The Week Ahead
Lagos to demolish 70 defective buildings, enforce building insurance
The Lagos State Building Control Agency (LASBCA), is set to demolish 70 defective buildings in the coming week in a bid to rid the state of dilapidated and distressed structures and end the era of building collapses.
This follows the demolition of a partially collapsed building at No. 19, Church Str, Lagos Island which was confirmed not to be fit for human habitation and to prevent another collapse.
The disclosure is contained in a statement issued on Friday by LASBCA spokesman, Mr Gbadeyan Abdulraheem, saying that the General Manager of the agency Mr Gbolahan Oki, supervised the demolition exercise, according to NAN.
Oki said that several other defective buildings had been marked for removal to rid the state of defective buildings, in a bid to end the era of building collapses, noting that his team had earlier visited the distressed building site to get an on-the-spot assessment and asked the residents to relocate for their safety.
While speaking on the 70 distressed buildings that had been marked for demolition, Oki explained that 20 of the structures were discovered on Lagos Island.
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The LASBCA boss assured that due process would be followed for Non-Destructive Tests (NDTs) to be carried out on affected buildings in order to ascertain their structural integrity. He added that the test would also determine if the buildings could be either renovated or demolished if found not safe for human habitation.
Oki further reiterated that the government has absolutely zero tolerance for building collapse, hence all building codes regulation within the state would be strictly enforced. He added that enforcement would include ensuring all buildings above two floors obtained insurance, as contained in the Building Regulations 2019 (as amended).
He issued a warning to developers and property owners to always do the right thing by involving LASBCA at various stages of construction works and obtaining all required approvals and completion certificates.
The UK set to relax quarantine rules on vaccinated Nigerians in the coming week
The United Kingdom has removed travel warning against Nigeria, as the former updated its travel advisory which previously placed the most populated black nation on its warning list.
This was confirmed from the foreign travel advice on Coronavirus on UK’s website on Thursday.
Though Nigeria is on the amber list, double vaccinated travellers will not have to quarantine in the UK when coming from amber list countries, including Nigeria after July 19. This is coming as the British government has moved to relax quarantine rules on vaccinated travellers as part of its efforts to ease Covid-19 travel restrictions.
The nation’s Transport Secretary, Grant Shapps, had said that UK residents, who are fully vaccinated against Covid-19, will no longer self-isolate upon their return from another country.
Shapps, who made this known on Thursday, July 8, 2021, explained that individuals who have been fully vaccinated through UK’s mass immunisation programme or rollout will no longer have to self-isolate when they return to the country from countries on the UK’s amber list.
Reports have it that over 140 countries are currently on the UK’s amber list, which involves a 10-day quarantine upon arrival in the U.K. with a test before arrival and 2 tests on day two and eight after arrival. People can ‘test out’ after day five with a negative test.
Gold Post Gains for the 3rd Week in a row
Gold ended the week bullish and that counts as the third straight weekly gain for the yellow metal. The safe-haven asset has returned above the $1,800 trading zone which is considered a crucial support area. However, the outlook for Gold remained unsure as a result of the uncertainty on how long it will take for the much-touted U.S. inflation to accelerate its gains.
The benchmark gold futures have gained over $40 representing a 2.69% growth, since its last negative weekly close that occurred a month ago, when it declined to a two-month low of $1,761.20. The gains recorded on Gold is a result of a weaker U.S dollar and U.S Treasury yield rate. The pair usually move inversely against the yellow metal.
The U.S Federal Reserve has indicated that it expects two hikes before 2023 that will bring interest rates within a range of 0.5% to 0.75% from a current pandemic-era super-low of zero to 0.25%. They have also not set a timetable for the tapering or complete freeze of the $120 billion in bonds and other assets it has been buying since March 2020 to support the economy through the Covid crisis.
Even though the Federal Reserve has not set the timetable for tapering, it has not stopped senior bankers from commenting on it at the Federal Open Market Committee (FOMC) meeting, talking about the likelihood of a taper or rate hike in their public speeches. Typically, any speech on tapering or rate hike by a Fed official ends up affecting the price of Gold.
Gold prices are expected to hold steady in the coming week, given concerns over the U.S. labour market recovery and Delta coronavirus variant.
