Saturday, April 30, 2022 / 06:50 AM / Proshare Content / Header Image Credit: EcoGraphics

Nigeria: Economic Dashboard @ 290422

Editor's Note

Source: Proshare Research - April 30, 2022

Nigeria Economy

• The Minister of Mines and Steel Development while briefing the press on the concession of the delineated Nigerian bitumen blocks project stated that the federal government has appointed a transaction advisor, PricewaterhouseCoopers, to oversee the process. According to the Minister, as the country is preparing to begin the production of bitumen locally the cost of road construction in the country would ultimately go down.
• The Federal Government on Monday announced that it had identified preferred/reserved bidders for 12 federal highways up for concession under the Highway Development and Management Initiative. It said this was following the conclusion of the evaluation of the proposals submitted for phase one of the value-added concession under the HDMI. The 12 highways comprise 1,963km or 5.6% of Nigeria's 35,000km federal highways. 
• The International Monetary Fund (IMF) will be committing $40 bn to Nigeria and 11 other African economies under the Resilience and Sustainability Trust (RST), which will be operationalized later this year. The Resilience and Sustainability Trust would be funded by Special Drawing Rights (SDRs) channeled from donor countries. The RST is meant to provide affordable financing to address longer-term challenges, including climate change and pandemic preparedness. 
• The Federation Accounts Allocation Committee shared a total sum of N725.57bn among the three tiers of government, as federal allocation for the month of March 2022. This indicates a 23% increase from the N590bn that was shared by the three tiers of government in February. The Federal Government received N277.10bn, States received N227.2bn while the local government areas got N167.91bn. It was further disclosed that the total revenue of N725.57bn was drawn from Statutory Revenue of N521.16bn (collected at a cost of N35.63bn) and Value Added Tax of N204.40bn (at a cost of was N8.78bn). 
• According to a recently released National Bureau of Statistics data., the average fare paid by air passengers for specified routes on a single journey increased by 4.43% month-on-month from N44,825.04 in February 2022 to N 46,810.62 in March 2022. Meanwhile, the average fare paid by commuters for bus journey intercity per drop rose by 5.29% month-on-month to hit N3,270.94 in March 2022.

Global Economy

• The US economy shrank at an annual rate of 1.4% in the first quarter of 2022. Economists had expected a 1% rise in GDP. The decline in first-quarter GDP was mostly attributed to declining inventories, an expanding trade deficit, and lower government spending. The White House has downplayed the significance of the GDP fall while blaming the Russian invasion of Ukraine and a statistical quirk relating to inventories. 
• Japan's unemployment rate edged down in March to its lowest rate in almost two years as the easing of Covid-19 restrictions helped the labor market inch closer to pre-pandemic levels. The unemployment rate fell to 2.6% as the number of people working rose by a seasonally adjusted 180,000 from February, Analysts had expected the unemployment rate to hold steady at 2.7%. 
• The Bank of Japan decided on Thursday to maintain the short-term policy interest rate at -0.1%. Meanwhile, the BOJ will continue its yield curve control scheme meant to guide the benchmark yield on 10-year Japanese government bonds to around 0%. In a quarterly report, the BOJ raised its fiscal 2022 inflation forecast. to 1.9%, up from the January projection of 1.1% 
• Australian consumer prices jumped an extraordinary 5.1% in the month of March and 2.1% in the first three months of the year, the biggest quarterly jump since the introduction of the 10% goods and services tax at the start of the century. Together with a record rise in petrol, the new tax pushed Australia's annual inflation rate way above the Reserve Bank's 2-3% target to 5.1% - the biggest annual inflation rate for two decades.
• Review and Outlook

  "We are not going to see stagflation. We are going to see an inflationary boom," Glenn Hubbard, chair of the Council of Economic Advisers under former President George Bush and Columbia University economics professor said in his 2022 US economic outlook on December 10, 2021. Neither Hubbard's outlook nor that of other experts foresaw the Russian invasion of Ukraine and the resultant energy crisis, which has buffeted the US and global economy in the last 60 days. 

  The recently released estimate of -1.4% US GDP growth actually ties in with earlier ques signaling economic worries, from falling trucking demand to an inversion of the yield curve. Despite the optimism of many analysts, having inflation at a record high of 8.5% and a -1.4% GDP contraction, the US economy is indeed experiencing a stagflation.

  Next week, Central bank policy meetings at both the US Federal Reserve and the Bank of England would be held, while global manufacturing and services PMI data for April is also expected to be released.  Inflation figures for Asia-Pacific economies are also due next week. 

