Nigerian equities bounced back on Friday with the stock exchange market capitalisation rising by N47bn, on a day that President Muhammadu Buhari signed the 2016 budget into law.
Trading in the treasury bills market also closed the week on an upbeat note as demand persisted across most maturities (supported by the healthy system liquidity) – yields moderated 17bps on average.
Financial experts expressed no surprise at the immediate reaction of the President’s assent to the budget from the capital market and they stressed it would have a significant impact on the real sector of the nation’s economy.
The stock market closed positive at week close with most key sectors recording gains. Specifically, the Nigerian Stock Exchange market capitalisation rose to N8.84tn from N8.793tn in 24 hours.
Elsewhere, global markets traded mostly in the red as the disappointing United States’ job data for the month of April and renewed pressure on the oil price weighed heavily on investor sentiment.
In Nigeria, a total of 181.108 million shares worth N1.166bn were traded in 3,710 deals.
In all, 31 stocks appeared on the gainers’ chart while 11 did otherwise. As of Thursday, the share prices of 24 firms appeared on the losers’ chart and 25 on the gainers’ chart.
The NSE All-Share Index also rose to 25,701.60 basis points from 25,563.78 recorded on Thursday.
The oil and gas sector (+433bps) led advances, bolstered by the continued recovery in Forte Oil Plc (+10.25 per cent) and gains in Mobil Oil Nigeria Plc (+493bps).
Similarly, the financial services (+85bps) and consumer goods (+16bps) sectors closed higher, following price appreciations in Guaranty Trust Bank Plc (+210bps), Zenith Bank Plc (+115bps) and Tiger Branded Consumer Goods Plc (+902bps), Guinness Nigeria Plc (+106bps) respectively. The industrial goods sector closed flat.
FBN Holdings Plc topped the volume chart for the third consecutive session, trading 30 million units while Nigerian Breweries topped the value chart for the second consecutive session, trading 1.9 million units worth N222m.
The NSE ASI and NSE 30 gained 54bps and 69bps, putting year-to-date returns at -10.27 per cent and -12.42 per cent respectively.
Following a mild improvement in liquidity to N380bn (previous: N370bn), interbank placement rates moderated marginally with the call rate down 9bps to 4.08 per cent.
At the foreign exchange interbank market, the naira closed unchanged at 199.05/dollar, retracing from an intraday high of 197.50/dollar.
The Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said the signing of the budget into law would have a significant impact on the real sector of the nation’s economy.
“In terms of the real sector, the N1.57tn capital expenditure; the N500bn provided for intervention in the segments relating to the poor will have the effect of reflating the economy to the extent that it will create new jobs because when government spends about N1.57tn, N350bn of that will be paid to contractors whose debts are outstanding. They will pay off their existing debts and then the remaining N1.2tn will go into new and ongoing contracts. So, the contractors will engage new workers and possibly that will result in increase in demand for goods and services.
“We are going to see additional pressure on the foreign exchange market due to the increase in demand for goods and services.
“On the money market, we are going to see further uptick in inflation rate, which will force the monetary policy committee to further tighten monetary policy rate. So, that will lead to an increase in interest rates. An increase in interest rates will have a negative effect on the equities market.
The Partner, Corporate/Commercial/Public Sector Group, Olisa Agbakoba Legal, Mrs. Olabisi Akodu, said the non-passage of the budget before now had affected all areas of the economy, including the capital market.
The move, according to her, will boost the purchasing power of Nigerians and will in turn impact sales volumes of companies.
The Head of Investment Research, Afrinvest West Africa Limited, Mr. Ayodeji Ebo, said the signing of the budget would boost investor confidence, adding that industrial growth should be impacted positively, given a 30 per cent allocation to capital expenditure.
“We expect to see significant activities in the building materials and construction space. In terms of the banking space, it will increase lending opportunities because some of the banks will need to support the government’s vision,” he said.
He added that the delay of the budget had affected business activities and compounded the problem of foreign exchange restrictions.
“The GDP growth in the first and second quarters will be significantly affected, especially the Q1, because a lot of business activities have been stalled,” Ebo said.
President Muhammadu Buhari at the signing of the budget had said the development would trigger concerted efforts to reflate the Nigerian economy, adding that “a key element of which is an immediate injection of N350bn into the economy by way of capital projects.”
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