By Lukman Otunuga
Can Gold stand toe-to-toe with Black Gold for Nigeria’s economy?
Geopolitical tensions have triggered explosive levels of market volatility and uncertainty. These unfavourable market conditions continue to accelerate the flight to safety with gold by roughly 6% since the start of 2022.
Amid the negative themes bombarding global sentiment, gold remains a bright spot and high upside thanks to its status as an inflation hedge.
The precious metal was trading around $1935 last week and is expected to remain volatile over the next few days amid key economic reports, the Ukraine-Russia conflict, and China lockdowns among other factors.
Gold buoyed by fundamental factors
Several factors are supporting gold prices.
Safe-haven buying triggered by fears over the Ukraine-Russia conflict has boosted the metal’s spot and futures prices. In recent events, Russian and Ukrainian negotiators are set to resume face-to-face talks in Turkey this week.
While signs of both sides finding a middle ground could boost risk sentiment, further delays or disagreements could rattle financial markets. Soaring Covid-19 cases in China have also added to the risk-off mood and overall uncertainty. With commodity prices soaring on supply-side fears, concerns over stagflation and its consequences on the global economy continue to weigh on investor confidence.
On the flipside, expectations over the Federal Reserve adopting an aggressive approach toward interest rates could hit zero yielding gold. An appreciating dollar and rising bond yields may compound the precious metal’s woes, creating obstacles for bulls down the road.
Nigeria’s Gold reserve….
Back in 2020, Nigeria refined its own reserve gold bar and paid N268 million for the 12.5kg bar to start a central bank stock. When considering the previously mentioned factors stimulating the appetite for gold, this move was a welcome development for Nigeria as it diversified away from oil reliance.
Indeed, if cultivated well, gold mining and trading possessed a frightening potential to generate more revenue than crude oil for Nigeria.
Fast forward to today, Nigeria still remains in an ongoing quest to tap the potential of the gold mining sector. Since the massive hype in 2020 which created awareness on access to the markets, it’s been a tale of uncertainty and negativity. Illegal mining activities have become a major plague in the sector, with solid minerals being smuggled out of the country – resulting in a loss of potential government revenues.
The numbers do not lie…
The underlying math’s in Nigeria’s Gold market show strong potential.
Nigeria’s Gold reserve is estimated at 200 million metric tonnes, according to the Nigeria Mining Growth Roadmap. Meanwhile, Trading Economics places Nigeria as the sixth largest country with Gold deposits in Africa, with an average of 21.37 tonnes from 2000 to 2020, reaching an all-time high of 21.46 tonnes during the first half of 2021. The nation’s current estimated gold reserves are over 200 million ounces, most of which have not been exploited.
Back in 2020, the newly-regulated gold mining sector was expected to create 250,000 new jobs and provide the Federal Government with an additional estimated annual revenue of $150 million in taxes, $25 million in royalties, and $500 million in foreign exchange reserves. It remains to be seen whether these predictions will match reality.
Should the developments in the gold mining sector improve, this could help boost investor sentiment against external risks in the form of geopolitical tensions and oil price volatility among many other factors.
In a perfect world, a well-managed diversification into precious metals mining and building a national gold stock could support the CBN’s foreign exchange reserves in the longer term. But we do not live in a perfect world. Negative news around illegal smuggling and violence around the sector have hit the sector’s reputation. However, there is still hope if government regulations instil long-term trust and credibility -especially when factoring in the sector’s strong potential.
Lukman Otunuga is the Senior Research Analyst at FXTM
Unlisted Securities Investors Gain N10bn in One Week
By Adedapo Adesanya
The 25th week of trading at the National Association of Securities Dealers (NASD) Over-the-Counter (OTC) Securities Exchange ended on a positive note last Friday.
In the five-day trading week, investors saw an expansion in their investment portfolios by 0.5 per cent or N10 billion as the market capitalisation closed at N1.011 trillion compared with the preceding week’s N1.010 trillion as the NASD Unlisted Securities Index (NSI) increased by 3.86 points to 768.27 points from 764.41 points.
Business Post reports that three stocks on the bourse contributed to the gains reported by unlisted securities investors last week as they overpowered the losses printed by two equities.
Niger Delta Exploration and Production Plc appreciated in the week by 10 per cent to close at N198.00 per share in contrast to the preceding week’s N180 per share, Citi Trust Plc grew by 9.6 per cent to N6.85 per unit from N6.25 per unit, while Central Securities Clearing System (CSCS) Plc appreciated by 2.5 per cent to N14.80 per share from N14.44 per share.
Conversely, NASD Plc lost 8.7 per cent to settle at N13.68 per unit compared with the previous N15.00 per unit, while Nipco Plc depreciated by 5.2 per cent to N58.85 per share from N62.10 per share.
There was a 352.8 per cent increase in the total value of transactions in the week to N324.4 million from N69.9 million, while the volume of trades went down by 57.0 per cent to 6.0 million units from 2.6 million units just as the number of deals decreased by 8.1 per cent to 57 trades from 62 trades of the previous week.
