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Analysts Predict Bullish Outlook For Equities, Fixed Income

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Nigerian stock market - Investors King

Analysts Predict Bullish Outlook For Equities, Fixed Income

Capital market analysts say the equities and fixed income markets are likely to see a relative bullish response this week.

The equities market closed last week on a positive note after recording declines in the first three days of the week (aside from Monday, which was a national holiday).

At last week’s close, the Nigerian Stock Exchange All-Share Index rode on the improving appeal for banking stocks to close positive.

“With the appeal still quite decent, coupled with waning bearish sentiment across other sectors, we expect the index to open higher in the week ahead,” analysts at Vetiva Capital Management said in the firm’s week-end market report.

For the fixed income market, the analysts said, “At the start of this week, we expect buoyant demand to further drive bullish trading in the Treasury bills space amid continued muted trading sentiment on bonds.”

The Nigerian equity market started the year on negative footing with the NSE ASI down 2.32 per cent amid light trade volumes. After opening in negative territory, the market maintained its bearish momentum as all key sectors continually closed in the red.

However, on Thursday, the financial services sector logged the first positive close of the key sectors following gains across select tier-one banks. Despite this, the market still closed lower as the ASI performance was skewed by a loss in Dangote Cement Plc.

At the week close, the ASI clinched its first gain of the year, amid extended gains across banking stocks and waning negative sentiment in other key sectors.

The fixed income market opened the year on a mixed note. At last week’s open, the Central Bank of Nigeria auctioned N51bn (offered: N50bn) across the 184 day-to-maturity and 352DTM bills. Despite the liquidity mop up, the treasury bill yields declined – supported by buoyant demand across the space, analysts said.

The treasury bills market sustained the bullish trend throughout the week amid a Primary Market Auction, where the CBN sold N35bn, N23bn, and N135bn (offered: N28bn, N42bn and N55bn) across the 91DTM, 182DTM and 364DTM bills at respective stop rates of 14 per cent, 17.50 per cent and 18.69 per cent (effective yield: 14.51 per cent, 19.17 per cent and 22.97 per cent).

However, the bond market traded bearish throughout the week with yields advancing by 97 basis points overall as the wait for the bond auction calendar kept investors on the sidelines.

To this end, analysts at Meristem Securities Limited, in its weekly report, maintained, “Given investors’ apathy towards the equities market in 2016, coupled with the dearth of positive news inflows amidst unfavourable economic fundamentals, we do not anticipate a revamp in market performance in the near term.

“However, we anticipate some position taking in fundamentally justified stocks currently trading below their intrinsic values.”

Meanwhile, global markets traded mostly higher in the first trading week of the year amid holiday-thinned trading and a barrage of data releases. Whilst most major markets were shut last Monday for the New Year’s holiday, the South Korean bourse traded mixed amid better-than-expected trade data and as investors continued to track events on the political scene.

On the other hand, the European markets closed the first trading week of the year higher on the back of upbeat 2016 Manufacturing Purchasing Managers’ Index data.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Energy

Massive Fuel Station Closures in North-East Nigeria Over Anti-Smuggling Clampdown

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In a significant protest against an anti-smuggling operation, nearly 2,000 petrol stations in Nigeria’s North-East have shut down, causing widespread fuel shortages and forcing motorists to turn to the black market.

The closures began yesterday following a crackdown by the Nigeria Customs Service (NCS), which targeted petrol outlets suspected of smuggling fuel to neighboring countries.

Dahiru Buba, Chairman of the Independent Petroleum Marketers Association (IPMAN) for Adamawa and Taraba states, revealed that the closures were a direct response to the NCS impounding tanker trucks and shutting down some fuel outlets.

This crackdown, known as “Operation Whirlwind,” aimed to curb the smuggling of subsidized petrol to Cameroon, Benin, and Togo—a practice that has thrived for years due to the significant price difference.

Buba explained that the operation initially led to the seizure of tanker trucks belonging to IPMAN members. Although the trucks were released following protests by the association, the continued impoundment of more vehicles and the closure of several petrol stations led to the widespread shutdown.

“We wrote to them [Nigeria Customs] again, but there were no responses. That is why we decided to go on strike,” Buba said, adding that over 1,800 outlets had ceased operations.

“This is our business, and we cannot be quiet when our members are treated this way,” Buba added, emphasizing the association’s frustration with the ongoing situation.

In response to the closures, the black market has surged, with fuel vendors in Adamawa’s capital, Yola, selling petrol at N1,400 per liter—significantly higher than the official pump price of between N650 and N750.

This has placed an additional burden on consumers, who now face inflated costs amid the fuel scarcity.

Mangsi Lazarus, the customs spokesperson for Adamawa and Taraba, defended the operation, stating that the impounded tanker trucks were indeed being used to smuggle petrol.

“We are simply carrying out our duty to prevent illegal activities that harm the economy,” Lazarus said.

The fuel crisis comes as oil prices edged higher globally due to anticipated strong driving demand, geopolitical tensions in the Middle East, and drone attacks on Russian refineries.

Brent crude futures for August delivery rose by 0.9% to $86.04 a barrel, while US crude gained 1.1% to $81.63 per barrel.

