Being an Analyst Note issued by Proshare Research on January 10th 2023

Petroleum Ministry Predicts Local Refining in Q1 2023 but Analysts Remain Cold

In line with analysts’ prognosis that the Port Harcourt Refinery is not feasible by 2022 but likely by the first quarter of 2023, the Minister of State for Petroleum Resources, Timipre Sylva, has disclosed that the 60,000 b/d refinery will begin operation in Q1 2023. The minister also mentioned that the FG had acquired stakes in four refineries to also begin operation this year, including the 650,000b/d integrated Dangote Refinery with 20% equity stakes; 12,000b/d Azikel Modular Refinery with 20% equity stakes; 5,000b/d Waltersmith Modular Refinery with 30% stakes; and 10,000b/d Duport Modular Refinery with 30% stakes. While Dangote has secured its feedstocks from the NNPC Ltd, delivery to other refineries hangs on the balance, underscoring the inability of the NNPC Ltd to meet even the domestic crude oil requirements, based on current production volume. Analysts are not so optimistic about the new timeline for onboarding the refineries and ceasing petroleum importation. Upstream industry challenges and political maneuvers might yet delay the operations of those refineries.

Inflation May Decline in December 2022 but CBN to Remain Hawkish

Forecasts by Analysts suggest that Headline Inflation may have declined in December on the back of a slight appreciation in the Naira at the Parallel Market and a decline in food prices. According to recent surveys, consumers resisted price increases resulting in low patronage for many sellers. Meanwhile, the Naira’s appreciation at the parallel market by 3.72% to N740/$ also meant that a major driver of inflation moderated in the period. If the forecast holds, the decline in inflation would be the first since January 2022 while bringing inflation for the year to 18.76%. In 2021, Inflation averaged 16.98% and inflation moderated in eight out of twelve months Nevertheless, December Inflation at around 22% would remain at a record high as the Monetary Policy Committee prepares to meet at the end of the month for its first meeting this year analysts say that the decision would likely remain hawkish with slight moderations to reflect slowing GDP (see chart 1 below).

Chart 1:

Buy Interest in Airtel Africa Spurs Equity Market Gains

The positive bounce in the equity market continues as the market appreciated by 470.74 basis points (bps). The NGX All-Share Index advanced by 0.92% to close at 51,693.08 bps as against a 0.07% gain recorded previously to close at 51,222.34 bps at the end of the last trading session. The NGX Market CAP records a N470.74bn gain with a YTD gain of 0.86%. Analysts attribute the gain to buy interest recorded in large cap-stocks like Airtel Africa. Airtel Africa recorded a 5.88% gain in its share price to close at N1630 per share as against N1550 recorded previous trade session. Analysts attribute the gain recorded in Airtel Africa to Airtel's recent acquisition of both 4G and 5G spectra. The total volume traded advanced by 17.10% to close at 229.22m, valued at N2.91bn and traded in 3,900 deals. STERLNBANK was the most traded stock by volume with 85.18m units traded while AIRTELAFRI was also the most traded stock by value which is put at N1.03bn (see chart 2 below).

Chart 2: 

Bond Market Turns Bearish

Nigeria’s bond market sashayed from bearishness yesterday, with selloffs out muscling buy interest. The selloffs were concentrated at maturities in 2034 and 2037, pushing the average benchmark yield to 13.05% from 13.02% on Friday. However, analysts expect improved liquidity to sustain buy interests in the market through the week (see table 1 below). 

Table 1: 

Airtel Acquires 5G, 4G Spectrums for US$316.7m in Nigeria 

Airtel Africa, a provider of telecommunications and mobile money services, said that its Nigerian subsidiary, Airtel Networks Limited, has acquired 100MHz of spectrum in the 3500MHz band and 2x5MHz of 2600MHz from the Nigerian Communications Commission for a gross consideration of US$316.7m as part of the wider plans to bolster connectivity in Nigeria, payable in local currency. Analysts believe the additional spectrum will support network expansion for both mobile data and fixed wireless broadband capability including 5G rollout and capacity to accommodate data growth in Nigeria. 

Analysts Expect XRP Market Bullishness before the End of Q2 2023

Analysts are of the view that the price of XRP may likely rise steeply before the end of June 2023. XRP saw a triangle continuation pattern with a major increase in April 2021. Analysts expect the deciding factor for XRP’s price trajectory to be the court ruling in the US Securities and Exchange Commission (SEC) case against Ripple. However, SEC claims that XRP is an unregistered security in its December 2020 complaint filed against Ripple that brings both parties into a long-drawn court battle (see chart 3 below). 

Chart 3: