This week’s trading session on the Nigerian Stock Exchange was abridged, due to holidays declared on Tuesday 4th and Wednesday 5th June, 2019 to mark the end of holy month of Ramadan and commemorate the Eid el-Fitr celebrations.
The NSE All-Share Index depreciated by 2.05% to close the week at 30,432.13 basis points. Year to date, the index is down 3.18%.
15 equities appreciated in price during the week, lower than 35 in the previous week. 44 equities depreciated in price, higher than 24 equities of the previous week, while 109 equities remained unchanged, the same as recorded in the preceding week.
Champion Breweries Plc was the best performing stock this week. The stock gained 18.81% this week, opening at N1.01 and closing at N1.20, up N0.19.
Year to date, the stock is down 39.70% however, and is the worst performing stock in the breweries segment.
Academy Press Plc
Academy Press Plc opened the week at N0.25 and closed at N0.27, up N0.02 or 8%.
Year to date, the stock is down 46%.
Livestock Feeds Plc
Livestock Feeds Plc at N0.59 and closed at N0.63, up N0.04 or 6.78%.
Year to date, the stock is up 28.57%.
NPF Microfinance Bank
NPF Microfinance Bank Plc appreciated by 6.67% this week. The stock opened at N1.35 and closed at N1.44, up N0.09. Year to date, the stock is down 12.73%.
LASACO Assurance Plc
LASACO Assurance Plc also gained 6.65% this week, but appreciated by a smaller rate in absolute terms. The stock opened at N0.30 and closed at N0.32, up N0.02.
Year to date, the stock is up 6.67%.
Sterling Bank Plc
Sterling Bank Plc opened the week at N2.30 and closed at N2.45, up N0.15 or 6.52%.
Year to date, the stock is up 28.95%.
Conoil Plc appreciated by 4.55% this week. The stock opened the week at N22 and closed at N23, up N1. Year to date, the stock is down 1.08%.
Access Bank Plc
Access Bank Plc opened the week at N6.10 and closed at N6.30, up N0.20 or 3.28%. Year to date, the stock is down 7.35%.
AIICO Insurance Plc
AIICO Insurance Plc gained 3.03% this week. The stock opened at N0.66 and closed at N0.68, up N0.02. Year to date, the stock is up 7.94%.
FCMB Group Plc
FCMB Group Plc rounds up the top 10 gainers for the week. The stock opened at N1.61 and closed at N1.65, up N0.04 or 2.48%. Year to date, the stock is down 12.70%.
NEM Insurance Plc
NEM Insurance Plc was the worst performing stock this week. The stock declined by 13.14%, opening at N2.36 and closing at N2.05, up N0.31.
The stock was this week marked down by N0.13, following the closure date of a dividend payment.
Year to date, the stock is down 24.7%.
Capital Oil Plc
Capital Oil Plc opened the week at N0.23 and closed at N0.20, down N0.03. Year to date, the stock is down 13.04%.
Consolidated Hallmark Insurance Plc
Consolidated Hallmark Insurance Plc also declined by 13.04%. The stock opened at N0.23 and closed at N0.20, down N0.03.
Year to date, the stock is down 47.37%.
Dangote Sugar Refinery Plc
Dangote Sugar Refinery Plc opened the week at N13.20 and closed at N11.50, down N1.70 or 12.88%.
The stock was this week marked down by N1.10, following the closure date of a dividend payment.
Year to date, the stock is down 24.59%.
Vitafoam Nigeria Plc
Vitafoam Nigeria Plc shed 12.71% this week. The stock opened at N4.25 and closed at N3.71, down N0.54. Year to date, the stock is down 15.68%.
Japaul Oil and Maritime Services Plc
Japaul Oil and Maritime Plc opened the week at N0.28 and closed at N0.25, down N0.03 or 10.71%. Year to date, the stock is up 19.05%.
Ecobank Trans International
The tier two lender fell by 10.31% this week. The stock opened at N11.15 and closed at N10, down N1.15.
