Chinwendu Obienyi
News at the weekend that Nigeria recorded its first case of the global pandemic in Coronavirus sent shockwaves down the spine of the business community with the Federal Government, health authorities and capital market regulators speaking on what was being done to contain the health emergency.
Nigeria’s Health Minister Osagie Ekhanerie, who briefed on the matter last Friday said that an Italian business traveler who arrived Lagos from Milan with no symptoms of coronavirus suddenly began manifesting the disease and was promptly quarantined to avoid its spread like wild fires in the country.
While that may be the only reported case in the country at the moment, there were strong reasons to believe that with its very porous land and maritime borders, many more infected individuals may have sneaked into the country undetected.
Indeed, since the announcement, investors in the Nigerian financial market have been edgy after reports revealed that an estimated $5trillion may have been yanked off global financial markets in the wake of the Coronavirus spike across the world.
That perhaps could have been the worst shock for the global stock markets since the 2008 financial crisis with growing anxiety that Nigeria’s weak health infrastructure may soon be caught off guard as the disease continues to claim new territories and sparks fresh concerns about a global pandemic.
In Asia, last for instance, Japan’s Nikkei dropped 3.67per cent on Friday, while Hong Kong’s Hang Seng Index fell 2.4 per cent and mainland China’s Shanghai composite index was down 3.71per cent
European markets followed suit, with London’s FTSE 100 opening 3.3 per cent down, while Germany’s DAX fell 3.6 per cent with France’s CAC 40 falling 3.1per cent and Italy’s FTSE MIB losing 2.3 per cent on Friday.
The Stoxx 600, the pan-European index, was also on course for its biggest weekly drop since the 2008 financial crisis.
According to Reuters, economists are now warning that the impact of the illness could trigger another global recession as Covid-19, which just weeks ago appeared to have little international spread, is gradually turning a global pandemic.
This followed a dramatic plummet on Wall Street on Thursday, where shares plunged 4.4 per cent—the biggest fall since August 2011, while the Dow Jones recorded its biggest daily points drop.
In the global spot market, Brent crude oil benchmark dropped to below $50.31, marking its lowest level since December 2018.
This was even as coronavirus cases have again spiked in South Korea, with more than 2,300 Covid-19 infections now reported, as many people are turning to different ways to prevent the spread of germs:
Indeed, the latest evidences of coronavirus’s spread, triggered fresh waves of sell pressure across global markets last week.
According to a report, Wall Street’s three main indices each fell sharply, giving up opening gains on a day that saw investor sentiment swing on a near-hourly basis. The S&P 500 was down 1.9 per cent by early afternoon in New York, a day after it dropped 3.4 per cent in its biggest slide since trade tensions rattled markets in February 2018.
The Dow on the other hand gained nearly 0.3 per cent while the European markets finished mixed, as corporate profit warnings added to fears about the economic impact of the coronavirus outbreak.
To soothe frayed nerves, the Nigeria Centre for Disease Control (NCDC) at the weekend said it has deployed its Rapid Response Teams to support the Lagos State Government, as Nigeria records its case of the Coronavirus (COVID19).
Its Director General of NCDC, Dr Chikwe Ihekweazu who spoke in Abuja last week said the NCDC has also escalated the multi-sectoral coronavirus preparedness group to an Emergency Operations Centre (EOC), at Level II to lead response activities”.
Nigeria’s case is the third confirmed case in Africa.
The patient, an Italian national returned to Nigeria from Italy and has been placed in isolation.
Ihekweazu said that health facilities must remain on high alert, while assuring Nigerians of their safety against COVID19.
”The NCDC will continue to keep Nigerians informed. It is important for them to be focused on facts and not fear.”Nigerians should protect themselves by staying calm, drink lots of water.
He said Nigerians should frequently wash their hands, avoid touching eyes, nose and mouth, practice respiratory hygiene and if anyone have fever, cough and difficulty breathing, they should seek medical care early.
The DG assured Nigerians, that with appropriate information, treatment and precautions, Nigeria will beat COVID19 like Ebola.
For its part, the Nigerian Senate urged the Federal Government to henceforth quarantine international traveller coming into the country from China. The Senate President, Dr Ahmad Lawan, gave the charge following a matter of urgent national importance raised via Order 43 of the Senate Standing Rules by the Senate Deputy Leader, Senator Ajayi Boroffice.
