What To Expect From The Markets This Week - 260421

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Saturday, April 24, 2021 07:40 AM / Proshare Content / Header Image Credit: EcoGraphics


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Nigeria: Economic Dashboard @ 230421 

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Editor's Note

Source: Proshare Research - April 24, 2021

Nigeria Economy

  • According to the World Bank, in its Power Sector Recovery Programme fact sheet, Nigeria businesses lose about $29bn annually due to its poor power supply. Furthermore, it noted that Nigeria had the largest number of people without access to electricity in the world, as every one in 10 people without access to electricity now reside in Nigeria. Also, it highlighted other challenges such as liquidity squeeze and poor infrastructures in its fact sheet noting that "For every N10 worth of electricity received by Discos (distribution companies), about N2.6 is lost in poor distribution infrastructure and through power theft and another N3.4 is not being paid for by customers.
  • The CBN in its monthly economic report for January noted that the Federal Government recorded N485.51bn fiscal deficit. It noted that the low revenue performance in January was due to the decline in non-oil receipts following the lingering effect of the coronavirus pandemic on business activities and the resultant shortfall in tax revenues. Oil and non-oil contributed 45.4% and 54.6% respectively to the total revenue in the month. The modest rebound in crude oil prices in the preceding three months enhanced the contribution of oil revenue to total revenue, relative to the budget benchmark.
  • In its economic report titled 'Sectoral utilization of foreign exchange' for January, the CBN noted that the country spent $160m from its foreign exchange on food importation in January. The report revealed that total foreign utilization by sectors decreased by 40.3% from the preceding month to $2.75bn, reflecting a drop in end-user demand for foreign exchange, owing to year-end ease in economic activities. Visible and invisible imports, constituting 46.9% and 53.1% of the total foreign exchange utilization declined by 53.4% and 20.7% to $0.77bn and $0.87bn, respectively. The disaggregation of foreign exchange utilization of visible transactions showed that the amount utilized for industrial, manufactured products, and food products sub-sectors amounted to $0.30bn, $0.23bn, and $0.16bn respectively, relative to $0.72bn. $0.38bn, and $0.31bn in the preceding month. Also, oil, transport, agriculture, and mineral subsectors amounted to $0.05bn, $0.02bn, $0.008bn, and $0.006bn, respectively in January 2021, compared with $0.15bn, $0.05bn, $0.02bn, and $0.02bn in December 2020.


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Global Economy

  • UK's inflation rate rose to 0.7% in March after declining to 0.4% in February. The rise in the inflation rate was attributed to the rise in global oil price and retailers scaling back their coronavirus driven discounts. Fuel prices recorded their largest annual increase in March since January 2020. Clothing and footwear prices rose by 1.6% in March after store closures caused by lockdown rules caused discounting in February, the biggest increase since 2017. Although, clothing and footwear prices were still 3.9% lower than a year before, and food prices were 1.4% low down.  It is forecasted that UK's inflation rate will rise in the coming months, due to the increase in regulated household energy bills in April, higher global oil prices and comparisons with prices a year ago when COVID lockdowns triggered a slump in demand.
  • Russia's central bank increased its key interest rate for the second time this year to 5% amidst a weak rouble, high inflation, and geopolitical risks. The decision defies most analyst projection that expected a moderate increase in interest rate after a new wave of sanctions hit the rouble and inflation showed little signs of slowing.
  • The number of Americans filing new claims for unemployment benefits declined last week to a new one-year low, suggesting layoffs were declining and strengthening expectations for an increase in employment in April as a re-opening economy unleashes pent-up demand. Although there has been a decline in the unemployment rate, the number of employed people is still below the level associated with a stable labour market i.e, data from the United States Department of Labour reveals that at least 17.4m people were collecting unemployment cheques in early April.


