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Nigeria's Crude Oil Production Drops below 1mb/d Amidst Trade Surplus and Telecom Capital Inflow

Sep 09, 2022   •   by TheAnalyst, Proshare Research   •   Source: Proshare   •   eye-icon 422 views

Being an Analyst Note Issued by Proshare Research on September 9th, 2022

 

Stakeholders Groan as Nigeria's Crude Oil Production Falls Below 1Million Barrel Per Day (mb/d)

August 2022 production data released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) on Thursday reveals that Nigeria's crude oil production has dropped below 1mb/d. The oil production report shows that output fell from 1.083,899 b/d in July 2022 to 972,394 b/d in August, the lowest monthly output in years. With an average crude oil price of $100 per barrel and a production shortfall of 3.46 mb/d in August, Nigeria lost $345.67m (equivalent to N147.75bn) in the month. Analysts attributed the decline to the large-scale oil theft and vandalism of oil infrastructure, which had occasioned production shut-in across the country's oil wells. Analysts are also optimistic about the many efforts by the NNPC and the regulators to curb the menace but doubt the viability of the unique identifier in moderating oil theft given the domestic dynamics of crude oil theft (see chart 1 below).

 

Chart 1: Nigeria's Crude Oil Production in 2022 (million barrels per day)


Nigeria's Trade Surplus Rises to N1.97tr, as India Cuts back on Crude Oil Imports

On Thursday, the National Bureau of Statistics released Nigeria's Foreign Trade Data for Q2 2022. The figures suggest that exports rose +4.31% Q-o-Q to N7.4tr while imports dropped N5.43tr in Q2 2022 from N5.9tr in Q1 2022. This culminated in an N1.97tr surplus in Q2 2022. Analysts observed that Oil and Gas accounted for 89.7% of exports while PMS, Gas oil, and Durum Wheat jointly accounted for 30% of imports. Meanwhile, exports to India, Nigeria's major trading partner, declined by -6.56% Q-O-Q, a development that Analysts ascribe to a global headwind and a pullback in crude oil demand from the southeast Asian country. On the other hand, China scaled-down imports to Nigeria by -5.9% Q-O-Q to N1.42tr. Analysts attribute the drop in Imports from the world's second-largest economy to the country's dynamic zero covid-19 policy that has seen many manufacturing hubs and ports operate skeletally. 

 

Observers Note US$ 153.5m Q2 2022 Rise in Capital Inflow into Nigeria's Telecoms Sector 

Nigeria's Telecommunication sector attracted a US$153.5m capital inflow in the second quarter of 2022, the highest inflow into the sector in the last 6 quarters. The latest capital importation statistics released by the NBS show that the sector inflow increased by 165% in Q2 2022 over the US$57.79m attracted by the sector in Q1 2022. However, there has been a reduction in FDI flow into the sector since the COVID-19 pandemic of 2020. Analysts observed that overseas investment within the sector is too low to satisfy the infrastructural needs of the nation. Thus, they argued that implementing the Nigeria Nationwide Broadband plan of a 70% penetration by 2025 is only possible if the FX scarcity and the challenges of running a business in the country are addressed. 

 

United Bank of Africa Release Half-year Financial Statement , PBT Rises by 12.6%

United Bank of Africa released its Half year 2022 audited financial statement and recorded a 12.6% increase in profit before tax to N85.7bn, up from N76.2bn recorded in the same period of 2021 and a 16% increase in profit after tax to N70.33bn up from N60.6bn. The bank proposed to pay a dividend of N0.20k per share to shareholders on September 29 2022. Currently, the bank's share price has a negative Year-to-date of -10.3%, but analysts noticed a +1.4% increase in share price from N7.2 to N7.3 at the close of the trading session yesterday. However, the slight rise cannot be attributed to the release of the financials since it dropped after the trading session (see chart 2 below). 

 

Chart 2: UBA Share Price Movement August 26, 2022, to September 09, 2022 

 

The European Union (EU) Comes Together to Solve Energy Crisis

The European Union's next steps for addressing the continent's worsening energy crisis following Russia's invasion of Ukraine are expected to be unveiled next week due to the tightening of many European countries' belts as energy costs soar. One short-term solution is approximately 20 floating terminals that would take liquefied natural gas from other nations and transform it into natural gas for homes and businesses. However, environmental experts caution that the terminals would maintain Europe's reliance on natural gas, which releases climate-warming methane and carbon dioxide when generated, transported, and consumed. Analysts contend that the current energy crisis in Europe makes it more evident that renewable energy sources like solar and wind are crucial for energy in the future, and as such European countries must step up efforts to switch to energy alternatives.

 

World's Most Consumed Food Could Increase as India Makes Export Decision.

India, the world's second-largest rice producer, has banned broken rice exports and imposed a 20% duty on exporting various grades of rice to reduce domestic prices, as traders cite below-average rainfall affecting planting. While the world struggles with high food prices, the world's most consumed food, rice, is set to rise.

 

India held about 30% market share of the total global export of rice in 2020 while exporting just above 12% of the rice produced that year. Vietnam accounted for 11.8% market share, making India's decision a major one for the price movement globally. Vietnam's export of 19.9% of its total rice production cannot cover a deficit in the market that India's export ban would cause.

 

While Nigeria is not a significant rice exporter, it stands among the highest commodity producers as the 14th highest producer in the world. The smuggling of rice from neighbouring countries has been an issue for Nigeria. Thus, the nation could be affected by the global price rise of this commodity. In recent times, the price gap between globally produced and domestically produced rice has reduced, and a price hike on the global scene could have citizens witness a price increase of domestically produced rice (See table 1 below).

 

Table 1: Top 20 Rice Importers, Exporters, and Producers in 2020 (tonnes)

 

Zambia's Eurobond Tumbles as Country Seeks US$8.4bn Debt Relief 

Zambia seeks $8.4bn debt relief from its external creditors (Chinese and Eurobond lenders) for 2022 to 2025. The restructuring is required to bring down debt servicing to 14% by 2025. Currently, the country spends nearly two-thirds of its revenue on debt servicing. The decision came after receiving a US$1.3bn bailout from IMF to prevent the reoccurrence of the default recorded in 2020, with the country's debt-to-GDP ratio at 126% in 2021. The goal is to reduce it to 104.7% by the end of 2025. Zambia plans to ask creditors to either agree to an outright write-down of the debt or extend their loan repayment term. Analysts expect a dip in prices of the Eurobond as investors begin to sell excessively as a reaction to the announcement.  

 

Crypto Mining Threatens Climate Change Note Stakeholders

Depending on the energy intensity of crypto mining operations, the White House Office of Science and Technology warned that crypto assets could hinder the effort of the United States to become a decarbonized economy. The office also urged the Environmental Protection Agency to provide technical assistance to state public utility commissions and the crypto industry in developing an effective environmental performance standard. Analysts noted that mining, primarily based on proof of work consensus, increases the supply of crypto assets while posing an energy consumption issue. 


The cryptocurrency market edged further as the global crypto market cap bounced back to the US$1trn mark, increasing by +5.69%. Bitcoin consolidated US$20,721.03 price level, up by +7.86%, but remains in the fifth wave of a downward trend since its all-time high on November 10, 2021. All major coins followed suit as many posted gains of over 4% in the past 24 hours. Ethereum gained by +7.86%, while Solana gained by +8.96%. Analysts noted that upon the passage of Queen Elizabeth II, over 10 meme coins and digital artworks had been rolled out in her name (see chart 3 below).


Chart 3: Bitcoin Price Movement

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