Summary and Outlook
Earlier last week, the National Bureau of Statistics (NBS) issued the Foreign Trade Report for Q2-2021. Overall trade rose by 88.7% y-o-y and 23% in Q2-2021. However, Nigeria’s trade with Africa saw a reduction in spite of the AfCFTA which kicked in earlier in the year. This has raised posers among analysts many of whom believe that the country needs to do more to position itself to take advantage of the enormous opportunities in the continental trade agreement.
Commodities Market
Weekly Review and Outlook
Energy
Domestic
- On Monday, the GMD of NNPC, Mele Kyari, said the earliest period the Corporation can issue its Initial Public Offer to investors is in the next three years (2024). According to him, “the NNPC may not be able to offer its shares to the public by 2022 or 2023 due to certain bottlenecks that had lingered over the years”. Later in the week, he assured Nigerians that the corporation was working with relevant agencies to ensure that the price of gas is affordable by increasing the volume supplied to the domestic market.
- The Minister of State for Petroleum Resources, Timipre Sylva, on Monday, called for the establishment of an Africa Energy Bank to help improve investments in the oil and gas sector in the continent as Nigeria hopes for huge investment with the passage of the Petroleum Industry Act.
- The Minister of Industry, Trade, and Investment, OtunbaNiyi Adebayo, On Monday, disclosed that his ministry has inaugurated a technical committee to review the Petroleum Industry Act 2021 and its implications on some of the statutory responsibilities of his ministry such as the Oil and Gas Export Permit as well as the standards for Weights and Measures.
- The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) has confirmed Kogi State as an oil-producing state, to benefit from the 13% derivation fund.
- The NNPC on Wednesday released its FY2020 Audited Financial Statements (AFS) which revealed a decline in revenue from N4.634trillion in 2019 to N3.718trillion to 2020 and surprisingly a surge in PAT from a loss position of N1.7billion in 2019 to a profit of N287bn in 2020.
- According to the latest figure released by the Department of Petroleum Resources (DPR), Nigeria’s crude oil production dropped to an average of 1.23 million b/d in August from 1.36 million b/d in January and 1.32 million b/d in July 2021, representing the lowest figure YTD. Analysts attribute this to the force majeure of Shell PDC on Forcados crude oil within the period.
Foreign
- Oil prices dropped by about $1 on Monday, extending previous losses after the world’s top exporter Saudi Arabia slashed crude contract prices for Asia over the week ending September 11, reflecting well-supplied global markets and concerns over the outlook for demand.
- Iraq and Total Energies have signed a $27billion contract to deepen oil, gas, and solar investment in Iraq. The Iraqi oil minister, Ihsan Abdul Jabbar, said the deal was also to reduce the country’s dependence on fossil fuels.
- The head of Russia’s Lukoil Company said oil prices at $65-$75 were comfortable for the market and OPEC+ is striving to maintain that price range by regulating output.
- Russia’s Foreign Minister, Sergey Lavrov, on Monday, said the Nord Stream 2 natural gas pipeline from Russia to Germany is set to be completed in few days. While the US and many EU countries opposed the project, Germany has considered it mostly from a business perspective. Gazprom, the main facilitator of the project, on Friday said it has finished the construction of the Nord Stream 2 subsea pipeline to Germany, but flows are not yet cleared by the regulators.
- OPEC+ at the first Ministerial Roundtable on Energy, Climate, and Sustainable Development canvassed for a different approach in tackling climate change in developing countries.
- Oil prices grew towards $73 a barrel on Friday, supported by growing signs of supply tightness in the United States as a result of Hurricane Ida and as U.S.-China trade hopes gave riskier assets a boost.