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Commodities Market

Energy

Domestic

  • On Monday, the GMD of NNPC said there would be no increase in the ex-depot price of Premium Motor Spirit in May. The NNPC has maintained an ex-depot price of N148/litre since February despite the hike in the actual cost of the commodity, thereby bearing the subsidy of over N120bn monthly.
  • On Monday, the Petroleum Tanker Drivers suspended their proposed strike after the intervention of NNPC in the impasse between the Petroleum Tanker Drivers and the National Association of Road Transport Owners.
  • On Tuesday, a local gas company (Flash Gas) through its Chief Operating Officer, Michael Nweke, said it would begin conversion of cars to gas-powered engines from June to complement the Federal Governmen's National Gas Expansion Programme (NGEP). The company said it would convert about 30 cars weekly and it is partnering with financial institutions to have a good amortisation scheme to make the conversion of vehicles less dear.
  • NNPC report for 2020 revealed that Nigeria's three refineries guzzled a total of N5.86 billion in overhead expenses on zero output in December 2020 resulting in an operating deficit of N5.37bn.
  • On Thursday, the United States slashed its imports of Nigerian crude oil by 64.12 percent in 2020 to the lowest in five years. Nigerian light sweet crude is very similar to the light oil produced in US shale. As US shale production grew, the appetite for Nigerian crude in the US dropped dramatically.
  • On Friday, Nigeria House of Representatives has resolved to investigate the amount of gas so far flared in the country to address the discrepancies in the figures being released by both government and oil companies. The committee is to ascertain the amount of gas flared and the extent of the discrepancies and ascertain the amount of revenue due to the government from gas flare penalties.
  • The House of Representatives accused global oil giant, ExxonMobil, of breaching local content laws in Nigeria by splitting contracts for procurement and favoring foreign contractors. The House has mandated its Committee on Nigerian Content Development and Monitoring to investigate the matter.

 

Foreign

  • One of the world's largest carbon dioxide emitters and one of Nigeria crude importer, India is set to add more coal-fired electricity generation capacity despite the global push for clean power sources. India could still need new coal capacity in the coming years to balance more renewable energy sources. The state miner, Coal India approved as many as 32 new coal mining projects worth a total investment of US$6.4 billion.
  • China's crude oil imports from top supplier Saudi Arabia rose 8.8%, Imports from the UAE also rose by 86%, and imports from Russia also rose by 6% in March from a year earlier, driven by strong demand and as shipments delayed due to port congestion finally arrived.
  • Oil prices fell for a second day on Wednesday, weighed down by concerns that surging COVID-19 cases in India will drive down fuel demand in the world's third-biggest oil importer. However, the global crude markets remains well supplied with OPEC and its allies scheduled to hike production in coming months. OPEC considers that if demand picture does not improve significantly, prices may correct further down.
  • India Sees Oil Production and Refinery Output Slump in 2020 and Q1 2021. Due to the pandemic that shut down some oilfields, India's oil production dropped by 5 percent year-on-year in the fiscal year between April 2020 and March 2021. Refiners processed 13 percent less crude because of the slump in fuel demand and Natural gas production in India also slumped by 8 percent.
  • Crude oil production by the OPEC+ is scheduled to rise by a collective 350,000 barrels per day starting from May, followed by another 350,000 bpd increase in June and a 441,000 bpd rise in July.
  • Oil prices climbed on Friday, edged high on hopes that demand will recover as economic growth picks up and lockdowns ease, but worries about India's surging second wave of COVID-19 cases limited the gains.

 

Metals

Gold depreciated by -0.02% while Silver grew by 0.12% W-o-W (see Table 1).

 

Agriculture

  • Cocoa prices declined by -0.61% this week.
  • Corn prices jumped by 10.20% W-o-W on strong demand by China while Sugar also appreciated by 3.31% (see Table 1).

 

Table 1Weekly Change in Commodity Prices

Commodity

23-Apr-21

16-Apr-21

31-Dec-20

Weekly Chg

YTD Chg

Brent

65.85

66.67

51.8

-1.23%

27.12%

Gold

1777.73

1778.17

1898.67

-0.02%

-6.37%

Silver

26.04

26.01

26.4011

0.12%

-1.37%

Cocoa

2446

2461

2597

-0.61%

-5.81%

Corn

635

576.25

484

10.20%

31.20%

Sugar

16.87

16.33

15.28

3.31%

10.41%

Source: Bloomberg, Proshare Research

*Data for 23rd Apr 2021 is as of 5:56pm (Nigerian Time)

 

Outlook

  • In the coming week, oil prices are expected to little changed as the third-largest oil consumer in the world, India struggles with the record surge of coronavirus infections.
  • Gold prices are expected to be little changed in the coming week, as U.S. Treasury yields and the dollar keeps pressuring the precious metal.
  • Cocoa prices to decline next week on weak demand from Europe and production surplus in Ghana and Ivory Coast.
  • Sugar prices are expected to rise next week due to supply tightness as India, a top producer of the commodity battles new Covis cases.
  • Corn prices are expected to rise in the coming week on strong demand by China heightened by a domestic corn deficit, as Brazil deals with dry weather.


