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Analysts Recommend Upward Adjustment of Petrol Price and Widening of Revenue Sources

Nov 28, 2022   •   by TheAnalyst, Proshare Research   •   Source: Proshare   •   eye-icon 184 views

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

 

Economists Urge Phased Removal of Subsidy; Petrol Price May Settle at N250 Per Litre 

Petrol scarcity worsened over the weekend as arbitrary pricing and diversion intensified in most filling stations across the country. Proshare analysts noted that market distortion would keep petrol prices high, between N200 and N250 per litre until the year-end. This distortion is predicated on dollar scarcity, impeding petrol importation, authorized and unauthorized dollar charges, and logistical issues. Analysts have maintained that phase removal of petrol subsidy will ease the tension in the market, noting that an upward review should peg petrol price at N250 per litre for now. The plethora of petrol import charges and the fiscal constraints of petrol subsidies have made it unsustainable for petrol prices to remain lower. Over the weekend, oil marketers reiterated that the lowest price NNPC Ltd can sell petrol to marketers without subsidy is currently N400 per litre. This suggests that the one-off removal of the petrol subsidy may be too severe for the system, as petrol prices might skyrocket to about N450 per litre. 

 

FG borrows N6.31trn through Ways and Means 

The Federal Government’s borrowing from the Central bank of Nigeria (CBN) through Ways and Means Advances has accumulated to N23.77trn in October 2022 compared to N17.46trn as of December 2021. For the ten months in 2022, the Federal government borrowed N6.31trn, which is not part of the total public stock, which stood at N42.84trn as of June 2022. According to Section 38 of the CBN, the apex bank may grant temporary advances to the federal government to fund a temporary budget revenue deficit at an interest rate as the bank may determine. However, the increasing borrowing will create fiscal pressure on the country’s expenditure, as stated by the World Bank in 2021. Analysts recall that the FG intends to convert N20trn to a 40-year bond as the country’s revenue shrinks, showing an inability to fund the borrowings. To prevent a further rise in debt, the FG needs to explore methods to widen its revenue sources.  

 

FG Approves N16bn Broadband Infrastructure Projects 

Minister of Communication and Digital Economy, Professor Isa Pantami, disclosed that the FGN had approved N16.7bn for the provision of unlimited broadband infrastructure to 18 selected higher institutions. These institutions include three universities each from six geo-political zones and 20 markets chosen across the country. The markets will benefit from the infrastructure at approximately N400m each. These projects are part of the moves to achieve 70% broadband penetration in the country by 2025, as set in the broadband plan (NNBP 2020-2025). Analysts observed that according to NCC, as of February, the broadband penetration usage was at 40.9% and later reached 44.5% in July 2022. The deepening broadband penetration across the country will improve the quality of education in Nigerian schools and link-local businesses with the international community for economic growth.

 

Nestle Nigeria Plc Tops Losers Chart In a Bullish Week 

Nestle Nigeria Plc, one of the consumer goods companies, recorded a decline in its share price in the week the market recorded its best Q4 Performance so far. The quoted company opened the previous trade week at N1,215 per share, recording a -20.67% decline in its share price to close at N963.90, representing a loss of N199.036bn in its market capitalization. Analysts attribute the persistent sell-offs by investors to the increase in Monetary Policy Rate (MPR) by CBN and the uncertainty leading up to the election on foreign investors. Analysts expect the consumer goods sector to pick up as we gear towards the festive period, as increased sales in the festive period would cause an increase in the profit margin. Analysts also noted that while persistent sell pressure increased in Nestle, the Equity market experienced a bullish trend with the NGXASI, recording a gain of +6.88% WoW. NGX INDUSTRIAL topped the gainers’ chart with an increase of +9.45% WoW, while the NGX OIL and GAS Index topped the loser’s chart with a loss of -1.29% WoW (see chart 1 below).

 

Chart 1: 

 

DOGE Bulls Maintain an Uptrend Despite a Bearish Market over the Weekend

Dogecoin price analysis was bullish over the weekend, with the Doge/USD pair rising to the $0.1011 level. The price action recently created a bullish engulfing candlestick pattern, which indicates that the bears are losing control.

 

Resistance for the Doge/USD is present at $0.096 with a market cap of about $13bn, a breakout above this level could see DOGE target the next resistance level at $0.1050 before the week runs out. On the other hand, a failure to move out of this $0.096 may see the price pull back to test support at $0.085. Although there has been a decline in price in the last 24hrs of -4.6%, there is a likelihood of a rebound before the week runs out on the Elon Musk effect. Twitter is set to launch the payment system on Friday, and there is a huge tendency that people might pay with their Dogecoin. This could also drive the market as Crypto work with trends (see chart 2 below).

 

Chart 2: 


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