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Nigeria's leading finance and market intelligence news report.

The Week Ahead

BUA Cement Further Guarantees ‘No Price Increase’ In Coming Weeks

In the light of the current inflationary trend, BUA Cement, Nigeria’s second-largest cement maker, has again assured Nigerians that it won’t further increase the price of cement.

This is the second time BUA is reassuring its customers in the past two months. This was confirmed from a statement it shared on its Instagram page on Friday.

“We have been inundated with request from our distributors seeking clarifications as to whether BUA also intends to increase the price of its cement. This is in view of a purported 10% price increase by another major cement manufacturer.

“While we are now aware that the said producer has increased the price of its cement (ex-factory) effective Monday, June 14, 2021, we however wish to state that BUA is not a part of this increase and does not seek to increase the price of its cement (ex-factory) in the foreseeable future.”

In April 2021, BUA debunked claims that it plans to increase the price of cement. This came after reports that the cost of building materials has risen by over 60 percent in one year.

“We are very much aware that there is a huge difference in the ex-factory prices of cement and the retail market prices of cement, which is mostly because of retailers taking advantage of increased cement demand to make maximum profits.

“Timing is not right for any increase in the price of major commodities. There are however no further arbitrary increases in the retail price of cement.”

Egbin Power Plc Plans to Raise $1.8 Billion to Increase Generation Capacity

Egbin Power Plc, one of the largest power generating companies in Nigeria, announced that it plans to raise the sum of $1.8 billion in a bid to increase its present generating capacity from 970 megawatts to 1,320 megawatts in its second phase growth plans.

This was disclosed by Bloomberg in a report on Friday, citing that the company also plans to export electricity with its increased generating capacity.

“The plan is to raise the fund to be available to kick off,” the company said in a statement, adding that it is looking at a combination of debt and equity to achieve funding requirements”.

“We would have a state-of-the-art facility that is generating clean energy sustainably and paving the way for the seamless energy transition in Nigeria and beyond,” they further stated, citing plans to export the electricity generated through the West African Power Pool.

In a recent report also, Nigeria’s Minister of Power, Sale Mamman, stated that the West African Power Pool (WAPP) sub-regional interconnection project, a 330 kV North Core Power Project, would costs stakeholders $568 million to complete.

The project involves the construction of approximately 875 Kilometers (KM) of 330 Kilo Volt (kV) and 24 KM 225 kV transmission lines from Nigeria to Burkina Faso, through Niger and Benin with associated substations.

It is being developed by the governments of Nigeria, Niger, Togo, Benin and Burkina Faso and would be financed by the African Development Bank (AFDB), Agence Francaise de Development (AFD), the World Bank and the Federal Government of Nigeria.

Read Also: FG disburses N1.6bn loan to 5,200 youths

Bayelsa State Set To Work with South Korea on Agriculture Infrastructure Development

The Bayelsa State government has disclosed that it plans on working with South Korea for the development of maritime, agriculture and infrastructure in the South-South state.

This was disclosed by Governor Douye Diri after a meeting with the ambassador of South Korea to Nigeria, Kim Young-Chae, in Abuja on Friday, adding that the state was also interested in improving education, science and technology, as well as oil and gas.

Bayelsa is one of the eight oil-producing states in Nigeria. The state earned N80.9 billion in FAAC revenues in 2020.

“The purpose of this meeting is to explore areas of economic partnership and seek the expertise of South Korea in developing our state and its economy. Our administration is taking deliberate steps to open up the state. This can be done through massive road construction and the development of infrastructure, including how to control the perennial flooding in our state. We seek your partnership and expertise too in these areas,” Governor Diri said.

NBS Release Calendar for the Week Ahead

The NBS release calendar for the coming week indicates the following:

Monday 21st June 2021: Demographic Statistics Bulletin 2020
Wednesday 23rd June 2021: Nigerian Ports Statistics 2020

 Gold’s Worst Week in 15 Months

Gold suffered its worst week since the 2020 Covid-19 outbreak as its price declined tremendously as a result of the US Federal Reserve’s (FED) expedited timetable for rate hikes and stimulus tapering.

The announcement by the FED generated fear which caused Gold to plummet amidst a stronger dollar index. Gold dived by -5.97 percent while Silver also dipped by -7.67 percent W-o-W.

Gold futures on New York’s Comex settled at $1,769 per ounce on Friday, after declining 0.3 for the day.

For the week, Gold declined by $110, representing a 5.97% drop, the biggest drop in Comex gold since the week ended March 6, 2020.

The spot price of gold closed the week at $1,765.53 representing a 0.4% drop on Friday. For the week, Gold dropped by $111, which represents an approximately 6% decline.

Outlook

Gold prices are expected to be bearish in the coming week, as the dollar continues to strengthen.

Oil Prices Marginally Down Over U.S. Fed Decision

Oil prices rose on Monday, extending the three weeks of gains underpinned by an improved outlook for fuel demand as increased COVID-19 vaccinations help lift travel curbs, along with tightness in supply.

