CAPITALDIGEST DAILY NEWS 16 AUGUST 2021

MONDAY 9/8/2021 – PETROL LANDING COST HITS N249/LITRE, DEREGULATION REMAINS UNCERTAIN The landing cost of Premium Motor Spirit (petrol) imported into the country has increased to a new high of N249.42 per litre on the back of high global crude oil prices. The further rise in the landing cost of petrol means increased subsidy as the pump price of the product remains steady at N162-N165 per litre. Petrol subsidy, which was removed in March 2020, resurfaced earlier this year as the government has left the pump price of the product unchanged since December despite the increase in global oil prices. The Nigerian National Petroleum Corporation, which has been the sole importer of petrol into the country in recent years, has been bearing the subsidy cost since it resurfaced. While marketers have continued to stress the need to allow market forces determine the pump price of petrol and do away with subsidy, it remains uncertain whether the discussions between the Federal Government and labour unions will lead to the deregulation of petrol price. An analysis of data collated by our correspondent on Sunday showed that the landing cost of petrol rose to N249.42 per litre on July 30 from N240.17 per litre as of June 25. The Petroleum Products Pricing Regulatory Agency had in March this year released a pricing template that indicated the guiding prices for the month. The template, which showed that petrol pump price was expected to range from N209.61 to N212.61 per litre, was greeted with widespread public outcry and was later deleted by the agency from its website. The pump price of petrol has remained at between N162 and N165 per litre at many filling stations in Lagos since December. The template, which was based on an average oil price of $62.22 per barrel for February and an exchange rate of N403.80 to a dollar, showed that the landing cost of petrol was N189.61 per litre. In May, the Central Bank of Nigeria devalued the naira as it adopted the NAFEX exchange rate of N410.25 per dollar as its official exchange rate, days after removing the N379/$ rate from its website. The price of crude oil, which accounts for a large chunk of the final cost of petrol, has continued to rise in recent months, with Brent, the international oil benchmark, increased to $77.72 per barrel on July 30. It, however, closed at $70.70 per barrel last Friday. Based on the PPPRA template and Platts data, the expected pump price of petrol rose to N272.34 per litre on July 30 from N263.09 per litre as of June 25. The expected retail price of N272.34 per litre and the current pump price of N162 per litre indicate a subsidy of N110.34 per litre as of July 30, compared to N101.09 per litre on June 25.     TUESDAY 10/8/2021 – ANTICIPATED $3.4BN SDRS FROM IMF, $6.2BN EUROBOND ISSUANCE LIFT NAIRA AT BDC, PARALLEL MARKETS Despite the suspension of supply of foreign exchange sales to Bureau De Change (BDCs) by the Central Bank of Nigeria (CBN, the naira strengthened against the dollar at the BDC and parallel markets by 0.98per cent and 1.35per cent last week to close at N505 and N510 respectively. However, the naira at the Investors & Exporters Foreign Exchange (I & E FX) window in its week-on-week (WoW) performance depreciated by 0.01 per cent to close at N411.5 against the dollar from N411.4 4 it opened for trading last week. Analysts believe the speedy appreciation of the local currency against the greenback– which earlier touched N525 against the dollar after the CBN’s announcement – may have been caused by the expectation of foreign currency inflows from Eurobond issuance of $6.2 billion and the anticipated $3.4 billion Special Drawing Rights (SDRs) from International Monetary Fund (IMF). Naira at the CBN window last week traded flat at N409.11 against the dollar at buying rate and N410.11 against the dollar at Selling rate. On the flip side, the naira at the CBN window appreciated by 0.33 per cent to N569.52 against the pound sterling at buying rate in week-on-week (WoW) performance from N571.39 against the Pound sterling in prior week’s trading, and also gained 0.69 per cent to N483.04 against the euro at buying rate prior’s week exchange rate transaction. It was learnt that the CBN injected $210 million into the foreign exchange market with a breakdown of $100 million allocated to Wholesale Secondary Market Intervention Sales (SMIS), $55 million was allocated to Small and Medium Scale Enterprises and $55 million was sold for invisibles. Despite the CBN intervention, the foreign reserves increased to $33.57billion as at August 5, 2021 from $ 33.40billion it closed in June. Reacting, analysts at Cowry Assets Limited noted that, “In the new week, on the back of the anticipated dollar inflow and recent accretion to the external reserves – foreign exchange reserves rose w-o-w by 0.48per cent to close at $33.5 billion –, we expect Naira to further strengthen against the greenback at most foreign reserves segments, especially at the parallel market.”   