What To Expect From The Markets This Week - 120421

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Saturday, April, 2021 08:00 AM / Proshare Content / Header Image Credit: EcoGraphics


  

Nigeria: Economic Dashboard @ 090421

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Editor's Note

Source: Proshare Research - April 10, 2021

Nigeria Economy

  • In the first quarter of 2021, the Ports and Terminal Multiservices Limited Command of Nigeria Customs Service stated that it recorded total revenue of N46.85bn in the first quarter of 2021 which is +3.19% higher than N45.4bn collected in Q1 2020. A breakdown of the monthly collection reveals that the sum of N15.21bn was collected in January 2021 while in February and March the amount collected was N11.71bn and N19.94bn, respectively.
  • According to the Fiscal Responsibility Commission's Debt sustainability analysis of state governments', the debts of Lagos, Osun, Cross River, and Ogun state exceeded their net revenues by more than 400% in 2019. It reported that all 36 states and FCT exceeded the DMO threshold of 50%. Lagos State recorded the highest Debt-to-Total Net Revenue as of the end of 2019, with 712.94% while Osun, Cross River, and Ogun State recorded Debt-to-Total Net Revenue of 650.94%, 597.36%, and 402.3% respectively. Furthermore, the commission noted that it cannot be concluded that such states have overborrowed, as the overall debt limits of the governments in the federation has not been set. According to FRC “It is on record that the overall limits of consolidated debts of federal, states and local governments are yet to be set since the enactment of the Fiscal Responsibility Act, 2009, though the commission has continually engaged the Honourable Minister(s) of Finance, Budget and National Planning on the issue”.
  • The International Monetary Fund (IMF) in its World Economic Outlook update released made an upward adjustment of Nigeria's growth forecast for the Nigerian economy in 2021 to +2.5% from its earlier projection of +1.5% it announced in January. The new growth projection is 1.0 percentage points higher than the multilateral institution's 2021 forecast in January. It should be noted that the Nigerian economy exited recession in the fourth quarter of 2020 with a modest growth of +0.11%


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Global Economy

  • The Board of Directors of the World Bank has approved a $500m loan to Ethiopia's government. The financing would be provided via the bank's subsidiary, the International Development Association (IDA). The funds will enable the Ministry of Water, Irrigation, and Power to Implement its Access to Distributed Electricity and Lighting in Ethiopia (ADELE) project. The ADELE project is a component of Ethiopia's National Electrification Programme (NEP). The project is being implemented by the Ethiopian Electric Utility and aims to provide universal electricity to Ethiopians by 2025.
  • According to the Federal Statistical Office (Destatis), Germany recorded a budget deficit of 189.2bn euros in 2020, the first deficit since 2013 and the highest since German reunification after recording a surplus of 45.3bn euros. It was revealed that spending by the federal and state governments, municipalities, and social security funds increased by +12.1% in 2020 compared to 2019, as the state attempted to cushion the financial fallout of the pandemic. In total, the federal government paid out around 17.8bn euros to the federal states, which was then passed on as coronavirus aid to small businesses and self-employed workers. At the same time, state revenue fell by -3.5% to around 1.5trn euros last year. The main reason for this was that income from taxation and tax-like charges fell by -3.8%.
  • IMF has predicted that the stronger recoveries from the coronavirus pandemic in the US, the UK, and other rich western countries will result in faster than expected growth for the global economy. After contracting by -3.3% in 2020, the IMF has projected that the global economy would grow by +6% in 2021 and a further +4.4% in 2020. It had initially predicted an expansion of +5.2% in 2021 and +4.2% in October 2020. The October forecast for 2021 was later upgraded to +5.5% growth in January 2021. It noted that successful vaccine programs, businesses adapting to the challenges of lockdown, and Joe Biden's $1.9trn stimulus package were key factors in the upgrade.
  • The executive board of the International Monetary Fund approved the third tranche of grants for debt service relief for 28 member countries under the Catastrophe Containment and Relief Trust.   This approval followed two prior tranches approved on April 13, 2020, and October 2020, respectively. It enabled the disbursement of grants from the CCRT for payment of all eligible debt services falling due to the IMF from its poorest and most vulnerable members from April 23, 2021, to October 15, 2021, estimated at SDR 168 ($238m). This tranche of grants for debt service relief would continue to help free up scarce financial resources for vital emergency health, social, and economic support to mitigate the impact of the coronavirus pandemic.
  • The Caixin/Markit services Purchasing Managers' Index (PMI) for China rose to 54.3, the highest since December, from 51.5 in February.  This indicates that recovery in China's services sector picked up speed in March as firms hired more workers and business optimism surged, although inflationary pressures remained. Firms reported the sharpest increases in activity and overall sales in three months. New export business continued to contract but at a slower pace. A sub-index for employment rose back into positive territory as businesses hired more work.


