Being an Analyst Note Issued by Proshare Research on August 30^th, 2022 

Conflicting Figures on Oil Theft in the Oil and Gas Industry 

Nigeria's Chief of Naval Staff, Vice Admiral Awwal Gambo, has disagreed with the oil theft figures reported by the minister of state for petroleum, the upstream regulator, and the Nigerian National Petroleum Company Limited (NNPC Ltd). The naval boss argued that 20,000-200,000 b/d (equivalent to several million litres of daily oil trips) could not have moved through the estuaries nor the heavy security presence in Nigeria’s waterways. Indeed, the oil and gas industry is constrained by several challenges beyond crude oil theft. Proshare analysts have raised concerns about the inconsistency in oil and gas industry activity data. There are inconsistencies in production volumes as well as underreported production shut-in and maintenance-related force majeure. 

However, there are also crude oil thefts associated with pipeline vandalism by local communities, which supply the artisanal refineries. These kinds of thefts are not routed through the heavily guarded waterways. Elsewhere, some thefts are conducted through the estuaries with forged bills of lading or underreported loadings, which might escape the security checks. Indeed, the Nigerian Navy has made significant progress with its surveillance technologies, such as the Falcon Eye Alignment system and Satellite Boat Tracking System. However, analysts have raised a broader conversation on the need to fast-track the development of Nigeria's Maritime Strategy (Proshare will soon publish its eight-month-long investigative review of the sector in a report titled, "Anatomy of Nigeria's Crude Oil Theft: Understanding the Graft and Economic Implications"). 

FG's 2023 budget deficit Violates the Fiscal Responsibility Act.

While presenting the Medium-Term Expenditure Framework (MTEF 2023-2025) to the House of Representatives on Monday, the Minister of Finance stated that the Federal Government is proposing an N19.76trn budget for 2023. This represents a +15% growth compared to the 2022 budget. Meanwhile, Analysts noted that as the budget deficit is expected to rise to between N11.3trn and N12.41trn in 2023 (5.01% of the GDP), the size of the proposed budget deficit violates the Fiscal Responsibility Act (2020). Analysts, however, note that the Fiscal budget deficit of N7.35tn in the 2022 budget had also exceeded the 3% threshold stipulated by the Act. The implication is that Federal Government would add up to N11trn to its debt profile. Also, according to the document, the Federal Government may not be able to make provisions for treasury-funded capital projects in the 2023 fiscal year due to subsidy payments. Subsidy payment is expected to amount to N6.7trn if the subsidy regime is retained for the whole year and N3.36trn if the subsidy regime is removed by June 2023. 

Global Wheat Market Gets Tighter Amid Extreme Weather Conditions.

As extreme weather conditions ravage big economies, food products have increased. The United States experienced drought in many eastern parts of the country. China experienced a heatwave of about 40 degrees Celsius, the UK was equally affected by a heatwave, and India experienced flooding in some parts of the country. These extreme conditions in different countries have caused a drop in food production, as China and the United States have witnessed a reduction in the production of some agricultural products. 

While this poses bad news for food exports, Canada has begun its harvest bringing good news to the market. The world's third highest exporter has noted that the harvest would be more than they harvested last year and the second highest in 9 years. Estimates point toward about 34.6 million tonnes, about a 55% increase from 2021 production. This output follows Proshare's expectations after noting that we would witness a price increase in the period between harvest from US and Canada. Proshare Analysts expect a downtick in wheat price, particularly in September, but could see an uptick in October as countries plant Winter wheat. Wheat currently has a YTD of +8.1% (see Chart 1 below).

Chart 1: Wheat Price Movement

Stanbic IBTC Head of People and Culture take Position, as United Bank of Africa set to release Q2 results.

