BusinessDay
Nigeria's leading finance and market intelligence news report.

The Week Ahead

IDA triggered oil supply disruptions to tighten market in the week ahead

International Development Association-triggered supply disruptions will only worsen the tight market in the coming weeks, as global demand slows down faster than supply, despite OPEC+ pushing more barrels into the market.

The Energy Information Administration says the latest weekly data on crude stockpiles show that, in the week ended September 10, crude stockpiles fell by 6.422 million barrels as refiners faced a squeeze in crude supply.

For the week ending September 10, a number of market experts had earlier anticipated that crude oil sales would decline by 3.544 million barrels. Crude draws hit a four-week low due to Ida-related disruptions during the week of September 3

Friday’s oil futures were lower, with prices easing back from their highest levels since late July. As a result of the run-up earlier in the week, Friday’s selloff is mainly driven by profit-taking.

With the resultant of Tropical Storm Nicholas and Hurricane Ida’s impacts in the Gulf of Mexico, U.S. crude production remains sidelined in that part of the Gulf more than 30% of the time.

As a result, the outlook for global demand growth is deteriorating as the delta variant spreads. West Texas Intermediate crude for October delivery on the New York Mercantile Exchange fell 0.9%, to settle at nearly $72 a barrel. Overall, prices climbed 3.2% last week.

US Gulf of Mexico production is gradually returning to full service, roughly a quarter of oil output remains halted, but expectations of continued US stock draws have weighed on the market sentiment and pushed Brent prices towards $75 per barrel.

Read also: Obadiah Mailafia, former CBN deputy governor dies

 

National Bureau Statistics calendar the week ahead 

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

· Monday 20th September 2021: Selected Food Prices August 2021

· Thursday 23rd September 2021: Federation Account Allocation Committee (FAAC) August 2021 Disbursement

Currency market

The Naira depreciated against major currencies last week, both at the BDC market and I & E FX Window.

At the I & E FX window, the domestic currency fell by +0.21% on a week-on-week (W-o-W) basis to N412.88/US$ at the close of trading on Friday.

At the BDC market, it closed at US$/N565 depreciating by +3.29% against the US dollar, against the British pound it also fell by +4.70% to close at Pound/N780, and against the Euro by +3.15% to close at Euro/N655.

The Naira closed the week at $/N412.88 at the I&E FX window, at the NAFEX (spot market) it closed at $/N412.03

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

System liquidity was elevated last week despite the PMA settlement that took place causing money market rates to trade in single digits towards the end of the week.

However, at the close of the session on Friday, funding rates increased returning to its double-digit trend. Open Buyback (OBB) closed at 16.50% while Overnight (O/N) rates closed at 17.75% indicating a W-o-W rise of +17.86% for OBB and +22.41% for O/N rates.

Funding rates are expected to trade in double digits trend in the coming week in the absence of any inflow.

Treasury bills market

Trading at the treasury bills market was mixed last week, as attention was towards Treasury Bills sold by DMO.

At the close of the market on Friday, average benchmark yields for T-bills rose by +13.43%% to 5.57%, OMO bills were up by +2.00% W-o-W to close at 6.34% while CBN’s special bills dipped by -9.47%.

The DMO sold N155.87 billion worth of notes against N155.87 billion offered at its NTB auction last week. The 91-day, 182-day & 364-day instrument were allotted at 2.50%, 3.50%, and 7.20%, respectively. Rates remained unchanged compared to the previous auction

Activity next week is expected to be dictated by the market liquidity situation.

FGN BOND and EUROBOND market outlook

Sentiment in the bond market was mixed last week, with the bears sustaining dominance, with the mid-tenor note buoyed by a sell-off sentiment.

The overall average benchmark yields closed at 8.58% for the week which rose by W-o-W by -3.87%.

The Eurobond market maintained its weak trend this week, with slight interests seen across several maturities.

Access Bank successfully issued a US$500m Senior Unsecured Eurobond under its US$1.5bn Global Medium-Term Note Programme. The order book was oversubscribed by 3x (over US$1.6bn), this represents the largest order book for a Nigerian bank Eurobond transaction. The instrument is a five-year instrument that matures on the 21st of September 2026, with a yield and coupon rate of 6.125%. The coupon is the lowest outstanding Nigerian Bank Eurobond coupon, which is another first in the corporate Eurobond space.

Nigerian capital market

Activity on the local bourse last week was choppy, however, with interests seen in several stocks. The NGXASI closed the week with a growth of +0.06% The Nigerian Stock Exchange gained N11.15bn, year-to-date return moderated to -3.29%, while the market capitalization settled at N20.29trillion.

The volume and value of stocks traded on the exchange last week declined by -39.95% and -17.76% respectively.

Sectoral performance across sectors tracked was bearish last week as the NGX Oil and Gas was the highest loser for the week with -3.35% while NGX Banking, NGX Insurance, NGX-IND and NGX Consumer Goods closed negative with -0.79%, -0.58%, -0.24% and -0.21% respectively.

Market breadth for the week closed negative with 21 gainers led by UPDC and UBCAP as against 38 losers led by SCOA and TRANSCORP

In the coming week, we expect to see further bargain hunting around the half-year earnings season as companies continue to release their results and impressive earnings reports should spur some interest. However, 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.

Whatsapp mobile

Get real time updates directly on you device, subscribe now.