Impact of Covid-19 on Nigerian Stock Market

Nigeria saw its first case of coronavirus in late February 2020, shortly before the WHO declared the pandemic. As of this writing, the country has 9,140 active cases and 382 total deaths. The peak in daily growth occurred on June 9, and contagion is not slowing down. The global crisis has caused a dent in the national economy already affected by the oil price collapse.

Acute effects of COVID-19 highlight the need for radical change. As the national economy is heavily dependent on oil, the government ought to reconsider the entire financial system. Consumers are seeing their incomes erode, and the effects are felt across the board. The stock exchange was quick to reflect the changes.

Double Trouble

Even before the outbreak, the government was grappling with economic complications. Nigeria had not fully recovered from the oil crisis of 2014. GDP for 2019 was unimpressive – only 2.3%, which was later lowered to 2% by the International Monetary Fund. In early 2020, the country was expecting it to reach 2.5%. Now, the Debt Service to Revenue Ratio has soared to 60%.

The damage caused by the pandemic was two-fold. First, global lockdown exacerbated the effects of the oil crisis. Failure of the OPEC+ deal in March had already triggered a plunge in prices. Oversupply of crude oil caused them to stay low. Nigeria’s budget for 2020 was based on forecasts of $57 for a barrel. In April and May, the price was fluctuating at around $29. Meanwhile, sales of the commodity account for 90% of the country’s foreign exchange earnings.

Key Figures

Covid-19 has had a vastly negative impact on local stock trading. The imposing of social distancing caused the shutdown of financial markets, offices, companies, and events. As the coronavirus is still spreading quickly, the effects are likely to be magnified in the future.

The stock exchange has seen a dramatic decline. The resulting volatility was wild. On March 13, the stock exchange saw the most dramatic collapse as it fell by 13.49%. However, on April 17 investors saw the highest weekly returns, which amounted to 7.19%. On May 22, the YTD of the NSE All-Share Index lost 6.10 % in comparison with January 31.

There is no certainty concerning the duration of the crisis or the depth of looming economic devastation. Institutional players are taking less interest in stocks. Their portfolios are now geared towards safer assets like Treasury bills and government bonds.

Recent Improvements

In May, as oil prices started to recover, investors reaped sizeable gains. Market capitalization grew by N1.2 trillion, and the sentiment was bullish. In total, 69 stocks appreciated, while just 11 lost value. Nevertheless, trading metrics kept deteriorating. The monthly value of trades was the lowest for the year.

Finally, there are positive developments. Online traders are increasingly engaging in buying and selling of corporate stocks through FXTM. For local clients, internet-assisted trades present a viable opportunity to make a profit remotely. Modern platforms and apps make stock trading accessible to anyone, even with a modest initial investment.

The change is associated with the transition of government measures from lockdown to reopening. This boosted market sentiments worldwide. On NSE, stocks were purchased by both local and offshore accounts, with the former buying most actively. Overall, the performance of the most capitalized stocks in May was remarkable.

  • The NSE 30 closed higher by 11.1% thanks to the recovery of oil prices, as a $3.4 billion IMF facility.
  • Investors also showed a positive reaction to the release of Q1’20 and FY’19 results for  MTNN and BUACEMENT, as well as their gains.
  • Another driver was the strength of GUARANTY and NB. These were popular with local and foreign investors attracted by low prices.

Conclusion: Positive Signs

Before the crisis, the Nigerian stock market was perceived as fairly safe for investors. Following the outbreak, the outlook has changed. It is now clear that Nigeria is going to feel the pain due to its dependence on crude oil exports. The steep decline in commodity prices is exacerbating the fiscal pressure.

However, the stock exchange has now turned to bullish sentiments. Stocks are being bought by local and foreign participants. Overall, the trends look encouraging, albeit not spectacular. Obviously, despite the rise in NSE, the national economy needs a long time to recover from the pandemic.

January 2, 2021 Update: We have just announced our BEST STOCK NEWSLETTER of 2020 AWARD!

CLICK HERE to find out which stock newsletter was up 78% in 2020 (and whose 2019 picks are now up 113%).

*** Our Award for BEST STOCK NEWSLETTER of 2020 ALERT ***

Updated January 2, 2021

At WallStreetSurvivor, we subscribe to dozens stock recommendation and advisory newsletters. There is ONE newsletter that is constantly outperforming all of the others--The Motley Fool Stock Advisor.

Five of their 2020 stock picks have doubled and the average return of all 24 of their stock picks for 2020 is up 78%!

We have been tracking ALL of the Motley Fool stock picks since January 2016. That's 5 years and 120 stock picks. As of Friday, January 1, 2021 the Motley Fool's January stock pick (TSLA) is up 720%, their March pick (ZM) is up 172%, their April pick of SHOP is up 226% and their June pick CRWD is up 120%; and another two have more than doubled. In addition, 10 of their 2019, 12 of their 2018, 11 of their 2017, 15 of their 2016. Most impressively, over the last 5 years that we have been tracking every recommendation, their average stock pick is up 209%--tht means over the last 5 years their stock picks, on average, have TRIPLED!

Now no one can guarantee that their next picks will be as strong, but our 5 years of experience has been super-profitable. The important thing about the Fool stock picks is you have to buy them the day they are recommended because they usually pop 5-10% in the first 72 hours after the release their recommendation. You sure don’t want to risk missing out on their next pick.

Normally the Fool service is priced at $199 per year but they are currently offering a NEW SUBSCRIBER DISCOUNT that allows you to get theiir next 24 stock picks for just $99/year. HERE is the LINK to visit their New Subscriber Discount page.

CLICK HERE to get access to all The Motley Fool’s Stock Picks and their next 12 months of picks for just $99 per Year! 



GET UP TO $1,000 IN FREE STOCK

WHEN YOU OPEN A ROBINHOOD BROKERAGE ACCOUNT

Robinhood was the first brokerage site to NOT charge commissions when they opened in 2013. They just past 10,000,000 accounts and to celebrate they are offering up to $1,000 in free stock when you open a new account.

Here’s the details: You must click on a special promo link to open your new Robinhood account. Then when you fund your account with at least $10, you will receive one stock valued between $5 and $500. Then, you will get a link to share with your friends. Every time one of your friends opens an account, you will receive another free stock valued between $5 and $500. Click here to learn more about this Special Robinhood offer.

Claim your free stock NOW (before it’s too late)



Comments are closed.