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Commodities Market

Energy

Domestic

  • The price of Nigeria's Bonny Light, on Monday, dropped to $61.54 per barrel over fears of Coronavirus pandemic resurgence in India, a major importer of the nation's crude. Brent crude, which is hovering around $60per barrel had continued to push Nigeria's revenue upward. Using that average, oil revenue in February stood at $2.39bn compared to the budgeted revenue of $2.08bn.
  • On Monday, Centre for Peace and Environmental Justice insisted that Chevron's claim that the oil spill between Otunana and Abiteye at NANA River was not from its assets, was not tenable.
  • On Wednesday, NNPC signed the contract with Tecnimont SPA for the $1.5bn rehabilitation programme of the PHRC. The contract covers the provision of engineering, procurement, construction, installation, and commissioning services for the refinery rehabilitation project.
  • On Thursday, Nigeria Customs Service reported that massive fuel smuggling persists amid opposition to border restriction by borderline communities.
  • Shell's yearly payment to the Nigerian govt hit six-year low ($3.24bn) despite being the highest among its 24 countries hosts.
  • On Friday, NNPC announced plans to resume active oil exploration in Sokoto Basin. Other areas to be explored are Benue Trough, Chad Basin, and Bida Basins.
  • Nigeria oil marketers projected that a persistent fall in global oil prices could lead to a reduction in petrol pump prices although subject to foreign exchange movement.

 

Foreign

  • The international oil benchmark, Brent crude, fell the most in nearly two weeks on Monday. Reasons are growing delays in Europe's reopening (UK delay in global travel), Italy extended restrictions, and looming Iranian supply against the US sanction.
  • Oil prices traded up on Wednesday as fears in the market calmed regarding additional supplies that might be brought onto the market should the talks over the Iranian nuclear deal end with lifting U.S. sanctions, increased COVID-19 vaccinations, and report that crude inventories in the US fell.
  • Vietnamese companies in the oil and gas field have started recording positive results in the first quarter of 2021 thanks to the strong rally of crude oil in the international market.
  • New Mexico will establish a statewide community solar program. The community solar allows electricity customers to opt into solar power from a shared facility larger than residential solar panels but smaller than a utility-scale solar farm. The purpose is to reduce pollution in its energy sectors by increasing use and access to solar power instead of fossil fuels like oil and gas.
  • Oil prices were little changed on Thursday as a falling dollar and rising stock markets offset earlier declines caused by a big increase in U.S. gasoline stockpiles and subdued demand compared with pre-pandemic levels.
  • Oil prices trimmed down on Friday as investors considered rising supplies from major producers and the impact on fuel demand from the COVID-19 pandemic.
  • China is paying a high price for its unofficial ban on coal imports from Australia, with the cost of domestic and alternative foreign supplies rising for both thermal and coking grades of the fuel.
  • Brent had a weekly decline of -1.98% (see Table 1).


Metals

Gold appreciated by 0.76% as the US dollar and Treasury yields pulled back from recent highs, while Silver also gained by 1% W-o-W (see Table 1).

 

Agriculture

  • On Tuesday, the insurers of agricultural commodities stated that the percentage of smallholder farmers that produce over 98 per cent of food consumed across the country who have access to agricultural insurance in Nigeria was less than five percent.
  • Cocoa prices grew by -2.37% this week.
  • Corn prices grew by 5.98% W-o-W while Sugar also appreciated by 1.98% (see Table 1).

