Being an Analyst Note issued by Proshare Research on October 28th, 2022 

Refineries Rehabilitation, Analysts Call for More Disclosure 

In a press release by the President's Special Adviser on Media and Publicity, Femi Adesina, the Nigerian National Petroleum Company Ltd (NNPCL) and Daewoo Group of South Korea have signed a Memorandum of Understanding (MoU) for the rehabilitation of the Kaduna refinery. According to him, the Group is also responsible for rehabilitating the Warri refinery and constructing the NLNG train-seven project. Analysts questioned whether or not the Daewoo Group is in a joint venture with Saipem SPA. Recall that the Minister of State for Petroleum, Timipre Sylva, had in August 2021 disclosed that the FEC had approved the sum of $1.48bn for the rehabilitation of both (Kaduna and Warri) refineries. Where he had said about 15% of the contract sum had been disbursed to the contractors- Messers Saipem SPA and Saipem Contracting Limited - to be executed in 3 phases over 77months. Analysts call for more transparency and organization in government press releases in the balance of public disclosure based on Section 9(2) of the FOI Act 2011.  

Federal Government gives a 5-year Tax Break to Agric Investors

Speaking at the 29^th edition of the LAPO Annual Development Forum, the Minister of Agriculture disclosed on Thursday that the Government had approved new incentives for agricultural investors to improve high-level private sector participation in the country's food production and processing industry.  According to the Minister, the incentives include tax and duty-free holidays for five years for agricultural production and processing in Nigeria; tax-free agrarian loans with a moratorium period of over 18 months and a repayment period of not more than seven years; and zero-tariff rates on the importation of agrochemicals. 

Analysts note that the agriculture sector accounted for about 35% of the country's employed workforce and has only grown at an average rate of about 2-3% since 2016. This is despite the significant CBN interventions by the Anchor Borrowers' Programme (ABP).  Although the current policy seeks to address one of the major challenges facing the sector, namely: funding, other problems attending the sector which also need to be addressed include the lack of mechanization, fractional land ownership system, and the lack of modern storage and processing facilities. 

Lagos State Government Presents N1.69trn Budget for 2023

On Thursday, Lagos State Governor Babajide Sanwo-Olu presented the State's 2023 appropriation bill to the State House of Assembly. The N1.69trn budget provides N759bn for recurrent expenditure while N932bn would be provided for capital expenditure. The 2023 budget is -3.4% lower than the 1.75trn budget approved for the 2022 fiscal year. Analysts note that the budget per capita at N110 is low, providing very little for the average Lagos resident. Analysts also note that actual revenue has fallen short of the budget projections (see chart 1 below).

Chart 1: Lagos State Budgets (N'bn) 2012 -2023

Oil Prices Strengthen by A Few Uptick Factors

Oil prices rose for most of the week on the weak US dollar, the hope of economic activities rebound in China and the US, the EU's hunger for more crude oil ahead of the Russian oil embargo, and the imminent supply cut by OPEC+. However, the reversals in some trading sessions were supported by high crude inventories in the US, bearish economic data, and the Chinese lacklustre trade data and doubling down on Covid-19 restrictions. Analysts expect oil prices to remain below US$100 per barrel, on average, for Q4 2022, barring any significant disruption. Prices of Petroleum products in Nigeria are expected to move in tandem with the trajectory of international crude oil prices.  

Strong Earnings Pulls Up Zenith Bank's Share Price 

Zenith Bank released its Unaudited Financial Statement for the period ended September 30, 2022, recording a growth of 20% in gross earnings from N516.7bn in Q3 2021 to N620.6bn in Q3 2022. The Q3 performance demonstrated resilience against the challenging macroeconomic environment, tightening monetary policy by the Central Bank of Nigeria (CBN), and rising inflation, which showed up as a +17% increase in operating costs. Zenith Bank, with a Year-to-Date price return of +2.6%, sold at N20.10 against the previous trade session before the financial result release. Analysts expect further positive reactions as Zenith recorded a growth of +9% in Profit after tax (PAT) which rose from N160.9bn in Q3 2021 to 174.3bn in Q3 2022 (see chart 2 below).

Chart 2: Zenith Bank Share Price Movement from October 4 – October 27, 2022

Musk Starts His Twitter Ownership with Layoffs

Tesla CEO, Elon Musk, is now in charge of Twitter, having completed his US$44bn acquisition deal, firing top executives, having accused them of misleading him and Twitter's investors over the number of fake accounts on the platform. Musk Plans to scrap permanent bans on users and cut jobs providing little clarity over how he will achieve the lofty ambitions he outlined for the influential social media platform.

Twitter shares ended trade on October 27, 2022, up 0.3% at US$53.86 per share, just under the agreed price of US$54.20 per share. The stock would be delisted from the New York Stock Exchange (NYSE). Analysts believe that until Musk finds new sources of revenue, he cannot afford to lay off a group that contributes 90% to Twitter's revenue.