Braithwaites: Financial & Related News Nigeria

FINANCE:

WE WILL PURSUE EXPANSION POLICIES TO FIGHT RECESSION – CBN

The Governor of the CBN, Mr. Godwin Emefiele, has said the bank will pursue expansionary monetary policies to fight recession because the fiscal policy was already constrained. Mr. Emefiele said this was necessary to curb the rising inflation and address recession in the economy. He said this was part of the resolutions of the Monetary Policy Committee (MPC) meeting held last week. He said the committee was therefore of the view that to abate the pressure, it had no choice but to pursue an expansionary monetary policy using development finance policy tools, targeted at raising output and aggregate supply to moderate the rate of inflation. At present, fiscal policy is constrained and so cannot, on its own, lift the economy out of contraction or recession, given the paucity of funds arising from weak revenue base, current low crude oil prices, lack of fiscal buffers and high burden of debt services. Therefore, monetary policy must continue to provide massive support through its development finance activities to achieve growth in the Nigerian economy. He said the MPC was confronted by policy dilemma and though the MPC felt the primacy of its price and monetary stability mandate, it nevertheless was confronted with what policy direction to focus on, given the contraction in output growth during the Q2 of 2020. He said the Q2 contraction may lead to a recession, if the Q3 of 2020 output growth numbers further show a contraction. It is, therefore, of the view that, if a recession occurs in Q3, the committee would be confronted with proposing policy options in a period of stagflation; and this was because with the recent removal of subsidy on fuel price, the increase in energy prices, and the adjustment of the exchange rate, inflationary pressure would no doubt persist unless MPC considers options that would deal with the pressure aggressively. He said this was the reason the MPC would continue to play a dominant role in the achievement of the goals of the Economic Sustainability Programme (ESP) through its interventionist role to navigate the country towards a direction that would boost output growth and moderate the level of inflation. Mr. Emefiele said given that the currency adjustment was a causal factor in determining the price of petroleum products and energy prices, the MPC believed that the CBN management must take bold actions to stabilize the exchange rate. He said the CBN was further enjoined by the MPC to continue to provide funding to sectors that would resolve the supply constraints in petrol pricing, energy pricing and food availability.

OIL:

BUHARI SUBMITS PIB TO NATIONAL ASSEMBLY, SCRAPS NNPC, PPPRA IN NEW BILL

The President, Muhammadu Buhari has transmitted the much-awaited Petroleum Industry Bill (PIB) 2020 to the National Assembly (NASS) and has proposed the creation of the Nigerian National Petroleum Company Ltd. The bill, which was sighted by our source yesterday, also proposes the scrapping of the Nigerian National Petroleum Corporation (NNPC) and the Petroleum Products Pricing Regulatory Agency (PPPRA). The bill stated that the NNPC Limited will be incorporated by the Minister of Petroleum, who together with his finance counterparts, will determine   NNPC’s assets and liabilities that will be inherited by the new firm. Section 54(1, 2 and3 ) read in part, “The Minister (of Petroleum) and the Minister of Finance shall determine the assets, interests and liabilities of NNPC to be transferred to NNPC Limited or its subsidiaries and upon the identification, the minister shall cause such assets, interests and liabilities to be transferred to NNPC Ltd. Assets, interests and liabilities of NNPC not transferred to NNPC Ltd or its subsidiary under subsection 1 of this section shall remain the assets, interests and liabilities of NNPC until they become extinguished or transferred to the FG. NNPC shall cease to exist after its remaining assets, interests and liabilities other than its interests, assets, and liabilities transferred to NNPC Ltd or its subsidiaries under subsection 1 of this section shall have been extinguished or transferred to the government. Section 53 of the bill said the Minister shall “within 6 months from the commencement of this Act, cause to be incorporated under the Companies and Allied Matters Act, a limited liability company, which shall be called Nigerian National Petroleum Company (NNPC Limited). The Minister shall be at the incorporation of NNPC Limited, consult with the Minister of Finance to determine the number and nominal value of the shares to be allotted which shall form the initial paid-up share capital of the NNPC Limited and the government shall subscribe and pay cash for the shares. Ownership of all shares in NNPC Limited shall be vested in the government at incorporation and held by the Ministry of Finance incorporated on behalf of the FG.” The bill also proposes the establishment of an agency known as the Nigerian Upstream Regulatory Commission which will be responsible for the technical and commercial regulation of upstream petroleum operations. Section 4 of the bill states in part, “There is established the Nigerian Upstream Regulatory Commission (the commission) which shall be a body corporate with perpetual succession and a common seal. “The commission shall have the power to acquire, hold and dispose of property, sue and be sued in its own time. The commission shall be responsible for the technical and commercial regulation of upstream petroleum operations.” The proposed law also recommends the creation of the Nigerian Midstream and Downstream Petroleum Regulatory Authority known as ‘The Authority’. Section 29 of the bill states in part, “There is established the Nigerian Midstream and Downstream Petroleum Regulatory Authority (the Authority) which is a body corporate with perpetual succession and a common seal. “The Authority shall be responsible for the technical and commercial regulation of midstream and downstream petroleum operations in the petroleum industry.” The new bill technically scraps the PPPRA with the creation of the new agencies that will now carry out the PPPRA’s functions. Efforts to reform the oil industry date back two decades, when the then President, Olusegun Obasanjo, inaugurated the Oil and Gas Reform Implementation Committee in April 2000. The committee was tasked to review and streamline all existing petroleum laws and establish an all-inclusive regulatory framework for the industry. The administration of President Umaru Yar’Adua continued the project and the PIB was presented to the Sixth National Assembly in September 2008. But the bill stalled over disagreements on the sharing of oil profit among the international oil companies, host communities and the federation, the Nigeria Extractive Industries Transparency Initiative (NEITI) said. In July 2012, the administration of President Goodluck Jonathan forwarded a revised version of the PIB to the Seventh Assembly, but it suffered the same fate that befell it in the previous legislative cycle.  It was passed by only the House of Representatives at the tail end of their term. The slump in global crude oil prices, from a high of $115 per barrel in mid-2014 to $28pb in January 2016, combined with the regulatory uncertainty occasioned by the delay in passing the PIB to worsen the state of the industry. In the first term of Buhari, the Eighth NASS split the bill into four parts – the Petroleum Industry Governance Bill, Petroleum Industry Administration Bill, Petroleum Industry Fiscal Bill and Petroleum Host Community Bill — in a bid to fast-track its passage into law. The PIGB was passed by the Senate and the House of Representatives in May 2017 and January 2018 respectively. After its passage by the NASS, the PIGB was transmitted to Buhari for assent in July 2018, but he eventually declined to sign the bill into law. The Presidency said the provision of the PIGB permitting the Petroleum Regulatory Commission to retain as much as 10 percent of the revenue generated is one of the reasons Buhari declined to assent to the bill.

