The bears clawed down prices in the local bourse today as the All Share Index and market capitalization shed 0.22% each, to 25,166.01 index points and N13.115 trillion respectively.

Market turnover finished lower compared to the previous trading session, as total volume and values dipped by 40.13% and 38.60% respectively, to 348.21 million units and N3.43 billion.

FBNH was the most traded stock by volume at 47.3 million units while GUARANTY topped by value at N576.2 million.

Market sentiment, as measured by market breadth, finished flat as 19 tickers gained, while 18 lost. MAYBAKER (+9.71%) recorded the highest price gain to close at N3.39 per share, as ETI topped the losers chart shedding -9.92% to close at N5.45k per share.

The ASI slipped as significant losses in the Banking (-2.79%), Oil & Gas (-0.36%) and Consumer Goods Indexes (-0.07%) overshadowed moderate appreciations in the Insurance (+1.16) and Industrial Index (+0.23%).

Price depreciations in bellwethers overweighed the Banking Index as ETI (-9.92%), UBA (-6.25%) and ZENITHBANK (-2.51%) all declined. OANDO (-5.71%) and FLOURMILL (-4.76%) drove the Oil & Gas / Industrial Index southwards.

Conversely, the Insurance Index rose by +1.16% as MANSARD and CUSTODIAN gained +8.19% and +7.69% respectively, while GLAXOSMITH (+7.64%) and GUINNESS (+4.17%) buoyed the Consumer Goods Index.

Top gainers

CUSTODIAN up 7.69% to close at N6.3; GLAXOSMITH up 7.64% to close at N8.45; GUINNESS up 4.17% to close at N20; DANGCEM up 0.87% to close at N138.5; and MTNN up 0.87% to close at N116.

Top losers

ETI down 9.92% to close at N5.45; UBA down 6.25% to close at N6.75; FLOURMILL down 4.76% to close at N20; ZENITHBANK down 2.51% to close at N17.45; GUARANTY down 1.81% to close at N24.4.

Outlook

Most Nigerian bank stocks finished negative, partly due to the reduction of interest rate by the Monetary policy committee of Nigeria’s Central Bank from 13.5% to 12.5%. This probably will affect Nigerian banks profit margin negatively, as banks generally borrow short term to lend long term.

Nairametrics envisages cautious buying in the short term, as the present macro fundamentals doesn’t favor financial stocks.

The number of people living with the Coronavirus Disease (COVID-19) and deaths from it have been on the increase daily.

The Federal Government and its relevant agencies, especially the Central Bank of Nigeria, have responded with policies to cushion the economy, restore investors’ confidence, and support Small and Medium Enterprises (SMEs) and households.

A look at some of the initiatives:

MAY 28, 2020

The Monetary Policy Committee of the Central Bank of Nigeria decided by a unanimous vote to reduce the Monetary Policy Rate (MPR) from 13.5% to 12.5% and to hold all other policy parameters constant. Seven (7) members voted for a reduction of the policy rate by 100 basis points, two (2) members by 150 basis points and one (1) member by 200 basis points.

Highlights of the MPC’s decisions:

I. Reduce the MPR to 12.5 per cent;

II. Retain the Asymmetric Corridor of +200/-500 basis points around the MPR;

III. Retain the CRR at 27.5 per cent; and

IV. Retain the Liquidity Ratio at 30 per cent.

The Committee maintained that although a sharp decline in output growth is expected in Q2 2020 and maybe the third quarter if the current stimulus initiatives are properly implemented, the economy would reverse to positive growth by the fourth quarter.

MAY 27, 2020

Central Bank of Nigeria (CBN), approved regulatory forbearance to restructure credit facilities in the Other Financial Institution (OFI) sub-sector.

The apex bank reduced the interest rates on its facilities through participating financial institutions from 9% to 5% per annum for a year with effect from March 1, 2020.

MAY 21, 2020

CBN introduced N100 billion credit intervention scheme to mitigate the impacts of COVID-19 on businesses, particularly those in the health sector. The scheme, which was planned to be funded from the Real Sector Support Facility – Differentiated Cash Reserves Requirement, is to have an interest rate of 5% per annum until March 1, 2021, when it will revert back to 9%.

The apex bank insisted that the money would be given to people that would import or source for foreign exchange for materials that can be source locally

CBN also postponed the much-awaited  May 2020 Monetary Policy Commission (MPC) meeting. The meeting that was earlier scheduled for Monday and Tuesday, May 25 and 26, 2020,  was shifted to Thursday, May 28, 2020. This is as a result of the
declaration of Monday and Tuesday, May 25 and 26, 2020, as Eid-el Fitr holidays.

The apex bank assured that it has put in place all necessary machinery for the meeting to now hold for only one day on account of the on-going COVID-19 national lockdown and to align this meeting with extant rules of the Presidential Task Force (PTF) on COVID-19 and advisories from other relevant agencies.

