Most companies across different sectors have began closed periods and announced board meetings with intent to review their half year results. This can be verified from the numerous notice of board meetings sent to the Nigerian Stock Exchange by the secretary of these companies.
A review of the economic and market activities in the country during the review period provides an insight to the expectation of 2020 half year numbers.
According an investment newsletter by Leadway, the Nigerian equities market continued its bearish run in June with the NSEASI declining -3.12% MoM due to economic strain caused by the pandemic, profit taking following prior month's gain & foreign investors apprehension towards the Nigerian economy. Examining performance, only Consumers gained (+3.94%), other sectors of the index declined in June. Fixed income market yields continued falling following buy pressure caused by liquidity surfeit in the system. Average marginal rates at the June primary market Bond auction declined 79bps MoM to 10.38%, while average stop rates at the Nigeria Treasury Bill auction slid 43 bps.
The economy recorded slower GDP growth of 1.87% with expectations that Nigeria could fall into another recession. Foreign reserve as at June amounted to $36.19 billion which is a 6.24% decline from December 2019’ figure of $38.59 billion and a 24% year to date decline. Inflation remained in the double category hovering around 12.5%. The exchange rate was not left out as the CBN official devalued the naira to N360/$1, the I&E FX market closed at N386/$1 while the parallel (black) market trade N450 for $1 dollar.
Following OPEC’s output cut, oil prices improved to $42.39 higher than the Nigerian benchmark rate of $20pb. Market analyst expect that the second wave of COVID 19 in major global markets may put additional pressure on the already declining global demand for crude oil.
All indication points to a possible P&L contraction for most sectors. Our expectations are that the financial sector would see a sharp increase in impairment provisioning and decline in interest income. Operating expenses are also expected to marginally decline during the period. Investors will no doubt react to the upcoming H1 2020 reports.
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