Culled—Proshare

October 10, 2016/FDC

Brent oil, the proxy for bonny light crude crossed the $50pb level to $52pb. This will effectively boost Nigerian oil revenue by approximately 8.7%.

Coincidentally, the naira appreciated by 1.05% in the parallel market to N470/$.

Flour millers have jacked prices up 1.8% to N11,000 per 50kg. This means that you are most likely going to be paying more for a loaf of bread very soon.

Burning Economic Issues

• Nigeria announced a 16% increase in budget 2017 at N6.86trn

• In U.S dollar terms – 25% lower than 2016 budget

• Deficit projected at N2.7trn

• FGN offers 2 presidential jets for sale

• 8 institutions shortlisted as advisers for the $1bn Eurobond issue

• Naira appreciates to N470/$ – Parallel market

• Banks buying to cover short position resulting from NNPC refund

• Airlines offering seasonal promos & discount fares

Impact on Commodity Prices
• Staple food prices ease on expected bumper harvest

• Imported food items remain sticky downwards

• Nigeria’s rice consumption projected at 5.25mmt

• 50% higher than local production

• Diesel prices flat at N190/liter

Domestic Commodity Prices

Consumer Goods – No Change

Stock Market
•NSE ASI down marginally by 0.70% to close at 27,835.2pts

•Weak trading in the equities market

Oil Market Today

Oil Prices touches 4-month high

• Brent crude 2.97% to $52.38pb

• WTI 2.24 % to $49.78pb

• OPEC’s optimism to stabilize oil market supports prices

• U.S crude stockpile down by 3mb

• Declining for the 5th consecutive week, despite refineries seasonal maintenance

• Gasoline inventories up 220,000 barrels, distillates stockpile down 2.4mb

Outlook
• We expect prices to hover around $48pb – $51pb

• Details on OPEC oil deal will be discussed in Vienna meeting next month

• Prospects of increased output from Iran, Nigeria and Libya may exceed new target range (32.5 – 33mb/d)

• Traders will keep a close watch on rising U.S rig counts

Grains

• Grain futures are determined by weather patterns and supply/demand dynamics

• Record high global inventories will weigh on prices

Soft

SUGAR

• Production in India (a net importer) is expected to decline by 6.8% to 23.4mt in 2016/17

COCOA

• Prospects of favourable weather conditions in West Africa will ease prices