POWER:

POWER GENERATION HITS 4,312MW, 16 PLANTS RECORD INCREASE

Electricity generation in the country rose by 979.2mw yesterday to 4,312.1mw as 16 power plants saw an increase in their output. The number of idle plants dropped to 9 as of 6am yesterday from 11 at 6am on Saturday, when power generation stood at 3,332.9mw, data obtained from the Nigerian Electricity System Operator (NESO) showed. The plants that did not generate any megawatts of electricity as of 6am yesterday were Afam IV & V, Sapele II, Alaoji, Olorunsogo II, Ihovbor, Gbarain, Ibom Power, AES and ASCO. Sapele I and Omotosho II, which were idle as of 6am on Saturday, generated 36mw and 26.1mw yesterday. The nation generates most of its electricity from gas-fired power plants, while output from hydropower plants makes up about 30 percent of the total generation. Generation from Kainji, Jebba and Shiroro hydro plants, which stood at 182mw, 289mw and 412mw, respectively as of 6am on Saturday, rose to 305mw, 300mw and 450mw yesterday. Electricity generation from Egbin, the nation’s biggest power station, increased to 454mw as of 6am yesterday from 304mw on Saturday. Other plants that recorded increases in their outputs yesterday were Delta (gas), Omotosho I, Olorunsogo I, Geregu II, Odukpani, Okpai, Azura-Edo, Afam VI, Omoku and Rivers IPP. The amount of power generation capacity left unused fell to 3,005.9mw as of 6am yesterday from 3,558.9mw on Saturday. Gas constraints and low load demand by the distribution companies hampered the generation of 2,019.7mw and 986.2mw respectively yesterday, NESO reported. The system operator put the national peak demand forecast at 28,290mw; installed generation capacity at 12,910.40mw; available capacity at 7,652.60mw; transmission wheeling capacity at 8,100mw; and peak generation at 5,420.30mw.

CAPITAL MARKET:

STOCK MARKET EXTENDS WEEKLY GAINS BY N390BN

The Nigerian equity market extended its weekly gains by N390bn last week. The NSE-ASI and market capitalization appreciated by 2.92 percent to close the week at 26,319.34 basis points and N13.76trn respectively. All other indices finished higher with the exception of NSE ASeM Index, which closed flat. A total turnover of 1.57bn shares worth N20.56bn in 18,396 deals were traded last week by investors on the floor of the Exchange, compared with 1.14 billion shares valued at N12.69bn that exchanged hands the previous week in 17,109 deals. The financial services industry (measured by volume) led the activity chart with 1.18billion shares valued at N9.18bn traded in 9,900 deals, thus contributing 75.14 percent and 44.65 percent to the total equity turnover volume and value respectively. The consumer goods industry followed with 90million shares worth N1.68bn in2,715 deals. The third place was occupied by the ICT industry, with a turnover of 84.67million shares worth N5.79bn in 771 deals. Trading in the top 3 equities, namely Sterling Bank, FBN Holdings Plc and Zenith Bank Plc, (measured by volume) accounted for 612.80million shares worth N4.31bn in 3,739 deals. They contributed 39.10 percent and 20.97 percent to the total equity turnover volume and value respectively. 35 equities appreciated in price during the week, compared with 32 in the previous week; 28 equities depreciated in price, compared with 31 in the previous week, while 100 equities remained unchanged, same as in the previous week. A total of 119,603 units valued at N1.23m were traded last week in 16 deals, compared with a total of 143,690 units valued at N1.25bn transacted the previous week in 19 deals. A total of 467 units valued at N564.073.49 were traded last week in 5 deals, compared with a total of 18,803 units valued at N19.58m transacted the previous week in 8 deals. R.T. Briscoe Nigeria Plc, one of the six listed companies that were suspended on September 1, 2020, filed its outstanding financial statements with the Exchange last week. In view of the company’s submission of its outstanding financial statements, dealing members were notified that the suspension placed on trading on the shares was lifted on September 25.

Retail DAS by the Central Bank of Nigeria

18/2           ($199,606)

16/2           ($199,404)

11/2           ($199,440)

Note: the above figures are in Thousands of US$

Exchange Rates (NGN)

JPY                                    3.6019

WAUA                              534.2411

USD                                          380

CHF                                 409.2623

SAR                                   22.1719

SDR                                    533.558

SAR                                 101.3117

£GBP                                 483.512

€EUR                                   448.21

YUAN/REN                          55.138

As at Sept., 25, 2020

This report is mainly for information purposes.

For more information, please email: intelligence.report@tabinsurancebrokers.com