“The chief underlying reason behind the price strength … is the growing confidence that global oil inventories will inevitably plunge during the summer in the northern hemisphere,” said Tamas Varga of oil broker PVM, referring to seasonal demand for oil products.

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Crude Oil

Oil Prices Inch Down Amid Dollar Strength and Interest Rate Concerns

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Crude oil prices declined on Monday as the U.S. dollar strengthened and concerns over potential interest rate hikes resurfaced.

Brent crude oil, against which Nigerian oil is priced, slipped marginally by 3 cents to settle at $85.21 per barrel following a modest 0.6% decline on Friday.

Similarly, U.S. West Texas Intermediate (WTI) crude oil saw a minimal decrease of 2 cents to close at $80.71 per barrel.

Market analysts pointed to the robust performance of the U.S. dollar, which gained ground after the release of positive Purchasing Managers’ Index (PMI) data on Friday.

Tony Sycamore, a markets analyst at IG in Sydney, noted, “The U.S. dollar has opened bid this morning and appears to have broken higher following better U.S. PMI data on Friday night and political concerns ahead of the French election.”

A stronger dollar typically makes dollar-denominated commodities like oil less attractive for holders of other currencies, putting downward pressure on prices.

Last week, however, both Brent and WTI crude contracts managed to gain approximately 3% each.

This was largely driven by increasing signs of demand recovery for oil products in the U.S., the world’s largest consumer of crude oil. Additionally, ongoing supply constraints enforced by OPEC+ further supported market sentiment.

According to ANZ analysts, U.S. crude inventories continued their decline while gasoline demand recorded a seventh consecutive weekly rise.

Moreover, jet fuel consumption has rebounded to levels last seen in 2019, indicating a robust recovery in travel-related fuel demand.

Speculative activity in the oil market has also been notable, with analysts from ING observing an increase in net-long positions in ICE Brent as traders adopt a more positive outlook heading into the summer months.

“We remain supportive towards the oil market with a deficit over the third quarter set to tighten the oil balance,” they stated.

Despite these bullish indicators, geopolitical tensions persisted, providing a floor for oil prices.

Escalating conflicts in the Middle East, including the Gaza crisis and increased drone attacks on Russian refineries by Ukrainian forces, continued to underpin market sentiment.

In South America, Ecuador’s state oil company Petroecuador declared force majeure on deliveries of Napo heavy crude for exports due to severe weather conditions.

Heavy rains led to the shutdown of a critical pipeline and oil wells, impacting production and exports.

Meanwhile, in the U.S., the number of operating oil rigs fell by three to 485 last week, marking the lowest count since January 2022, according to Baker Hughes’ weekly report.

Looking ahead, the interplay between the U.S. dollar’s strength, geopolitical developments, and economic indicators such as PMI data will likely dictate short-term oil price movements.

Investors and analysts remain vigilant for any shifts in these factors that could influence global oil market dynamics in the coming weeks.

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Gold

First Commercial Gold Transaction Nets Nigeria $5 Million in Foreign Reserves

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The Ministry of Solid Minerals Development has concluded its first commercial transaction under the National Gold Purchase Program (NGPP), bolstering the nation’s foreign reserves by $5 million.

Minister of Solid Minerals Development, Dele Alake, announced the successful sale of over 70 kilograms of gold, refined to meet the stringent London Bullion Market Association Good Delivery Standard.

Speaking at the presentation ceremony, Alake emphasized the economic significance of the transaction, stating that it injects approximately NGN 6 billion into the rural economy.

He lauded President Tinubu for his unwavering support for reforms in the solid minerals sector, highlighting the pivotal role of the NGPP in enhancing Nigeria’s foreign reserves and bolstering the value of the Naira.

“This transaction represents a strategic move to use the Nigerian Naira to acquire a liquid asset denominated in United States Dollars, demonstrating a viable strategy for fiscal and monetary stability,” Alake stated.

He further expressed confidence in the NGPP’s ability to contribute to Nigeria’s economic diversification agenda, fostering greater economic confidence and attracting foreign investment.

Executive Secretary of the Solid Minerals Development Fund, Fatima Shinkafi, explained that adherence to the London Bullion Market Good Delivery Standard ensures that Nigeria’s gold exports meet global trading requirements.

She emphasized that only gold bars meeting these standards are acceptable in the settlement of Loco London contracts, reinforcing Nigeria’s credibility in the global gold market.

President Tinubu, upon receiving a symbolic gold bar, commended the Ministry for achieving a crucial milestone in the nation’s economic diversification efforts.

He described the transaction as a concrete step towards realizing the objectives of the Renewed Hope Agenda, aimed at reducing economic dependence on oil and gas revenues.

Through initiatives like the NGPP, Nigeria aims to further enhance its gold reserves, promote economic stability, and create an environment conducive to sustainable economic growth.

The successful completion of the first commercial gold transaction marks a pivotal moment in Nigeria’s journey towards becoming a key player in the global gold market, driving economic prosperity and resilience.

The Ministry of Solid Minerals Development continues to advocate for supportive policies and regulatory frameworks that promote transparency, efficiency, and sustainability in the mining sector, laying the groundwork for future economic growth and development.

As Nigeria moves forward with its gold refining and export initiatives, stakeholders anticipate continued progress in diversifying revenue streams and strengthening the nation’s economic resilience on the global stage.

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