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Fixed Income and Money Market 

Money Market

Money market rates were elevated throughout the week as system liquidity remained constrained.

 

At the close of the trading session, this week's funding rates fell. Open Buyback (OBB) closed at 15.88% while Overnight (O/N) rates closed at 16.75% indicating a Week-on-Week (W-o-W) decline of -36.48% for OBB and -40.88% for O/N rates.

 

Money Market Rate

 

16-Apr-21

23-Apr-21

% Change

OBB

25.00

15.88

(36.48)

O/N

28.33

16.75

(40.88)

Source: FMDQ, Proshare Research

 

Funding rates are expected to continue to trend in the double-digit as liquidity remains constrained.

 

Treasury Bills Market

overall trading activity for the Nigerian Treasury Bills for the most part was bearish this week.

 

At the close of the week, average benchmark yield for T-bills was up by +9.06% to close at 4.74% while OMO bills rose +7.66% W-o-W to close at 7.73%. Yield for CBN's Special bills also rose slightly by +0.92% W-o-W to close at 6.57%.

 

Average Benchmark Yields

16-Apr-21

23-Apr-21

% Change

T. Bills (%)

4.35

4.74

+9.06

OMO Bills (%)

7.18

7.73

+7.66%

SPEB

6.51

6.57

+0.92%

Source: FMDQ, Proshare Research

 

The Central Bank also offered N20.00 billion worth of OMO bills but sold N12.84 billion of that in its auction this week. The offer was under-subscribed at the 91- and 187-day tenor.  Rates on the 96-day, 187-day & 355-day notes at 6.90%, 8.48% and 10.10%, respectively (see table below).

 

 

PMA Result OMO Bill - April 22, 2021

Tenor

Amount Offered (N'bn)

Total Subscription (N'bn)

Amount Allotted (N'bn)

Rate (%)

Previous Rate (%)

Changes (%)

96 days

5

1.84

1.84

6.9

7

(0.10)

187 days

5

1

1

8.48

8.5

(0.02)

355 days

10

18.44

10

10.1

10.1

0

Source: CBN, Proshare Research

 

FGN Bond Market

Activity in the bond market for this week's session was relatively quiet note as attention was skewed towards the Bond auction.

 

At the close of the week, the market was bearish with selling interest seen majorly at the short and long end of the curve.

 

The overall average benchmark yields closed at 8.29% for the week which increased W-o-W by +2.25%.

 

Average Benchmark Yields

16-Apr-21

23-Apr-21

% Change

Short Tenor (%)

5.75

5.94

+3.36%

Mid Tenor (%)

9.68

9.38

-3.12%

Long Tenor (%)

12.74

12.87

+0.98%

Source: FMDQ, Proshare Research

 

Auction Result for the 16.2884% FGN MAR 2027 (Re-opening 10-Year Bond), 12.50% FGN MAR 2035 (Re-opening 15-Year Bond) & 9.80% FGN JUL 2045 (Re-opening 25-Year Bond).

 

FGN Bond Auction Result - April 21, 2021

Tenor

Amount Offered (N'bn)

Total Subscription (N'bn)

Amount Allotted (N'bn)

Rate (%)

Previous Rate (%)

Changes (%)

10- Year

50

34.69

22.97

12.25

10.5

1.75

15-Year

50

56.13

38.78

13.34

11.5

1.84

25-Year

50

174.86

96.2

13.85

12

1.85

Source: DMO, Proshare Research


Details in proshareng.com

 

FGN Eurobond Market

The overall trading session in the FGN Eurobond market was mixed, as investor sentiments were influenced by crude oil prices and the intending nuclear deal by May for Iran that would take U.S. sanctions off the Islamic Republic's crude exports, potentially adding another two million barrels per day or more to the market.

