Economy
Regulated Pump Prices, Others Hinder Nigeria’s Oil/Gas Sector—Agusto
By Modupe Gbadeyanka
Lack of substantial investments, import constraints and regulated pump prices have been identified as some of the issues affecting the growth of the Nigerian oil and gas downstream sector.
In its 2020 Oil & Gas Downstream Report, Agusto & Co. said the huge involvement of the government in the industry was the major reason for these issues, particularly in relation to the importation of refined petroleum products.
Over the years, the industry has enjoyed stable demand of petroleum products as a result of the subsidies provided by the government. This contributed to the gradual the crippling of government finances.
Recently, when the price of crude oil plunged at the international market to around $20 per barrel, the federal government of Nigeria took positive steps to fully deregulate the sector and it announced the pump price cap of PMS to N123 per litre.
However, a recovery of crude oil prices in June 2020 led to the revised price of N143.8 per litre for PMS, leaving many observers to ask if the sector is truly deregulated.
The consensus medium-term outlook for the crude oil market is positive, which implies that the price of petrol will be higher than the old regulated pump price in the near future.
The pricing of PMS will continue to be overseen by the Petroleum Products Pricing Regulatory Agency (PPPRA) through a pricing template, the government said when it defended its stance.
The new pricing template takes several factors such as the petroleum product cost and the foreign currency conversion rate into consideration, according to Agusto & Co, which expects the recent adjustment of the official exchange rate from N306 to N380/$1 to test the sustainability of the pricing template before the end of 2020.
It said notwithstanding, the new pricing regime is expected to emplace a more transparent operating model, stimulating investment growth and encouraging the importation of products by Oil Marketing Companies.
The firm said it also believes that the continuous efforts of the government to deepen the utilisation of LPG in Nigeria will continue to bear fruit in the medium to long term.
“Substantial local supply of refined petroleum products is imminent with the 650,000bpd Dangote Refinery which is currently under construction.
“The expansion of the Waltersmith refinery by 25,000 bpd to 30,000 bpd and other smaller modular refineries are also expected to drive increased local refining capacity in the near to medium term.
“Nevertheless, a significant structural change in the industry is hinged on the approval of the Petroleum Industry Bill (PIGB), which aims to create efficient and effective governing institutions with clear and separate roles.
“The delay in the approval of the bill has brought about uncertainty for potential investors. However, given Nigeria’s track record of weak policy implementation and the negative impact of the COVID-19 pandemic on economic activities,” Agusto & Co said, noting that it “does not expect the PIGB to be approved before the end of 2020.”
According to Agusto & Co.’s estimates, total consumption of white fuels in Nigeria in 2019 stood at 28.1 billion litres, translating to total revenue of N4.7 trillion.
Its research shows that 99 per cent of petroleum products consumed were imported as the country’s refineries operated below the installed capacities, sometimes down for months.
It said for instance, no white fuels were produced at NNPC refineries for the seven months from June to December 2019 due to ongoing rehabilitation works.
The impact of the COVID-19 pandemic on economic activities in Nigeria has resulted in a decline in the consumption of petroleum products.
The lockdown restrictions which were implemented by the government as part of an effort to curtail the spread of the coronavirus disease affected the consumption of PMS significantly.
In view of these, Agusto & Co. said it expects the consumption of petroleum products particularly PMS and ATK to decline to 27.2 billion litres in 2020 given the severely restricted travel and transportation activities during second and third quarters of the year. This is expected to translate to a decline in revenue to N4.3 trillion in 2020.
By Adedapo Adesanya
Four securities weakened the NASD Over-the-Counter (OTC) Securities Exchange by 1.95 per cent on Friday, erasing N41.17 billion from the bourse, which had its market capitalisation at N2.567 trillion compared with the previous session’s N2.618 trillion.
In the same vein, the NASD Unlisted Security Index (NSI) decreased at the close of business by 85.28 points to 4,277.07 points from 4,362.32 points.
The price decliners were led by 11 Plc, which gave up N20.50 to sell at N200.50 per share compared with the preceding day’s N221.00 per share, FrieslandCampina Wamco Nigeria Plc dropped N16.94 to close at N155.20 per unit versus Thursday’s closing price of N172.14 per unit, Central Securities Clearing System (CSCS) Plc went down by N2.11 to N84.68 per share from N86.79 per share, and Afriland Properties Plc lost 11 Kobo to end at N16.74 per unit, in contrast to the N16.85 per unit it closed a day earlier.
