Being an Analyst Note issued by Proshare Research on January 5th 2023

Surveys Suggest Production Rise but Nigeria Still Undershoots Target

Surveys by Reuters and Bloomberg on OPEC crude oil production in December 2022 showed a significant rebound in Nigeria’s oil production, accounting for the most increase in the group’s output. The Reuters survey showed that Nigeria’s oil production rose by 170,000 b/d in December 2022, contributing largely to the 120,000 b/d increase in OPEC output for the year. However, the Bloomberg survey showed Nigeria’s oil production hit an eight-month high of 1.35mb/d, raising OPEC’s production by 150,000 b/d above November figure. 

The increase in Nigerian output strengthened the country’s compliance with OPEC quota to 161% from 163% on November 22 but remains the largest restraint in meeting quota guidelines. Whilst waiting for official data to confirm the increase, Analysts remain optimistic that Nigeria would meet its oil production benchmark for 2023 (1.69mb/d) in Q1 2023 and OPEC quota within the year. Nevertheless, this will depend on the continuous campaign against oil theft and insecurity, leading to the recovery of oil at major terminals. 

Economists Unimpressed by Nigeria’s 2023 Budget

Following the passage of the 2023 budget and the 2022 Finance Bill, Analysts have raised concerns about the capacity of the 2023 budget to alter the trajectory of the Nigerian economy. According to them, the rate of unemployment which was 33.3% as of 2020, would not improve going by the Federal Government’s (FG’s) plan to spend only N5.97trn (28% of the 2023 budget) on Capital expenditure even while fiscal deficits have risen since last year from 26% of the budget to over 50%. Analysts believe that growth would continue to be unimpressive so long as FG, the economy's largest spender, allocates spending inefficiently. At the same time, the miscellany of new excise duties and taxes contained in Finance Bill 2022 would worsen inflation in 2023. 

Stakeholders insist Burning of Oil Trucks Reflect Poor Security Operating Procedures

Analysts have raised concerns about the immediate destruction of arrested oil vessels and trucks by the security agencies, arguing that it is neither effective at deterring criminal activities nor aligning with global standard operating procedures. This comes as Members of the Petroleum Tanker Drivers branch of the National Union of Petroleum and Natural Gas Workers (NUPENG) threatened to stop loading petroleum products nationwide following the illegal destruction of two trucks conveying High Pour Fuel Oil (HPFO) popularly known as black oil by military agents. 

The association argued that the military task force burnt the trucks without investigation, reflecting a lack of professionalism and acting in ignorance. Analysts attributed the situation to the lack of standard operating procedure as it relates to identifying or verifying petroleum products' standards/qualities. Analysts also questioned the high points of the collaboration between the regulators and the security agencies on industry sanctity, noting that the regulators may have dropped the ball in educating relevant security personnel on product standards. 

Nigeria Equity Market Rises as SEC Fights Ponzi Schemes

The Nigerian Equity Market continues its impressive bounce, as analysts note investors sustained buying interest. The NGX All-Share Index advanced by 0.12% to close at 51,657.56 basis points against a 0.67% gain recorded previously to close at 51,595.66 basis points at the end of the last trading session. The equity market saw a gain of N33bn with a market capitalization of N28.136trn. The gains recorded in the market can be attributed to the buying interest in stocks like NAHCO, Nigerian Brewery, FCMB, FIDELITY BANK, and others.

Meanwhile, the Security and Exchange Commission (SEC) disclosed that the consistent proliferation of operators running illegal investment schemes in the country continues to be a major concern to the capital market. The regulatory body stated that the commission as of last year sealed off the offices of four illegal operators that have defrauded innocent citizens of billions of naira and assured that the commission will continue its enforcement actions to ensure that such illegal entities are not allowed to operate. Analysts commend the regulatory body for its fight against illegal operators and suggest that the regulator should work in collaboration with banks to flag such investment companies. Analysts also believe that the regulatory body should set up an intelligence unit to hunt illegal entities.

Economist Review Impact of Open AI (ChatGPT) in a New Digital Order

Chat GPT (Generative Pre-trained Transformer) is the most recent language model created by Elon Musk, Sam Altman, and other Silicon Valley investors, owners of a Non-profit AI Research Organization established in 2015. Sam Altman’s OpenAI released ChatGPT on November 30, 2022, and it has since taken the tech industry and the internet by storm. 

ChatGPT has different features, including understanding human speech and reducing harmful and deceitful responses, solving math questions, writing text, debugging and fixing code, teleplays, translating between languages, creating text summaries, making recommendations, classifying things, and explaining concepts and functions, such as a code block. It has a vast array of functions that have the potential to simplify everyday life for a lot of people. Analysts believe the rapid development and adoption of technology may replace the human workforce over the next decade, including programmers as users and AI communicate and process complex requests.

CBN Set to Build Regulatory Framework for Cryptocurrency 

The Central Bank of Nigeria  (CBN) has stated that it would issue a regulatory policy framework for the implementation of cryptocurrencies in the country. Recall that the CBN had directed banks to close the accounts for peer-to-peer (P2P) crypto trading before the launch of the e-Naira, which uses identical blockchain technologies two years ago. However, the new move is directed at providing the regulatory framework for transacting Stablecoins and not all crypto coins. 

Notably, Nigeria's Security and Exchange Commission (SEC) also plans to introduce a bill allowing it to recognize cryptocurrencies as capital for investment. Analysts believe the CBN move is in support of SEC plans on crypto investment, underscoring the subtle acceptance of regulated crypto transactions in the country. Analysts hope for sound regulation, considering the effect of weak regulations on business prospects. On the other hand, analysts believe the move could drive promote the cashless policy drives of the CBN. 

Moroccan Bank Al-Maghrib (BAM) Releases Crypto Law

The governor of the Moroccan central bank popularly referred to as Bank Al-Maghrib (BAM) disclosed that the country’s crypto law is ready. The law seeks to protect individuals from the risks associated with crypto trading. Bank Al-Maghrib (BAM) intended for Moroccans to embrace crypto with the belief that crypto adoption is inevitable, thus, building regulatory frameworks around it to protect investors and traders. Analysts considered that now is the time for international collaboration of governments to regulate cryptocurrencies by bringing issuers and intermediaries of cryptocurrency securities into compliance.