WEDNESDAY 11/8/2021 – FIXED INCOME, FX MARKETS SUSTAINS MOMENTUM RECORDING N15.31TRN, $10.12BN TURNOVER IN ONE MONTH Investors’ interest in the fixed income and currencies markets has continue to soar as both markets recorded significant increase in turnover in June 2021, a report by FMDQ OTC limited has revealed. Analysis of the report revealed that fixed income markets recorded a turnover of N15.31 trillion for the month ended June 30, 2021, representing a month-on-month (MoM1) increase of 49.51 per cent to N5.07trillion and a year-on-year (YoY2) decrease of 7.04 per cent (N1.16trn). The report revealed that foreign exchange (FX) and money market transactions were the highest contributors to the fixed income markets turnover in June 2021, jointly accounting for 64.18 per cent of the total fixed income markets turnover. Similarly, the FX market recorded a turnover of $10.12bn (N4.16trillion), in June 2021, representing a MoM increase of 38.44 per cent ($2.81billion) from the turnover recorded in May 2021 ($7.31billion). According to FMDQ, the MoM increase in total FX market turnover was jointly driven by the 17.90 per cent ($0.75billion) and 65.73 per cent ($2.06billion) increase in FX Spot and FX Derivatives turnover respectively in June 2021. The MoM increase in FX Derivatives turnover was driven by MoM increase in turnover across all derivative products, as FX Swaps, FX Forwards, FX Futures and Other Derivatives turnover increased by 88.07 per cent ($0.92bn), 19.80 per cent ($0.26billion), 118.18 per cent ($0.51billion) and 106.84 per cent ($0.37billion) respectively. “In the OTC FX Futures market, the near month contract3 (NGUS JUN 30, 2021) with a total outstanding notional value (NV) of $0.29billion matured and was settled, whilst a new long-term (60M4) contract, NGUS JUN 24, 2026 was introduced at a Futures price of $/N613.76. The total NV of open OTC FX Futures contracts as at June 30, 2021 stood at circa (c.) $4.25bn5 representing a MoM increase of 7.32 per cent ($0.29billion) from its value as at May 31, 2021, and a reversal in the downward trend witnessed since May 2020, “it stated. On the currency front, the report revealed that the Naira depreciated against the U.S.   THURSDAY 12/8/2021 – NAIRA TUMBLES TO 515 AS DOLLAR SCARCITY PERSISTS The naira pared some of its recent gains against the dollar at the parallel market on Wednesday amid the lingering scarcity of the greenback in the country. The local currency fell to 515 against the dollar at the parallel market from 510 on Tuesday. The naira had strengthened to 506/$ on August 4 after plunging to 525/$ at the parallel market on July 28, a day after the Central Bank of Nigeria stopped foreign exchange sales to Bureaux de Change. It had been hovering around 508/$ and 510/$ in recent days. The CBN Governor, Mr Godwin Emefiele, had on July 27, at the end of the Monetary Policy Committee meeting, announced the stoppage of forex sale to the BDCs, saying they had turned themselves into ‘agents that facilitate graft and corrupt activities of people who seek illicit fund flow and money laundering in Nigeria’. He said the CBN would channel a significant portion of its weekly allocation currently meant for BDCs to commercial banks to meet legitimate forex demand for ordinary Nigerians and businesses. At the Investors and Exporters’ window, the naira, however, strengthened by 0.02 per cent to close at 411.40/$ on Wednesday, according to FMDQ Group. The PUNCH had reported on Monday that foreign exchange transactions at the I&E window declined by 17.2 per cent last week, citing data from FMDQ Securities Exchange Limited. The total value of transactions at the I&E window stood at $489.85m last week, down from $590.34m the previous week. The FMDQ data also showed that forex turnover at the window, where more than half of Nigerian forex transactions are traded, fell to $2.81bn in July from $3.01bn in June. It said the total turnover in the forex spot and derivatives markets was $677.44m, representing a decrease of 24.93 percent ($225.01m) from $902.45m reported for the previous week.   FRIDAY 13/8/2021 – STOCK MARKET EXTENDS GAINING STREAK, GAINS N21.6BN The equities market of the Nigerian Exchange Limited rose on Thursday for the fourth straight day as investors gained N21.67bn by the end of trading. Interest in large-cap stocks saw the NGX All-Share Index rise by 0.11 per cent to 39,490.06 basis points from 39,448.46bps the previous day, despite 24 stocks recording losses as against eight gainers. The market capitalisation increased from N20.55tn on Wednesday to N20.57tn at the end of trading on the floor of the NGX on Thursday. Honeywell Flour Mills Plc topped the gainers’ list with a 10.00 per cent increase to N1.87 per share. Wema Bank Plc was second as it rose by 3.95 per cent to close at N0.79 per share. AIICO Insurance Plc’s share price appreciated by 2.11 per cent.  Guaranty Trust Holding Company Plc (+1.07 per cent), Zenith Bank Plc (+0.41 per cent) and Dangote Cement Plc (+0.67 per cent) also recorded gains on Thursday. Tripple Gee and Company Plc decreased by 9.28 per cent, closing at N61.75 per share. It was followed by Regency Alliance Insurance Plc, which fell by 8.51 per cent to N0.79 per share. Other major losers were Prestige Assurance Plc which saw an 8.33 per cent decrease, Japaul Gold & Ventures Plc (7.84 per cent) and NEM Insurance Plc (6.34 per cent).