Year to date, the stock is down 28.57%.
Thomas Wyatt Nigeria Plc
Thomas Wyatt Nigeria Plc shed 10% this week. The stock opened at N0.40 and closed at N0.36, down N0.04. Year to date, the stock is up 56.52%.
GSK Consumer Nigeria Plc
GSK Consumer Nigeria Plc also declined by 10% this week. The stock opened at N8.50 and closed at N7.65, down N0.85.
Year to date, the stock is down 47.24%.
BOC Gases Plc
BOC Gases Plc rounds up the top 10 losers for the week. The stock opened at N4.16 and closed at N3.76, down N0.40.
The stock was this week marked down by N0.40, following the closure date of a dividend payment.
Year to date, the stock is down 10.69%.
Capital market operators call for the suspension of recapitalisation plans
Amolegbe called for regulators to suspend recapitalisation because of the coronavirus pandemic.
Capital Market Operators (CMOs) have noted their desire for the suspension of plans regarding the recapitalisation of the stockbroking community, calling on regulators to consider the current economic realities posed by the COVID-19 pandemic.
President, Chartered Institute of Stockbrokers (CIS), Mr Tunde Amolegbe, made this known at a webinar organized by the Capital Market Academics of Nigeria themed: “Mitigating the Impact of COVID -19 on the Capital Market.”
The Securities and Exchange Commission (SEC) in February had made mention its plans for the recapitalisation of stockbroking firms ahead of the ownership change of the Nigerian Stock Exchange (NSE). At the webinar, Amolegbe called for regulators to suspend such plans for now as a result of the constraints of the coronavirus pandemic.
Ms Mary Uduk, then SEC acting Director-General, in explaining the overall sentiments, consequently, had noted that only 10 per cent of the 255 stockbroking firms controlling 80 per cent of the market activities, believed that there was a need for recapitalisation.
Amolegbe explained further stating that the pandemic had slowed down NSE demutualisation programme. The implication of this will thus be a possible aggravation of the funding challenge of the CIS. Given its level of importance, he believed that the Federal Government should treat the capital market as a priority sector in terms of pandemic alleviation strategies.
“In view of the existing major constraints with regard to trading liquidity, the Central Bank of Nigeria should formulate policies that will drive more liquidity into the hands of CMOs, especially equity traders,” he said. He added that the stability and growth of the equity market would eventually lead to an overall market rebound as well as growth in the economy.
The CIS president also emphasized the need for the launch of a derivatives market as it is required to hedge investments at a period of heightened risks such as this. He observed that the Nigerian capital market had been hamstringed even before the pandemic challenge.
“The equity market, which drives performance of the other market segments had been characterised by low investor patronage and low liquidity ever since the global financial crisis which hit Nigeria in 2008,” he said.
Nigeria’s worsening current account deficit piles pressure on exchange rate
The current account deficit is critical to deciding on whether to devalue or not.
Nigeria’s current account deficit closed at $4.8 billion dollars at the end of March 2020 as the country continues to import more than its exports. This is according to provisional data from the CBN and analyzed by Nairametrics research.
This is as the country continuous to face pressure pressure to unify the exchange rate and reflect the true value of the naira against the dollars.
A current account deficit occurs when a country’s foreign liabilities exceed its foreign assets. It is exacerbated when the country imports more than it exports. Nigeria has reported a negative current account balance in 15 quarters out of the 25 quarters since 2014 under the Buhari administration. The figures are stated net because the inflows are set off against outflows, thus a negative balance deficit.
Nigeria recorded a current account deficit of N17 trillion in 2019 the highest since we started tracking in 2014. In the last quarter of 2014, Nigeria’s current account deficit was a whopping $6.9 trillion one of the worst on record.
Large current account deficits typically fan devaluation calls as it suggest the country’s reserve is not adequate to meet long term commitments hence the need to adjust the currency. In March the central bank devalued the official rate at the NAFEX to about N388/$1 and recently devalued the exchange rate window for importers to N380/$1.
