Economy
Nigeria’s Private Sector Sustains Expansion in Stanbic IBTC PMI
By Modupe Gbadeyanka
In the month of July 2021, Nigeria’s private sector sustained its expansion by growing to 54.4 points from 53.6 points recorded in June 2021.
This is according to the Purchasing Managers’ Index (PMI) of Stanbic IBTC Bank Nigeria. The growth showed an 18-month high despite strong demand conditions. This run of expansion started in July 2020, according to the lender.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
In the period under review, the sector witnessed quicker upticks in output, new orders, purchases and employment supported growth. However, companies were able to keep backlogs at bay, though sentiment did moderate to the weakest since last September.
On the price front, higher raw material, wage and transportation prices were linked to another robust rate of overall input price inflation. Output prices also rose sharply.
It was observed that the uptick was centred on stronger demand conditions, with new orders rising at the fastest rate in one-and-a-half years. As a result, firms raised their output levels, and at the joint-quickest rate since August 2020.
Greater output requirements led firms to raise their buying activity during the month, which they did so at the sharpest rate in one-and-a-half years. The sustained period of output and new order growth encouraged firms to add to their inventory holdings. Anticipation of greater demand was also linked to stockpiling efforts.
To cater for higher workloads, firms raised their headcounts. Job creation has now been seen in each month since February. This allowed firms to clear their backlogs for the fourteenth month in a row. The rate of backlog depletion eased to the softest in four months but was still among the quickest in the series history.
Meanwhile, vendor performance improved again, a trend observed throughout much of the series’ history. That said, the rate at which lead times shortened was the softest in 15 months. According to firms, busier road conditions and material scarcity affected supplier delivery times.
Material shortages drove higher costs, with firms also mentioning rising transportation and staff expenses. Overall input price inflation eased to a seven-month low but was still strong in the context of the historical average. Output price inflation meanwhile quickened, with the improving demand environment allowing firms to raise their charges.
Finally, sentiment remained positive amid plans to raise exports and expand business operations. That said, the degree of positivity moderated to the fourth-weakest in the series.
By Dipo Olowookere
A 0.15 per cent growth was achieved by the Nigerian Exchange (NGX) Limited, driven by continued buying interest in banking stocks such as First Holdco and others.
The banking index was up by 1.53 per cent during the session, offsetting the losses recorded by the others. The industrial goods segment fell by 0.37 per cent, the insurance counter shrank by 0.21 per cent, and the energy sector contracted by 0.04 per cent, while the consumer goods space closed flat.
At the close of business, the All-Share Index (ASI) moved up by 364.26 points to 245,573.60 points from 245,209.34 points, and the market capitalisation increased by N235 billion to N158.513 trillion from N158.278 trillion.
Despite the gains printed by Customs Street during the trading day, investor sentiment was weak, as there were 22 price gainers and 24 price losers, indicating a negative market breadth index.
UPDC surged by 9.23 per cent to N3.55, CWG soared by 6.56 per cent to N19.50, AXA Mansard appreciated by 4.80 per cent to N13.10, Neimeth advanced by 4.24 per cent to N8.60, and Cutix improved by 4.00 per cent to N2.60.
Conversely, Red Star Express lost 10.00 per cent to trade at N18.00, CAP declined by 9.98 per cent to N115.45, John Holt shrank by 9.82 per cent to N10.10, ABC Transport depreciated by 9.57 per cent to N5.20, and Legend Internet crashed by 8.70 per cent to N4.20.
A total of 1.5 billion equities worth N26.7 billion exchanged hands in 42,580 deals on Friday versus the 531.8 million equities valued at N20.5 billion traded in 44,826 deals on Thursday, representing a spike in the trading volume, value, and number of deals by 182.06 per cent, 30.24 per cent, and 5.01 per cent, respectively.
The busiest stock during the session was Fortis Global Insurance, with a turnover of 824.5 million units valued at N2.1 billion, FCMB traded 217.9 million units worth N2.8 billion, Access Holdings exchanged 176.2 million units for N4.7 billion, Chams sold 32.5 million units worth N132.1 million, and First Holdco transacted 25.0 million units valued at N3.7 billion.
