Reinforcing data from OPEC’s monthly oil market report, S&P Global Platts Survey showed that OPEC countries fell short of their aggregate production targets by 700,000bpd in January.

Last week, petrol stations in Nigeria saw abnormal queues due to shortage of petrol supply, after over 100.0m litres of adulterated petrol had to be recalled. However, the Chief Executive Officer, NMDPRA, disclosed the arrival of 300.0m litres of PMS in six vessels, to close supply gap.

Furthermore, Britannia-U, a company accused by the NNPC MD of importing the off-spec petrol, has stated that its vessels were duly certified as meeting NNPC product specifications. Investigations to identify the fault lines in the supply chain, and chain of command, are ongoing.

Also, transporters of Premium Motor Spirit, popularly called petrol, on Thursday alleged the nationwide scarcity of PMS was in part due to the gradual halt in the operations of truck owners. According to them, many PMS transporters have stopped transporting the commodity, while more will soon park their trucks if the government remains adamant in refusing to increase the freight rate for transporting petrol.

The International Monetary Fund (IMF) called on Nigeria to engage in significant domestic revenue mobilization, by further increasing the value-added tax rate, improving tax compliance, and rationalizing tax incentives.

Additionally, in its Article IV consultation with Nigeria, It advised the country to fully remove fuel subsidies and move to a market-based pricing mechanism as stipulated in her Petroleum Industry Act (PIA). It advises that higher debt service to government revenues threaten fiscal sustainability.

Following the conclusion of the Banker’s Committee meeting, the CBN governor announced the introduction of a new FX policy called “RT200 FX Programme”. More details in the FX segment of this report.

In the coming week, we expect the National Bureau of Statistics (NBS) will release the Jan-2022 inflation report which should give indications on if the uptick recorded in Dec-2021 is an exception or a new trend of upward inflationary pressure. From our forecast, we expect inflation numbers will print lower by 45bps to print at 15.2%, supporting the former.

Global Markets: Global equities market record mixed performance

Developments across the global equities market in the past week was mixed as more divergent factors prevailed in different countries. In the US, the Bureau of Labour Statistics released the January inflation report showing that US inflation outpaced consensus expectation of 7.2%, to print at a 40-year high of 7.5% y/y. This sparked fear of emergency rate hikes. Fanning the flames, St Louis Fed President, Bullard (a FOMC voter) stated he supports a 100bps hike in benchmark interest rates by the end of July, including one 50bps hike in that timeframe. This roiled markets, erasing positive sentiments that trailed Dr Fauci announcement that the US was exiting “full blown” pandemic phase. Finally, US stocks plunged on Friday after National Security Adviser, Jake Sullivan acknowledged that there exists a distinct possibility that Russia could invade Ukraine before the end of the Olympics. Overall, all the major benchmark indices, S&P 500 (-1.8% w/w), DJIA (-1.0% w/w) and NASDAQ Composite (-2.2% w/w) closed the week southwards.

In Europe, sentiments were broadly different as European markets clawed back some of last week’s losses despite negative macroeconomic developments. Last week, the European Union (EU) revised its growth expectation for the eurozone lower by 0.3ppt, to 4.0% y/y from the 4.3% y/y it had forecasted three months ago. According to the EU economy commissioner, Paolo Gentiloni, soaring energy prices and persistent supply-chain disruptions remain headwinds that will continue to weigh on the region’s growth, slowing down post-pandemic recovery. Despite the somewhat downbeat revisions, the pan-European STOXX 600 index closed the week higher by 1.6%. Similarly, key European markets recorded a decent close to the week with the German’s XETRA DAX (+2.2% w/w) leading the pack while the UK FTSE (+1.9% w/w) and French CAC 40 (+0.9% w/w) both trailed.

In Asia, market proceedings were mixed as the Chinese market resumed from the holidays in upbeat mood with the Shanghai composite surging 3.0% w/w, from a six-month low inflicted by policy-normalization-induced selloffs. Similarly, the Japanese market consolidated the prior week’s profits, gaining 0.9% w/w. On the other hand, equity market in India remained in selling mood as the SENSEX shed 0.8% w/w.

Global oil prices continue to show strength as Brent crude rallied to close the week at $94.44/bbl., gaining 1.3% w/w. The sustained increase in oil price has been due to growing tensions between Russia, Ukraine, and the West. In addition, inability of OPEC+ members to meet its production increase targets amid rising oil demand have left the oil market tighter than in recent years.   

Our expectations for the global equities market remains downbeat and we prefer to underweight FX-denominated equities particularly in the US. Unease regarding policy normalization across global economies as well as unabating Russia, Ukraine and Western forces crisis would remain fear points for investors in the next months. That said, we do not totally rule out investing in foreign equities preferring a case-by-case basis to creating fresh exposures.

Domestic Equities: Losses in large caps halt bullish run… ASI down 16bps w/w

Last week, losses in large cap counters weighed on what was an otherwise broad bullish performance, halting a six-week bullish run. Investors booked profits in MTNN (-1.1% w/w), SEPLAT (-2.3% w/w) and BUAFOODS (-4.0% w/w), thus denting the positive performance from other smaller-sized companies. As a result, the NGX All-Share Index (NGX-ASI) shed 16bps w/w to settle at 47,202.3 points. Also, YTD return saw similar moderation to close the week at 10.5%, with market capitalisation losing a total of N101.1bn w/w to settle at N25.4tn. Echoing sentiments of profit-taking activities in large cap stocks, activity level was mixed as average value traded rose 15.7% w/w to N4.5bn while average volume traded fell 25.4% w/w.  Reflecting the broad based positive performance in the market, investor sentiment as measured by market breadth, strengthened to 1.4x from 1.2x as 44 tickers appreciated, while 31 depreciated. 

As previously emphasized, overall sectorial w/w performance mirrored the opposite of the benchmark index performance as all five (5) sectors we cover closed in the green. On that note, the Banking Sector (+2.3% w/w) spearheaded the advancement owing to buy pressure in JAIZBANK (+4.5% w/w) and ETI (+3.3% w/w). Lagging behind were the Insurance (+1.5% w/w), Consumer Goods (+1.3% w/w), Oil & Gas (+0.3% w/w), and Industrial Goods sectors (+0.1% w/w) whose gain came on the back of share price appreciation in SUNUASSU (+30.0% w/w), PRESTIGE (+7.1% w/w), GUINNESS (+24.6% w/w), FLOURMIL (+9.7% w/w), TOTAL (+9.9% w/w) and WAPCO (+0.6% w/w).

On corporate disclosure, following media reports listing Oando as one of four (4) importers that supplied methanol-blended Premium Motor Spirits (PMS) into the country, Oando issued a rejoinder to the media reports as a disclaimer to alleged media reports.