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Analysts Baulk as FG Acquires Advanced-Tech to Curb Oil Theft as Naira Dips in FX Market

Oct 31, 2022   •   by TheAnalyst, Proshare Research   •   Source: Proshare   •   eye-icon 311 views

Being an Analyst Note issued by Proshare Research on October 31st, 2022 

 

FG Acquires Advanced Technology and Facilitated Oil Industry Park

The Minister of State for Petroleum Resources, Timipre Sylva, has disclosed that the federal government has acquired cutting-edge software and gadgets to curb oil theft and is facilitating the creation of the Nigerian Oil and Gas Park at Odukpani, Cross River State. Proshare analysts had argued for political will to increase investment in advanced technology to tackle oil theft. Specifically, the analysts believed that "political will" would spur improved geospatial technology, high-impact drones, and sweeping ground forces combined to create a canopy of forceful correction for oil thieves. On the oil and gas park, analysts noted that such infrastructure should have been operational some years ago, but its onboarding is better late than never. The park would create a hub for oil and gas infrastructure and reduce the pressure on the Naira against the dollar by cutting down on equipment importation. Some analysts argued that the park should be private sector-led to increase operational efficiency.    

 

Naira Tumbles at the Parallel Market Following Currency Redesign Policy 

Following the announcement of redesigning some naira denominations by CBN, analysts noticed a reaction in the parallel market. On Friday, the Naira fell to a record low of N785 per dollar from the N765 recorded in the previous session. The significant fall was due to the great demand for the dollar as individuals with starched naira notes rushed to convert to dollars. There have been several comments concerning the policy and its effect. Minister of finance Ahmed Zainab stated that the policy would have a grave consequence on the value of the Naira to other foreign currencies, which is currently happening. Some experts believe that the timing of the policy is wrong considering the current economic issues such as high debt servicing, dwindling revenue, a falling currency, and the cost of printing. Proshare analysts worry that the currency's value will continue to fall at the parallel market, probably reaching N1000 to a US dollar as we move close to January 31, 2022, fixed for the full implementation of the policy (see chart 1 below). 

 

Chart 1: Naira to US dollar ($) at the Parallel Market 

 

LP Candidate Set to Release Plans for the Nigerian Economy

Peter Obi, Labour Party's presidential candidate, has published a 48-page campaign document titled "Our Pact with Nigeria" ahead of the general elections slated for February next year. The LP candidate who Bloomberg has tipped to succeed President Muhammadu Buhari identified seven cardinal goals in his campaign document. The document prioritizes Securing Nigeria, institutional reforms to ensure effective governance, and diversifying the economy by taking advantage of the fourth industrial revolution.  The document also aims for food sufficiency and the promotion of Production and exports.

 

NNPC and Chevron Partnership to Increase Gas Supply

The NNPC Upstream Investment Service (NUIS), a Nigerian National Petroleum Company Limited (NNPCL) subsidiary, and Chevron Nigeria have agreed to increase gas supply to the domestic market. Chevron currently has some gas facilities in Nigeria, including Escravos Gas Plant (EGP), the Escravos Gas-to-Liquids (EGTL) facility, the 678km West African Gas Pipeline (WAGP), and the Sonam Field Development Project. Analysts expect the NUIS to have a significant stake in major gas projects of domestic and multinational oil companies in the country to secure gas delivery to the domestic market.  

 

Massive Sell offs In the Equity Market as Investors Move to Less Risky Assets 

The NGX All-Share Index (ASI) inched down by +1.60% to close the week at 43,912.64 Index points against a -0.52% loss recorded at the end of the previous trading session. The NGX Market CAP recorded a loss of N388.10 bn. Sectorial performance was broadly negative; four (4) Sector indices closed positive, ten (10) sectors closed negative, and four (4) sectors closed flat. The NGX MERIVAL sector topped the gainer's chart with the growth of +1.25%. The INDUSTRIAL Index dipped by -4.83% to top the losers' chart. Gote Index declined by -9.26% recorded, with Dangote cement contributing a -10% loss to close at N220.50 as against N245 in previous trading session. The Toni index declined by 0.07%, closing the 106.22 index points. The month-on-month (M-o-M) loss stood at -10.43%, while the Year-to-Date (YTD) gain stood at +2.80%. Analysts note that at the current rate of Sell-offs in the market, the NGX YTD could close the year in a negative benchmark, with rising inflation and depreciation of the currency being the contributing factor (see chart 2 below).

 

Chart 2: NGX ASI MOVEMENT FROM 4TH OCT – 26TH OCT 2022

 

MTN Leads as Nigeria's Mobile Subscription Hits 211.8m

New statistics released by NCC revealed that active subscriptions for telecommunications services across the mobile networks: MTN, Airtel, Glo, and 9mobile rose to 211.8m in September. In August, the country's active mobile subscriptions stood at 209.6m, with an additional 2.3m increase in September. The increase was driven by MTN, which recorded the highest gain of 1.6m new subscriptions in the month, followed by Glo, which recorded 524,387 new subscriptions. Airtel added 33,623 new subscriptions, while 9mobile added 83,575 subscriptions in the period. Analysts observed that the Nigerian economy's digitalization of the SMEs sector and the ability to connect and communicate is fundamental to human existence and is strongly related to telecommunications, giving power to the telecom sector, which explains the growing demand for connectivity. 

 

Cryptocurrency: Uptick in Dogecoin 

Dogecoin overtook Cardano as the Sixth Largest Currency following Elon Musk Twitter Takeover. The price of DOGE has risen 150% since Tuesday, from US$0.0594 to US$0.15, with a 74% increase in the last 24 hours. Since Tesla's CEO, Elon Musk, completed his acquisition of Twitter, DOGE appears to be gaining momentum. Musk has been a long-time supporter of DOGE. Musk has also advocated using DOGE to regulate spam and bot accounts on Twitter and charge users for their tweets. DOGE had a market cap of approximately US$17.5 billion at the time of writing, exceeding the market cap of over 120 S&P 500 members.

 

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