EUR 132.56 For Business Accounts Only

Breakfast Report - 04 October 2016

• The Organization of the Petroleum Exporting Countries (OPEC) agreed on Wednesday to cut oil output to between 32.5 and 33 million barrels per day (bpd) from current levels of around 33.5 million bpd (according to Reuters estimate), with minutiae of the deal (including timing, quotas for member countries, and how compliance will be verified) to be announced after its policy meeting in November. According to the Petroleum ministry, Nigeria has been exempted from the OPEC production curbs as a result of recent negative production shocks. With the deal likely to lead to a modest recovery in oil prices, we highlight that the agreement should translate to a boost in Nigeria’s oil revenues, although this could potentially be mildly offset by local production challenges. We recall that oil prices began their free fall from 2014 levels due to weak global economy growth, supply glut and OPEC refusal to cut output. Following this, Nigeria has seen a significant fall in oil revenues which accounts for about 90% of FX earnings and 85% of government revenues.
  
  
• Meanwhile, the President, African Development Bank (AfDB), Dr. Akinwumi Adesina, disclosed that the AfDB is set to lend a total of $4.1 billion to Nigeria over the next two years which will include a loan of $1 billion at a concessionary interest rate of 1.2% to address the 2016 budget imbalance and help revive Nigeria’s ailing economy. He further stated that the bank expects its loan portfolio in Nigeria to grow to $10 billion by 2019 and the funds will be directed towards power, agriculture, infrastructure development and SME financing.
  
  
• The Nigerian bourse traded sideways in the past week with the NSE ASI hovering around the flatline for most part of the week following mixed performances across key sectors. However, the market closed 31bps higher on Friday buoyed by advances in a number of bellwether stocks. Overall, the ASI posted w/w gains of 0.31% with ytd loss pared to 1.07%.
  
  
• Noting that the ASI would have closed lower but for the surge in NB late in Friday’s session, coupled with market breadth turning widely negative at the end of the week, we believe a bearish start to this week is the most likely outcome when markets resume Tuesday following the Independence Day holiday (Monday).