Freshly released Q4 2020 consumer expectations survey report by the Central Bank of Nigeria (CBN) showed that consumer confidence in the quarter was negative as the overall index stood at -14.8 points; albeit it improved from -21.2 points printed in Q3 2020. Consumers attributed the pessimistic outlook to declining economic conditions and lower family income.
However, their confidence about Nigeria’s economic outlook for the Q1 2021 and the next twelvemonths was positive at 10.5 points (increasing from 10.1 points) and 28.9 points (moderating from 30.5 points) respectively. Consumers also expected inflation rate to further rise in Q1 2021 as the index rose to 39.9 points (from 35.1 points printed in Q4 2020).
According to the report, the expected marginal rise in the general price level in Q1 2020 would be driven majorly by upward movement in prices of food and other households needs, education, as well as the purchase of houses.
The borrowing rate is expected to rise marginally in Q1 2021 as the index points fell to 17.0 (from 22.6) and moderated in the remaining part of 2021 -the index points declined to 12.2 (from 20.8).
The survey also showed that the “buying intention” index for consumer durables in the next twelve months improved – it rose to 42.2 points from 39.5 points – although it still indicates that majority of the consumers did not think it would be an ideal time to buy consumer durables such as furniture and electronics as the index points stood below 50 points.
In another development, a report by the Nigerian Stock Exchange (NSE) on domestic and foreign portfolio participation in equities trading showed that total equities market transactions rocketed month on month (m-o-m) in October 2020 when compared to transactions are done in September 2020.
Total transactions on the nation’s bourse increased to N244.90 billion m-o-m in October 2020 (from N134.97 billion recorded in September 2020) of which FPI transactions rose to N81.72 billion (from N40.05 billion). Also, transactions by domestic players increased to N163.18 billion (from N94.92 billion).
Breakdown of the FPI transactions in October 2020 showed that foreign portflio outflows increased by 116.66% to N56.44 billion, while foreign portfolio inflows rose by 80.57% to N25.28 billion. Local institutional transactions rose m-o-m by 57.42% to N93.24 billion in October 2020.
Similarly, transactions by retail investors rose m-o-m by 95.97% to N69.94 billion. Local players were able to lift the equities market, despite the relatively weaker rise in foreign portfolio inflows relative to outflows. Hence, the NSE All-Share Index (ASI) jumped by 13.76% to 30,530.69 index points on October 30, 2020 (from 26,837.42 index points on September 30, 2020).
Elsewhere, crude oil prices mellowed for most benchmarks to halt seven consecutive weeks of gains; albeit, traders still expect demand to pick up next year amid vaccination campaigns.
Specifically, the West Texas Intermediate(WTI) crude price fell w-o-w by 0.79% to USD47.82 a barrel given the 1.19% w-o-w decline in US crude oil input to refineries to 14.01 mb/d as at December 18, 2020 (also, It declined y-o-y by 18.91% from 17.28 mb/d as at December 27, 2019). Also, Brent price fell by 1.32% to USD50.82 a barrel as at Thursday, December 24, 2020.
We note that Gross Domestic Product (GDP) growth in Q4 2020 may still be negative but would be better than the negative figures printed in the last two quarters as we expect the yuletide period to further drive economic activity in the quarter.
However, the worsening insecurity challenges, particularly in the northeastern part of the country, coupled with the rising inflation rate may impede the anticipated growth rate.
Meanwhile, we expect the local equities market to sustain its bullish activity in December as investors take a position in dividend-paying stocks in anticipation of positive corporate releases and actions.