For the FGN Eurobond market, we expect the market to continue to react to the news both on the domestic level and international level especially to movement in crude oil prices.

 

Foreign Exchange Market

The Naira to major currencies at the BDC window was bearish against the dollar and Euro, and flat against the British Pound. At the I&E FX window, Naira appreciated by +0.24%

 

The Naira closed the week at $/N410.00 at the I&E FX window, at the NAFEX (spot market) it closed at $/N409.83, and at the BDC market, it closed at $/N485, £/N670, and Euros/N579. 



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Nigerian Capital Market

  • The Nigerian bourse closed the week positive with a growth of +1.27%. The Nigerian Stock Exchange gained N257.61bn in Market capitalization W-o-W while YTD return and market capitalization currently stands at -2.41% and N20.57trn respectively.
  • The volume and value of stocks traded on the exchange this week declined by -43.41% and -90.90% respectively. A total turnover of 1.60m shares worth N42.14bn in 19,507 deals was traded this week by investors on the floor of the Exchange.
  • Trading in the top three equities by volume were FIDELITYBK, MTNN and GTBANK. They accounted for 580.76m shares worth N34.39bn in 3,197 deals, contributing 36.25% and 81.61% to the total equity turnover volume and value respectively.
  • Performance across sectors tracked was broadly positive this week as the NSE-IND was the highest gainer for the week with +4.82% while NSE-30, NSE Consumer Goods, NSE-IND, NSE Insurance, and NSE Oil & Gas advanced by +1.64%, +1.05%, +0.50%, +0.40% and +0.29% respectively.
  • Market breadth was positive for the week with 39 gainers led by PZ and UPL as against 24 losers led by FTNCOCOA and PORTPAINT

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Chart 1: Movement of NSEASI Index Points 16 Apr. 2021 - 23 Apr. 2021

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Source: NSE, Proshare Research

 

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NASD OTC

 

The NASD OTC Security Index (NSI) and Market Capitalization closed the trading week with a positive movement in Market capitalization and NSI. The NSI and Market capitalization closed the week at 785.15 points and N558.09bn with a growth of +2.31% and +2.31% respectively.

 

 

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Dangote and Toni Index 

 

Dangote Index closed the week positive with 116.78 basis points from 116.46 basis points recorded the previous week, a growth of +0.27%.


DANGCEM closed flat, NASCON declined by -2.63% WoW, while DANGSUGAR advanced by +5.92% WoW. DANGSUGAR recorded the highest growth W-o-W.

 

Table 2: Dangote Index W-o-W Change

 


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Furthermore, the Toni Index closed positive with 91.32 basis points from 86.36 basis points recorded the previous week, a W-o-W growth of +5.74%


UBA, TRANSCORP and UBCAP closed the week positive with +7.91%, +1.27% and +1.69% respectively, AFRIPRUD closed negative WoW with -3.64% while TRANSCOHOT closed flat WoW. 


 

Table 3: Toni Index W-o-W Change


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Outlook

 

As we advance further into Q2 2020, we expect investors to be cautious of Q1 2020 corporate earnings, press releases from listed companies and macroeconomic developments to make investment decisions.

 

In addition, we expect investors' to monitor the movement of yields in the fixed income market.


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Latest Reports This Past Week

1.      N1.31trn Generated as IGR in 2020 – NBS

2.     Average Price of 1kg of Tomato Decreased by -0.64% MoM in March 2021 - NBS

3.     Average Fare for Bus Journey Within City Increased by 4.42% MoM in March 2021 - NBS

4.     N1.31trn Generated as IGR in 2020 - NBS

5.     Headline Inflation Increases by 18.17% YoY In March 2021, 0.82% Higher Than February 2021 Rate - NBS

6.     NBS Publishes COVID-19 Impact Monitoring Survey Report for February 2021

7.     Real Household Consumption Expenditure Growth Rate Stood at 0.18% in 2020 - NBS

8.     All Commodity Group Import Index Grew By 0.13% in Q4 2020 - NBS

9.     38.60% of Nigeria's Total Public Debt Was External in Q4 2020 - NBS


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