Oil prices on Friday fell for a second straight session as the U.S. dollar soared on the prospect of interest rate hikes in the United States, but they were on track to finish the week little changed and only slightly off multi-year highs. Brent had a weekly growth of 0.72%

Outlook

In the coming week, oil prices are expected to hold steady as the U.S. dollar soars on the prospect of interest rate hikes in the United States.

Currency Market Outlook

The currency market was bearish at the beginning of the week at the BDC window.

However, towards the end of the week, we saw a bullish reversal which was supported by CBN’s announcement to increase forex supplies for Personal Travel Allowance (PTA), Basic Travel Allowance (BTA), tuition fees, and medical payments as well as Small and Medium Enterprises transactions.

It appreciated against the US dollar, British Pound and Euro by +2.61%, 0.42%, +0.82%respectively closing at $1/N485, £1/N715 and €1/N603 at the BDC window.

At the I & E FX window, the Naira appreciated marginally week-on-week by +0.01% and +0.02% at the NAFEX window. The Naira closed the week at $/N410.80 at the I&E FX window, at the NAFEX (spot market) it closed at $/N409.92.

At the I & E FX window, the Naira depreciated marginally week-on-week by -0.01% and appreciated +0.02% at the NAFEX window. The Naira closed the week at $1/N411.80 at the I&E FX window, at the NAFEX (spot market) it closed at $/N410.24.

Read Also: BUA, Axens 200,000bpd refinery project gets underway

Outlook

More of the same is expected in the week ahead as the Naira is anticipated to continue to hover around N406/$1-N412/$1 threshold in the NAFEX window.

Money Market Outlook

Funding rates are expected to trend in double digits in the coming week.

Open Buy Back (OBB) and the Overnight (OVN) rates opened the previous week on a positive note by declining by 733bps and 776bps to 15.00% and 15.17%, respectively.

This trend did not continue throughout the week as rates expanded as a result of CBN’s OMO Bills and Treasury Bills auction which constrained system liquidity.

At the close of the trading session last week, funding rates declined. Open Buyback (OBB) closed at 18.75% while Overnight (O/N) rates closed at 19.25% indicating a Week-on-Week (W-o-W) rise of -16.03% for OBB and -16.05% for O/N rates.

Treasury Bills Market Outlook

Activity in the treasury bills market is expected to remain subdued this week as system liquidity remains relatively tight.

The Treasury bills market maintained its quiet trend last week, and the market ended on a slightly bullish note, majorly CBN’s Special Bill.

At the close of the week, the average benchmark yield for T-bills fell marginally by -0.12% to close at 6.35% while OMO bills rose by +0.18% W-o-W to close at 9.66%, CBN’s Special Bill declined significantly by -9.07%.

The CBN offered N20 billion worth of OMO notes but sold N17.30 billion at its auction last week. The offer was over-subscribed. The 89-day, 159-day & 348-day notes were allotted at 7.00%, 8.50%, and 10.10% respectively.

The CBN sold N30.56 billion worth of notes against N14.83 billion offered at its NTB auction today. The 91-day, 182-day & 364-day notes were allotted at 2.50%, 3.50%, & 9.40% respectively.

Compared to the previous auction, rates on the 91-day & 182-day were unchanged while the 364-day paper fell slightly by 24bps.

FGN Bond and Eurobond Market Outlook

The Bond market resumed its relatively quiet trend in this week’s session as the thin offers in the market continue to dampen market activity.

At the close of the week, the overall market was bearish with selling interest seen at the short and mid-end of the curve.

The overall average benchmark yields closed at 9.87% for the week which rose W-o-W by +0.88%.

The Eurobond market maintained its relatively weak trend today as market participants await the outcome of the FOMC meeting. At the end of the week, selling interest was seen across the board in the Eurobond market following the outcome of the FOMC meeting as the US Fed started the discussion on scaling back its bond purchase.

The average benchmark yield closed at 5.62% at the end of the week declining W-o-W by -4.96%.

Outlook

Market sentiment is expected to remain soft in the near term as economic data continues to dictate market direction.

Nigerian Capital Market

The Nigerian bourse closed the week on a negative note with a decline of -1.30%. The Nigerian Stock Exchange lost N266.03bn thus, year-to-date return moderated to -4.03%, while the market capitalization settled at N20.41 trillion.

The volume and value of stocks traded on the exchange this week declined by -23.68% and -28.67% respectively.

Sectoral performance across sectors tracked was significantly bullish this week as the NSE Banking was the highest gainer for the week with +1.48% while NSE-IND recorded the highest decline with -0.05%. NSE Oil and Gas, NSE Insurance, NSE-30 and, NSE Consumer Goods closed the week positive with +1.05%, +0.76%, +0.29% and +0.25% respectively. Market breadth for the week closed positive with 38 gainers led by BERGER and LASACO as against 25 losers led by UACN and AIRTELAFRI.