Analysts noticed insider Director dealings in Stanbic IBTC. The NGX saw the purchase of 170,00 shares at an average of N30.44. The purchase was completed on August 26, 2022, which accounts for +21% of the total volume traded at the Friday trading session's close. Analysts observed a flat share price since the sale went through. Stanbic IBTC posted a recent year-to-date (YTD) price yield of -16.70%. Analysts expect capital appreciation, with the bank posting a positive Q2 result as investors expect a high year-end dividend yield. Stanbic IBTC recorded a +61.8% Profit after Tax (PAT) and a +43.9% in Gross earnings as against Q2 2021.

United Bank Africa released a press briefing to shareholders regarding its Q2 Audited Financials, pending CBN's approval. Analysts predict a decent financial performance in Q2 2022, prompting expectations of hidden value market opportunities. The share price of UBA appreciated by +0.7% to close at N7.20 per share at the close of the last trade. The bank posted a recent year-to-date (YTD) price yield of -10.60%. Analysts attribute the appreciation to speculation around the Banks Q2 financials. Traded volume saw a + 42% increase compared to the previous day's activity (see chart 2 below).

Chart 2: Share price Movement of Stanbic IBTC and UBA 

Datapro Gives Positive Rating of A+ (short term) and A1 (long term) to Nova Merchant Bank

Datapro approved Nova Merchant Bank Limited's long-term rating of 'A+' and "A1" for its short-term, indicating an investment grade credit quality and satisfactory capacity for timely payment of financial commitments. Similarly, the rating shows low risk, sound financial strength, and operating performance after assessing the bank's financial performance. The Full-year result for 2021 reported a 25.7% growth in gross earnings and a 76.9% growth in loans and advances. DataPro specified that the rating would be for a maximum shelf life of 12 months (2021/2022). Analysts believe the ratings should assist investors' decision-making regarding investment in the financial lender. 

POS Transactions Hit N4.6tn in Seven months, Cheque Usage Drops

The data released by the Nigeria inter-Banking Settlement System (NIBSS) showed that aggregate Point of sales (POS) transactions rose significantly to N4.6 trillion between January 2022 and July 2022, a 29.3% increase compared to N3.56 trillion recorded in the corresponding period of 2021 and a 90% increase compared to the same period of 2020. The usage of cheques has been on the decline as total cheques transactions in the nation dropped in the same period to a total of N1.38 trillion. Analysts believe that the adoption of POS has brought banking services closer to the rural areas, which do not have many banks accessible. 

Australia Makes Stronger Move in The Renewable Energy Sector

Recently, Australia has become more deliberate about advancing the renewable energy sector and seeks to make a more visible footprint in the global fight against climate change. This is propelled by the election of a new government that has pledged to cut greenhouse-gas emissions, dump coal as the primary electricity source, and increase investors' interest in green-energy projects. Australia's move would have a significant global impact as they are one of the world's largest coal consumers; thus, transitioning to alternative and sustainable sources would significantly reduce global emissions. However, the nation is experiencing increased pressure to make this move as the consequences of climate change are having more drastic effects and increased demand by nations for the off-grid power supply. Hence, the nation, leveraging existing infrastructure and technical know-how, could significantly increase the chances of net-zero emission by 2050 and provide the developing nation with sustainable forms of energy.

Iranian Government Approves Cryptocurrency for Foreign Trade

To circumvent US sanctions, the Iranian government approved a regulation to authorize the use of cryptocurrency for foreign trade. The decision was reached after the country made its first import month using cryptocurrency. In response, the country's chief trade promotion organization hinted that the regulatory framework was necessary for the country's commercial activities and that, by the end of September, the use of cryptocurrencies and smart contracts in foreign trade with selected countries will be prevalent. According to analysts, the government has been making strides into cryptocurrencies since 2019, when Bitcoin mining was approved, and presently has 118 authorized Bitcoin mining farms.

The global cryptocurrency market traded in a green position as Bitcoin rose steadily from US$19,792.52 to US$20,413.34, gaining +2.95% over the past 24 hours. Major altcoins followed suits, with most of them outpacing Bitcoin in performance. Ethereum, the second largest capitalized coin, rose +9.73%, increasing from US$1,445.37 to US$1,591.63 (see chart 3 below).

Chart 3: Bitcoin Price Movement