 

Table 1Weekly Change in Commodity Prices

Commodity

09-Apr-21

01-Apr-21

31-Dec-20

Weekly Chg

YTD Chg

Brent

62.99

64.26

51.8

-1.98%

21.60%

Gold

1745.77

1732.59

1898.67

0.76%

-8.05%

Silver

25.29

25.04

26.4011

1.00%

-4.21%

Cocoa

2388

2446

2597

-2.37%

-8.05%

Corn

580.5

547.75

484

5.98%

19.94%

Sugar

15.48

15.18

15.28

1.98%

1.31%

Source: Bloomberg, Proshare Research

*Data for 9th Apr 2021 is as of 5:27pm (Nigerian Time)

 

Outlook

  • In the coming week, oil prices are expected to decline marginally on rising supplies from major producers and concerns over the COVID-19 pandemic's impact on fuel demand.
  • Gold prices are expected to be mixed in the coming week, with a rise in bond yields likely to put renewed pressure as well as the strengthening dollar.
  • Cocoa prices to decline next week on production surplus.
  • Sugar prices are expected to dip next week due to the lack of demand and oversupply.
  • Corn prices are expected to rise in the coming week on strong demand by China. 



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Nigerian Capital Market

  • The Nigerian bourse closed the week negative with a decline of -0.13%. The Nigerian Stock Exchange lost N26.33bn in Market capitalization W-o-W while YTD return and market capitalization currently stands at -3.49% and N20.34trn respectively.
  • The volume and value of stocks traded on the exchange this week declined by -32.90% and -44.70% respectively. A total turnover of 887.04m shares worth N9.19bn in 17,837 deals was traded this week by investors on the floor of the Exchange.
  • Trading in the top three equities by volume were ZENITHBANK, ACCESSBANK and GTBANK. They accounted for 259.25m shares worth N4.82bn in 4,970 deals, contributing 29.23% and 52.41% to the total equity turnover volume and value respectively.
  • Performance across sectors tracked was broadly negative this week as the NSE Consumer Goods Index was the highest gainer for the week with +1.12% while NSE-30 recorded the highest loss for the week with -10.83%, NSE Banking, NSE Insurance, NSE-IND and NSE Oil & Gas declined by -2.25%, -1.49%, -0.66% and -0.31% respectively.
  • Market breadth was negative for the week with 17 gainers led by JAPAULOIL and HMARKINS as against 40 losers led by GUINNESS and STERLING


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Chart 1: Movement of NSEASI Index Points 01 Apr. 2021 - 09 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 755.84 points and N537.26bn with a growth of +1.44% and +1.44% respectively. 

 

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Dangote and Toni Index 

 

Dangote Index closed the week positive with 113.99 basis points from 114.01 basis points recorded the previous week, a decline of -0.02%.


DANGCEM and NASCON closed flat WoW,  while DANGSUGAR dipped by -0.29% WoW. DANGSUGAR recorded the highest decline W-o-W.


 

Table 2: Dangote Index W-o-W Change


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Furthermore, the Toni Index closed negative with 86.98 basis points from 87.73 basis points recorded the previous week, a W-o-W decline of -0.85%


UBA, TRANSCORP and UBCAP closed the week negative with -0.71%, -2.44% and -1.82% respectively, AFRIPRUD closed positive WoW with +1.89% while TRANSCOHOT closed flat WoW.


 

Table 3: Toni Index W-o-W Change

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Outlook

 

Considering the full-year 2020 corporate earnings season has come to an end; 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.     38.60% of Nigeria's Total Public Debt Was External in Q4 2020 - NBS

2.     Average Price of 1kg of Tomato Increased by 11.33% YoY in February 2021 - NBS

3.     Average Fare Paid by Commuters for Intercity Journey Increased by 1.13% MoM in February 2021 - NBS

4.     FAAC Disburses N619.34bn in January 2021 - NBS

5.     38.60% of Nigeria's Total Public Debt Was External in Q4 2020 - NBS

6.     Average Price of 1kg of Tomato Increased by 11.33% YoY in February 2021 - NBS


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Related News

1.     Investors Lose N26.33bn WoW as NSEASI Dips by -0.13% to Close the Week Negative

2.     Investors Gain N13.50bn as NSEASI Inches Up Further by 0.07% Amid Improved Market Breadth

3.     Investors Gain N3.88bn as NSEASI Inches Up Marginally by 0.02% Amid Negative Market Breadth

4.     Investors Lose N78.53bn as NSEASI Dips by -0.39% to Open the Week Negative



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