He said: “We must be prepared. We must take all the necessary measures at our ports – airports, seaports. If someone is coming from China, he should be quarantined, not self-n isolation.”
Regulators’ view
Questions have been raised as to how the Federal Government as well as regulatory authorities would tame the likelihood of the global impact of the virus in the Nigerian capital market. However, the SEC has said efforts are being taken to ensure investors’ confidence is brought back into the market.
Speaking to Daily Sun, Acting Director General, Securities and Exchange Commission, (SEC), Mary Uduk, noted that economic activities in the country have slowed down due to the fear of the virus and said this could translate to the performance of the capital market if urgent steps are not taken to address the situation.
Uduk said, “The effect of coronavirus has been bad for the economy because economic activities have slowed down due to the fear of the virus and we don’t see it as affecting the market directly, what would happen is that businesses will no longer do as much activities as before thereby slowing down business and when that happens it affects the market”.
According to her, “We have been with constant engagement with the Ministry of Health and they have told us that there is no incidence of the virus in Nigeria and we hope that the virus will not come into our market but, even if it comes I think efforts are being made to ensure that it is contained. So we don’t see this as much of the problem, what we see as the problem is our trade with other countries that are infected by this virus because trade have slowed down.
The Acting DG further said, “It’s not just about the Nigerian Capital Market, it’s about the companies in the capital market that have issued equities and debt and how the virus would affect them which is a bigger consideration than just the consideration of the capital market. In all we believe the ministry of health that told us that they are ready are ready”.
On the other hand, a top source at the NSE said the Exchange will continue to set its sights on global oil prices.
“These markets are experiencing declines due to what is happening in China at the moment and that is simply because they contribute to the manufacturing sector of these markets. Right now there appears to be no movement in and out of china, then stocks declined because investors remain concerned by the sustained incidence of the virus, which remains a drag on economic activities.
It can only have a major impact on our market because we are dependent on oil prices which is why other jurisdictions are suffering from constant drop in the price of oil. We are watching all these closely and we can only hope we will not suffer severe impact in our market even as we will continue to educate investors”.
Operators’ view
Chief Executive Officer, Crane Securities Limited, Mike Eze, believes that the impact might likely hit the NCM as Nigeria is not adequately prepared due to its weak macroeconomic state.
Eze said, “We operate in a globalised market now and whatever is happening in any part of the world, so far, your country is in that part of the world, it will affect your country and with our market being slow, the Chinese contribution to our economy is quite reasonable as they contribute heavily to the real sector”
Now, no one goes there or comes out of China and this is affecting activities in other part of the world and you know they have a big capital market in so many parts which is affecting transactions in other bourses in the developed markets.
According to him, “emerging markets in Africa will eventually be affected if the vaccine is not quickly developed, then it will eventually snow-ball into our market even though we are not seeing any translation of it to our market yet. But just like the crash of 2007\2008 happened in the US in which everyone felt less concerned until our market crashed. We are hoping that the vaccine will be developed in time so that we will not be affected”.
For his part, Managing Director, Afrinvest Securities Limited, Ayodeji Ebo, said since Nigeria’s revenue is linked to oil, the decline suffered by other markets might have a negative impact on the market even as foreign investors control the large stake of transactions on the nation’s bourse.
He said, “I feel what we are we are currently seeing at the moment (downtrend) is as a result of the impact of the virus through the global markets because our revenue is linked to oil and the decline in oil is having an impact in the market. This is one of the reasons why we have foreign investors pulling their profit away from the market.
If we escalate in terms of the spread, we have seen constant sell-offs in major stocks and this probably will send panic to the market and foreign investors will continue to run away. But then even if there was a possible impact, the onus is on the government to act fast because there is a direct link to oil price and it will affect the revenue that we get and as a result will impact heavily on what goes to the external reserves and with the pressure we have been seeing on the Naira, it will get to a point whereby the CBN will not be able to defend the naira again”.
Conclusion
It is becoming a tradition of the stock market to start positively and then retreat into the shadows especially in the month of February. The fears of investors are strong and their negative sentiment towards the equities segment of the market despite opportunities for bargain hunting and dividend gain. Thus, the time to act is now as the Federal Government is expected to swing into action and partner with the market authorities (SEC&NSE) amongst other market stakeholders to set up urgent steps to hedge against the possible impact of the coronavirus in the market.