The energy sector took a big hit in 2020 from the devastating blow sent across the markets by the coronavirus pandemic. One commodity which was deeply affected was Oil. It was a historic year for oil, characterized by negative oil futures - which was a record, oil war, oil output cuts, and oil recovery.
The year started with a gradual slump in oil price as the virus spread from China to all other countries in the world. To curtail the spread, many countries had to impose lockdowns and restrictions which affected the transportation sector - via land and air, in effect denting fuel demand.
The slump was so severe, that by April, oil futures had turned negative. Brent dipped to as low as $24.93 per barrel.
To shore up prices, the Organization of the Petroleum Exporting Countries (OPEC) and OPEC+ agreed in April to cut output by 9.7m barrels per day and then by 7.7m bpd in August 2020. Prices rose gradually because of these cuts.
In October 2020, Oil price took a hit yet again, crashed to its lowest price level since March as new lockdowns and restrictions were re-imposed to combat the second wave of the coronavirus pandemic.
Again, OPEC and non-OPEC allies met in December to discuss new output policies to help support oil prices. An agreement was reached - a 500,000 bpd output cut from January 2021.
Chart 7: Brent Crude Price Movement (Jan- Dec)
Source: Bloomberg, Proshare Research
AFEX Commodities Performance
The AFEX composite index (ACI) opened at a value of 175.25 points in January 2020, tumbling to 162.28 points in February. Market activity in February for maize, soybeans, and paddy rice was characterized by a marked increase in price volatility for all commodities in the local markets as stakeholders engaged in bargain.
Table 74: M-0-M Price Movement for Maize, Cocoa and Ginger(Jan- Dec)
In March, the ACI remained flat, but appreciated in April, hitting 168.26 points. By the end of June, the ACI settled at 246.64 points. The index performance rose in response to the positive market performance of the soybean, maize, and paddy rice sub-indexes.
Local market activity in August for maize and paddy rice was marked by a double-digit percentage price increase, with market activity for maize being the most pronounced amongst the commodities. The open market prices for maize and paddy rice surged in response to the lean season of the crop calendar in the agrarian North which indicates a continued depletion of market stocks from the last planting season which was terminated in December 2019. ACI in August stood at 269.73 points.
In September, local market activity increased mainly for soybeans while paddy rice experienced its highest decline in a year resulting in a double-digit percentage price decline. This was complemented by declining volatility on the exchange and international markets indicating increased price stability in the post-COVID period. ACI settled at 271.02 points.
Scarcity of commodities domestically saw little or no trades on the exchange resulting in low price volatility in October. Similarly, in the international markets, the depletion of global inventory caused a slow upward price change. Local market activity increased the most for soybean while paddy rice slumped. The ACI remained unchanged, closing at 271.02 points.
The period of August-November is usually the harvest season for most commodities in the country, therefore there are little or no price movements.
By December 2020, the ACI had a spike, settling at 352.85 points as of December 22nd, 2020. An impressive +98.5% growth Y-o-Y (see Chart 7 and Chart 8).
Chart 8: ACI Composite M-o-M(Jan- Dec)
Source: AFEX, Proshare Research
Chart 9: M-0-M Price Movement for Maize, Cocoa and Ginger(Jan- Dec)
Source: AFEX, Proshare Research
Downloadable PDF - The 2020 Nigerian Capital Market Report
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