Nigeria stock market is second-best

E kaaro o, Ututu Oma, Barka da Safiya - Good morning, and a warm welcome to ThinkBusiness Nigeria, your Monday – Friday dose of commentary, contexts, and insights on business and economic news that matter to you.

Welcome to a new week.

The graph below shows the dynamics of inflation and the Naira’s exchange rate to the US $ under the President. The labour union has called a strike for tomorrow and it looks like there is not going to be enough in the government tank to prevent this.

Nonetheless, I hope you have a great week.

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Markets

• The benchmark NGX All-Share Index (ASI) increased by 978.20 (1.47%) points to close at 67,527.19, representing a 1-week gain of 3%, a 4-week gain of 3.57%, and an overall year-to-date gain of 31.76%. Dangote Sugar Refinery led the gainers with 10% share price appreciation closing at NGN 60.50 per share, followed by Lasaco Assurance (+10%), Tantalizers (+10%) and National Salt Company (+9.99%).

• Oil prices rose on Friday to their highest in over half a year and snapped a two-week losing streak, buoyed by expectations of tightening supplies. Saudi Arabia is widely expected to extend a voluntary 1 million barrel per day oil production cut into October, prolonging supply curbs engineered by the Organization of the Petroleum Exporting Countries (OPEC) and allies, known collectively as OPEC+, to support prices. Russia, the world's second-largest oil exporter, has already agreed with OPEC+ partners to cut oil exports next month, Deputy Prime Minister Alexander Novak said on Thursday. Brent crude settled US $1.66, or 1.9%, at US $88.55 a barrel. Earlier it gained to a session high of $88.75 a barrel, the highest since Jan. 27.

• Naira gained at both the I&E Window and on the streets. At the I&E exchange, Naira appreciated by 2.93% to close N740.38 to the US dollar. Similarly, in the street market, the Naira was up by 0.90%, reaching a value of N915 against the US dollar.

• U.S. natural gas futures were little changed on Friday. Front-month gas futures for October delivery on the New York Mercantile Exchange fell 0.3 cents, or 0.1%, to settle at US $2.765 per million British thermal units (mmBtu). For the week, the front-month was up about 9% after falling less than 1% last week.

Nigeria stock market second-best performing Exchange in Africa in three months

In the three-month period of June – August 2023, the Nigerian Exchange Limited (NGX) has emerged the second best-performing stock exchange in Africa, after Ghana Stock Exchange, according to African Markets. Ghana Stock Exchange recorded 22.84% while NGX recorded 19.33% and followed by Malawi Stock Exchange at 15.79%.

 In August at the All-Share Index (ASI) rose from 64,337.52 basis points to 66,548.99, showing gains of 2,211.47 basis points or 3.44%, while year to date is 31.76%.

This surge in market performance and capitalization to a 15-year high can be attributed to various factors, including investor interest in low, medium, and high-capitalized stocks across key sectors, key macroeconomic reforms, and strategic positioning by investors to leverage recent record earnings posted by quoted firms, and the formation of the country's economic cabinet and executives.

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National Headlines

• Nigeria’s refining record – Organization of Petroleum Exporting Country (OPEC) says Nigeria has the least refining capacity of its members, 10,600 average bpd in five years. According to the latest OPEC Annual Statistical Bulletin, Nigeria refined a total of 56,000 barrels between 2018 and 2022.

• Anchor Borrowers as largesse – The Central Bank of Nigeria’s (CBN) anchor borrowers’ loan has gone the way of most subsidies in government – seen as largesse by recipients. From the N1.1 trillion disbursed by the CBN since it started, only N546 billion have been repaid. There are different levels of performance by different producer associations. While the Maize Producers Association took a loan of N39 billion and repaid N23 billion, Cotton farmers took a loan of N14 billion and N5 billion repaid so far. While the President has asked that the loans be recovered so genuine farmers can have access, the extent of default is still not very clear because there are no details of the time span of the loans, and whether these figures are outstanding loans that are still being serviced.

• Phasing out tax waivers – As part of its fiscal policy development under President Bola Ahmed Tinubu, the government will review its tax waivers, towards reducing the volume of tax waivers granted to companies. It has reached N6 trillion a year. Taiwo Oyedele, the chairman of the Presidential Tax Reform Committee hinted this. Also, some companies that previously enjoyed the pioneer status tax waivers in the region of N2.4 trillion will lose out.

Global Headlines

• US $50 billion Aramco shares for sale – It is widely reported over the weekend that Saudi Arabia’s national oil company Aramco is looking at offering another US $50 billion worth of shares to private investors. If successfully executed, it will be the largest stock offering in history. The offering is planned for the Riyadh Stock Exchange. Saudi Aramco is the world’s largest oil company, with a market value of $2.25 trillion. Its shares are up 20% this year

• US unemployment up in August – The US unemployment went up in August to 3.8%, highest since February. The US job market till now has shown tremendous resilience and this is the first indicator that labour market conditions may be easing. The US Fed will meet later this month’s September 19 – 20 to review interest rates.

• Canada economy contracted – Canada's economy contracted Q2 2023 by 0.2%, latest data showed. The Q2 data came lower than the Bank of Canada’s forecast of 1.5% and 1.2% by analysts. The Canadian economy may already have fallen into a modest recession and the current figures leave little doubt that the Bank of Canada will keep interest rates unchanged next week.

This Week

• Thursday, Sept 7, 2023, the National Bureau of Statistics (NBS) is expected to release the Nigeria foreign trade statistics for Q2 2023. The first quarter shows that Nigeria’s export slightly increased by 2% while imports stood at N5.56 trillion, with petrol accounting for 79.4% of total imports in the review quarter.