By Adedapo Adesanya
The Naira further closed south against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, August 7, by 81 Kobo or 0.06 per cent to N1,365.69/$1 from N1,364.88/$1.
It was a similar situation for the Nigerian Naira in the official market during the session as against the Pound Sterling; it lost N1.08 to quote at N1,839.17 versus the previous day’s N1,838.09/£1, and against the Euro, it slipped by N1.23 to close at N1,575.73/€1, in contrast to the preceding session’s N1,574.80/€1.
Further, at the GTBank forex counter, the Nigerian currency weakened against the Dollar yesterday by N2 to settle at N1,371/$1 compared with Thursday’s N1,369/$1, and at the black market, it traded flat at N1,400/$1.
The country’s legal tender came under FX demand pressure on Friday, with turnover rising by 304.3 per cent to $399.5 million from $98.8 million the previous day, with the number of deals slightly up to 107 from 106.
Next week, traders expect the Naira to hold steady, buoyed by dollar sales by the Central Bank of Nigeria (CBN), whose presence in the market could help ease demand pressure.
As for the cryptocurrency market, Bitcoin (BTC) neared the $65,000-mark after it gained 0.8 per cent to trade at $64,968.05, as investors took advantage of recent drops to shore up their holdings.
Previously, the decision by the US Senate to delay a vote on the Crypto Clarity Act until at least September weakened the outlook. The bill, which would set out which US regulator oversees which digital assets, needs 60 votes to pass and it is unclear whether it currently has 50.
Solana (SOL) grew by 2.5 per cent to $74.81, Dogecoin (DOGE) rose by 1.3 per cent to $0.0702, Binance Coin (BNB) jumped by 1.1 per cent to $593.80, Ethereum (ETH) expanded by 0.5 per cent to $1,916.08, Ripple (XRP) also soared by 0.5 per cent to $1.03, and TRON (TRX) appreciated by 0.2 per cent to $0.3275.
However, Cardano (ADA) depreciated by 1.0 per cent to $0.1997, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.
By Adedapo Adesanya
Brent futures climbed $1.06 or 1.3 per cent to $83.55 a barrel on Friday amid ongoing uncertainty about the negotiations in progress that determine control of and reopening of the key shipping artery of the Strait of Hormuz.
In the same vein, the US West Texas Intermediate (WTI) futures finished at $78.18 a barrel after it chalked up 89 cents or 1.15 per cent.
Iran is reviewing a bill to ban American and Israeli vessels from the Strait of Hormuz, through which roughly a fifth of the world’s oil and liquefied natural gas normally passed before the war began at the end of February.
Market analysts noted that while this week’s signals on a potential deal have sent a roller-coaster ride in market sentiment, the market remains in the dark as to what needs to happen for the agreement to be clinched.
Part of the question being asked is whether the Iran-Oman agreement would allow a US-flagged vessel to transit the Strait of Hormuz or allow a vessel headed for an American port to go through.
Shipping through Hormuz remains heavily constrained as Middle East oil production is still well below pre-war levels while attacks on commercial vessels have continued even as negotiators discuss possible arrangements for the waterway.
Some also said that this week’s developments have signalled that hostilities between Iran and the US are not yet over. This is because the proposed deal is not easily workable because of sanctions and restrictive insurance clauses on any payments by the US government.
Iran is seeking fees of between 5 per cent and 7 per cent of the price of cargoes from ships using the strait, while Oman is discussing fees of about 3 per cent, while the Donald Trump administration wants no fees at all.
Citi has raised its third-quarter Brent crude forecast to $80 per barrel from $75 as the war drags on and repeated attempts at a deal fail to restore normal oil flows through the strait.
The bank still expects the conflict to be resolved, but the five-month war has lasted longer than Citi anticipated and kept more geopolitical risk in crude prices. Citi left its fourth-quarter Brent forecast unchanged at $70 per barrel and still sees the benchmark averaging $65 in 2027.
