Being an Analyst Note issued by Proshare Research on August 15^th , 2022

IEA Cuts Nigeria's Sustainable Output

The International Energy Agency (IEA) has cut Nigeria's sustainable oil production volume by 200,000 barrels per day (b/d) from about 1.5mb/d to around 1.3mb/d. The agency attributed the cut to persistent technical and operational issues such as pandemic-related disruptions, sabotage, and theft. Based on the estimate, sustainable output implies a production level that can be reached in 90 days and maintained for some extended period. 

Analysts have attributed the country's production shortfalls to low crude oil flows in Bonny, Forcados, and Shell-operated EA oilfields related to the country's large-scale oil theft and leakages. Following the return of OPEC's 2020 output cut, the country should have returned to its pre-pandemic output level of 1.8mb/d under the OPEC quota. However, Nigeria's crude output has remained low at about 1mb/d as of July 2022 compared with the July target/quota of 1.8mb/d, soaring its compliance level (see chart 1 below). 

 Chart 1: Nigeria's July 2022 Crude Oil Production Overview  

Analysts Note Negligence and Double Standards in Nigeria's Agriculture Sector

Stakeholders in the Nigerian agricultural sector have spoken against the European Union for their double standard and NAFDAC for its negligence about pesticide use in the country. They highlight how certain chemicals used as pesticides were banned and withdrawn in Europe but allowed their production and export to other countries, including Nigeria, to continue. Among the pesticides used in 4 states in Nigeria, 65% are said to be Highly Hazardous Pesticides (HHPs), as some of them show signs of chronic human health effects. They also claimed that NAFDAC had not updated its database on newer harmful pesticides, claiming that the last update was in 2008.

The effects range from health problems to the export of commodity products. Using these pesticides, which could have this residue could cause residue remains in food products and could have a dangerous effect on the Nigerian population, who might not check for the residue in the farm produce they buy. Global trade could also witness a general increase in the rejection of exports of the country's food crops which would worsen the nation's international trade.

CP issuance and FGN bond auction Stir Analysts' Worries over Fixed Income Market 

Coleman Technical Limited issued an N10 bn series 5 & 6 Commercial paper under the N20bn programme on 8 August 2022, scheduled to close on Friday, 12 August 2022. The yield for the 182-days and 270-days is 14.0% and 15.5%, while the discount rate is at 13.09% and 13.91%, respectively. However, on Friday, the company announced a reprice with the yields at 15% and 16.5% for 182 and 268 days, respectively and extended the closing to Tuesday. The minimum subscription is N5m and multiples of N1,000. Analysts believe the GCR short-term rating of BBB- indicating a good credit rating and raised yields should sway investors to the programme. 

The Debt Management Office (DMO) announced the Re-opening of a previously issued bond by the Federal government slated for 15^th to 17^th July 2022. The offer for subscription is a total of N225 billion notes, with N75bn each across the three tenors. The yield to maturity rates across tenors is 13.53% for FGN MAR 2025, 12.50% for FGN APR 2032, and 13.00% for FGN JAN 2042. Analysts expect investors' buying interest should swing towards the 10-years and 20 years tenor in a bid to hedge over rising inflation with a lesser subscription for the 3years tenor. 

Green Hydrogen Piques Analysts' Interest in Renewables 

As noted last Friday, green hydrogen is the preferred renewable energy because zero-carbon emissions characterize its electrolysis production. Suppose electrolysis becomes a widespread method of hydrogen production, which uses electricity to separate hydrogen and oxygen in the water and allow hydrogen to be harnessed. 

In that case, it will be imperative for researchers to look for an electricity-generating method other than thermoelectric processes to power electrolysis. With this perspective, other renewable sources such as wind or solar may be adopted to prevent the whole venture from being counterproductive. Also, there are rising concerns over the use of hydrogen as it is highly flammable and has to either be liquified or compressed before it can be transported. Analysts believe it will take a significant amount of time before the cost of producing hydrogen reduces as the process of purifying the water needed for its production is very expensive.

Analysts Observed Huge Buy Interest in Capital Hotel

Analysts observed a huge buy interest in Capital Hotel after an increase in its shareholdings. The +157,822,880% increase in volume may be attributed to strategic positioning in the hospitality firm by a significant investor, as there has been a notification of an allotment by way of special placement to 22 Hospitality Limited following the increase in the company's share capital. 

The share price of Capital hotel remains N3.40k. Analysts expect a bullish trend in the long run which can be attributed to the Holiday season that we are gearing toward, where there would be a lot of travelling. Analysts also observed the trade attributes for 63.74% of the total market volumes of 750.29m, while the volume traded represents 15.13% of Capital Hotel's total shares (see chart 2 below)..

  Chart 2: Capital Hotel Share Price and Volume Traded 22 Jul-8 Aug 2022

Customs Deployment of Cameras and Drones at Borders Leave Analysts Unimpressed   

Nigeria customs service (NCS) is trying to stop smuggling by introducing drones and other facilities to the nation's borders. Proshare analysts believe the Nigerian Customs Service is thinking in the right direction with the deployment of technology to the security of the Nigerian border. Still, more effective and efficient manpower would be needed.

Meme coins showed an intense bullish trend. Say, Analysts amid losses in the crypto market.

The cryptocurrency market reeled off last week's gains by -2.91%; After Bitcoin tested US$25,135.59 over the weekend and the bullish momentum faded, this morning's Bitcoin bid fell below US$24,000, from US$25,135.59 to US$23,904.21. Other Altcoins also experienced stiffness after the positive impetus faded. Ethereum fell by -6.09% from a new high of US$2006.45, and BNB was down by -3.53%. Nonetheless, the top meme coins, Dogecoin and Shiba Inu tokens saw vigorous buying activity, with Dogecoin re-entering the crypto top 10 market cap and Shiba Inu rising 38% to US$0.00001774 on Saturday and +4.90% this morning. Analysts foresee a keen move in the meme coins, given that the coin's value has plummeted since the crypto winter began in March, and the fear and greed index is heading up to the greed position (see chart 3 below).

 Chart 3: Bitcoin Price Movement