In the wake of an oil crisis, debt challenges, high inflation, and a volatile FX landscape, coupled with the exogenous shock that is the Covid-19 pandemic, investors must urgently reposition themselves in the sectors that come out relatively unscathed.
As the greatest minds in the world think of solutions to what seems like the biggest global crisis in recent times, strategies are being set, and policies are being executed. Also, vaccines are being created to solve two major issues: the COVID-19 pandemic and the hefty economic issues that have risen by virtue of it. Pre-COVID-19, Nigeria undoubtedly had its fair share of challenges; however, the pandemic has worsened an already precarious situation.
Wale Okunrinboye, Head, Investment Research at Sigma Pensions, in a detailed presentation delivered at Nairametrics’ Quarterly Economic Outlook webinar, gave an overview of the current state of affairs of the Nigerian economy. Some notable mentions include:
- Oil prices have fallen post the historic cuts, with markets focused on demand destruction (20-30mbpd) and depleting global storage capacity.
- Due to the collapse in oil prices, Nigeria faces an external financing gap in the region of USD10-15 billion.
- This shortfall is at the heart of the decision to weaken the official rate from NGN305/$ to NGN360/$. Other segments have moved higher (Parallel: NGN430-450/$, Investors, and Exporters: NGN380-395/$).
- CBN’s ability to maintain the Naira peg received a boost with the inflows from the IMF’s USD3.4 billion RFI loan, but FX reserves remain low.
- The revised budget assumes a 40% dip in revenue projections to NGN5.1trillion (3% of GDP) but amounts to 1% decline in revenues from 2019 levels (3.6% of GDP).
- Deficit financing is as yet unclear, but the FGN will have to borrow heavily to plug the budget hole over 2020.
With the volatile oil economy–Nigeria’s primary source of revenue–and amidst many of the businesses that have been at the receiving end of the negative effects of the pandemic, particularly in the entertainment, tourism, and international trade spaces, a recession is imminent. The International Monetary Fund (IMF) forecasts steep recession and slow recovery, with Nigeria expected to contract by about -3.5%. Pressures on FX will also weaken the Naira.
However, a myriad of opportunities also exists, particularly in the non-oil sector. Many countries across the world, including Nigeria, will have no choice than to cut down interest rates towards spurring economic activity and creating jobs. For the investor, certain industries will undoubtedly perform better than others. Given the times and based on projections, some of the more favourable sectors that will not feel the impact of the pandemic as much, include:
Agriculture and Food Production
Cheta Nwanze, Lead Partner at SBM Intelligence, also in the Nairametrics’ Quarterly Economic Outlook webinar, revealed that the sector would experience low to moderate exposure to Covid-19. The SBM Jollof Index forecasts further increase in food inflation and the Index has continued its upward trajectory since the border closure in August 2019.
He noted that currently, local Nigerian rice has risen to the pre-August 2019 levels of imported rice. With increased demand (and not enough supply – a primary cause of Nigeria’s inflation) owing to the reduction in the importation, as well as the potential investments in the sector with the goal of increasing production and employment, the sector will present a good opportunity for investors. Sub-industries like bakeries and beverage producing companies are part of this as well.
Nigerian Communications Commission (NCC) reveals that as at Q4 2019, the telecommunication industry contributed 10.60% to Nigeria’s GDP, and the total active telephone subscribers in Nigeria as at January stood at 185.7 million. With the world forced indoors, communication as we know it has gone virtual.
Consequently, it is only expected that internet service providers, and the telecommunication industry at large, will thrive–not without its own challenges, of course. This industry, however, has a low exposure to the pandemic, making investments into the sector a good portfolio addition.
Healthcare/ Pharmaceuticals and Personal care
The CBN had disclosed its plans of supporting critical sectors of the economy with an N1.1 trillion intervention fund. Godwin Emefiele, the CBN governor, had explained that about N1 trillion of the fund would be used to support the local manufacturing sector, while also boosting import substitution. The balance of N100 billion is expected to be used to support the health authorities towards ensuring advancement in health R&D.
Other industries with low exposure to the pandemic, as explained by Nwanze in his presentation, include chemicals, packaging, and professional services, while industries like clothing & textiles, cement & building materials, consumer electronics, education, electricity, and real estate are some of the industries expected to be moderately exposed.
COVID-19 Update in Nigeria
On the 25th of September 2020, 213 new confirmed cases and 2 deaths were recorded in Nigeria
The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 58,062 confirmed cases.
On the 25th of September 2020, 213 new confirmed cases and 2 deaths were recorded in Nigeria, having carried out a total daily test of 10,526 samples across the country.
To date, 58,062 cases have been confirmed, 49,606 cases have been discharged and 1,103 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 494,577 tests have been carried out as of September 25th, 2020 compared to 484,051 tests a day earlier.