NBS economic data release calendar for the week ahead
The NBS release calendar for the coming week indicates the following:
- Thursday 15th July 2021: CPI and Inflation Report June 2021
- Friday 16th July 2021: Premium Motor Spirit (PETROL) Price Watch June 2021
Oil Prices record a weekly decline
Oil prices remained steady on Monday as investors and traders awaited the crucial talks by OPEC following the disagreement over output within the group that could lead to major producers opening up their taps to gain market share.
United Arab Emirates (UAE) on Monday maintained that it accepts a proposal to raise output in stages by about 2 million bpd from August to December 2021 but rejects an extension of cuts beyond April 2022 without adjusting its baseline production.
The International Energy Agency (IEA) on Monday noted that the rebound in global gas demand to 2024 following a record fall last year is set to knock down the global climate goal of achieving net-zero emissions by 2050.
The former US Energy Secretary, Dan Brouillette, on Tuesday opined that oil prices could very easily hit $100 a barrel in the aftermath of the failed OPEC+ talks, and on the flip side, it possibly could collapse. According to sources from Russia on Thursday, Russia is leading efforts to close the divisions between Saudi Arabia and the United Arab Emirates to help strike a deal to raise oil output in the coming months.
Bloomberg on Wednesday reported that the US shale producers have started boosting their hedges to lock in the price of oil they plan to pump in the coming months. India’s newly appointed Petroleum Minister, Hardeep Singh Puri, on Thursday, said it plans to boost domestic production of oil and gas and increase the role of natural gas in the country’s energy mix as India works toward a $5-trillion economy.
Oil prices started Friday mixed but rose over $1 later in the day yet heading for a weekly loss as uncertainty about global supplies fuelled by the OPEC+ impasse weighs in on the optimism from a draw in U.S. inventories. Brent had a weekly decline of -0.36%.
In the coming week, oil prices are expected to be bearish amid uncertainty over global supplies after an OPEC+ impasse.
The currency market was flat last week at the BDC market while it depreciated at the official window.
It remained flat against the US dollar sold at $/N500, appreciated against the British Pound by -0.56% to close at £/N700, while it remained flat against the Euro at €/N600 on a week-on-week (W-o-W) basis at the BDC window.
At the I & E FX window, the Naira fell week-on-week by +0.12% and +0.21% at the NAFEX window.
The Naira closed the week at $/N411.75 at the I&E FX window, at the NAFEX (spot market) it closed at $/N411.29.
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.
Interbank rates at the beginning of the previous week contracted significantly due to the increase in system liquidity. However, at the close, rates spiked up, this was propelled by the twin impact of an N142.95 billion Repo and N11.05 billion Standard Deposit Facility outflow which tightened system liquidity at the end of the week.
At the close of the trading session last week, funding rates rose significantly. Open Buyback (OBB) closed at 19.75% while Overnight (O/N) rates closed at 20.50% indicating a W-o-W rise of +64.58% for OBB and +64.00% for O/N rates.
Funding rates are expected to continue their double digits trend in the coming week in the absence of any maturity.
Treasury Bills Market
The overall trading session of the Nigerian Treasury Bill market was mixed.
At the close of the market on Friday, average benchmark yields for T-bills was up by +4.69% to 6.89% while OMO bills fell marginally by -0.33% W-o-W to close at 9.89%, CBN’s Special Bill fell by 0.11%.
We expect activity next week to be dictated by the market liquidity situation.
FGN bond and Eurobond market outlook
The Bullish momentum in the Bond market waned at the start of last week as improved offers were seen across the board particularly on the long end of the curve.
At the close of the week, the overall market was bullish with buying interest seen majorly at the short and mid tenor notes.
The overall average benchmark yields closed at 9.54% for the week which fell W-o-W by -0.81%.
With the U.S. on their Independence Day holiday on Monday, activities were muted in the Eurobond market at the start of the week. For most of the trading session last week, the market was quiet, as the decline in crude oil prices overshadowed the impact of the sharp decline in the U.S. 10-year Treasury yields.
Market sentiment is expected to remain soft as inflation concerns continue to linger.