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MAY 19, 2020

The Central Bank of Nigeria (CBN) tasked industrial conglomerates operating in the country to support efforts of the government to grow the nation’s economy and return it to its green days. CBN Governor, Godwin Emefiele, warned that the apex bank would not support the importation of items that could be produced in Nigeria.

In a virtual meeting with Chief Executive Officers (CEOs) of conglomerates in Nigeria, Emefiele explained that the CBN, in line with President Muhammadu Buhari’s desire, was determined to return the Nigerian economy to the period when the manufacturing and agricultural sectors formed the base of the economy.

READ ALSO: Central banks digital currencies pose a threat against the U.S dollar

MAY 18, 2020

The Central Bank of Nigeria (CBN) tasked industrial conglomerates operating in the country to support efforts of the government to grow the nation’s economy and return it to its green days. CBN Governor, Godwin Emefiele, warned that the apex bank would not support the importation of items that could be produced in Nigeria.

In a virtual meeting with Chief Executive Officers (CEOs) of conglomerates in Nigeria, Emefiele explained that the CBN, in line with President Muhammadu Buhari’s desire, was determined to return the Nigerian economy to the period when the manufacturing and agricultural sectors formed the base of the economy.

MAY 18, 2020

The Federal Government of Nigeria extended the gradual easing of the COVID-19 lockdown across the country by two weeks.

Chairman of the Presidential Task Force (PTF) on COVID-19, Boss Mustapha, stated that in spite of the modest progress made, the country is still not yet ready for full reopening of the economy and said that tough decisions have to be taken for the good of the greater majority.

Central Bank of Nigeria (CBN) also signed an agreement with the Nigerian National Petroleum Corporation (NNPC) to spend as much as N1 billion as quarantine costs for about 3,000 Nigerian returnees.

The decision by the duo regulator was disclosed by Nigeria’s Foreign Affairs’ Minister, Geoffrey Onyeama. According to Onyema, this is a CSR gesture by the CBN and the NNPC. The N1 billion is expected to cover the costs of hotel accommodation and the feeding of the returnees

READ ALSO: Covid-19: CBN wants to fund research for Nigerian Made vaccines

MAY 16, 2020

Federal Government announced that new Micro Small and Medium Enterprises (MSMEs) will access National Agency for Food and Drugs Administration and Control (NAFDAC) registration of their products at an 80% discount, over the next 6 months.

This concession covers MSMEs that are into production of foods, drugs, and related consumables. As an added incentive, the first 200 micro and small businesses to register on the e-platforms will be allowed to do it at no cost – zero tariffs.

In view of current economic challenges faced by businesses due to the pandemic, the government has also authorised NAFDAC to grant a waiver on administrative charges for overdue/late renewal of expired licenses of products for a period 90 days.

MAY 12, 2020

CBN disclosed that it was developing a framework to provide financial support to aid the fight against Coronavirus Disease in the country. According to Emefiele, the fund would be released as soon as the vaccine was validated by health authorities.

MAY 10, 2020

CBN assured foreign investors that repatriating their funds from the country was secured despite forex related revenue shortages due to the drop from the sale of crude oil globally.

The apex bank had put in place policies to ensure an orderly exit for those that might be interested in doing so and also urged investors to be patient as such repatriations were being processed, owing to the Bank’s policy of orderly exit of investments.

MAY 3, 2020

CBN and the Bankers’ Committee ordered all banks in the country not to retrench or lay-off any staff of any cadre (either full-time or part-time). The apex bank also said that its approval must be sought if it became absolutely necessary to lay-off any such staff.

MAY 2, 2020

The Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) Microfinance bank, on behalf of the Central Bank of Nigeria (CBN), started the disbursement of the N50 billion Targeted Credit Facility (TCF) to beneficiaries.

The facility is a stimulus package which was introduced by CBN, to help mitigate the impact of the coronavirus pandemic on households and MSMEs.

APRIL 30, 2020

CBN extended the deadlines issued to Microfinance banks (MFB) to comply with its revised minimum capital requirements.

APRIL 29, 2020

CBN resumed the sales of dollars to SMEs who need foreign exchange for essential imports, as well as Nigerian students in foreign schools who need to pay their school fees.

This comes as the world-wide COVID-19 lockdown begins to ease up, even as business activities are expected to gradually return to normal. In view of the gradual easing of the COVID-19 lockdown both globally and in Nigeria.

APRIL 28. 2020

The apex bank lifted the temporary suspension placed on cheque clearing in the country with effect from Tuesday, April 28, 2020.
In the circular, it explained that it lifted the suspension in furtherance of its efforts in the development of a safe and efficient payment system in the country.

IMF loan
The executive board of the International Monetary Fund (IMF), approved $3.4 billion as Rapid Financing Instrument (RFI) as fiscal support to Nigeria during this period of coronavirus pandemic.

