The week ahead

Oil prices plunge further: Largest drop since April 2020

Oil prices experienced one of their worst trading days since April 2020 on Friday, plunging across the board by over 10% on fears that a new COVID-19 variant discovered in Southern Africa might dampen economic growth and trigger another demand slump.

Following the spectacular failure of the SPR release, which instead of depressing prices ratcheted them up higher, renewed COVID-19 concerns have now brought about President Biden’s objective. OPEC+ might still have a say in this, with the group’s December 02 meeting potentially resulting in a reduction in production targets for 2022.

Read also: How crude oil prices impact Nigeria’s external reserves

Oil prices came off seven-week lows on Monday but remained under pressure after Japan said it was weighing releasing oil reserves and as the COVID-19 situation in Europe worsened, raising concerns about both oversupply and weak demand.

The International Energy Agency (IEA) on Monday said OPEC+ has been producing less oil than its agreed output targets. The IEA says OPEC+ production was below its target in both September and October by more than 700,000 b/d and analysts expect this to continue going forward.

The US, on Tuesday, announced the release of 50 million barrels of oil from the US SPR, backed up by a series of agreements with key Asian crude importers who would also release strategic inventories to tame outright crude prices. India has stated that it would release 5 million barrels while South Korea and Japan are yet to come up with their numbers.

Oil prices slid more than 2% on Friday on concerns that a global supply surplus could swell in the first quarter following a U.S.-led coordinated release of crude reserves among major consumers and as a new COVID-19 variant spooked investors. Brent had a weekly decline of -5.42%.

In the coming week, oil prices are expected to be bearish on the resurgent pandemic in Europe.


NUPENG extends strike notice by another week

Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) has announced the extension of its earlier issued 14-day ultimatum to the Federal Government by another week.

This disclosure was contained in a statement issued by NUPENG’s General Secretary, Mr Afolabi Olawale, on Thursday night in Lagos.

He asked the government and all other concerned entities to take advantage of the extension to do the needful.

This came barely 4 days to the expiration of the ultimatum it gave on November 15, where it threatened to go on a nationwide strike due to non-implementation of an agreement reached with the government and others.

Recall that on November 15, 2021, NUPENG issued a 14-day ultimatum to the Federal Government with a threat to embark on a nationwide strike due to the non-implementation of an earlier agreement.

“Leadership of the union is still exercising further patience and restraint to give the ongoing discussions the chances of resolving these issues once and for all. The decision of the union to give another seven-day ultimatum should not be misconstrued as a sign of capitulation or weakness,” Olawale said.

Quant ratings warn public of JUMIA’s stock bad performance

Quant ratings have warned that jumia’s stock is at high risk of performing badly, contending that the stock is historically associated with poor future stock performance.

The share price of Jumia Technologies, one of Africa’s largest e-commerce companies, fell 25% in the last 5 days as investors dumped the stock. The stock opened at $19.4 per share and fell to $14.09 per share as of Friday, November 21, 2021.

Jumia has seen its share price tank 65% year to date and 41.8% in the last one year. The stock has fallen from a year high of $61 recorded in February 2021.

Jumia reported its third-quarter 2021 results last week missing sales estimates despite recording a 9% growth. The company reported a GMV increase of 8.1% YoY to $238.1 million; Orders up 28% YoY to 8.5 million; Annual Active Consumers grew 8.1% YoY to 7.3 million. Operating losses ballooned 92.6% to $64 million compared to $33.3 million same period last year. Adjusted EBITDA losses also ballooned 94.3% to $52.5 million.

Jumia has inferior profitability and decelerating momentum when compared to other Consumer Discretionary stocks, to the point that it gets a Very Bearish rating from our Quant rating system. Stocks rated Very Bearish by our Quant rating system have massively underperformed the S&P 500, as this article will describe,” Quant stated.

Lagos warns public of 4th wave of COVID-19 outbreak

Lagosians in the week ahead should beef up their COVID-19 safety protocols as the Lagos State Government has warned of a possible outbreak of the fourth wave of Covid-19 infection across the country.

The state government fears that this could be triggered by the large volume of inbound passengers arriving in the state for Christmas and New Year festivities, low vaccination and the anticipated social activities in the festive season.

This was disclosed by the Lagos State Commissioner for Health, Prof. Akin Abayomi, at a press briefing on the Lagos State Covid-19 response and mass vaccination strategy, noting that the state government is currently implementing strategies to prevent and mitigate a possible fourth wave of Covid-19 infections.

The state government has also announced the suspension of the Greater Lagos Fiesta, due to the fourth wave of the Covid-19 scare. It stated that the suspension was necessary just as Europe, the epi-centre of the Covid-19 pandemic, reintroduced restrictions to tackle the fourth wave of the pandemic.


The NBS release calendar for the coming week indicates the following

Monday 29th November 2021: Company Income Tax (Q3 2021)

Tuesday 30th November 2021: Foreign Trade in Goods (Q3 2021), Sustainable Development Goal (SDG) Tracking Report 2020

Currency Market

The Naira started the previous week on a negative note, closing lower against the US dollar for most of the trading session at the I & E FX window.

The Naira closed at N415.07/US$ on Friday, indicating a week-on-week (W-on-W) depreciation of the Naira. At the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) window it also depreciated by 0.07%. More of the same is expected in the week ahead as the Naira is anticipated to continue to hover around N410/$1- N415/$1 threshold in the NAFEX window.

Money Market

Interbank rates opened the previous week low due to a N169.97bn short lending facility inflow which boosted system liquidity leaving open buy-back (OBB) and overnight rates (O/N) depressed during the week.

At the close of the trading on Friday, open buy-back (OBB) and overnight rates (O/N) settled at 15.00% and 15.67% respectively indicating a W-o-W downtick of -21.05% and -21.65%.

We expect rates to hover around current levels barring any significant outflows from the Apex bank.

Treasury Bills Market

The treasury bills market started the previous week on a quiet note with minimal volumes traded across the board, but activity picked up later into the mid-week as investors focused on the Primary Market Auction.

At the close of trading on Friday, the market was bullish with selling interest seen across OMO Bills and Special Bills. Average benchmark yield for T. Bills fell by -5.09%, yields on OMO bills advanced by +0.36% while yields on CBN’s special bills grew by +18.56%.

We expect activity next week to be dictated by the market liquidity situation.

FGN Bond and Eurobond market

The local bond market sustained a mixed sentiment last week, with most of the selling concentrated at the short to mid-end of the curve.

At the close of trading on Friday, the market closed on a mixed note with sell pressure at the mid to long end of the curve. Overall average benchmark yields closed at 8.16% indicating a W-on-W decline of -3.32%.

The Eurobond market started last week on a sustained bearish trend driven by the discovery of the new COVID-19 variant in South Africa and a fall in oil prices.

Market sentiment in the coming week is expected to be mixed as inflation concerns dampen.

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