- Nigerian Equities Market Will Grow 3.5% in 2017, Say Market Analysts
Despite opening the year with on a negative note, analysts at Meristem Securities Limited (MSL), an investment banking firm, have projected that the Nigerian stock market will close 2017 positively. The stock market has recorded three consecutive yearly fall, closing 2016 with a decline of 6.17, which was lower than what was recorded in 2014 and 2016. As at Friday, the market, measured by the Nigerian Stock Exchange (NSE) All-Share Index (ASI) has posted a negative return of 2.42 per cent.
However, in a special report on the economic and financial outlook titled: “In murky waters…wading through uncertainties,” analysts at MSL have said the NSE ASI will gain 3.49 per cent.
Explaining the performance of the market in 2016, they said in line with the lacklustre state of the economy amid fiscal and monetary policies misalignment, the NSE ASI closed 2016 “below waters” at – 6.17 per cent.
“Market breadth, which measures the number of price gainers relative to price losers in the year, settled at 0.39x, representing 30 gainers and 77 laggards,” they said.
According to them, market sentiments waned under continued pressure from a barrage of negative news flows such as, persistent inflationary pressure, and the paucity of foreign exchange (FX), which consequently led to the further depreciation of naira against major currencies.
This, they added, ultimately culminated to the country sliding into recession.
Speaking on the activities in the equities market in 2017, they said the market is expected to remain largely weak in the first half of 2017, on the back of subsisting macroeconomic uncertainties, while they anticipate a modest recovery towards the tail end of the year. “However, we note that market recovery is partly hinged on stability in the fx market and moderation in exchange rate gap between the interbank and parallel markets. Based on our mix of methodologies, we arrived at a 2017 index level of 27,812, 50, indicating a +3.49 per cent potential market return by December 31, 2017,” they declared.
The Chief Executive Officer of the NSE, Mr. Oscar Onyema had the previous expected optimism that the market will recover this year, disclosing some of the strategies that would be taken by the exchange to market the performance better.
Onyema noted that in the immediate future, the NSE will focus on achieving its goal of becoming a more agile and demutualised exchange and will fast track efforts towards developing innovative products such as exchange traded derivatives to provide investors with tools to better weather economic realities in 2017.
“We intend to strengthen our thought leadership efforts with policymakers to drive policies that will free up the system and promote the ease of doing business in Nigeria. We believe that incentive schemes for sectors of the economy that can support a pivot to export led economy will be beneficial and systematic removal of impediments to doing business and therefore reduction of leakages will attract private sector investments,” Onyema said.
He added that they expect to see a revival of supplementary listings, return of the new issuance market, and potentially one initial public offering (IPO) since the equity market is a forward indicator of the economy.
The Drop in US Crude Oil Inventories Boosted Oil Prices on Wednesday
Crude oil prices rose on Wednesday following a decline in US crude inventories last week.
The American Petroleum Institute (API) had reported that United States crude oil inventories declined by 5.3 million barrels in the week ended January 22, 2021, more than a reduction of 430,000 barrels predicted by a Reuters poll.
The unexpected decline, coupled with slowing new COVID-19 cases in China, the world’s largest importer of crude oil, boosted oil prices on Wednesday.
Brent crude, against which Nigerian crude oil is measured, rose by 41 cents or 0.7 percent to $56.32 per barrel.
The U.S. West Texas Intermediate (WTI) crude oil also gained 56 cents or 1 percent to $53.17 a barrel.
“WTI is slightly firmer on the back of a larger-than-expected draw in US crude inventories reported by the API, which is offset by builds in gasoline and distillates,” said Vandana Hari, oil market analyst at Vanda Insights.
The data, however, showed petrol inventories grew by 3.1 million barrels in the week, more than experts projected.
Similarly, API data revealed that distillate fuel inventories that include diesel and heating oil, jumped by 1.4 million barrels, far higher than the 361,000 barrels decline predicted. However, refinery runs declined by 76,000 barrels per day.
“Market participants are now in ‘wait and see’ mode, wanting to see how lockdowns evolve in the coming weeks and months, and how successful countries are in rolling out Covid-19 vaccines,” ING economics said in a note.
COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020
Nigeria’s oil revenue declined by 41.44 percent in the first nine months of 2020 to $2.033 billion, according to the latest data from the Nigerian National Petroleum Corporation, NNPC.
This represents a decline of 41.44 percent from $3.47 billion filed in the same period of 2019 when there was no COVID-19.
In the September 2020 edition of NNPC’s Monthly Financial and Operations Report (MFOR), revenue from oil and gas rose by 16 percent to $120.49 million in the month of September, a 66 percent or $234.81 million drop from $355.3 million posted in the same month of 2019.
The global lockdowns caused by the COVID-19 pandemic plunged Nigeria’s crude oil sales and global demand for the commodity. This was further compounded by Nigeria’s high cost of production compared to Saudi Arabia, Russia and others that were offering discounts to boost sales during one of the most challenging periods in human history.
Experts like Prof. Yinka Omorogbe, President of Nigeria Association of Energy Economics, NAEE, were not surprised with the drop in earnings given the effect of COVID-19 on the world’s economy.
She, however, called for the revamp of the nation’s petroleum sector laws and diversification of the economy away from oil revenue dependence. She said “Covid-19 made 2020 a very hot year and it battered the oil industry internationally and we are not an exception; so we could not have been unaffected”.
She also said the effect of the fall “is definitely a wake-up call; we have to diversify, strengthen our other resources and capabilities”.
Omorogbe, a former NNPC Board Secretary, urged the government and the operators in the sector to look inward and think strategically, stating: “think medium term, think of where they want to be and the government, above all, must think of how best we can utilize our resources, so that we can achieve our objectives once we know and define them.
“It is a clear wake-up call, if not we will just sit here and find that we have become one of the poorest nations in the world”, she noted.
Crude Oil, Other Commodities Closing Price for Monday
Brent crude oil, Nigeria’s crude oil benchmark, gained 47 cents to $55.88 per barrel on Monday, while the US crude oil expanded by 50 cents to $52.77 per barrel.
Gold for February delivery fell $1 to $1,855.20 an ounce. Silver for March delivery fell 7 cents to $25.48 an ounce and March copper was little changed at $3.63 a pound.
The dollar fell to 103.80 Japanese yen from 103.83 yen. The euro fell to $1.2139 from $1.2167.
Wholesale gasoline for February delivery rose 1 cent to $1.56 a gallon. February heating oil rose 2 cents to $1.59 a gallon. February natural gas rose 16 cents to $2.60 per 1,000 cubic feet.
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