- Both Brent and WTI benchmarks had weekly decline (See Table 1)
Table 1: Weekly Change inCommodity Prices
| Commodity | 10-Sep-21 | 03-Sep-21 | 31-Dec-20 | Weekly Chg | YTD Chg |
| Brent | 72.7 | 72.82 | 51.8 | -0.16% | 40.35% |
| WTI | 69.5 | 69.52 | 48.52 | -0.03% | 43.24% |
| Gold | 1794.4 | 1830.25 | 1898.67 | -1.96% | -5.49% |
| Silver | 23.97 | 24.79 | 26.4 | -3.31% | -9.20% |
| Platinum | 968.61 | 1028.11 | 1072.02 | -5.79% | -9.65% |
| Palladium | 2142.08 | 2416.5 | 2448.81 | -11.36% | -12.53% |
| Source: Bloomberg, TheAnalyst |
* Data for 10th September 2021 as at 5:12pm (Nigerian Time)
Outlook
- In the coming week, oil prices are expected to gain slightly as the US Gulf of Mexico production comes on stream and President Biden’s vaccine mandate strengthens economic recovery. Oil prices may also be supported by the Chinese oil auction which was aimed at stabilising oil prices.
- The oil market in the coming week will be looking out for OPEC and the International Energy Agency’s oil demand outlook for 2022 against the spread or containment of the Delta variant of COVID-19
Meanwhile, the legal tussle between the FIRS and governments of Lagos and Rivers states over the collection of VAT, has once again raised the issue of Fiscal federalism as operated in Nigeria. Analysts project that up to 30 states would experience severe revenue shocks if the pendulum swings in the favor of the litigating states.
Spot Prices of Commodities as of 18:12pm 03/09/2021
| Commmodity | 03-Sep-21 | 27-Aug-21 | 31-Dec-20 | Weekly Chg | YTD Chg |
| Brent | 72.77 | 72.42 | 51.8 | 0.48% | 40.48% |
| Gold | 1,832.20 | 1819.4 | 1898.67 | 0.70% | -3.50% |
| Silver | 24.765 | 24.035 | 26.4011 | 3.04% | -6.20% |
| Cocoa | 2,646 | 2579 | 2597 | 2.60% | 1.89% |
| Corn | 524.25 | 553.25 | 484 | -5.24% | 8.32% |
| Sugar | 19.63 | 20.03 | 15.28 | -2.00% | 28.47% |
Source: CNBC
Fixed Income and Money Market
Currency Market
The Naira continued its fall against major currencies this week, both at the BDC market and I & e FX Window.
At the I & E FX window, the domestic currency fell slightly by +0.12% on a week-on-week (W-o-W) basis to N412.00/US$ at the close of trading on Friday.
At the BDC market, it closed at US$/N547 depreciating by +3.60% against the US dollar, against the British pound it also fell by +3.47% to close at Pound/N745, and against the Euro by+2.58% to close at Euro/N635.
The Naira closed the week at $/N412.00 at the I&E FX window, at the NAFEX (spot market) it closed at $/N411.29
| Average Benchmark Yields | |||
| 03-Sept-2021 | 10-Sept-2021 | % Change | |
| I & E FX Window | 411.50 | 412.00 | +0.12% |
| NAFEX ($/N) | 411.36 | 411.29 | -0.02% |
| BDC ($/N) | 528 | 547 | +3.60% |
Source: FMDQ, AbokiFX
Money Market
For most of the trading session this week, money market rates were in single digit, this was supported by robust system liquidity.
At the close of the session on Friday, funding rates increased which was propelled by PMA. Open Buyback (OBB) closed at 14.00% while Overnight (O/N) rates closed at 14.50% indicating a W-o-W rise of +7.69%for OBB and +7.14% for O/N rates.
| Money Market Rate | |||
| 03-Sept-2021 | 10-Sept-2021 | % Change | |
| OBB (%) | 13.00 | 14.00 | +7.69% |
| O/N (%) | 13.50 | 14.50 | +7.14% |
Source: FMDQ
Funding rates are expected to trade in double digits trend in the coming week in the absence of any inflow.
Treasury Bills Market
The bills market was largely bearish this week, with attention skewed towards the PMA that held in the week.
At the close of the market this week, average benchmark yields for T-bills rose by +6.54% to 4.91%,OMO bills were up by +1.64% W-o-W to close at 6.12% while CBN’s special bills dipped by -2.23%.
| Average Benchmark Yields | |||
| 03-Sept-2021 | 10-Sept-2021 | % Change | |
| T. Bills (%) | 4.61 | 4.91 | +6.54% |
| OMO Bills (%) | 6.12 | 6.22 | +1.64% |
| SPEB | 6.87 | 6.72 | -2.23% |
Source: FMDQ
We expect activity next week to be dictated by the market liquidity situation.
