EUR 140.56 For Business Accounts Only

Breakfast Report - 24 October 2016

• Amidst a rise in inventories, the Nigerian National Petroleum Corporation last week cut the official selling prices (OSPs) of a number of its crude grades in a bid to become more competitive in the global oil market. Specifically, the premium on Qua Iboe and Bonny Light over Dated Brent were cut to $0.17 (prev: $1.07) and $0.07 respectively whilst the discount on Forcados was increased to $0.41, according to the price list. The price cut comes on the heels of complaints from Nigeria’s crude marketers about high OSPs. After hitting a 15-month high last Wednesday on the back of an output curb deal by OPEC, oil prices retreated last Friday following Nigeria’s price cut and after Russia said it could boost production. In a related development, the World Bank raised its oil price forecast for 2017 to $55 per barrel (prev: $53 per barrel), citing the growing likelihood of the OPEC agreement to freeze production levels.
• • Meanwhile, the September FAAC allocation fell to ₦420 billion, representing an 18% m/m decrease. The Permanent Secretary of the Federal Ministry of Finance - Dr. Mahmoud Isa-Dutse attributed this to a shock in crude oil volumes owing to attacks on oil facilities and pipeline vandalism. He further stated that allocations from Value Added Tax and Customs duty collection also slumped compared to August.
• The Nigerian bourse traded lower for the first three sessions amidst thin market volumes as investors trod waters ahead of major earnings releases. However, market sentiment turned on Thursday, particularly in the banking sector following investor reaction to 9M’16 earnings (PAT up 60% y/y) of Guaranty Trust Bank PLC. Also, during the course of the week, Mobil Oil Nigeria PLC announced Exxon Mobil’s (its majority shareholder) decision to sell its 60% equity stake to NIPCO Investments Limited. At week close, the NSE ASI traded flat amidst investor reaction to CADBURY’s 9M’16 earnings (net loss: ₦842 million). Overall, the NSE ASI posted w/w decline of 95bps with ytd loss extended to 3.65%.
• Whilst we observe that Friday’s market turnover returned to the low levels typical of the past week, we note that investors remained quite active on GUARANTY (accounted for 30% of market trade) following impressive 9M’16 earnings. We think this market pattern will persist in the week ahead as investors react to earnings release.