Breakfast Report - 08 April, 2019
The Week Ahead
According to media sources, Nosa Okunbor, Managing Director of Shell Petroleum Development Company (SPDC) has said that the Energy giant plans to invest c.$15 billion in Oil & Gas projects in Nigeria over the next five years. Whilst a bulk of this investment is set to come in oil projects (deep offshore, shallow water, swamp and land water terrain), the company is also looking to ramp up its investment in gas infrastructure. Specifically, SPDC has taken a final investment decision on the Assa North Ohaji gas project, which at peak production is expected to generate 300 million scf/day. The gas will be processed at SPDC JV’s processing facility and distributed through the Obiafu-Obrikom-Oben pipeline network. Using Nigeria’s rig count as a metric for tracking investments in the upstream, we note that the level of oil and gas investments plummeted between 2014 and 2016, with the rig count hitting a multi-year low of 4 in 2016. This was consequent to falling oil prices and Niger Delta militants’ attacks on the Trans Forcados Pipeline (TFP) during the two-year period. However, as oil prices began to rebound in 2017 alongside the restoration of the TFP, Nigeria’s rig count consequently showed improvement, averaging 9 and 13 in FY’17 and FY’18 respectively.
Equity: The Nigerian equity market closed the first week of Q2’19 in the red losing 459bps w/w (vs -31bps in the last week of Q1'19). Whilst investor apathy in the Nigerian market has persisted in recent sessions, we expect to see players bargain on appealing price marks across the board this week.
Stock Watch: Bears returned to ZENITHBANK as the stock traded at its lowest price since January 8th. The Tier-I bank shed 73bps on Friday to settle at ₦20.35 after touching its year-high as ₦26.00 towards the end of February 2019.
Fixed Income: In line with recent trend, we do not foresee an OMO auction on Monday and expect buy interest in the treasury bills market. Similarly, driven by attractive bond yields, we anticipate continued demand in the bond market, albeit milder.
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