Coronavirus:  Nigerian stock market stays rocky

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…loses N77.16bn in domestic transactions in one month

  • Pandemic putting pressure on economy – Analysts
Uba Group

The raging Coronavirus, otherwise known as Covid-19, may have resulted in massive exit of foreign investors from the Nigerian Capital market.

 

Analysis of transactions executed at the Nigerian Stock Exchange revealed that total domestic transactions decreased by 53.27 percent from N165.14 billion in January to N77.16 billion in February 2020. Total foreign transactions increased marginally by 1.46percent from N70.31 billion to N71.34 billion between January and February 2020.

 

A comparison of domestic transactions in the current and prior month (January 2020) revealed that retail transactions also decreased by 63.81percent from N81.67 billion in January 2020 to N29.56 billion in February 2020. Similarly, the institutional composition of the domestic market decreased by 42.97 percent from N83.47 billion in January 2020 to N47.60 billion in February 2020.

 

Analysts who spoke with The Point said the effect of the virus on the nation’s economy may cause Nigeria’s total revenue from crude oil export in 2020 to drop between $14 billion and $19 billion, compared to $38.9 billion previously predicted.

 

United Nations Economic Commission for Africa, in a report titled, “Economic Impact of the COVID-19 on Africa,” and obtained by The Point, notes that Nigeria’s gross oil revenue stood at N1.564 trillion as at the end of fourth quarter 2019.

 

The report also estimates that Nigeria and other oil-exporting nations in Africa can record revenue losses of up to $65 billion due to a likely drop in demand for the commodity.

 

Speaking on the gloomy impact that COVID-19 would have on the Nigerian economy if the pandemic lasts longer on the global scene, an economic expert, Mr. Jude Nnabude, said Nigerian banks that were still trying to recover from an economic contraction in 2016 were now faced with a triple whammy of COVID-19 and volatile markets that could further delay progress.

 

“This, however, poses downside risks to the profitability of banks in 2020, mainly given the likely impact on asset quality and loan growth,” adding that “Capital adequacy ratios of banks are more at risk amid the current macro realities.”

 

He explained that Oil has slumped to around $31 a barrel, below the government’s $57 target, amid a price war between Saudi Arabia and Russia, and as widening global efforts to fight the spread of the Coronavirus risks triggering a drop in demand.

“CBN"

 

According to him, if oil prices remain at current levels for the next two quarters, Nigerian banks’ problem-loan ratios can rise beyond the initial expectation of six to eight per cent, noting that most Nigerian lenders have their oil exposure hedged at $40-$50 a barrel, which will mean they will have to make provisions if prices remain where they are.

 

The Securities and Exchange Commission said the Coronavirus is real, but Nigerians must also try not to create unnecessary panic.

 

Head of External Services, SEC, Mr. Okey Umeano, said the whole thing was being overhyped.

 

“I’m not saying that the virus is not serious, especially in the international communities, but we must be very careful not to create unnecessary panic. The Federal Government has come up with some palliatives to cushion the effect, and even the CBN had also made some monetary pronouncements to support the society, including the health sector,” he said.

 

He noted that some of the quoted companies are part of the general economy, and that when the Federal Government and the apex bank come up with palliative measures, the money trickles down to the capital market.

 

“So, while we thank the CBN and the Federal Government for the intervention, it is also an intervention for the capital market,” he said.

 

Speaking on the rapid spread of the disease, IMF’s Managing Director, Kristalina Georgieva, said over one-third of the member countries were directly affected.

 

“This is no longer a regional issue; it’s a global problem calling for a global response.”

 

Georgieva explained that one-third of the economic losses from the COVID-19 outbreak would be direct costs such as loss of lives, workplace closures, and quarantines. Two-thirds, she added, would be indirect, including impacts on consumer confidence, business behaviour and financial markets.

 

According to the 2019 Global Report on Food Crises, Africa remains disproportionally affected by food insecurity with more than half of the global 113 million, 58 per cent to be precise acutely food-insecure people living in 33 countries in Africa.

 

Ironically, Africa holds 65 per cent of the world’s uncultivated arable land, particularly its vast 400 million-hectare savannas, which are the world’s largest agriculture frontier. Therefore, the continent of Africa should have no business with food insecurity.

 

The Central Bank of Nigeria, in its policy measures in response to the Coronavirus outbreak and spillover, said Covid-19 pandemic is having significant adverse effects for both the global and Nigerian economy, and has already led to unprecedented disruptions in global supply chains, sharp reduction in crude oil prices, turmoil in global stock and financial markets.

 

According to the CBN, It has also created widespread cancellations in sporting, entertainment and business events, lockdown of large swathes of movements of persons in many countries, and intercontinental travel restrictions across critical air routes in the world.

 

These outcomes, the apex regulator said, have had serious adverse implications for key sectors, including but not limited to oil and gas, airlines, manufacturing, trade and consumer markets.

 

According to the apex bank, the virus has already led to unprecedented disruptions in global supply chain, sharp reduction in crude oil prices, turmoil in global stock and financial market, massive cancellation in sporting, entertainment and business events.

 

Others are lockdown of large swathes of movement of persons in many countries, and intercontinental travel restrictions across critical air routes in the world.

 

They said these outcomes have had serious adverse effects for key sectors, including but not limited to Oil and Gas, airlines, manufacturing sectors trade and consumer market.

 

The CBN, however said, in furtherance of its financial stability mandate, it was committed to providing support for affected households, businesses, regulated financial institutions, and other stakeholders in order to cushion the adverse economic impact on the pandemic.