The Nigerian equities market has in recent weeks recorded impressive gains, as investors take positions in blue-chip stocks.
The All-Share Index and market capitalization, on Wednesday, gained 0.50%, to settle at 25,783.02 points and N13.474 trillion respectively, reducing the YTD loss to -3.92%.
As the COVID-19 virus continues to rattle global financial markets, including the Nigerian bourse, it became prevalent to seek diverse opinions about Nigerian equities. In this case, that of Nigerians living abroad.
Nairametrics interviewed Investment Experts, Traders and an Engineer, seeking their opinions on what Nigerian Stocks they will presently consider for a BUY.
Their responses were varied, ranging from top Banking, Industrial, and unsurprisingly, Agriculture-based stocks.
London based, Lukman Otunuga, the Senior Research Analyst at ForexTime (FXTM) said,
“In a world where the coronavirus menace has created widespread chaos, disruptions, and uncertainty, no prisoners were taken.
“Oil has been one of the biggest causalities of COVID-19, down roughly 40% year-to-date (YTD), as worldwide restrictions a few months back, crippled demand for the commodity. With a fair chunk of Oil & Gas companies losing billions of dollars to the pandemic, their respective stock prices declined considerably.
“Big names in Nigeria such as Oando, LekOil, Seplat Petroleum Development Company, and 11 Plc, among others, have seen their shares depreciate between 20 to 40% + YTD. However, if Oil rebounds on stabilizing global economic conditions and a possible breakthrough in finding a COVID-19 vaccine, this could provide an opportunity for Oil & Gas companies to roar back to life – ultimately pushing stocks higher.”
According to France-based Computer Engineer, and COO, Feldel Gas Limited, Oladayo Oladele,
“Generally speaking, I will be interested in stocks in the IT/Telecoms sector, which includes MTN Nigeria, Airtel, because Nigeria has a digital economy that is growing at an exponential rate. Lots of tech startups like PiggyVest, Paystack, and Flutterwave are fast becoming internationally relevant, not forgetting agriculture-based stocks like Okomu oil, as the border closure by President Buhari’s administration seems to increase their profitability in the near term. Finally, FMCG stocks, like Nestle and Unilever, as significant buying pressures from their offshore-based parent companies, shows a high room for more upside.
“My bias is that, no matter how unstable Nigeria’s economy looks presently, these domains are the least affected in my opinion.”
In the words of Scotland-based Market Analyst, and an Energy Trader, Dapo-Thomas Opeoluwa, “When it comes to picking stocks from overseas, it’s a bit difficult, because we do not know how the companies are faring in the country. Sometimes we go with Warren Buffet’s recommendation of investing in a good business.
“So, to be on the safe side, we invest in the household names that give us dividends, and hopefully capital appreciation in the long run.
“I invest in Zenith; GTB; Stanbic; Sahco PLC (which are particularly promising, because of its cheap price and high potential, given how tourism might pick up, the aviation company might benefit); and Dangote Plc.
“Sometimes we go through the financials of these companies, and check if the businesses are healthy and if they’ve got what we call ‘moat’.
“Notably, because our stock exchange isn’t as fundamentally driven, as it is in England or the United States, we can’t trade stocks like we do overseas.”
Explore the Nairametrics Research Website for Economic and Financial Data
It is imperative to note that, most of the professionals interviewed seem unsurprisingly attracted to banking, energy dominated stocks, and most especially, blue-chip stocks on their prevalence to Nigeria’s economy.
Many Nigerian stocks still look greatly undervalued, and exhibit high potential for more upsides, in terms of their present price action and also attraction attributes to foreign portfolio investors in the long term.
Nigeria and its long standing fuel subsidies
We are in a country where the subsidy on petrol prices is seen as the only source of social security.
Recently, the Nigerian National Petroleum Corporation (NNPC) in a press release said there was no plan to increase the ex-depot price of Premium Motor Spirit (PMS) in March 2021.
Since the increase in the global price of crude oil, there have been expectations that the retail pump price of petrol would rise following an increase in the landing cost of petrol and claims of full deregulation of the sector by the government.
In September 2020, the Minister of State for Petroleum Resources, Timipre Sylva, announced that the government will take a backseat in the regulation of the price of petrol, noting that market forces and crude oil price would continue to determine the cost of the product.
So far, in 2021, crude oil prices have continued to rise, implying an increase in the landing cost of PMS. Currently, the landing cost of PMS is estimated at c.N190/Litre compared to the current market price at N165-N170, implying subsidy is back.
However, the Managing Director of the NNPC, Mele Kyari, insists there is no allocation for fuel subsidies in the 2021 budget. In a Reuters report, the chairman of the Major Oil Marketers Association, Tunji Oyebanji was reported to have said the NNPC was losing at least N30 ($0.08) per litre on gasoline as of early February, based on the international fuel price and the publicly available dollar exchange rate. This comes to c.N1.2bn (US$3.15m) per day assuming daily consumption of c.40 million litres
There have been attempts in the past to remove the fuel subsidy but these have not been without resistance from the populace. On May 11, 2016, petrol pump prices were hiked by around 68% from N87/litre to N145/litre and many assumed this signalled a full deregulation. This wasn’t the case however as the subsidy regime was still in place.