First Quarter Deficit
According to the data, Nigeria’s total exports was $13.3 billion out of which crude oil and gas exports was $11.2 billion. Non-oil exports was $2.1 billion. Nigeria’s non-oil import was $11 billion out of which services gulped $8.8 billion. Investment income which includes dividends cost about $2.8 billion in currency outflows.
Services remains a huge source of forex outflows in the country and it comprises of travel, transportation, payment for technical services etc. Services gulped about $33 billion last year alone. However, net portfolio outflows in the first quarter of 2020 was as high as $8.3 billion out of which $6.9 billion was for debt securities mostly short term.
In total about $12.8 billion was outflowed from the country for debt securities in the 4th and 1st quarter of 2019 and 2020 respectively.
What this means
As the country continues to deal with the twin challenges of a drop in crude oil prices and the covid-19 pandemic there is an urgent need to reverse the trend of a current account deficit if it is to keep the exchange rate stable. Depending on who you listen to, pent up dollar demand could be as high as $2 billion leading calls for another devaluation.
The world bank has also called for a unification of the exchange rate, a situation that could either lead to a devaluation or beyond the NAFEX rate or enforce stability if there is enough liquidity. The exchange rate at the black market is currently N365/$1 however the external reserve is about $36.1 billion.
Naira remains stable against the dollar across the forex markets despite liquidity squeeze
The forex turnover dropped by 64.4% while the exchange rate remained stable at N386/$1.
The exchange rate at the parallel market remained stable closing at N465/$1 on Tuesday, July 14, 2020. However, on the officially recognized NAFEX Market, the forex turnover dropped by 64.4% while the exchange rate remained stable at N386/$1.
Parallel Market: At the black market where forex is traded unofficially, the Naira remained stable as it closed at N465 to a dollar on Tuesday, according to information from Aboki FX a prominent FX tracking website. This was the same rate that it exchanged on Monday. However, during intraday trading, Nairametrics research observed the dollar sold for as high as N470/$ and as low as N462/$1. Nairametrics FX tracker reported a parallel market FX rate of N470/$1.
NAFEX: The Naira remained stable against the dollar at the Investors and Exporters (I&E) window on Monday, closing at N386/$1, this was the same rate that was reported on Monday, July 13. The opening indicative rate was N387.92 to a dollar on Tuesday. This represents a 33 kobo drop when compared to the N387.46 to a dollar that was recorded on Monday.
Nigeria maintains multiple exchange rates comprising the CBN official rate, the BDC rates, SMIS, and the NAFEX (I&E window). Nairametrics reported a few weeks ago that the government has set plans in motion to unify the multiple exchange rate in line with requirements from the World Bank. Nigeria is seeking a world bank loan of up to $3 billion. The country has been under pressure from the International Monetary Fund and the World Bank for currency reforms.
Meanwhile, forex turnover at the Investor and Exporters (I&E) window recorded a decline on Tuesday, July 14, 2020, as it dropped by 64.4% day on day. According to the data tracked by Nairametrics, forex turnover dropped from $36.28 million on Monday, July 13, 2020, to $12.91 million on Tuesday, July 14, 2020. The very low turnover reaffirms the scarcity of dollars and an indication of the liquidity pressure in the foreign exchange market. This also is a far cry from an average of $200 million recorded at major trading days during the last few weeks.
Nairametrics reported last week that the CBN official rate has been adjusted from N360 to a dollar to N381 at its SMIS window where forex is sold to importers and SME’s. A note from renaissance capital suggests that the naira might be depreciated again at the official window if the parallel market or unofficial rate continues to weaken further. As long as there are restrictions on access to dollars, businesses will continue to patronize the unofficial market to meet up with their demands.
Forex News: On Monday, the Central Bank of Nigeria (CBN) has directed all authorised dealers to immediately discontinue the processing of Forms M for maize/corn importation into the country. This directive is contained in a notice that was addressed to authorised dealers and signed by Dr O.S Nnaji, CBN’s Director in charge of Trade and Exchange Department.