COVID-19 Case Updates- 25th September 2020,
- Total Number of Cases – 58,062
- Total Number Discharged – 49,606
- Total Deaths – 1,103
- Total Tests Carried out – 494,577
According to the NCDC, the 213 new cases are reported from 17 states- Lagos (51), Plateau (51), FCT (29), Rivers (18), Ondo (12), Oyo (9), Osun (8), Gombe (7), Ogun (7), Kaduna (5), Enugu (4), Edo (3), Jigawa (3), Kano (3), Benue (1), Delta (1), Sokoto (1).
Meanwhile, the latest numbers bring Lagos state total confirmed cases to 19,174, followed by Abuja (5,644), Plateau (3,373), Oyo (3,248), Edo (2,620), Kaduna (2,389), Rivers (2,305), Delta (1,801), Ogun (1,796), Kano (1,737), Ondo (1,620), Enugu (1,289), Ebonyi (1,038), Kwara (1,028), Abia (881), Gombe (864). Katsina (848), Osun (826), Borno (741), and Bauchi (692).
Imo State has recorded 566 cases, Benue (481), Nasarawa (449), Bayelsa (397), Jigawa (325), Ekiti (317), Akwa Ibom (288), Niger (259), Adamawa (237), Anambra (234), Sokoto (162), Taraba (95), Kebbi (93), Cross River (87), Zamfara (78), Yobe (75), while Kogi state has recorded 5 cases only.
Lock Down and Curfew
In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.
The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.
On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.
On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.
Lagos launches N5 billion support fund for 2,000 low-cost private schools
The Governor said the facility will benefit low-cost schools with amounts ranging from N500,000 to N5 million.
Lagos State government has launched a N5billion support fund to help reduce the impact of Coronavirus pandemic on low-cost private schools in the state.
This was disclosed by the Governor of the state, Babajide Sanwo-Olu via his Twitter handle on Friday.
According to him, the educational sector is one of those severely impacted by the pandemic, with schools and vocational learning-centres shut since March.
He said, “With access to funding for privately owned schools and vocational training centres in the state, we are confident that this programme, under the partnership between First Bank Nigeria and Lagos State Education Trust Fund (LSETF) will help accelerate a sustainable return to learning and skills acquisition.”
Today, I launched a N5bn support fund to help reduce the impact of #COVID19 on low-cost private schools in Lagos. The educational sector is one of those severely impacted by the pandemic, with schools and vocational learning-centres shut since March. #EducationMeetsFunding pic.twitter.com/PrKjLhxBXq
— Babajide Sanwo-Olu (@jidesanwoolu) September 25, 2020
He explained that the facility will benefit 2,000 low-cost schools with amounts ranging from N500,000 to N5 million.
“As a responsible Government, we are obligated to provide interventions that would enable learners in schools study in line with the new normal,” the Governor Sanwo-Olu added.
The Chief Executive Officer, First Bank Nigeria, Dr Adesola Adeduntan, said “With this partnership, we are sure that registered educational institutions in Lagos State will have access to funds at subsidised interest rates to meet their needs as they reopen at this auspicious time.”
WHO endorses emergency use of China’s COVID-19 vaccine
China says WHO has approved the emergency use of its COVID-19 vaccine.
The World Health Organization (WHO) has endorsed the plans by China to start administering experimental coronavirus vaccines to people while clinical trials are still underway.
This disclosure was made by a Chinese Health Commission official, Zheng Zhongwei, during a news conference on Friday, September 25, 2020.
Zheng recalled that China launched its emergency programme in July, having communicated with the WHO in late June. Hundreds of thousands essential workers and other limited groups of people considered at high risk of infection have been given the vaccine, even though its efficacy and safety had not been fully established as Phase 3 clinical trials have not yet been completed.
Zheng at the news conference said, “At End-June, China’s State Council approved a plan of COVID-19 vaccine emergency use program. After the approval, on June 29, we made a communication with the relevant representatives of the WHO Office in China, and obtained support and understanding from WHO.’’
Nairametrics had reported that Chinese Pharmaceutical firms have been quite aggressive about the development of a Covid-19 vaccine with the likes of Sinovac Biotech and Sinopharm publicly displaying their vaccine candidate for the first time at a trade fair in Beijing earlier this month.
It was pointed out that China National Pharmaceutical Group (Sinopharm) and the US-listed Sinovac Biotech SVA.O, are developing the three vaccines under the state’s emergency use program just as a fourth COVID-19 vaccine is being developed by CanSino Biologics 6185 HK, was approved for use by the Chinese military in June.
The WHO chief scientist Soumya Swaminathan, while describing it as a temporary solution, said earlier this month in Geneva that national regulatory authorities could approve use of medical products within their own jurisdictions in the current emergency situation.
He emphasized that the long-term solution in the successful development of a Covid-19 vaccine, lay in completion of Phase 3 trials, this is as China has not publicly released full details of its emergency use programme.
Zheng disclosed that China’s annual production capacity of COVID-19 vaccines is expected to reach 610 million doses by end-2020 and 1 billion doses by 2021. He said that the price of the vaccine will be affordable for the general public.