The exchange rate factored into the landing cost of fuel was between N280 and N285/US$1. A steep devaluation in the currency and an increase in crude prices in the international market implied an increase in the landing cost which necessitated the continuation of the subsidy regime, which was now booked as under-recovery losses in the books of NNPC.
In 2020, a steep decline in global crude prices triggered by the global pandemic completely wiped out the subsidy via significantly lower landing costs, paving the way for a reduction in the pump price of Petrol in mid-March and paved the way for talks of deregulation.
The PPPRA announced a reduction in ex-depot price to N113/litre and official pump price to N125/litre. Between June and November 2020, the price of petrol was revised four times, rising from N121.50–N123.50 per litre in June to N140.80-N143.80 in July, N148-N150 in August, N158-N162 in September and N165-N170 in November.
We note that deregulation of the oil sector remains a politically sensitive discourse. Deregulating the downstream sector which would many times involve raising the pump price of petrol is always a challenge in a country where the subsidy on petrol prices is seen as the only source of social security and in many cases is resisted by the populace.
We have always expressed concerns that the current timing may be inopportune and the government be forced to return to the subsidy regime given the effects of the pandemic and recent hike in electricity tariffs on the already squeezed Nigerian consumer.
CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.
COVID-19 Update in Nigeria
On the 6th of March 2021, 195 new confirmed cases and 10 deaths were recorded in Nigeria
The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record significant increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 158,237 confirmed cases.
On the 6th of March 2021, 195 new confirmed cases and 10 deaths were recorded in Nigeria.
To date, 158,237 cases have been confirmed, 137,645 cases have been discharged and 1,964 deaths have been recorded in 36 states and the Federal Capital Territory.
A total of 1.54 million tests have been carried out as of March 6th, 2021 compared to 1.49 million tests a day earlier.
COVID-19 Case Updates- 6th March 2021,
- Total Number of Cases – 158,237
- Total Number Discharged – 137,645
- Total Deaths – 1,964
- Total Tests Carried out – 1,544,008
According to the NCDC, the 195 new cases are reported from 17 states- Lagos (70), Kaduna (22), Abia (20), Edo (18), Kano (10), Akwa Ibom (9) Rivers (7), FCT (7) Borno (6) Bauchi (5), Osun (5), Oyo (5), Plateau (3), Ekiti (3), Niger (2), Ogun (2) and Zamfara (1).
Meanwhile, the latest numbers bring Lagos state total confirmed cases to 56,374, followed by Abuja (19,328), Plateau (8,939), Kaduna (8,623), Oyo (6,761), Rivers (6,651), Edo (4,645), Ogun (4,419), Kano (3,830), Ondo (3,066), Kwara (2,953), Delta (2,582), Osun (2,449), Nasarawa (2,248), Enugu (2,078), Katsina (2,060), Gombe (2,010), Ebonyi (1,951), Anambra (1,811), Akwa Ibom (1,588), and Abia (1,568).
Imo State has recorded 1,551 cases, Borno (1,297), Bauchi (1,232), Benue (1,188), Adamawa (942), Niger (917), Taraba (863), Ekiti (825), Bayelsa (779), Sokoto (769), Jigawa (496), Kebbi (401), Cross River (334), Yobe (288), Zamfara (221), 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.
Governor Babajide Sanwo-Olu of Lagos State announced the closed down of the Eti-Osa Isolation Centre, with effect from Friday, 31st July 2020. He also mentioned that the Agidingbi Isolation Centre would also be closed and the patients relocated to a large capacity centre.
Due to the increased number of covid-19 cases in Nigeria, the Nigerian government ordered the reopening of Isolation and treatment centres in the country on Thursday, 10th December 2020.
On 26th January 2021, the Federal Government announced the extension of the guidelines of phase 3 of the eased lockdown by one month following the rising cases of the coronavirus disease in the country and the expiration of phase 3 of the eased lockdown.
On 28th February 2021, the federal government confirmed that the first tranche of Covid-19 vaccines will arrive in Nigeria on Tuesday, March 2nd, 2021.
Nairametrics | Company Earnings
Access our Live Feed portal for the latest company earnings as they drop.
- Seplat falls into a loss in FY 2020
- 2020 FY Results: Cornerstone Insurance Plc reports a 61.1% decline in profit
- Ellah Lakes increases operating expenses by 33.36% in HY 2020
- 2020 FY Results: Nigerian Breweries reports a 54.3% decline in profits in 2020
- Abbey Mortgage Bank projects N51.08 million profit in Q2 2020.