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Dark Clouds loom for investors as stocks fall 8% in first half of 2020

Nigerian stocks are down 8.8% for the year worse than 5.86% in May.

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The Nigerian Stock Market closed the month of June down 3.12% as investors clawed back profits after two successive bullish months. Stocks reversed a disastrous March (-18.75%) to gain 8.08% and 9.76% for April and May respectively.  

Global stocks had outstanding returns in major markets in Q2 2020, triggered by America’s biggest economy, as major Wall Street stocks recorded their best quarter in more than 20 years, boosted by monetary policyholders’ stimulus packages at enormous levels. 

The S&P 500 index gained more than 20% in Q2 2020, printing the largest gain since the final quarter of 1998. Emerged and emerging market stock prices overall also gained about 17% in the second quarter, according to MSCI’s All-Country World index. 

Bearish June – The stock market staged a remarkable comeback in April and May just as Nigerians grappled with an economic shutdown caused by the COVID-19 pandemic. The Federal Government had in late March shut down economic activities, closed borders, and imposed curfews in Lagos, Abuja, and key states in a bid to contain the spread of the pandemic. Whilst economic activities stood at a standstill, investors pounced on cheap stocks beaten down by the March mega sell-offs. 

In June, the market sustained several mixed trading sessions with bulls and bears switching positions. However, stocks will eventually close the month in the negative snapping two months of positive gains. In terms of year to date returns, Nigerian stocks are down 8.8% for the year a sharp reversal from the 5.86% gains recorded in May but still better than the 20.65% year to date return recorded in March, capping a disastrous first quarter of the year.  

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Broken Economy – The Nigerian Economy is projected to get into a recession this year as the effects of the lockdown take its toll on the economy. The government faces a revenue crisis as debt service to revenue ratio hit 99% in the first quarter of the year. The government has earmarked a N2.3 trillion stimulus package which it hopes will jump-start the economy and cushion the effect of the impending recession. 

While the government deals with fiscal challenges, macro-economic issues persist with the CBN battling multiple interest rates and exchange rates respectively. For example, treasury bills, FGN bonds, and risk-free securities are trading at sub 5%. Conversely, the inflation rate rages on above 12% while lending rates remain sturdy at 21% compared to saving deposit rates at sub-2%. On the other hand, forex rates at the black market averages N460/$1 compared to the NAFEX at N388/$1. However, the official rate used for government revenue conversions remains at N360/$1 stoking pressure from the World Bank and institutional investors for a unification of the Naira. 

Outlook for Stocks – With the dark clouds hanging over the economy, investors have their gaze on stocks anticipating the earnings results which are due in a few weeks. Most investors anticipate weak earnings this quarter considering the lockdown and its ensuing consequence on the economy. Nairametrics expects earnings to be poor across sectors of the economy further depressing interest in the stock market.

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Most of the major companies trading on the stock exchange operate in industries that are not COVID-19 proof. From consumer goods to financial services, oil and gas, and Industrials, Nairametrics research expects the impact to be severe. Guinness Nigeria Plc, on Wednesday, informed the public in a statement to the Nigerian Stock Exchange, about the material circumstances that will impact its full-year financial results for 2020. According to the company, the adverse impact of the sharp contraction in economic activities and the knock-on effect of the COVID-19 lockdown took a toll on the on-trade segment of the business across all our markets. Production and revenues have thus been negatively affected. Nairametrics expects more companies to report similar guidance. 

Foreign investors also appear to be playing a waiting game as they await CBN action on the expected unification of the naira. Data from the CBN reveals portfolio investments into Nigeria was just $67.9 million for the month of April 2020, the lowest inflow recorded this year. FPI sharply reversed from $2.30 billion at the beginning of the year (January) to just $67.9 million inflow in April 2020. Nigeria, like most emerging markets, relies heavily on foreign portfolio investments to shore up its external reserves and manage its exchange rate position.  

Nigerian Stock market closed on Wednesday on a bullish note, as the all-share index gained 0.47% to close at 24,595 basis points as against 1.53% depreciation recorded previously. Its Year-to-Date (YTD) returns currently stands at -8.37%. Nigerian bourse market capitalization stood at N12.83 billion.  

Market turnover closes negative as volume moved down by -29.45% as against +76.83%, the upside recorded in the previous session. WAPIC, UPDCREIT, and UBA were the most active to boost market turnover. GUARANTY and UBA topped market value list. 

 

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Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

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Business

US Government removes visa reciprocity fees for Nigerians from December 3

The US government has removed all visa reciprocity fees for Nigerian citizens seeking visas to the US.

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The United States government has announced the removal of all visa reciprocity fees for Nigerian citizens seeking visas to the US with effect from December 3.

This disclosure was made through a statement titled, ‘Update on removal of visa fees for Nigerian citizens by the US Government,’ by the Federal Ministry of Finance on Saturday, December 4, 2020, and signed by the ministry’s Spokesperson, Ferdinand Nwonye.

The Federal Government revealed that this positive development follows the removal of excess visa application, processing and biometric fees for United States citizens applying for Nigerian visas by the Nigerian Government.

The statement from the Foreign Affairs Ministry reads, “The Ministry of Foreign Affairs wishes to inform that the United States Government has removed all visa reciprocity fees for Nigerian citizens seeking visas to the United States.

“The positive development is in line with the removal of excess visa application, processing and biometric fees for the United States citizens applying for Nigerian visas by the Nigerian Government. The United States Government has therefore eliminated reciprocity fees for Nigerian citizens with effect from December 3, 2020.”