Nigerian Capital Market
The Nigerian bourse closed the week on a negative note with a decline of -0.57%. The Nigerian Stock Exchange lost N123.71bn thus, year-to-date return moderated to -5.65%, while the market capitalization settled at N19.79 trillion.
The volume and value of stocks traded on the exchange this week advanced by +15.61% and +34.40% respectively.
Sectoral performance across sectors tracked was broadly bullish this week as the NGX Oil and Gas was the highest gainer for the week with +6.53% while NGX Main Board recorded the highest decline with -2.22%. NGX Banking, NGX-30, NGX-IND, NGX Insurance +3.29%, +0.80%, +0.19%, +0.17% respectively while NGX Consumer Goods closed the week negative with -0.32%.
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 are 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
The Nigerian Senate on Wednesday approved the request of President Muhammadu Buhari to take new external loans amounting to N2.34tn to fund the deficit in the N13tn 2021 Appropriation Act. The proceeds are expected to be used to fund various specific capital projects especially in specific priority sectors of the economy such as Power, Transportation, Agriculture, and Rural Development, Education, Health, Provision of counterpart funding for Multilateral and Bilateral Projects, Defence and Water Resources.
On Wednesday, the Senate passed the N982.729billion supplementary budget into law. The appropriation committee had reviewed the original amount of N895.842 billion upward by N86.9 billion. An analysis of the budget shows that N123,332,174,164 billion is allocated for Recurrent (Non-Debt) Expenditure; and N859,397,521,179 billion as a contribution to the Development Fund for Capital Expenditure.
According to the International Monetary Fund, Nigeria currently faces a six-year delay in achieving Sustainable Development Goals. In a statement released on Tuesday, The IMF president noted that achieving the SDGs will be even more challenging as the financing needs of the SDGs increase by an annual average of $60bn per year for low-income countries. This, therefore, would account for the lengthening of the journey to achieving the development goals in the case of Nigeria by six years and in that of Rwanda by five years.
The Federal Government earlier in the week stated that the proposed Funtua, Katsina State Integrated Textile, and Garment Park, will create at least 10,000 direct jobs and 60,000 indirect jobs for Nigerians when it becomes fully operational. According to a senior official of Nigeria Export Processing Zone, the Federal Government has spent N500 million on the project, and that it is expected that the project would be completed in 18 months.
The GMD of Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari on Monday said the NNPC in collaboration with other oil exploration and production companies operating in Nigeria has brought down the cost of oil production in the country by 30 percent. He said they used contract renegotiation and discounts with contractors and launched the National Upstream Cost Optimisation Programme.
Yemi Osinbajo, OPEC, NNPC, DPR, and other stakeholders on Tuesday kicked against plans to end investment for fossil fuels and the financing of net-zero ambition.
The minister of finance, Zainab Ahmed, on Wednesday amid growing oil prices said Nigeria will set a crude oil benchmark price of $57 per barrel at 1.88 million barrels a day for its 2022 budget.
Nigeria’s oil output recorded the largest drop in June despite an increase in the combined crude oil production by OPEC and its allies in June.
In the previous week, Fiscal authorities were active, first, we saw the passage of the supplementary appropriation bill and then the senate approval of the proposed N2.3trn external loan. The Appropriation committee had decided to upwardly review the original supplementary budget from N895bn to N982.7bn to more adequately meet pressing needs for military arms and equipment. However, the fact that N722.4bn of the amount is to be borrowed, given the debt position of the country further suggests that the country may be approaching the fiscal cliff.
Analysts, while citing the Q1 Debt service to revenue generated ratio of 98% note that the fiscal position of the country does not exactly provide for sustainable growth. The Federal Government however prefers to look at the Debt-GDP ratio of 21% which is still lower than the IMF prescribed threshold of 25% for developing countries.
Meanwhile, we anticipate the release of June inflation figures in the middle of the month while the MPC is expected to meet later in the month. The MPC’s stance has for some time been aimed at striking a balance between stimulating growth and containing inflation. Inflation data for the month of May shows that headline inflation eased to 17.93% from 18.12% but analysts foresee a rise in inflation in June owing to an increase in the price of Diesel, increased levels of insecurity and exchange rate pressures.