FGN Bond Market
The FGN bond market sustained its mixed trend this week, with buying interest seen at the short and long-dated instruments, while investors went long for the mid-tenor notes.
The overall average benchmark yields closed at 8.26% for the week which fell slightly by W-o-W by -0.66%.
| Average Benchmark Yields | |||
| 03-Sept-2021 | 10-Sept-2021 | % Change | |
| Short Tenor (%) | 5.37 | 5.46 | +1.63% |
| Mid Tenor (%) | 9.62 | 9.28 | -3.52% |
| Long Tenor (%) | 11.67 | 11.83 | +1.37% |
Source: FMDQ
FGN Eurobond Market
The Eurobond market was relatively bearish for the entire week, with buying interests seen across the board.
Access Bank is set to issue a 5-year Fixed Rate USD Senior Unsecured Note.
The bank currently has a 5-year Eurobond which was issued on the 19th of October 2016.
Nigerian Capital Market
- The Nigerian bourse closed the week on a negative note as performance was bearish. The NGXASI closed the week with a decline of -0.86%. The Nigerian Stock Exchange lost N176.75 bn, year-to-date return moderated to -3.35%, while the market capitalisation settled at N20.28trillion.
- The volume and value of stocks traded on the exchange this week grew by +6.55% and +51.14% respectively.
- Sectoral performance across sectors tracked was mixed this week as the NGX Oil and Gas was the highest gainer for the week with +2.28% while NGX Insurance was the highest loser with -3.39%. NGX Consumer Goods closed positive with +0.18%, NGX-IND remained flat while NGX Banking closed negative with -0.19.
- Market breadth for the week closed negative with 25 gainers led by OANDO and FTNCOCOA as against 34 losers led by CORNERST and UPDC
Chart 1: Movement of NSEASI Index Points 03Aug. 2021–10 Sep. 2021
Source: NSE
NASD OTC
The NASD OTC Security Index (NSI) and Market Capitalization closed the trading week with a negative movement in Market capitalization and NSI. The NSI and Market capitalization closed the week at737.87 points and N641.34 with a decline of -0.27% and -0.27% respectively.
Dangote and Elumelu Index
Dangote Index closed the week negative with 129.05 basis points from 129.10 basis points recorded the previous week, representing a decline of -0.04%.
DANGCEM and NASCON closed flat while DANGSUGAR recorded a decline of -0.85% W-o-W.
Table 1: Dangote Index W-o-W Change
| Company | 03-Sept-21 | 10-Sept-21 | WoW Chg |
| DANGCEM | 245.00 | 245.00 | 0.00% |
| DANGSUGAR | 17.75 | 17.60 | -0.85% |
| NASCON | 14.15 | 14.15 | 0.00% |
| Source: NGX, |
Furthermore, the Toni Index closed negative with 101.28 basis points from 102.15 basis points recorded the previous week, a W-o-W decline of -0.85%.
TRANSCOHOT, TRANSCORP, and UBA all closed the week negative with -3.29%, -3.19% and -1.94% respectively while AFRIPRUD, UBCAP closed the week positive with +2.40% and +8.99% respectively.
Table 2: Elumelu Index W-o-W Change
| Company | 03-Sept-21 | 10-Sept-21 | WoW Change |
| AFRIPRUD | 6.25 | 6.40 | 2.40% |
| TRANSCOHOT | 5.17 | 5.00 | -3.29% |
| TRANSCORP | 0.94 | 0.91 | -3.19% |
| UBA | 7.75 | 7.60 | -1.94% |
| UBCAP | 7.34 | 8.00 | 8.99% |
| Source: NGX |
Outlook
In the coming week, we expect the weak trend to persist, pending further corporate actions from listed companies and other macroeconomic developments likely to impact investors’ decisions.
In addition, we expect investors to monitor the movement of yields in the fixed income market.
