Being an Analyst Note issued by Proshare Research on November 18th, 2022

A New Floating LNG Plant to Boost Nigeria's Gas Supply and Revenue

Against the backdrop of slowly recovering oil and gas output, Analysts expect the UTM floating LNG plant to promote the monetization of Nigerian gas, increase export delivery to Europe, increase Nigeria's energy security, and boost economic activities in the country. Partners to the project, including UTM Offshore Limited, JGC Corporation, Technip Energies, and Kellogg Brown & Root (KBR) Engineering Companies, on Thursday, signed a Front-End Engineering Design (FEED) contract for the construction of the US$5bn LNG Floating plant, the first ever in Nigeria. The 1.52m tonnes per annum facility, processing 176m standard cubic feet (SCF) of natural gas and condensate per day, will aid the exploration of Nigeria's 209trn SCF of proven gas. Analysts expect the project to beat the legacy challenges in the industry, given that it is AFREXIM funded, and its offshore nature makes it a cheaper and more flexible alternative to traditional facilities.    

Nigeria Sees 63% of Citizens Experience Multidimensional Poverty

In collaboration with many international agencies on Thursday, the National Bureau of Statistics (NBS) released Nigeria's Multidimensional Poverty Report (2022). The report, first released in 2018 as part of the Human Development Report, included an additional variable to track the trends in multidimensional poverty and some of the Sustainable Development Goals (SDGs), which found that 63% of Nigerians are multidimensionally poor. The report considers such metrics as Food insecurity, Time to Healthcare, Nutrition, unemployment etc. Analysts note that government policy needs to be focused on increasing growth in elastic job sectors and reducing inequality by creating macroeconomic stabilizers and social safety nets. Poverty reduction strategies in Nigeria have failed to achieve their desired objective due to a lack of commitment on the part of the government, corruption and bureaucratic bottlenecks, all of which must be addressed if the country would record improvement in its poverty (see illustration 1 below).

Illustration 1: 

Oil Prices Fall but Maintain Range

Although a reversal occurred on Friday on a weak dollar, oil prices dipped for the week on concerns about weakening demand in China and continuous interest rate hikes by the US Federal Reserve. The recession concerns from the Chinese covid cases and rate hikes dominated the looming EU ban on Russian crude oil and OPEC's tightness policy. Analysts expect oil prices to trade within its US$90-100 per barrel range in the near term. In the local fuel market, analysts expect further volatility in the prices of petrol amidst the tight supply.   

DMO to raise N100bn through Al-ljarah Sukuk Bond Issuance 

The Federal Government of Nigeria has launched a series V Sovereign Sukuk bond of N100bn to finance the rehabilitation and construction of road projects specified by federal government securities. The Sukuk Al-Ijarah bond has a tenor of 10 years, with the repayment scheduled to be paid on bullet sum at maturity. The offer will begin on November 21 to close on November 29 2022, and investors can invest with a minimum of N10,000 (at N1,000/unit). The rental rate for the offer will be disclosed when the offer begins. Previous issuances have recorded oversubscription, but the rental rate for the issuance should determine the direction of the subscription for this issuance, as investors have to consider the real return with the high inflation expectations.     

African Leaders Explore Ways to Scale up Agriculture at COP27 as India Kicks Against Linking Emissions to Farming.

At COP27, African ministers have spoken about ways to improve agriculture on the continent, discussing some of the challenges and solutions to help Africa achieve food security. Some problems include access to finance from banks, disasters and geopolitical conflict. Africa needs to adapt its way of agriculture to be able to meet the demand of its people. Rwanda achieved some successes in food production because of its policy involving farmers, citizens, the private sector and civil society in implementing agricultural policies. African Development Bank (AfDB) President Dr. Akinwumi Adesina cited many AfDB initiatives to drive food sovereignty, including the Technology for African Agricultural Transformation initiative, which has enabled Ethiopia to become self-sufficient in wheat production. Increased green financing to boost irrigation and support yield productivity was also touted as one of the solutions to the current issue bedevilling the continent's agricultural system.

India kicked back at efforts to expand the reduction of emissions of greenhouse gases to the agriculture sector. The country representative highlighted that the world is facing a climate crisis today because of the excessive historical emissions by the developed nations. In defence of developing nations, India noted that agriculture in such countries is done by small and marginal farmers who till hard, toil hard and brave the vagaries of extreme weather and climate variability. Hence, emissions from developing nations are survival emissions and not luxury emissions.

Selloffs in Guinness Nigeria Plc Shares Hammers Down Equity Market Capitalization  

Guinness Nigeria recorded a selloff at the end of the last trading session, which led to a -9.97% decline in share price to N60.50 against N67.20 the previous trade. The company's market capitalization declined by N49.1bn to N132.5bn from N181.58bn in November. Guinness Nigeria started the year with a share price of N39 per share, showing a growth of +55.13% in the year-to-date (YTD) returns. Analysts attributed the selloffs to investors taking profit as the festive period approached, the inflation rate increase, and the CBN's recent interest rate hike. These continue to negatively impact the equity market as analysts expect more selloffs in companies with good YTD returns as investors want to profit. In its recently released financials, Guinness Nigeria shows a 32% decline in its profit after tax (PAT) while experiencing a 7.38% rise in the cost of sales (see chart 1 below). 

Chart 1: 

Spread Of Global Layoffs Ignites Nigerian Technology

Amid global staff layoff, which has continued to hit tech companies due to the economic shutdown, no Nigerian tech company has announced it is laying off workers. Still, the rumble is already being heard from beneath the industry. According to data from Layoffs FYI, a global startup tracking platform, tech companies worldwide have laid off a total of 42,356 tech workers in November across 122 layoff events. With over 12 days left in November, the figure will likely increase. Recall that stripe: earlier this month, the American fintech giant announced 1,120 head cuts, representing 14% of its workforce, like Meta, Twitter, Amazon, and so on. With these developments, the issue of layoff is no longer a question of if but when and who will be affected. There is a rising concern not just for global tech workers thrown into the labour market but for Nigerian tech employees. Analysts believe there would be more layoffs as other tech companies would want to use the current trend to trim down their headcount.

New FTX boss John Ray III vows to Revamp FTX

The new CEO of collapsed cryptocurrency firm FTX, John Ray III, a finance expert, promised to bring back the hope of traders and investors. He disclosed the lack of competent teams running the company, arguing that he had never seen such a complete failure of corporate controls and a complete absence of trustworthiness in his career. He promised to protect and recover missing or stolen assets, implementing accounting audits and data protection that did not exist to an appropriate degree before his appointment. Analysts expect the new FTX boss to be the saviour of FTX, where investors and traders who are on the verge of losing hope will regain their confidence.

This morning, there seems to be a bull in the market as Bitcoin gains 1.35% in a 24hrs trade, currently trading at $16,750.5. Today's global cryptocurrency market cap is $871bn, a 0.5% change in the last 24hrs. Although Bitcoin price was down the previous week, analysts believe the price would probably hit $20,688 before the end of this year following FTX's new boss implementation (see chart 2 below).

Chart 2: