EUR 106.04 For Business Accounts Only

Breakfast Report - 8 August 2016

• According to the NNPC Monthly Oil & Gas report, NNPC recorded a N26.51 billion trading deficit in June compared to the N274 million surplus in May. This was driven by lower PPMC petroleum product revenues (down 13.3% or N14.9 billion m/m) and higher production distribution costs. We recall the spike in revenues recorded in May was largely due to increased PMS prices (of about 67%). Crude oil & Condensate production was down 12% m/m to 1.69 mbpd as at May (reported period). Also, vandalism remained a problem with about N20 billion lost revenue from the SPDC Force Majeure and shutdown at Forcados terminal. In June, combined capacity utilization at 12.4% (vs 16.03% in May) with Kaduna refinery operating at 0% (vs 19% in May), Warri operating 24.43% in June (May: 14.25%), PH at 11.78% (May: 15.53%) – which led to lower production. Furthermore, power generation was down from 2,017MW to 1,483MW in June due to much lower gas supply to power plants. From the foregoing, N56 billion was remitted to the Federation Account (compared to the N65 billion in May) and N49.78bn to JV cash calls.
• The Asset Management Corporation of Nigeria (AMCON) has revealed that it made a loss of N304.35 billion in 2015, surpassing losses of N275.49 billion made in 2014. The larger loss was attributed majorly to a write down in the value of collaterals on its bad loans and partly to interest payments on N3.8 trillion bond due to the CBN. AMCON also revealed that its Non-Performing Loans spiked to 93% up from 57% in 2014 as the adverse state of the economy stalled debt servicing by debtors.
• The Nigerian equity market traded mostly lower in the past week with all key sectors closing in the red for the first three sessions. After a brief snap in the downtrend, the NSE retreated at week close amidst bearish investor sentiment and thin volume trades, putting the ASI week-to-date and year-to-date returns at -2.09% and -4.25% respectively.

• We expect mixed trading pattern to persist in the equity market as investor appetite remains lukewarm.