Being an Analyst Note issued by Proshare Research on July 26^th, 2022 

Coal Production in Nigeria; Looking Back in Expectation

Despite the commitment of Western nations to a net-zero production goal, China and other coal-dependent developing countries appear to have taken a detour. The phased reduction in the use of 'dirty fuel' in the coming years under the  COP26 agreement is undergoing revision as economic realities are forcing western countries to rethink decarbonization timelines. 

 European companies are mulling over a switch to coal as an alternative to Russian gas. In contrast, China's coal production and consumption continue to hover around its record high of 4.07bn tons per annum. The return to coal is becoming a trend for countries to bridge their energy shortages. 

Nigeria is said to hold over 2.8bn metric tonnes of unproven coal reserves and 639m metric tonnes of proven reserves with significant deposits in Enugu, Nasarawa, Gombe, and Kogi states. Analysts questioned Nigeria's lack of coal production despite its large reserves and the scale of energy shortages for power generation, railway corporations, and cement factories, among others. Coal production in Nigeria reached its all-time high of about 900,000 tonnes before independence. It significantly declined until no production was recorded, attributable to poor government interest, weak infrastructure, and technical failure (see chart 1 below). Proshare Analysts believe the large coal deposits across the country should be harnessed to bridge the energy gaps of the country in the short to medium term. 

Chart 1: Historical Trend of Nigeria Coal Production 

Analysts Optimistic as the NEPC Launches Domestic Export Warehouses

According to the Nigerian Export Promotion Council (NEPC), the newly launched Domestic Export Warehouses (DEW) would help to increase Nigeria's non-oil export proceeds. The DEW offers exporters various services, including storage, fast-track logistics, and documentation; Proshare Analysts note that over the years, quality control issues have significantly inhibited agricultural exports. Meanwhile, the Central Bank of Nigeria's (CBN's) drive to generate US$200bn from non-oil export under the RT200 Programme is expected to receive a boost from the DEW. If well implemented, Proshare Analysts predict that the initiative would further improve the Federal government's revenues and the country's current account balance (see chart 2 below).

Chart 2: Nigeria's Trade deficit Q1 2019-Q1 2022 (N'Trn)

Despite Fall in Global Wheat Prices, Nigerians Brace up for Bread Price Hike

High wheat prices globally spurred by the war in Ukraine have pushed prices of wheat-dependent foods up. Nigerian bakers have suffered high input costs and recently voiced their discontent with the collusive oligopoly experienced in the import of yeast, flour, and sugar. They went on a strike action to urge the government to allow other importers to import these goods to increase competition, thereby reducing prices. The Kogi Masters Bakers Association pulled out and decided to resume baking, albeit with a 20% price increase, to pass down some costs to consumers until the prices of yeast, sugar, and flour drastically reduced.  

When the increase starts, it is very likely to spread across the nation; some states in the southwestern region of Nigeria are selling bread at a higher rate. Unfortunately, there are no cheaper alternatives than Yam, Potato; Rice has equally advanced prices. 

Stock Winter to Continue in a Bearish Equity Market Say, Analysts

Nigerian Equities Market maintained its hostile posture to open the week on a negative note amid intense sell pressure. The benchmark All Share Index dropped 111bps to close at 51,400.53 points as Year-to-Date return, and Market Capitalisation settled at 20.33% and ₦27.72trn, respectively. Market breadth closed negative at 0.76x with 13 gainers against 17 losers. The market saw some selloffs in stocks like MTNN, GTCO, and UBA, influencing the bearish note. 

Analysts expect the impact of the increased benchmark lending rate on equity markets to continue to take effect, notching a bearish market. Albeit, Proshare analysts expect investors to cherry-pick in anticipation of the half-year (H1) 2022 earnings season. 

Quietness, as Investors Remain Cool Towards Bonds

The bond market closed tepid yesterday against the multiple selloffs recorded in the previous week as investors seek higher yield investment. The average benchmark yields remained unchanged at 12.20, with low activity across the tenors. Analysts expect a similar outcome today in anticipation of the NTB auction on Wednesday (see table 1 below). 

Table 1: FGN Bonds Market 

Pushing Technology NITDA to Promote Tech-Enabling Laws 

As part of its strategic move to ensure Nigeria achieves 95% digital literacy by 2030, the National Information Technology Development Agency (NITDA) is creating laws that will protect the tech ecosystem in Nigeria and create opportunities in Blockchain technology. While celebrating the participants at the graduation ceremony of 1,353 students of a digital literacy programme jointly organized by ENGAUSA and NITDA, the DG of NITDA, Kashifu Inuwa, disclosed that options available in the tech space such as programming, Video Editing, Blogging, Graphics Design, Web Design, Computer Networking, Drone Technology, and CCTV Installation among others will enable youths to upscale their talents and contribute to nation building. Analysts believe the growing interest in tech and favourable regulations from the regulator will support higher tech adoption and lower unemployment levels in the country.  

Binance and Bloomberg Subsidiary at Loggerhead over Title for Newsletter

Due to the constant underwhelming title for newsletters by Bloomberg's Chinese Modern Media, Binance CEO sued Bloomberg Chinese subsidiary for defamation on the weekly cover title of the 250^th Bloomberg Businessweek titled "Changpeng Zhao Ponzi Scheme." Zhao hinted that the statement harmed its image and asked Bloomberg to withdraw the defamatory comment, issue a formal apology, and pay compensation for damages. However, last week, the subsidiary company retitled the article "the mysterious Changpeng Zhao." According to analysts, the parent company titled the newsletter "Can Crypto Richest Man Survive the Winter" before the subsidiary company changed it to "Changpeng Zhao Ponzi Scheme." 

Bitcoin extended losses below the US$21,200 mark, falling by -4.21% from US$22,213.48 in the previous 24 hours. Other significant coins mirrored losses and traded close to their support levels, though Ethereum has lost over -7.78% of its value, with Quant topping the laggers' list by -12.3% in the past 24 hours. However, analysts observed a bearish movement around the US$20,600 support level for Bitcoin and believed that a break below the support level might push Bitcoin to US$19,700 (see chart 3 below).

Chart3: Bitcoin Indicators