At the close of the week, VFD Group Plc was the most traded security by volume with 1.2 million units, CSCS Plc traded 703,377 units, NASD Plc exchanged 350,935 units, CitiTrust Holdings Plc traded 214,800 units, while NDEP Plc sold 65,300 units.
In terms of the value of trades in the week, VFD Group Plc also topped with N293.5 million, NDEP Plc recorded N12.5 million, CSCS Plc traded N10.4 million, NASD Plc posted N5.3 million, while CSCS Plc had N1.5 million.
On a year-to-date basis, investors have transacted 3.2 billion units worth N21.3 billion in 1,428 deals, with the year-to-date gain at 3.4 per cent.
Trading in Greif Nigeria Shares Halted for Smooth Winding up Process
By Dipo Olowookere
Holders of Greif Nigeria Plc shares have been prevented from trading the security on the floor of the Nigerian Exchange (NGX) Limited for now.
The embargo on the trading of the company’s stocks was placed on Monday, June 20, 2022, to ensure the process of winding up the organisation goes seamlessly.
Greif Nigeria, formerly known as Van Leer Containers Nigeria Plc, is in the business of making steel drums in the country. It also manufactures plastic containers and sheet metal products.
The company, which is a subsidiary of Greif International Holding BV, also offers services for steel punching and aluminium welding.
But lately, things have not been going on smoothly and it is in the process of winding up.
At its Annual General Meeting (AGM) held on January 31, 2022, the shareholders of the firm authorised the board to begin the voluntary winding up of the company.
In accordance with Section 622 of the Companies and Allied Matters Act (CAMA) 2020 which states that a voluntary winding-up shall be deemed to commence at the time of the passing of the resolution for voluntary winding-up, the NGX Regulation (NGX RegCo) Limited, has notified “all trading license holders and the investing public that it has suspended trading in the shares of Greif Nigeria Plc effective on Monday, June 20, 2022, to ensure a smooth winding-up process.”
In a notice filed last week, the agency explained that this action was also in line with Section 624 of CAMA 2020 which provides that a transfer of shares, not being a transfer made to or with the sanction of the liquidator, and any alteration in the status of the members of the company, made after the commencement of a voluntary winding-up, shall be void.
Business Post reports that Greif Nigeria, which uses the ticker Vanleer on the NGX trading platform, has shares outstanding of 42.640 million units and a market capitalisation of N232.4 million as it last traded at N5.45 per unit.
Stock Prices of CWG, 55 Others Shed Weight in One Week
By Dipo Olowookere
Transactions on the floor of the Nigerian Exchange (NGX) Limited last week closed bearish with a week-on-week decline of 0.14 per cent, with the All-Share Index (ASI) and the market capitalisation closing at 51,705.61 points and N27.875 trillion respectively.
Similarly, all other indices finished lower with the exception of the CG, premium, banking, pension, NGX Afr bank value, energy and lotus indices, which appreciated by 0.86 per cent, 1.50 per cent, 0.33 per cent, 0.40 per cent, 0.16 per cent, 0.32 per cent and 0.55 per cent respectively, while the Asem and growth indices closed flat.
In the week, 16 equities gained points compared with the 13 equities of the previous week, while 56 stocks shed weight in contrast to the 51 stocks of the preceding week, with 84 shares closing flat as against the 92 shares of the earlier week.
Data from the exchange showed that CWG was the worst-performing stock as it fell by 14.89 per cent to 80 kobo, RT Briscoe dropped 14.29 per cent to 48 kobo, GlaxoSmithKline depreciated by 13.28 per cent to N6.10, John Holt lost 11.27 per cent to 63 kobo, while Academy Press went down by 10.00 per cent to N1.17.
On the flip side, NAHCO finished the five-day trading week as the best-performing stock as it gained 10.53 per cent to settle at N8.40, Champion Breweries appreciated by 10.00 per cent to N3.74, MRS Oil Nigeria rose by 9.80 per cent to N16.25, FBN Holdings improved by 8.76 per cent to N10.55, while Royal Exchange climbed higher by 6.59 per cent to 97 kobo.
Last week, investors bought and sold 1.121 billion shares worth N13.703 billion in 22,350 deals versus the 940.892 million shares valued at N11.494 billion transacted a week earlier in 20,077 deals.
FCMB, UBA and Oando accounted for 407.770 million shares worth N2.009 billion in 2,181 deals, contributing 36.39 per cent and 14.66 per cent to the total trading volume and value respectively.
A further breakdown showed that financial stocks led the activity chart with the sale of 806.824 million equities worth N6.075 billion in 11,071 deals, accounting for 71.99 per cent and 44.33 per cent of the total equity turnover volume and value respectively.
Energy shares recorded a turnover of 95.031 million units valued at N1.449 billion in 1,849 deals, while conglomerates goods equities traded 66.716 million units valued at N169.517 million in 733 deals.
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