaught due to time lag involved in production, but flow to market was hindered by inter-state lockdown. In line with expectation, ICT (+15.09%) and Financial Services (+18.49%) outperformed the economy due to increased adoption of digital services and credit-friendly policies of the CBN. Going forward, we expect the economy to contract by -2.21% in FY’20 due to adherence to OPEC production cuts, trade disruptions and currency depreciation.
Equity: Last week investors continued to cherry pick attractive counters as the domestic bourse extended its weekly bullish run, despite low trading turnover. We expect the market to be driven by the long-awaited results of the Tier 1 banking stocks this week, coupled with continued bargain hunting activities in the Consumer goods space.
Stock Watch: Following four consecutive sessions of declines, the Banking sector recovered slightly on Friday, rising 0.37% d/d due majorly to gains in ACCESS (+240bps) and GUARANTY (+79bps). However, with the declines recorded in the first four sessions, the sector closed last week down by 0.23% amidst profit taking action.
Fixed Income: We expect the healthy system liquidity at ₦640 billion, to further drive buy sentiment across the market at the start of the week.
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