The fast-spreading coronavirus had not reached Nigeria when the impact of the deadly diseases started to be felt by industries and markets in the country, through its impact on global oil price and trade.
When Nigeria reported its first case of the virus two Fridays ago, oil price was already on the verge of dipping below $50, causing the Nigerian equities market to suffer its worst one-day loss in almost a year at its lowest point in the year.
However, the market gained Tuesday on news of global efforts to limit economic impact of the coronavirus and expectations that OPEC and its allies would announce a dip enough cut to support oil price.
On Thursday OPEC said it planned to cut oil production to 1.5 million barrels per day from April through December but it would depend on it biggest ally Russia, which is a non-member, to decide if there would be any cuts at all.
According to the proposal, OPEC would take one million barrel off the market while Russia would take the other half-million cut.
Oil price collapsed to $45 Friday (rose to $46.12 as at 17:00 GMT+1), its lowest since at least mid-2017 after Russia failed to give the necessary cooperation to the cartel.
What this means is that one-half of the condition for the devaluation of the Naira set by the Central Bank of Nigeria (NBS) might no longer be an unlikely scenario with the oil market now in free-fall. (The other half condition is the country’s foreign exchange reserve – now at $36bn – dipping below $30bn).
Beyond the apex bank and broader risk to the government’s revenue target, the stocks market might be set for another round of bleeding should downturn in the oil market persist when trading opens in Lagos on Monday.
“I think the market will kick off the week on a bearish note with the recent development where Russia seems not to be in support of further production cut,” said Gbolahan Ologunro, an analyst at Lagos-based CSL Stockbrokers Ltd.
Ologunro added that the continued spread of the coronavirus has kept foreign investors risk-off towards risky assets, “a double-whammy situation,” he said.
While the outlook looks depressing, Boboye Olaolu, research analyst at Lagos-based Cordros Capital says the market might not see any significant reaction although the news is not very positive.
“OPEC not being able to reach a consensus with Russia means we might not get the support we are looking for,” said Olaolu. “While we cannot estimate the magnitude of decline that would follow, we believe by next week oil price should hover around or above $50.”
As of Friday, oil has lost 26.61 percent while Nigerian Stocks have shed 2.1 percent.
