Markets
NSE: The reign of the bears persists
The stocks performances revealed that all banking stocks recorded a dip in their stock prices.
Investors lost over a trillion naira in the Nigerian equities market as at 11th March 2020. The fall in Brent Crude price has shown the bloodletting that has taken place in markets for equities around the world with the Nigerian stock market losing over -12.46% year-to-date.
The performance of the stock market reflects, to some extent, the performance of the economy, particularly in a free market where there are minimal entry restrictions.
The decline in the Nigerian stock market, therefore, is an indicator of the state of the economy – an indication of loss of confidence in the underlying values of the stocks or the general performance of the firms, coupled with the geopolitical uncertainty in lieu of the Coronavirus outbreak and fear that the naira might be devalued.
Week-to-date banking stocks performance reveals that all banking stocks recorded a dip in their stock prices. The top three banking stocks with the highest dips recorded, using their week-to-date performance, include Zenith Bank, which fell from N16.95 to N12.05; Access Bank from N7.65 to N6.45, and Union Bank from N7.05 to N6.00, with percentages decline of -28.91%, -15.69% and -14.89% respectively. The stocks that recorded the lowest dip include FCMB, UBA and Unity Bank with percentages decline of -0.60%, -0.80% and -2.08% respectively.
[READ MORE: NSE: Market drops by N329.39 billion on Monday, as one stock makes the gainers’…)
Month-to-date oil performance reveals that 7 stocks were flat, that is, recorded no change in their share price while 3 energy stocks dipped and 2 energy stocks were bullish. The 3 energy stocks that dipped were FO, ConOil, and Oando with percentages decline of -10%, -18.89% and -22.22% respectively. The 2 stocks, which were bullish, are Eternal and Mobil with percentages increase of +1.51% and +9.98% respectively.
Peter Omoregie, CFA, Head Proprietary Trading at CardinalStone Partners Limited, explained to Nairametrics that the bearish trend around equities market, particularly oil had negatively affected Nigeria’s bourse.
He further buttressed that foreign investors had been trimming their positions, and until there were good fundamentals in the economy, he expected the trend to continue.
The fears of investors have been reflected in massive stocks sell-offs, as everybody tries pushing through the door at the same time. What looks like a stampede from the Nigerian bourse has caused a continual fall in stock prices, taking it into bearish territory.
The week-to-date performance of almost all the Nigerian Stock Exchange sector index was bearish. The Nigerian Stock Exchange banking index had a decline of -22.51% week-to-date change with the Oil and Gas sector index also recording a fall of -3.01% week-to-date change.
This was as a result of panic in the equity market due to the fall in oil-price on 9th March 2020 which was termed a ‘Bloody Monday’ (by Zenith Bank’s Founder, Mr Jim Ovia at the just-concluded Central bank growth 2.0 conference held yesterday) as result of the huge losses recorded in the equities market.
The Nigerian Stock market bearish trend is not expected to reverse soon as Saudi Arabia announced that it would make a further sale of oil to bring its total production to 12.3 million barrels per day by April 2020. This is likely to keep oil crude prices on the downward trend mid and long term
Coronavirus
Covid-19: Timeline of every pronouncement made by Nigeria to support the economy.
Timeline of every action announced since the outbreak hit Nigeria.
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 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.
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.
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
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.
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
Markets
Gold drops in two consecutive days, as hope raises over Covid-19 vaccine
Gold futures fell 1.70% to $1,706.06 by 4 pm local time, with global investors retreating from the pullback from gold after hopes were strengthened
Gold was down for the second day in a row on Tuesday morning in London’s trading session, even after a falling dollar made gold slightly cheaper for investors holding other currencies.
Gold futures fell by 1.67% to $1,706.45 by 4 pm local time, with global investors retreating from the pullback from gold after hopes were strengthened on Novavax’s Covid-19 vaccine. The biotechnology company is preparing to present results from its phase one clinical trial of its vaccine by July. Based on these, phase 2 trials will begin in many countries, including America.
Investor sentiment was also boosted by Japan, the third-largest economy in the world, as it lifted its state of emergency which included regions like Tokyo. However, the number of Covid-19 cases continues to climb, and U.S.-China relations continue to simmer in the background.
Furthermore, global investors will look to U.S. Federal Reserve Chair, Jerome Powell’s, statements during a scheduled virtual meeting on Friday for tips of whether the Federal Reserve will consider negative rates.
(READ MORE: The World’s Economy may not survive without a vaccine)
“US-China tensions have also fueled concerns about the implementation of a trade deal. Gold’s rally is showing signs of exhaustion amid relative calm in equity markets. However, buying interest may emerge at lower levels amid growth worries and US-China tensions,” Kotak Securities said in a recent note.
Markets
Naira drops to N462 at parallel market
Rates in the parallel market will remain under pressure and we might see it above the N460 /$ levels it is currently trading at.
The Naira depreciated on Tuesday at the parallel segment of the foreign exchange market against the U.S (United States.) dollar selling at N462 to $1 compared to N460 against the dollar on Monday.
Victor Silas, an Investment analyst, in an interview with Nairametrics, explained that the downward pressure seems to persist at the black market due to the limited forex supply at the I & E window. He said,
“With the prolonged limited FX supply to the market, investors and corporates unable to get dollars at the I & E windows will result in the parallel market. As more shortage of FX supply is prolonged and unable to meet demands.
READ ALSO: Bureaux De Change operators warn against proposed VAT increment
“Rates in the parallel market will remain under pressure and we might see it above the N460 /$ levels it is currently trading at.
At this point, Nigeria’s central bank needs to restore confidence and provide more FX for legitimate transactions.”
(READ MORE: Naira depreciates to N460/$1 at the parallel market, despite improved liquidity)
However, Aminu Gwadabe, president, Bureau De Change Operators of Nigeria (ABCON (Association of Bureau De Change of Nigeria)) explained recently that Bureau De change operators will resume fully as soon as restrictions placed on air travels and international airports are lifted.
READ MORE: We are still studying ‘Eco’ adoption by ECOWAS members- FG
He said the return of the operators will help stabilize the naira and reduce the impact of currency hoarders and speculators.
“I, therefore, want our members and the General public not to engage on panic buying as anytime soon fingers might be burnt from such behaviours,” he said.
