Week Ahead: Oil breezes past $70; what to expect as CBN “naira for dollar” scheme begins

Oil breezes past $70 after attack on Saudi facility

Oil prices, which were already rallying after a shock decision by OPEC+ to keep supply limited as the global economy recovers from a pandemic-driven slump, are being aided this time by reports of attacks on Saudi Arabian facilities.

Brent crude futures surged above $70 a barrel on Monday for the first time since the COVID-19 pandemic began, while U.S. crude touched its highest in more than two years.

Brent crude futures for May hit $71.38 a barrel in early Asian trade, the highest since Jan. 8, 2020, and were at $71.11 a barrel by 0255 GMT, up $1.75, or 2.5%.
U.S. West Texas Intermediate (WTI) crude for April rose $1.60, or 2.4%, to $67.69. The front-month WTI price touched $67.98 a barrel earlier, the highest since October 2018.

Yemen’s Houthi forces fired drones and missiles at the heart of Saudi Arabia’s oil industry on Sunday, including a Saudi Aramco facility at Ras Tanura vital to petroleum exports, in what Riyadh called a failed assault on global energy security.

Attacks on oil facilities tend to boost oil prices as it comes with expectations for a reduction in supply.
Analysts see oil prices closing higher by the end of the week in what is on one hand a boost for Nigeria’s public finances but also a worry for a government trying to keep petrol prices artificially low.

What to expect as CBN’s naira for dollar scheme begins
Starting today, March 8, Nigerians who use formal channels to receive dollars from abroad will get 5 naira extra for every $1 they remit through licensed international money transfer operators and commercial banks. The program will initially run for 60 days, according to the CBN, which is betting on the move to improve dollar liquidity in the official window.
Based on the policy, Deposit Money Banks reached out to their customers on Sunday telling them that N5 would be given for every dollar received by the customers.

Nigeria is turning its attention to diaspora remittances as it seeks to boost dollar inflows into the country after a difficult past year that saw dollar flows dry up on the back of lower oil exports, causing shortages of the greenback.

Read Also: New policy on remittance inflow to reduce cost, check round-tripping – CBN

In December 2020, the CBN also unveiled new rules on remittances allowing people getting cash from friends or family abroad to be paid in US dollars. This marked a divergence from the usual practice of paying in naira which discouraged diaspora inflows via official channels.
Economists say the latest incentive by the CBN to boost diaspora inflows could indeed help direct some dollars through the official channel and ease the pressure on the naira which last traded at N411 per dollar at the investors and exporters window.
The big question on the minds of analysts is the cost implication of the scheme.

New week, old worries for equities
Bearish sentiments again dominated the Nigerian equities market last week, dragging the All Share Index to its fifth consecutive negative close.
The NSEASI shed 1.18% WoW to 39,331.61pts, while the year-to-date return sunk deeper into negative territory, settling at -2.33%.
All sectoral indices closed negative with the exception of the Insurance index which climbed 1.39 percent. MORISON (+20.00%) topped the gainers’ chart, while CHAMPION shed -33.33% to emerge as the week’s biggest loser.
As yields in the fixed income market continue to rise, the equities market is expected to continue to see outflows.
It remains to be seen however if the ongoing corporate earnings season can swing sentiments in favour of embattled stocks.

Mixed corporate earnings
A number of audited financial results were released last week, with mixed performance across board. While Dangote Sugar recorded strong top and bottom-line growth (+33.03% and +33.16% respectively), Ardova Plc managed to grow its revenues (+2.90%), although after-tax profit dipped by 47.30% compared to last year. SEPLAT, on the other hand, recorded declines in both top and bottom-line.
MTN Nigeria also released its 2020 audited financial statements that showed an 8.5 percent increase in operating profits to N426.73 billion, as data revenues surged by 51 percent to N332.37 billion.
This week will see more corporate results and there are expectations that the financial performance of companies in 2020 will reflect the impact of the pandemic on the economy which slipped into a second recession in five years last year.

Beginning of the end?
Following the arrival of the first batch of COVID-19 vaccines, it would seem the beginning of the end for the pandemic is closer.
That would be a big relief for businesses in Africa’s largest economy who have endured a painful pandemic-induced recession.

President Muhammadu Buhari and Vice president Yemi Osinbajo took their jabs over the weekend and urged Nigerians to follow their lead by also accepting vaccination.

However, the trust deficit between the masses and the government poses a great threat to the success of this program.

Bitcoin’s sustained surge
The last couple of weeks have been splendid for Bitcoin investors as they have been relishing the fruits of their investments. Bitcoin has continued to dominate the crypto-community with its bullish position among other cryptocurrencies in recent weeks. In recent times, wealthy investors have been moving large stacks of Bitcoin at record levels, as the flagship crypto looks set to break above $50,000 price levels once again. This is triggered by the relatively strong bullish momentum in the BTC market.
This is coming on the back of institutional investors increasing their buying pressure amid recent price corrections prevailing at the world’s most volatile financial market. Long-term supply decreases as holders take profits during bull markets – and increases in re-accumulation phases at cheaper prices. Such data suggest that the Bitcoin market is transferring Bitcoin wealth from the impatient to the patient.

Though it’s often hard to anticipate market movements, such entities have historically shown that they often determine Bitcoin’s trend.

However, with Bitcoin’s current bullish momentum, coupled with investments from various reputable conglomerates, the flagship crypto is bound to gain more momentum in the coming weeks ahead.