Coronavirus: Nigerian Stock Exchange loses N308bn

Posted by News Express | 29 February 2020 | 1,303 times

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Following yesterday’s index case of the Covid- 19 disease otherwise known as coronavirus in Lagos, the deadly disease has consumed its first casualty as the Nigeria Stock Exchange (NSE) lost a whooping N308 billion in less than 24 hours of the new. While many had thought the victim would be a human casualty, Nigerians were caught napping at the reality and extent of the fiscal damage the virus could have on the economy.

The situation has however led to palpable fears among some residents and visitors to the state and its environs, just as many people in several parts of the country showed concerns over the situation.

The index case of an Italian has also led to the panic buying of sanitary equipment, such as hand sanitisers and face masks, which has in turn, brought about the scarcity of the products whereby some sellers of the products now exploit the situation to sell at exorbitant prices. Checks by Saturday Telegraph revealed that most residents and visitors to the Centre of Excellence are expressing worries over the situation as they rush to protect themselves and their wards against any unexpected contact with the virus.

The mad rush has however led to an almost embarrassing situation as many people, including bankers, worshippers and motorists now wear protective facemasks to shield themselves form those with symptoms of the virus, including coughing and sneezing.

A visit to some regular markets in Lagos witnessed many traders and motorists refusing to engage in their usual activities due to fears of contacting the disease while others had to put on the mask. Similar situations were seen at few banks visited as well some Mosques, where Muslim faithful had their weekly Juma’at prayers. One of those spoken with had this to say: “I am only protecting myself, since they said the mask will not allow us to inhale others’ cough.

Investors lose N308bn, naira drops on forward market

The impact of the development was already being felt by the country’s financial markets as the Nigerian stock market yesterday suffered a loss of N308 billion or 2.2 per cent in market capitalization. Consequently, the All- Share Index dipped 591 basis points or 2.2 per cent to close at 26,216.46 index points as against 26.808.24 recorded the previous trading session while market capitalisation of equities depreciated by N308 billion from N13.965 trillion the previous day to N13.657 trillion as market sentiment remained on the negative territory.

The market breadth closed negatively, recording only 2 gainers against 41 losers. Almost all the lenders quoted on the banking sub sector of the market recorded considerable loss. However, the health sub sector remained flat except shares of GSK Plc which dropped by 8.70 per cent to close at 4.20 per share. In the same vein, coronavirus panic sent world share markets crashing again yesterday, compounding their worst week since the 2008 global financial crisis and bringing the wipeout in value terms to $5 trillion.

The rout showed no signs of slowing as Europe’s main markets slumped 2-3 percent early on and the ongoing dive for safety sent yields on U.S. government bonds, seen as probably the securest asset in the world, to fresh record lows.

Hopes that the epidemic that started in China would be over in months, and that economic activity would quickly return to normal have been shattered this week as the number of international cases has spiraled.

Bets are now that the Federal Reserve will cut U.S. interest rates as soon as next month and other major central banks will follow to try and nurse economies through the troubles and stave off a global recession. Similarly, the naira came under pressure in the foreign exchange market as traders said the local currency slid past N400/$ on the one-year forward market yesterday. It was priced at 413.55 to the dollar in a year’s time, compared with the N399.73 per dollar it traded at two weeks ago.

Nigeria early on Friday confirmed the first case of coronavirus in sub-Saharan Africa, with the Federal government saying that the Italian patient – who had flown in from Milan- a city badly hit by the coronavirus outbreak – on 25 February, is clinically stable, with no serious symptoms, and is being managed at the Infectious Disease Hospital in Yaba, Lagos. Analysts say that the spread of the new coronavirus from China has hit global financial markets, and Nigeria’s economy is at risk from the tumbling price of oil, which accounts for 90per cent of the country’s foreign exchange earnings and more than 50% of government revenue.

In fact, the global oil benchmark, Brent Crude, finally slipped below the $50 per barrel mark yesterday, after declining by as much as 3.85%. It was trading at $49.74 per barrel, according to Oilprice.com.

This figure is about $7 lower than Nigeria’s $57 crude oil benchmark in the 2020 budget. According to the International Energy Agency (IEA), with the coronavirus outbreak resulting in a partial shutdown of the Chinese economy, global oil demand will witness its first contraction in a decade. Commenting on the likely impact of the development on Nigeria’s economy in a chat with journalists recently, FXTM research analyst, Lukman Otunuga, said the economy’s dependence on oil as its primary source of revenue will continue to make it vulnerable to recession. He said: “Falling oil presents negative consequences for the economy, especially when considering how roughly 90% of export earnings and over 50% of government revenues are from crude exports.

“What is even more alarming is Nigeria’s 2020 budget which has set the benchmark for oil at $57. With Brent and Crude both depreciating over 15% since the start of 2020, it raises tough questions whether Nigeria will meet its oil revenue goal of N2.64 trillion.

“The woes do not end here. Foreign exchange reserves are poised to decline on lower oil which not only complicates the Central Bank of Nigeria’s (CBN) efforts to defend the naira but raises the risk of inflation running rampant.

“The toxic combination of lower government revenues, rising consumer prices and weakening local currency is more than enough to threaten Nigeria’s fragile economic recovery,” he added. In a recent report, Fitch Ratings predicted that Nigeria, Ghana, Angola, Congo, Equatorial Guinea, Zambia, South Africa and Gabon were sub- Saharan African countries that would be impacted heavily by the Coronavirus outbreak. (New Telegraph)


Source: News Express

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