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WEEKLY MARKET UPDATE

Local Economic Updates

Last week, the Petroleum Products Marketing Company (PPMC) estimated that the annual subsidy on Premium Motor Spirit (PMS) could soar as high as N2.9 trillion by the end of the year thus making it increasingly obvious that the subsidy regime in the downstream oil sector continues to constitute a drag on the Federal Government budget.

The massive subsidy bill was met by condemnations by the World Bank’s Country Director for Nigeria (Shubham Chaudhuri), but expectations see the implementation of the Petroleum Industry Act bringing with it a gradual deregulation of the downstream oil sector and the complete elimination of PMS subsidies by the second half of 2022.

Also, the Major Oil Marketers Association of Nigeria disclosed that the landing cost of Automotive Gas Oil (Diesel) has increased to N336.45, stakeholders expect this increase to also reflect on the pump price of diesel in the near term.

Elsewhere, the Chinese Ambassador to Nigeria, Cui Jianchun, disclosed China’s interest in further boosting the trade and commerce relations with Nigeria. The Ambassador also disclosed that plans directed towards establishing Chinese financial institutions in Nigeria and vice versa are already in motion between the CBN and China.

The Federal Executive Council (FEC) granted approval to the Nigerian National Petroleum Corporation (NNPC) to embark on a N621.23bn project for the reconstruction of 21 federal roads (covering a distance of 1,804.6km) across the six (6) geopolitical zones of the country.  The projects are to be undertaken by the NNPC through the deployment of its own tax liabilities.

Global and Emerging Market Economic Updates

In the U.S., the real growth rate slowed in Q3’21, as data from the Commerce Department revealed the weakest growth rate of the nation’s pandemic-era recovery. The economy grew at an annualised rate of 2% in the review period, falling shy of the 2.80% Dow Jones estimate, and printing below a 6.70% growth rate recorded in the preceding quarter (Q2’21) on the back of COVID-19 Delta Variant alongside a lingering global supply chain bottleneck that stifled the growth in the consumer spending to a mere 1.60% in Q3’21, when compared with a 12.00% growth recorded in Q2’21.

Also, the Personal Consumption Expenditure (PCE) index soared to one of the highest levels in over three decades. The Headline index rose by 4.40% YoY in Sept’21, relative to a 4.30% uptick recorded in the preceding month, while the monthly increase for the review period stood at 0.30%. Food and energy prices continue to buoy the headline index increase, with both categories rising by 4.10% and 24.90% respectively.

Elsewhere, the UK’s Office of Budget Responsibility (OBR) raised its GDP growth forecast for 2021 to 6.5% from 4.0% as Finance Minister Rishi Sunak unveiled plans to boost infrastructure spending while lowering corporate tax rates for some industries hit hard by the pandemic.

In the oil market, Brent crude declined by 2.12% w/w to $83.72/barrel, suffering its first weekly dip in ten weeks, amid speculation of increased Iranian supply and a bigger-than-expected increase in U.S. crude inventories, which rose by 4.3m barrels.

The Nigerian Equities Market

The NGX ASI closed the week in green by 0.66% as it closed positive in 3 of the 5 trading sessions during the week as a result of buy pressures in bellwether stocks such as GUINNESS (+23.05%) and TOTAL (+17.52%). Consequently, at 42,038.60 points, the equities market’s Year-to-Date return improved to 4.39% as market capitalisation increased by 0.69% to close at N21.94 trillion.

Market breadth (a measure of investor sentiment) strengthened last week, increasing from 0.94x to 1.88x as 47 stocks appreciated against 25 stocks that declined. UPL and AIICO topped the market gainers with 44.67% and 31.91% WoW respectively, while GLAXOSMITH and FTNCOCOA were the top laggers with declines of 12.86% and 10.20% respectively WoW.

The activity level strengthened as the trade volume and value increased by 91.76% and 87.92% respectively WoW. A total turnover of 3.001 million shares worth N34.547 billion in 25,932 deals were traded during the week by investors on the floor of the Exchange. Trading in the top three equities by volume were ETERNA, FBNH and TRANSCORP. They accounted for 1.731 billion shares worth N19.681 billion in 4,207 deals; contributing 57.66% and 56.97% to the total equity turnover volume and value respectively.

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