During the trading day, the value of transactions jumped by 172.1 per cent to N29.9 million from the preceding session’s N10.9 million, and the volume of trades soared by 136.5 per cent to 955,096 units from the previous 403,901 units, while the number of deals went down by 11.4 per cent to 31 deals from 35 deals.
Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units worth N6.5 billion, and CSCS Plc with 68.6 million units sold for N4.7 billion.
GNI Plc also ended the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units exchanged for N8.4 billion, trailed by Infracredit Plc with 2.3 billion units traded for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
By Dipo Olowookere
The last trading session of this week on the floor of the Nigerian Exchange (NGX) Limited ended on a negative note, with a 0.66 per cent loss on Friday.
This was influenced by sustained selling pressure and cautious trading, which forced investors into profit-taking.
Data obtained by Business Post showed that the energy sector fell by 4.66 per cent, the insurance counter dipped by 2.23 per cent, the consumer goods index depreciated by 0.96 per cent, and the banking segment shed 0.28 per cent, while the industrial goods space remained unchanged.
At the close of business, the All-Share Index (ASI) of Nigeria’s stock exchange went down by 1,531.81 points to 232,049.02 points from 233,580.83 points, and the market capitalisation dropped N983 billion to settle at N148.905 trillion compared with Thursday’s N149.888 trillion.
Aradel was the worst-performing equity after it lost 10.00 per cent to close at N1,417.50. International Energy Insurance slipped by 9.95 per cent to N5.79, Trans-Nationwide Express depreciated by 9.89 per cent to N3.28, eTranzact crashed by 9.79 per cent to N14.75, and UPDC slumped by 9.72 per cent to N28.12.
The best-performing equity for the day was Universal Insurance, which gained 6.32 per cent to close at N1.01, McNichols grew by 5.52 per cent to N8.60, Linkage Assurance expanded by 4.67 per cent to N1.57, NGX Group appreciated by 4.35 per cent to N120.00, and Transcorp increased by 3.62 per cent to N41.50.
As look at the activity level indicated that investors traded 388.7 million stocks worth N18.4 billion in 44,631 deals compared with the 393.7 million stocks valued at N19.2 billion executed in 45,813 deals a day earlier, representing a decline in the trading volume, value, and number of deals by 1.27 per cent, 4.17 per cent, and 2.58 per cent, respectively.
By Adedapo Adesanya
The Naira recorded a loss of 82 Kobo or 0.06 per cent against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, June 26, exchanging at N1,380.93/$1, in contrast to the previous day’s rate of N1,380.11/$1.
Equally, the domestic currency further weakened against the Pound Sterling in the official FX market yesterday by N6.06 to settle at N1,824.90/£1 versus the preceding session’s N1,818.84/£1, and lost N10.74 on the Euro to sell at N1,577 .58/€1 versus N1,566.84/€1.
At the GTBank forex counter, the Naira depreciated against the greenback during the session by N4 to close at N1,387/$1, in contrast to Thursday’s value of N1,383/$1, and at the parallel market, it was unchanged at N1,395/$1.
Interbank FX activity among financial institutions has fluctuated amid a sharp slowdown in forex market interventions by the Central Bank of Nigeria (CBN), as it allows demand and supply to move the market.
Also, a stronger greenback has generally put significant pressure on emerging-market currencies.
Nigeria has accessed the first tranche of a proposed $5 billion derivatives financing arrangement with First Abu Dhabi Bank PJSC, the largest lender in the United Arab Emirates (UAE).
The $5 billion facility, approved by the National Assembly earlier this year, is part of the federal government’s plan to diversify external financing sources and reduce borrowing costs. Structured as a Total Return Swap with First Abu Dhabi Bank, proceeds are earmarked for refinancing debt and supporting infrastructure financing.
If the proceeds are brought into the country through the official FX market, the transaction will increase the currency reserves or Dollar liquidity.
At the cryptocurrency market, Solana (SOL) grew by 2.2 per cent to $71.92, Cardano (ADA) gained 1.1 per cent to trade at $0.1474, Ripple (XRP) also appreciated by 1.1 per cent to $1.05, Dogecoin (DOGE) expanded by 0.9 per cent to $0.0755, and Ethereum (ETH) improved by 0.4 per cent to $1,578.84.
On the flip side, TRON (TRX) slid 0.6 per cent to $0.3203, Binance Coin (BNB) slumped by 0.3 per cent to $564.33, and Bitcoin fell by 0.2 per cent to $60,219.37, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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