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Breakfast Report - October 14, 2019

Last week, while presenting the 2020 budget to the National Assembly, the President highlighted a new initiative intended to boost MSMEs. The proposal, which would introduce a threshold of ₦25 million per annum, would relieve companies with turnover less than the threshold from charging VAT. While the new initiative is likely to boost the competitiveness of smaller businesses, the underlying issues affecting the ease of doing business in Nigeria—inadequate power supply, unimpressive transport infrastructure — have yet to be properly addressed. Meanwhile, according to the National Bureau of Statistics (NBS), Nigeria was reported to have 37 million MSMEs in 2017, contributing about 48% to GDP and 7% to exports, while employing about 59 million people. Further focus on improving the ease of doing business and creating an enabling environment for small-scaled businesses to thrive through incentives would boost economic activity.

Equity: Weak sentiment due to the absence of catalysts dominated the market as evidenced by the negative performance last week. However, with most bellwether stocks hitting new lows, we expect bargain hunting in some of the fundamentally sound stocks this week.

Stock Watch: ABCTRANS recorded the highest percentage gain in Friday's session, rising 10.00% to settle at ₦0.44. Despite the bearish trend in the equities market, ABCTRANS has appreciated 51.72% YTD.

Fixed Income: At the start of the week, we expect the T-bills market to trade in a mixed fashion following the drawdown in liquidity amidst last week’s OMO and FX Retail auctions. In the bond market, with no foreseeable drivers to support positive sentiment in the space, we expect market activity to remain quiet at the start of the week.