Economy
Nigeria’s Revenue Rises as Oil Trades Above $58
By Adedapo Adesanya
The funding of the 2021 budget of Nigeria received a big boost on Wednesday when crude oil, the major source of revenue for the country, traded above $58 per barrel.
The oil benchmark for the year was $40 per barrel but yesterday, the Brent crude, under which Nigeria’s oil grade is priced, appreciated by $1.07 or 1.86 per cent.
This boost was triggered by a drop in the United States inventories as well as the decision of oil allies not to make recommendations about changing their production levels.
As a result, the West Texas Intermediate (WTI) crude futures appreciated by $1.03 or 1.88 per cent to sell at $55.79 per barrel at the midweek trading session.
According to a report from the Energy Information Administration (EIA), crude oil inventory reduced by one million barrels for the last week of January.
A day earlier, the American Petroleum Institute (API) estimated crude oil inventories had fallen by 4.26 million barrels in the reporting period.
The EIA estimate compared with a build of 4.4 million barrels reported for the third week of January and analyst expectations for a modest build of 367,000 barrels.
Oil prices have been on a steady rise recently based on a high compliance rate with production cuts by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) and a weaker dollar, which made commodities cheaper for international buyers. The outlook is also bullish, with the futures price trend suggesting tighter oil supply on global markets.
Forecasts are also getting increasingly optimistic, with Goldman Sachs analysts recently saying they expected oil demand to rebound to 100 million barrels per day as soon as this year.
Also, prices also found support as the Joint Ministerial Monitoring Committee (JMMC) of the OPEC+ group wrapped up their monthly meeting on Wednesday and as expected did not make any recommendation about changing the oil production levels of the alliance.
The JMMC meeting this month was more of a formality rather than disagreements and bargaining like the previous meeting since OPEC+ decided in January how it would proceed with the production cuts for February and March.
This month, the OPEC+ alliance is easing its production cuts by just 75,000 barrels per day, of which 65,000 barrels per day will be given to Russia and another 10,000 barrels per day to Kazakhstan.
In March, Russia and Kazakhstan are set to boost their oil production by another 65,000 barrels per day and 10,000 barrels per day, respectively.
However, all other members of the pact are keeping their production levels from January with OPEC’s top producer, Saudi Arabia cut its production by an additional 1 million barrels per day beyond its quota this month and next.
So, this month’s JMMC meeting only took stock of the oil market situation and the compensation schedules for those producers who haven’t fully complied with the cuts since the deal was enacted in May 2020.
Those producers who still need to compensate for over-production have to submit their schedules by February 15.
The next JMMC meeting will be held on March 3, and this is where discussions are expected to heat up again as the OPEC+ group will have to decide on the production levels for April, and possibly beyond.
Support could also be found as the US President Joe Biden’s coronavirus rescue plan, and two of its key economic provisions, have broad support as Democrats try to push it through Congress.
The White House is reaching for a bipartisan bill as Democrats pulled a Senate majority, voting 50-49, to start a lengthy process for approving Biden’s bill with or without the opposing Republicans support. The goal is a passage by March.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange was depleted by 0.86 per cent on Friday, November 14, after the price of six securities on the platform closed lower.
This reduced the NASD Unlisted Security Index (NSI) by 31.38 points to 3,613.23 points from the 3,644.61 points recorded a day earlier, as the market capitalisation lost N18.77 billion to end the week at N2.161 trillion compared with the N2.180 trillion it finished a day earlier.
During the session, NASD Plc fell by N4.00 to close at N55.00 per share compared with the preceding session’s N59.00 per share, FrieslandCampina Wamco Plc crashed by N3.00 to end at N51.00 per unit versus the previous day’s N54.00 per unit, Central Securities Clearing System (CSCS) Plc depreciated by N1.60 to close at N40.40 per share versus N42.00 per share, Lagos Building Investment Company (LBIC) Plc went down by 35 Kobo to settle at N3.13 per unit compared with the N3.48 per unit it ended on Thursday, UBN Property Plc decreased by 26 Kobo to quote at N2.33 per share versus the preceding day’s N2.59 per share and Industrial and General Insurance (IGI) Plc crumbled by 1 Kobo to close at 41 Kobo per unit versus 42 Kobo per unit.
Yesterday, the volume of securities traded by market participants increased by 99.5 per cent to 2.2 million units from the previous day’s 119,329 units, the value of securities ballooned by 4,185.1 per cent to N82.9 million from N1.9 million, and the number of deals expanded by 50 per cent to 21 deals, from 14 deals.
When the market ended for the session, Infrastructure Credit Guarantee Company (InfraCredit) Plc remained the most traded stock by value with a year-to-date sale of 5.8 billion units valued at N16.4 billion, trailed by Okitipupa Plc with 170.3 million units traded for N8.0 billion, and Air Liquide Plc with 507.4 million units sold for N4.2 billion.
