Being an Analyst Note issued by Proshare Research on December 21st 2022

Aged Nigerian Infrastructure will Constrain Full-Capacity Oil Production

The Federal Government projects crude oil production at a full capacity of 3 million barrels per day (mb/d) in the near term, higher than analysts' expectation of 1.5mb/d. The Minister of State for Petroleum Resources, Timipre Sylva, disclosed that the FG is working to ensure that all local and major oil companies return to full production capacity to boost revenue and meet the OPEC quota. Analysts consider the projection as overly optimistic. Aside from the possibility of relaxing the initial campaign against oil theft, analysts decry the country's ageing oil infrastructure as a condition that would undermine production at full capacity. Howbeit, with the slight improvement in the security situation, analysts expect production to improve further from 1.186mb/d in November to about 1.23mb/d in December.

Aviation Sector Stumbles into Crisis, as AON Warns of Flight Cancellations

Airline Operators of Nigeria (AON) has warned that the scarcity of aviation fuel would result in flight delays and cancellations. Back in May and July, FX and Jet A1 fuel scarcity disrupted airlines' operations. Analysts say that the recent development is also expected to lead to a rise in Air transport fares. Analysts say that the incessant challenge of fuel scarcity threatens growth in the aviation sector as travellers have little or no alternatives. The Nigeria Railway Corporation (NRC) had halted service on the Abuja-Kaduna rail lines for eight months following the terrorist attack on March 28, which left some passengers on board killed and others kidnapped.  While some travellers may still travel by air, Analysts expect a pullback in air travels with a discounting effect on the sectoral growth (see chart 1 below).

Chart 1:

Bond Market Stirs to a Recovery 

The bond market seems to be recovering in December. Bond yields have trimmed down as bond prices became more competitive. The strong buying interests defy the norm in previous years, where investors sell off to fund their festive expenses. However, analysts believe the robust liquidity system might be the main trigger for the strong inflows. As of December 20, the average benchmark yields fell to 13.61%, with the buying interest skewed at the short and mid tenor, compared to 14.61% as of November 30. The market rally should continue until the next monetary policy decision in 2023 (see table 1 below).

Table 1: 

MTN Nigeria Shareholders Approve Cancellation of 7.5bn Unissued Share

In compliance with the Corporate Affairs Commission (CAC) under the provision of Sections 124 and 868 of CAMA 2020, which only recognises issued share capital of a company and stipulates that all unissued capital be eliminated latest December 31, 2022, MTN Nigeria shareholders have approved the Cancellation of 7.5bn unissued shares. Analysts noted that MTN Nigerian currently has a share price of N214.00, beginning the year at N197 per share with a YTD of 8.6%. MTN Nigeria recorded a profit after tax of N269.03m in Q3, a growth of 22.12% profit after tax and a gain of 22.92% earnings per share. Analysts believe the Cancellation of the unissued share in compliance with the CAMA signed by the president is a welcome development and expect more companies to follow suit to meet CAMA 2020 (see chart 2 below).

Chart 2: 

SEC Approves NGX Technology Board Listing Rules

Nigerian Exchange Limited (NGX) announced the approval of the rules for listing on the NGX Technology Board by the Securities and Exchange Commission (SEC) on December 15 2022. The newly approved board is a specialised platform for technology-based companies to list and raise capital on NGX. Analysts believe the aim is to encourage investments in indigenous technologically inclined companies making it accessible to qualified institutional investors, retail investors and high-net-worth investors. The Rules are targeted at both Start-ups with a minimum of two (2) shareholders and operational for at least twelve (12) months before the date of application and Big Tech companies with a minimum of five shareholders and operating for at least twelve (12) months before the date of application. 

New Zealand Farmers Kick Against Cow Burp Tax

New Zealand is set to be the first country to tax farmers on emissions from livestock burps. This has caused an uproar from farmers in the country who claim this move would affect both the citizens and the country, with a claim that the citizens might bear the passed-on cost of livestock when they purchase meat. In contrast, the country would not have taken advantage of the increased export of meat globally. This forced the government into several changes, including allowing farmers to use on-farm forestry to offset their carbon emissions. However, the change did not stop the tax, with the government promising to keep emission prices as low as possible.

FDHIC restates its Commitment to Cleaner, Healthier Africa through Investments

Health Capital Africa, formerly known as Flying Doctors Healthcare Investment Company, introduced its new brand identity during a closed event with industry stakeholders from finance, healthcare, and the media, reinforcing its commitment to strategic investments to create a healthier Africa. African impact investors' growing interest in clean technology and ESG factors reflects global sustainability trends. Available data from AVCA shows that as of September 2022, 79 climate-related investments totalling US$1.3bn had been announced in Africa.

Nigerian SEC Set to Recognise Crypto as Investment Capital

Nigeria's Security and Exchange Commission (SEC) is set to introduce a new bill allowing local regulators to recognise cryptocurrencies as capital for investment. Recall that about two years ago, the Nigerian government, through the CBN, directed all banks to close the accounts for peer-to-peer (P2P) crypto trading before the launch of the e-Naira, which uses identical blockchain technologies. Intuitively, the Nigerian government did not condemn crypto transactions totally but banned financial services for cryptocurrency trading in the country. Peradventure the bill is passed into law, there will be supervisory roles for the Central Bank of Nigeria and the Securities Exchange Commission (SEC). The bill could also amend tax and other related duties by taxing crypto transactions and Exchanges. This move could also boost the blockchain to cashless growth.