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The foreign affairs ministry, in the statement, also advised prospective travellers to the United States to visit www.travel.state.gov for details.

What you should know

  • It can be recalled that in 2019, the Donald Trump administration had imposed the reciprocity fee for all approved non-immigrant visa applications by Nigerians. This fee was charged in addition to visa application fees for only applicants who were issued visas.
  • While imposing the additional reciprocity fees, which ranged from $80 to $303 depending on the class of visa, the US Embassy in Nigeria disclosed that the reciprocity fees were a fallout of unsuccessful talks with the Nigerian government over the reduction of visa fees it charged United States citizens.

 

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Hospitality & Travel

COVID-19: Over 70% of jobs lost in aviation, tourism industries in 2020 – AfDB

The AfDB has stated that about 5 million jobs have been lost in the aviation and tourism industries in Africa due to the COVID-19 pandemic.

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Aviation in Africa

About 5 million out of Africa’s 7 million aviation and tourism industry-related jobs have been lost in 2020. Also, as much as $15 billion in revenue, half of this to African airlines.

This was disclosed by the African Development Bank (AfDB) in a statement issued and seen by Nairametrics on Friday.

READ: FG bars aides of VIPs from airport terminals, to grant loans to airlines, others at 5%

Vice President for Infrastructure, Industrialization and Private Sector, AfDB, Solomon Quaynor explained that the pandemic’s effect was felt more in Africa, a claim that was backed up by numerous panelists at the just concluded AfDB’s webinar themed ‘African Aviation Recovery Conference: coordinating an efficient response to the COVID-19 crisis’s effects on the Aviation sector in Africa.’

READ: FG to double number of airports across the country by 2023

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He said, “The air transport system is really at the forefront of all our collective objectives to realize Africa as a single economic bloc. The centrality of the aviation sector to Africa’s long-term goals by referencing three flagship projects of the AU’s Agenda 2063 that aim to advance open skies and closer connectivity: SAATM, The African Continental Free Trade Area, and the African Passport-Free movement of people.

READ: These are the sad reasons Nigerian airlines struggle and fail 

“The air transport system is really at the forefront of all our collective objectives to realize Africa as a single economic bloc of 1.3 billion people with a GDP of almost 3 trillion dollars, for which we want to begin to really focus and increase trade among ourselves, as well as investment.”

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Also at the event, Minister of Aviation, Hadi Sirika called on African governments to embrace full liberalisation of the aviation sector, invoking the Yamoussoukro Decision, which established an arrangement for the gradual liberalization of intra-Africa air transport services.

READ: Aviation: Aviation sector grasps for stimulus in worst ever crisis

He said, “Nigeria today has all its bilateral air service agreements with the YD and was also among the first ten countries that signed a commitment to implement the Single African Air Transport Market.”

Dr. Amani Abou Zeid, African Union Commission for Infrastructure and Energy, explained that Africa’s aviation industry represents a huge market that the continent’s airlines need to exploit more fully, with technology and AI offering the way forward for expansion, regional development experts.

READ: Plentywaka raises $300,000, seeks partners as it launches operations in Abuja

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“Technology and smart technologies are offering this fantastic opportunity, so let’s make use of AI, let’s make use of the Internet of Things, let’s capacitate our people to revamp and to rethink our industry, to make sure that both our airports and our airlines cater for the very near future,” said Zeid.

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READ: COVID-19: Travel agencies beg FG for interest-free loans

What they are saying

A key takeaway was the urgent need for coordinated action among the sector’s actors, including governments, aviation authorities and multilateral stakeholders such as the Bank.

“The time is now. All of us who have really been working on upstream issues such as SAATM, the World Bank, ourselves, the AU and others, now is the time to really pool our advocacy and resources to make this happen once and for all because if we continue to operate as a federation of 54 states as opposed to an integrated market, our economies will continue to be sub-optimal,” said Quaynor

READ: SAHCO acquires eco-friendly electric tractors for its ramp operations

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Energy

Autogas: Nigerians will not pay N250,000 for conversion, it is free – FG

The FG has clarified an earlier statement about Nigerians having to pay N250,000 to have their vehicles converted from diesel/fuel use to autogas.

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FG says vehicle owners to pay N250,000 to convert from petrol to autogas

The Federal Government has said that news reports of Nigerians having to pay N250,000 to convert their cars from diesel/petrol engines to autogas is false and incorrect.

This was disclosed by Justice Derefaka, the Technical Adviser on Gas Business and Policy Implementation to Minister of State for Petroleum, Timipre Sylva, to newsmen on Friday.

READ: FG to deliver 1 million vehicle conversion to autogas by end of 2021

READ: N250bn to be spent to fund compressed Natural Gas infrastructure

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On Friday, Derefaka clarified his position as wrong and said the FG plans make the conversion for free. He added that the FG plans to convert 1 million vehicles for free by the end of 2021.

“I granted an interview on Channels Television, where I stated the auto conversion of vehicles to gas will amount to N250k and Nigerians will need to pay for that. That statement is not correct, it is wrong.

READ: 25 million Nigerians to pay N4,000 monthly for solar power system

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“On that note, I will like to state the position that has been made by my boss, Timipre Sylva, that FG will convert those vehicles for free for Nigerians, and we are looking at 1 million vehicles by the end of 2021,” he said.

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What you should know about autogas conversion

  • Nairametrics reported earlier this week that  Justice Derefaka had said vehicle owners in the country would have to pay N250,000 to have their cars converted to autogas from petrol.

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