The fund that was requested by Nigeria is to be used to mitigate the impact of the coronavirus pandemic on Nigeria’s economy as the country grapples with dwindling government revenue and an economic crisis following the crash of crude oil prices globally.

READ ALSO: CBN discloses conditions for assessing N100 billion credit facility, addresses ‘process problems’

APRIL 14, 2020

In preparation for post-COVID-19, CBN announced four major areas of focus. They are:

• Provision of affordable housing: Here the CBN will create an intervention fund which will target housing construction by developers who provide proof of profiled off-takers with the capacity to repay the loan.

The BVN will be used to verify the information given by the off-takers before the developers can access the facility. The CBN will also assist the mortgage finance sub-sector, assist land administration agencies at the states to build capacity for prompt processing and issuance of land titles.

• Renewable energy: The CBN, over the next three years, will be providing financial support to environmentally friendly energy production, as this has tangential long term health benefits.

• Cutting edge research: Also, the bank will be providing funding and encouraging efforts aimed at driving innovation and research in every sector through our universities, research institutions, creative industry initiatives and so on.

• Light manufacturing: The apex bank plans to set up a N500 billion intervention fund over a medium, and targeted at manufacturing firms for the procurement of state of the art machinery and equipment and automated manufacturing models that would fast track local production. It will also help increase the patronage of locally processed products.

CBN intends to close the funding gap needed for the replacement of machinery and equipment in order to enhance local production.

MARCH 30, 2020

* The Federal Government also gave a directive that all economic and social activities in Ogun, Lagos States and Federal Capital Territory should be suspended for two weeks. The lockdown affected the movement of people across the states, except for people in the essential services sectors.

• CBN suspended the clearing of all cheque instruments in the Nigerian Clearing System. According to the bank, the directive was intended to “ensure hitch-free clearing and settlement activities” during the previous 14-day lockdown.

CBN’s suspension was based on the earlier envisaged two-weeks lockdown which was later extended to about 5 weeks.

MARCH 27, 2020

CBN and the Banker’s Committee formed the Nigerian Private Sector Coalition Against COVID-19. The apex bank explained that the coalition was in partnership with the private sector, led by Aliko Dangote Foundation and Access Bank.

MARCH 25, 2020

Following the request of the Association of Bureau de Change Operators of Nigeria (ABCON) to declare market holiday on its members’ weekly bidding, the CBN suspended the sales of foreign exchange to operators of Bureau de Change.

MARCH 24, 2020

The Monetary policy committee unanimously voted to:
• Retain the MPR (Monetary policy Rate) at 14%.
• Retain the asymmetric corridor at +200/-500 basis points.
• Retain the CRR (Cash Reserve ratio) at 27.5% and retain liquidity ratio at 30%.

MARCH 20, 2020

• The CBN officially devalued the naira by 15% moving from N307/$1 to N360/$1. Depreciation at the “market-determined” I&E window is 5%, having moved from N360/$1 to N380/$1.

• CBN sold dollars to banks at N380/$1 in a move signifying a devaluation of the currency. Banks trading at the Investor and Exporter (I&E) window bought dollars at N360/$1 from the CBN on Friday, March 20, 2020. The I&E window is the official market where forex is traded between banks, the CBN, foreign investors, and businesses

Even with many Nigerian institutions already grappling with a difficult regulatory environment prior to the Covid-19 pandemic, Renaissance Capital Analyst, Soji Solanke, holds that some of the most compelling stock picks lie in the banking sector. These stocks include:

Guaranty Trust Bank (GTB)

The analyst believes the bank is a quality name that has sold off more than warranted. Some of the reasons he cited include the fact that the bank has the highest RoE in the Nigerian banking landscape, the highest breakeven cost of risk buffer, as well as the largest net long FX position, placing the bank in a good position to benefit from a naira devaluation. Also, the company’s diversification into the fast-growing payments space makes it a good opportunity to leverage for growth.

Zenith Bank  

A formidable name in the banking sector, Zenith Bank is expected to perform well in a quick recovery scenario as a result of its highly liquid balance sheet, the fact that it pays dividends consistently, as well as its high stock liquidity in the markets.

Stanbic IBTC  

Another bank expected to be able to withstand a protracted slowdown is Stanbic IBTC and this is as a result of its diversified business model largely due to its large asset management business – the largest in Nigeria. According to the analyst, it makes the company’s earnings somewhat more defensive compared to its peers.

(READ MORE: Zenith Bank: No major threat to earnings in the near term; Buy recommendation maintained)

In FMCG, Nestle emerged tops as well:

Nestle Nigeria 

The company’s SSA consumer analyst, Dayo Ayeni, believes Nestle Nigeria is compelling, also as a result of its strong balance sheet, its resilience, quality management; and its three strong brands, Maggi, Milo and Golden Morn.

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As at 28^th May 2020, before markets opened, the share prices of GTB, Zenith Bank, Stanbic IBTC, and Nestle Nigeria are N24.85, N17.90, N35.80, and N995, respectively.