Oil Prices Took a Hit as Naira Converged Below N400 to a Dollar


Friday, April 21, 2017/ 8:42 AM /FDC

The naira has converged below N400/$ for the second time this year as the CBN remains determined to achieve a unified exchange rate. At the parallel market, the naira is trading at N385/$ and could appreciate marginally in the days to come.

Oil prices took a hit as focus shifted towards the unexpected rise in gasoline stock in the US. OPEC is to meet on May 25th to discuss the extension of the output curb. If the exemption granted Nigeria is not extended, this could mean trouble for the gloating naira.

The attached/below report summarizes the commodity price movements for this week.  

Burning Economic Issues 

•Oil prices declined approximately 4% to $53.30pb

•CBN offers $100mn of 7- 45days forward contracts

•CBN intervenes with $280mn for invisibles

•External reserves up to $30.56bn, accretion rate slowing

•CWAY bottled water up 10% to N550

•Power supply down to 3712MW on April 18th, 5% lower than March’s peak of 3990MW

•Wholesale price of diesel flat at N200 per litre

Economic News  

The Good   

  • Forex market converging below N400/$
  • Okomu and Presco outperform with profits up 85% and 773% respectively

The Bad

  •   Manufacturers and retailers still refusing to reduce prices
  •   Interest rates in the money market at unsustainable levels of 127% p.a.
  • Oil price of $53pb is 2.33% below Q1 levels

Power Generation analysis & Impact

April 18th: On grid power output was 3712MWh/hour (down 41MWh/h)

• Total Power constraints: 2,239MW, attributed to gas

• Estimated loss: N1.074bn (annualised at N386.64bn /$0.96bn)

•Sapele I and Odukpani have restored turbines to functionality

•Nationwide average diesel price declined from 249/l in Feb to N235/l in Mar

Domestic Commodity Prices Movement



Stock Market

 Oil prices  

• Brent crude down by 3.72% to $53.30pb

• Crude supplies declined by 1mb higher than API’s projected drawdown of 840,000 barrels

• Gasoline stockpiles edged up by 1.5mb, defying expectations for a 2 million decline

• The drawdown in crude inventory was ultimately suppressed by an unexpected buildup in gasoline


Oil markets today   



Outlook – Oil Prices

 • Oil prices may extend drop with US trends in focus
• The EIA’s drilling productivity report projects an increase of 124,000bpd in May
• The largest monthly increase since February 2015
• OPEC extension of output curb still in view
• Saudi Arabia’s energy minister reckons its too early to decide on extension of output curb  

Outlook – Agric Prices 


  •  Losses will be limited by delays in planting in the United States




  •  Weather conditions in South America to support price


  • Supply-demand dynamics to weigh on prices


Related News

1.      Retail Commodity Prices Remained Relatively Unchanged as Manufacturers Capitalize on Margins

2.     The Impact of CBN's Intervention on Commodity Prices Not Yet Seen

3.     The Impact of Global and Domestic Developments on the Commodity Markets

4.     Naira Recovers by 5 percent in 2 days to N495 to 1$; Oil Trades at $57pb

5.     Are The Economic Realities of 2016 to Persist in 2017?

6.     Increasing Consumer Resistance and Declining Income Is Taking Its Toll on Retail Prices

7.     Consumer Effective Demand Negatively Affected By Festive Spending

8.    Domestic Commodity Prices Have Reached Their Peak

9.     Prices of Christmas Sensitive Staple Foods Remain Sticky Downwards


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