2020 budget presentation fails to bring respite to investors as losses hit N103bn 

By Omobayo Azeez

• As market capitalization plunges below N13trn
• It’s appropriate time for liquid investors to take position, say analysts

As President Muhammadu Buhari presented Nigeria’s 2020 budget to the National Assembly on Monday, there were high expectations that the country’s stock market would react positively and bring some respite to investors in its usual manner.

The situation in the market, however, reflected the opposite as market players refused to see the budget presentation as a stimulant strong enough to turn the tide and restore confidence, thereby leading to sustained sell-offs even with more aggressive momentum on Wednesday.

Market indicators, the all share index (ASI) and market capitalisation both fell by 0.79 per cent pegging year to date return at -15.37 per cent, as the former shed 210 points to close at 26,598.94 while the latter lost to the tune of N103 billion to close at N12.948 trillion.

All effort by bargain hunters to stay afloat proved abortive amidst hike in market activities into the mid-week.

A total of 591 million shares were traded at the midweek session as against previous close of 186 million units amounting to 217.86 per cent increase, and similarly, value also doubled by 191.55 per cent from previous level of N2.54 billion to N7.40 billion naira.

The market breadth recorded a spread of three in favour of the bears as 12 gainers emerged against 15 losers, while 15 other securities closed flat.

MTN Nigeria topped gainers’ list with N1.50 to close at N130; Forte Oil followed with N0.30 to close at N16, while ACCESS, UACN and Learn Africa added N0.20, N0.15 and N0.10 to close at N7.35, N7.15 and N1.12 per share respectively.

On the flip side, Nestle recorded N15 loss to close at N1,215 per share. Dangote Cement trailed with N5.90 loss to close at N145 and Guinness Plc occupied the third position by shedding N2.50 to close at N30 per share. Similarly, Nigerian Breweries and PRESCO shed N2 and N1.95 to close at N48 and N38.40 respectively.

In order of appearance, CUSTODIAN, ACCESS, WAPCO, GUARANTY and GUINNESS ended the trading day as top performers in terms of volume while CUSTODIAN, DANGCEM, GUINNESS, GUARANTY and WAPCPO made up the top five performers in terms of the value of units traded.

In terms of volume and value of trade, CUSTODIAN led with 348.049 million shares at N2.523 billion, ACCESS followed with second highest volume with 52.575 million shares at N383.44 million while WAPCO traded 28.152 million shares worth N450.347 million.

On the value chart, Dangote Cement followed CUSTODIAN with N1.813 billion in 12.501 shares and GUINNESS traded 20.234 million shares valued at N607.005 million.

Commenting on the current state of the market, analysts in some quarters have maintained that nothing is wrong with the market, stressing that it is only mirroring the state of the economy.

They said delay in budget implementation has impacted negatively on the economy and the capital market, which relies largely on the direction of the economy to perform.

Analysts at CSL Stockbrokers recalled that the 2019 budget of N8.9 trillion was passed in April 2019 but was not assented to by the President until May 2019, implying that five months into the fiscal year; budget spending would have been constrained.

According to them, this has been the age-long story in Nigeria with the public finance managers failing to adhere to the fabled January – December fiscal year, regarded as an organic budget calendar.

“Since 2014, it has taken an average of 5 months for the budget to be approved between presentation date and approval date.

“Over the years, the impact of operating an inorganic budget calendar has been that key capital projects have to be rolled over into subsequent fiscal years,” the analysts said.

According to Garba Kurfi of APT Securities and Fund Limited, delay in capital project execution impedes the capital market in no small measure, adding that capital expenditure implies pumping money into the economy.

He said as the President of the federation, Buhari, recently instructed the finance minister to release N800 billion for capital project, “that means they have not released a single kobo since the beginning of the year in capital expenditure of the 2019 budget.

“If you pump that money into the economy, then you will begin to see activities; otherwise, we will keep witnessing what we are witnessing now.”

He continued: “Last year we closed negative and this year, we are still negative. Now that the President has appointed economic team, he has presented the budget and the National Assembly has promised to pass the budget on time, all these give us hope.

“However, positive activities in the market are still holding back because investors want to see all the promises work. Let the dream become reality. Let the National Assembly release the budget as promised, let the president work on it as promised. When this happens, the market can rebound no matter the situation it is in now,” Kurfi s explained

Meanwhile, he counselled investors who have liquidity to seize the current situation of falling share prices to take positions on some stocks.

He said: “For the capital market, the nine month results are not yet out and any time from now we are expecting and if the nine month results are positive, I can assure the market will rebound back.

“Investors that have liquidity should take positions now. If you look at it, by June this year, WAPCO, for instances, crashed to N9.50, but today, it sells at N15. If by June you have entered at N9 and today, it is valued at N15, you have gained more than 75 per cent.

“Early September this year, UAC was trading at N4.50 and today the price has moved up to N7. If you have gained from N4.50 to N7, this is more than 50 per cent.

“Even generally, the market is looking somehow, doing analysis of individual stock and entering now will be the right time to take position, it will yield positive,” he further said.