InfraCredit Plc also ended as the most traded stock by volume on a year-to-date basis with 5.8 billion units worth N16.4 billion, followed by IGI Plc with 1.2 billion units transacted for N419.7 million, and Impresit Bakolori Plc with 536.9 million units valued at N524.9 million.
By Adedapo Adesanya
The Naira weakened against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Friday, November 14 on fresh forex demand pressure associated with this period.
During the session, the domestic currency depreciated against the greenback by 99 Kobo or 0.07 per cent to trade at N1,442.43/$1, in contrast to the N1,441.44/$1 it traded on Thursday.
In the same official market window, the local currency closed flat against the Pound Sterling at N1,898.96/£1, but further declined against the Euro by N3.60 to close at N1,678.56/€1 versus the previous day’s N1,674.96/€1.
However, at the GTBank FX counter, the Naira appreciated against the Dollar yesterday by N2 to settle at N1,448/$1 versus the preceding session’s rate of N1,448/$1, and in the parallel market, it maintained stability at N1,455/$1.
Increased demand for Dollars above the supply level has impacted price swing, but in the last two sessions, the pressure have been minimal.
In recent weeks, the apex bank FX injection has been minimal and erratic due to increasing FX inflows from foreign portfolio investors and exporters. FX inflow into currency market has fallen from peaked of $1.37 billion to $899 million.
While the Naira came under renewed strain, Nigeria’s foreign reserves continued their upward trajectory, climbing to $43.5 billion, up from $43.32 billion the week before.
This steady improvement in external reserves may be attributed to stronger crude oil receipts, improved non-oil inflows, and tightened FX management policies by the Central Bank of Nigeria (CBN).
As for the cryptocurrency market, investors tried to claw back some gains after many liquidated positions in the recent sessions largely driven by a lack of clarity on key US economic conditions and subsequent monetary policy direction.
That data blackout was due to the longest US government shutdown that lasted from October 1 until Thursday, that suspended government inflation and jobs data releases, with Litecoin (LTC) growing by 8.5 per cent to $104.14.
Further, Binance Coin (BNB) rose by 2.3 per cent to sell for $932.27, Solana (SOL) went up by 0.9 per cent to $142.71, Ethereum (ETH) jumped by 0.3 per cent to $3,175.02, and Dogecoin (DOGE) also appreciated by 0.3 per cent to $0.1633.
But Cardano (ADA) depreciated by 0.8 per cent to $0.5130, Ripple (XRP) fell by 0.3 per cent to $2.28, and Bitcoin (BTC) dropped 0.2 per cent to finish at $96,193.83, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
By Adedapo Adesanya
The oil market was up by more than 2 per cent on Friday as a key Russian port suspended oil exports after Ukraine attacked the facility, raising concerns about supply.
Brent crude futures increased by $1.38 or 2.19 per cent to trade at $64.39 a barrel and the US West Texas Intermediate (WTI) crude futures grew by $1.40 or 2.39 per cent to close at $60.09 a barrel. Brent rose 1.2 per cent on the week, and WTI posted a weekly gain of 0.6 per cent.
Russia’s port of Novorossiisk halted oil exports following a Ukrainian drone attack that hit an oil depot in the Russian energy hub, stoking supply concerns.
The port, a key export outlet of crude from Russia and Kazakhstan, and a major wheat export hub, paused oil exports, equivalent to 2.2 million barrels per day, or 2 per cent of global supply.
According to reports, the attacks damaged a ship, nearby apartment buildings, and an oil depot, injuring three crew members aboard the vessel. This comes as Ukrainian forces have increasingly targeted Russian oil-refining, storage, and export infrastructure using drones and missiles.
In addition, Russia’s pipeline company Transneft suspended crude oil supply to the facilities at the port.
Ukraine on Friday said it separately struck an oil refinery in Russia’s Saratov region and a fuel storage facility in nearby Engels overnight.
Market analysts noted that in recent month, Ukraine has made a shift in strategy from smaller-scale strikes on storage tanks to targeting hard-to-replace refinery equipment, like cracking units, much of it western-made and subject to sanctions.
Britain on Friday issued a special licence allowing businesses to continue working with two Bulgarian subsidiaries of sanctioned Russian oil firm Lukoil, as the Bulgarian government seized control of the assets.
The US imposed sanctions banning deals with Russian oil companies Lukoil and Rosneft after November 21 as part of efforts to stop the war which commenced with Russia attacking Ukraine in February 2022.
While geopolitical tensions and the end of the US government shutdown offered fleeting support this week, the market remained focused on rising global inventories, shifting supply-demand expectations from the Organisation of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) and a broader sense that supply continues to outpace demand.
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