Outlook

In the coming week, we expect the possibility of sustained bargain hunting as investors look to take advantage of good bargains, however, press releases from listed companies and other macroeconomic developments is likely to impact investors’ decisions.

In addition, we expect investors to monitor the movement of yields in the fixed income market.

The Nigerian Economy in Retrospect

NBS Data on Consumer Price Index for May 2021 shows that headline Inflation has reduced from 18.12% in April 2021 to 17.93%.  A further breakdown of the figures shows that the food sub-index reduced from 22.72% to 22.28% while the core sub-index increased from 12.74% in April to 13.15% for May.

The highest increases in this sub-index were recorded Healthcare services, shoes, carpets pharmaceutical products hairdressing cooking gas, and garments

According to the DMO, the Current Administration has borrowed $2.02bn from China in six years. As of June 30, 2015, Debt owed to China stood at $1.38bn.

However, as of March 31, the country’s debt portfolio from China had risen to $3.40bn. While allaying fears about the terms of the facilities, the DMO explained that loans from China are concessional loans with interest rates of 2.50 %per annum, a tenor of 20 years, and a grace period (moratorium) of seven years.

The latest data from the Central Bank of Nigeria shows that Nigeria’s external reserves have fallen by $1.4bn in two months. The figures released on Wednesday reveal that the nation’s foreign reserves, which stood at $35.25bn as of April 16, had as of May 31 fallen to $34.23bn and $33.85bn as of June 15. The depletion in the reserves is attributed to a drawdown for the onward sale in the foreign exchange market as well as for third-party payments.

According to the recently published foreign trade report by the National Bureau of Statistics (NBS), Nigeria’s agricultural imports reached N3.1trn in 2 years.

This is despite hundreds of billions of Naira spent by the Central Bank of Nigeria to reduce food imports. Nigeria imported agricultural items worth N630.18 billion in Q1 2021 the highest quarterly agricultural import recorded since 2016.

Major agricultural imports in this period include durum wheat, blue whiting, malt, and other edibles.

According to the World Bank’s recently released ‘Resilience through Reforms’ report, the Federal Government would have to incur N3.08tr through 2023 to keep electricity tariffs at their current levels. The Bank rued the government’s regulation of tariffs in the sector rather than allowing market forces to determine the rates electricity users pay.

CBN Governor, Godwin Emefiele announced earlier in the week that the Central Bank of Nigeria and its Gambian counterpart have agreed to a partnership that would see the Nigerian Security and Minting Company Printing the Gambian currency. This is part of efforts made by the Central Bank of Gambia (CBG) to reduce its currency printing cost.

The Federal Government of Nigeria, on Monday, charged oil and gas industry operators to move beyond conferences and workshops to take concrete steps to develop Nigeria’s huge natural gas reserves which had grown by 3.37tcf to 206.53 trillion cubic feet.

The President, GE Nigeria, Mohammed Mijindadi noted that Nigeria can generate as much as 45,000 Megawatts of power from its existing gas reserves.

S&P Global Platts reported, on Monday, that Nigerian crude variants are seeking other buyers in Asia and Europe as India’s COVID-19 situation remains wrapped in lockdowns with weak domestic consumption. It noted that Indian Oil Corporation last bought crude loading for mid-to-late June in April 2021.

On Tuesday, President Muhammadu Buhari inaugurated the construction of the Nigeria Liquefied Natural Gas train 7 project located in Bonny Island, Rivers State.

The managing director and chief executive officer of NLNG, Tony Attah, said Train 7 would increase NLNG’s total capacity to 30 million tonnes per annum from the current 22 million tonnes per annum

On Wednesday, the Nigerian National Bureau of Statistics released a report that showed that the average price paid by consumers for premium motor spirit (petrol) increased by 29.61% year-on-year and month-on-month by 1.01% from N166.38 in April 2021 to N168.06 in May 2021.

Also on Wednesday, Ardova Plc (formerly Forte Oil Plc) said it has reached an agreement with Enyo Retail and Supply Holding Limited to acquire a 100 percent equity stake in Enyo Retail and Supply Limited.

On Thursday, NNPC through its subsidiary, Duke Oil, said it has sealed a crude oil supply deal of 30,000 barrels per day with Indonesia’s state oil corporation, Pertamina, and Indian Oil Corporation.

Analysts Summary and Outlook

In the fiscal space, we have continued to witness aggressive interventions from the government in the form of new approvals of power projects across the country, the construction of the eastern railway, recruitment under the NPower scheme, and the continuous subsidy of PMS.

Analysts however express concerns about the sustainability of the debt-financed budget deficit of the country. In the Monetary space, the CBN has continued to advance lending facilities to the Agricultural sector through the ABP in a bid to stimulate growth but with concerns for the collateral effect on the general price level.

A look at the external sector shows imports are rising including imports of agricultural products. Given the security situation in the country, we may well see the trade deficit further widen

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