Economy
Oil Market Slumps on Weak Chinese Economic Outlook
By Adedapo Adesanya
The oil market closed lower by more than 2 per cent on Friday due to weaker Chinese demand and a potential slowing in the pace of US Federal Reserve interest rate cuts.
Weak data from China continued to affect the market, as Brent crude futures lost $1.52, or 2.09 per cent to trade at $71.04 a barrel and the US West Texas Intermediate (WTI) crude declined by $1.68 or 2.45 per cent at $67.02 per barrel.
China’s refinery throughput in October fell by 4.6 per cent from last year, down from a year earlier for a seventh month.
Official data showed that refining plant closures offset the ramp-up of a newly started complex and demand from holiday travel.
Refiners processed 59.54 million metric tons of crude oil last month, data from the Chinese National Bureau of Statistics (NBS) showed, equivalent to 14.02 million barrels per day.
The country’s factory output growth slowed last month and demand woes in its property sector showed few signs of abating.
This added to investors’ concerns over the economic health of the world’s largest crude importer.
For the week, Brent fell around 4 per cent while the WTI declined around 5 per cent.
US President-elect Donald Trump has pledged to end China’s trading status and impose tariffs on Chinese imports in excess of 60 per cent.
Analysts have also given a poor outlook as Goldman Sachs Research economists have modestly lowered their 2025 growth forecast for China.
The bank said in a note that is caused by expectations of significant tariff increases under Trump.
The International Energy Agency (IEA) forecasts global oil supply to exceed demand by more than 1 million barrels per day in 2025 even if cuts remain in place from the Organisation of the Petroleum Exporting Countries and its allies, OPEC+.
OPEC, meanwhile, cut its forecast for global oil demand growth for this year and 2025, highlighting weakness in China, India and other regions.
Support also came from retail sales in the US which increased slightly more than expected in October. This is a sign that the world’s largest economy kicked off the fourth quarter on a strong note.
The data also put in perspective the extent to which the US Federal Reserve will cut interest rates as investors further downgraded their expectations for a rate reduction at the central bank’s December meeting.
Lower interest rates typically spur economic growth, aiding fuel demand.
By Adedapo Adesanya
The Central Bank of Nigeria (CBN) has granted Bureaux de Change (BDC) operators temporary access to the Nigerian Foreign Exchange Market (NAFEM), which is the official market, as part of efforts to further strengthen the Naira in the currency market.
The CBN in a notice on Friday said BDC operators would have access to FX at the official market from December 19, 2024, to January 30, 2025, with a weekly cap of $25,000.
Transactions require upfront funding at prevailing rates and must follow a maximum of 1 per cent spread.
The Naira traded at the spot market at N1,541.38/$1 based on computation on the Bloomberg BMatch system computed by FMDQ Securities Exchange Limited.
The CBN recently launched the Electronic Foreign Exchange Matching System (EFEMS) to build transparency in the system, but this excluded street forex hawkers. This initiative has fortified the value of the Naira against the US Dollar at the official market.
The platform, which became operational on December 2, 2024, has enhanced operational efficiency in Nigeria’s FX market, with banks mandated to be on the system to trade forex.
The EFEMS initiative, according to Mrs Omolara Duke, the CBN’s director of the financial markets department, was designed to ensure “transparent, fair, and efficient FX trading, minimise counterparty risks, and enforce compliance with CBN regulations.”
Between December 2 when the new electronic trading platform commenced and December 19, 2024, the Naira recorded over N250 gain over the Dollar in the official FX market.
The CBN also issued comprehensive guidelines for the operations of the interbank foreign exchange (FX) trading system via EFEMS, pegging the minimum tradable amount at $100,000, with incremental clip sizes of $50,000.00, to promote transparency and efficiency in the FX market.
This development has forced currency speculators and illicit market operators to look elsewhere, pushing up demand to the parallel market and the BDCs.
To further ease the pressure on these unregulated markets, the CBN will allow BDCs to access the market with the hope of checking demand and further supporting the Naira.
By Adedapo Adesanya
A recent survey by the Central Bank of Nigeria (CBN) says businesses have projected depreciation of the Naira in the first three months of 2025.
In its Business Expectation Survey Report for November 2024, the CBN said despite this expectation, there are several businesses which expressed optimism about the macroeconomic environment.
The report noted that firms’ outlook on the volume of business activities, financial conditions, access to credit, volume of total orders and average capacity utilisation, were pessimistic.
“The overall confidence index (CI) on the macroeconomy indicated that businesses were optimistic in November 2024.
“Businesses expect the Naira to depreciate in the current month, next month and next 3 months but appreciate in the next 6 months,” the report said.
“The optimism on business outlook in the current month is driven by the opinion of respondents from all the sectors.
“The Construction Sector expressed optimism on its operations in the review month.
“The outlook of respondents on the volume of business activities, the volume of total orders, financial conditions, and access to credit were negative in the review month. the volume of business activity respondents expressed optimism on the volume of business activity for the next month and subsequent periods under review,” it added.
The report also showed that businesses hope to employ more workers in the month of December 2024 with the agriculture sector having the highest prospect for expansion.
Meanwhile, the CBN in its latest Consumer Expectation Survey Report said that consumers were pessimistic about the macro economy in November.
According to the CBN report, households projected a rise in the cost of transportation, rent, car/vehicle, house purchase, and medical expenses this month.
The report showed that 61.1 per cent and 57.6 per cent of respondents perceived that prices of non-durable and durable household items, though high, will keep declining this month and next month respectively.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange recorded a 0.46 per cent gain on Thursday, December 19, boosted by three stocks, which closed higher at the close of transactions.
Nipco Plc improved its closing price by N13.64 during the trading day to N150.10 per share compared with the preceding trading day’s N136.46 per share, Geo-Fluids Plc gained 33 Kobo to end the session at N3.88 per unit versus Wednesday’s closing value of N3.55 per unit, and UBN Property Plc appreciated by 16 Kobo to settle at N1.89 per share, in contrast to midweek’s closing price of N1.73 per share.
On the flip side, Industrial and General Insurance (IGI) Plc depreciated by 1 kobo to trade at 17 Kobo per unit compared with the preceding trading session’s 18 Kobo per unit.
At the close of business, the market capitalisation of the bourse increased by N4.73 billion to finish the trading day at N1.034 trillion compared with the midweek trading session’s N1.029 trillion.
In the same vein, the NASD Unlisted Security Index (NSI) went up by 13.77 points to wrap the session at 3,017.07 points compared with 3,003.30 points recorded in the previous session.
On Thursday, the volume of securities traded by investors surged by 603.9 per cent to 2.3 million units from the 59.624 units recorded a day earlier.
However, the value of shares traded yesterday slumped by 48.9 per cent to N2.3 million from N4.6 million as the number of deals declined by 12 per cent to 22 deals from the 25 deals carried out on Wednesday.
Geo-Fluids Plc remained the most active stock by volume (year-to-date) with 1.7 billion units worth N3.9 billion, followed by Okitipupa Plc with 752.3 million units valued at N7.8 billion, and Afriland Properties Plc with 297.7 million units sold for N5.3 million.
Aradel Holdings Plc also remained the most active stock by value (year-to-date) with 108.7 million units valued at N89.2 billion, trailed by Okitipupa Plc with 752.3 million units sold for N7.8 billion, and Afriland Properties Plc with 297.7 million units worth N5.3 billion.
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