  
  

Oil and Gas 

Domestic

• The weekly National PMS Evacuation Report of the NNPC reveals that the average National Daily Evacuation for the two-week ending 17th April 2022 stood at 70.74 million litres with Lagos, Kano, and Niger State as the top three high demand States.
• The latest NBS PMS Price Watch reveals that the average retail price of diesel paid by consumers increased by 129.10% Year-on-Year (Y-on-Y) and 72.87% Month-on-Month (M-on-M) to N539.32 in March 2022 while the average retail price of Household Kerosene rose by 25.27% M-on-M to N564.55. The price increases were driven by the Russia-Ukraine war and the lack of proper pricing regulation.
• The report also reveals that the average price for refilling a 12.5kg cylinder of LPG increased by 2.28% M-on-M to N7,617.71 in March 2022 while the average price for refilling a 5kg cylinder of LPG increased by 1.88% M-on-M to N3,778.30 in March 2022.
• The latest World Bank Commodity Markets Outlook discloses that Nigeria has the largest oil production shortfall (at 500,000 mb/d) in Q1 2022 among oil-producing countries due to oil sabotage, low investments, and the COVID-19 pandemic.
• According to Rystard Energy research, Nigeria and Angola recorded a decline of over 2 million tonnes of CO2 in offshore flaring due mainly to oil production shortfalls.
• Deloitte, in its energy market outlook for 2022, notes that higher oil prices would boost energy transition plans; Environmental, Social, and Governance (ESG) would play a larger role in Mergers & Acquisitions transactions; and business models would shift to enable a new energy era in the energy market.
• On Thursday, the Minister of State for Petroleum Resources, Timipre Sylva, emphasized the need for Africa to establish an African Energy Bank (AEB) to address its energy poverty in line with SDG 7.
• According to Bloomberg, TotalEnergies is ready to offload its 10% interest in a firm that holds 20 onshore and shallow water permits in Nigeria, reflecting the energy giant's exit from onshore oil fields in the country. 

Foreign

• Oil prices slumped to about two-week lows on Monday, extending losses from last week, as concerns grew that prolonged COVID-19 lockdowns in Shanghai and potential U.S. rate hikes would hurt global economic growth and demand for fuel.
• A Rystard Energy Report has suggested that the global oil demand will drop by 1.4 mb/d to an average of 99 mb/d in 2022 down from the 100 mb/d in 2019. The decline was projected to come from the Russian invasion of Ukraine, soaring inflation, China's covid-induced lockdowns, and supply chain disruptions.
• OPEC also cut its 2022 oil demand growth forecast by 480,000 b/d on lower-than-expected global economic growth given the war in Ukraine and China's covid lockdowns while International Energy Agency (IEA) cut its oil demand forecast by 260,000 b/d on severe covid-19 lockdowns in China.
• Libya's Prime Minister-designate, Fathi Bashagha, has disclosed that Libya's oilfields currently under force majeure may reopen within days as tribal representatives in the Oil Crescent region and the protesters have agreed to allow production and exports to resume.
• Russian energy giant, Gazprom, on Wednesday, said it has halted gas supplies to Bulgaria and Poland for failing to pay for gas in roubles, the toughest Kremlin response to the crippling sanctions imposed by the West for its invasion of Ukraine.
• Saudi Arabia may cut its crude prices for grades sold to Asia in June after benchmarks slumped from record highs in the previous month as COVID lockdowns curbed demand and weakened refining margins in the world's biggest crude importer- China.
• Iran's oil exports rose by 30% from last year to 870,000 b/d in Q1 2022 as the main Iranian crude buyer, China, is cutting back on imports of Russian oil.
• Oil prices were mixed on Friday as China's COVID-19 lockdowns weighed on the outlook for crude demand, although supply disruption fears as Western sanctions curb crude and product exports from Russia underpinned prices.
• Brent had a weekly growth of +2.89% (see Table 1).

Metals

Gold dropped by -1.45% while Silver dipped by -5.14% W-o-W (see Table 1).

Agriculture

• Cocoa prices inched up by +1.14% W-o-W.
• Corn prices inched up by +4.12% W-o-W while Sugar prices dropped by -0.31% .

Outlook

• In the coming week, oil prices are expected to grow as supply disruptions continues to push the prices up.
• Gold price is expected to drop in the coming week amid expectation of the Federal Reserve interest rate decision as it focuses on tacking inflation.
• Cocoa prices are expected to drop as global demand stabilizes
• Sugar prices are expected to rise in the coming week as major exporter, Brazil, experiences drop in sugar cane crushing.
• Corn prices are expected to rise as demand still outpaces supply.

Fixed Income and Money Market 

Currency Market

At the close of the market this week, Naira depreciated both at the I & E FX window and the NAFEX window.

On Friday, the naira depreciated by 16 basis points W-on-W to close at N419.00/$1 at the I & E window and depreciated by 19 basis points W-on-W at the NAFEX window

Money Market 

Interbank rates settled higher this week as liquidity levels remained depressed, causing rates to move in double digits.

At the close of the trading on Friday, funding rates closed at 12.25 and 12.50 for the Open repo rate (OPR) and overnight rate (O/N) respectively, indicating a W-on-W increase of +116.05% for OPR and +150.00% for O/N 

We expect funding rates to trade in double digits in the coming week on the expected tight liquidity situation in the system.

We expect yields in the TB market to increase in the coming week given an expected tight liquidity situation in the market.

FGN Bond Market

The bears dominated the FGN bond market this week as negative sentiment was seen across the board, pushing yields upward.

At the close of trading on Friday, the overall average benchmark yields closed at 11.53% indicating a W-on-W increase of +3.50% (

Treasury Bills Market

The bills market was mixed this week, with the yield in treasury bills falling while average benchmark yields for OMO bills edging upward at the close of trading this week.

At the close of trading on Friday, the average benchmark yield for T-bills declined by -0.83% W-o-W to 3.60 while OMO bills saw some sell-off this week as yield rose by +5.97% W-o-W to 4.08.

Nigerian Capital Market