Nigerian Stock Market Update: Profit Taking and Mixed Sentiments Impact Year-to-Date Growth

Market Overview

  • Year-to-Date (YtD) Performance: The Nigerian Exchange (NGX) experienced a pullback last week due to profit-taking activities, which reduced the Year-to-Date growth of the stock market from 29.9% to 28.4%. The NGX All-Share Index (ASI) closed at 95,973.45 points, down from 97,100.31 points the previous week.
  • Market Capitalisation: The overall market capitalisation decreased slightly by over ₦2 billion, ending the week at ₦55.129 trillion, compared to ₦55.131 trillion the previous week.

Sector Performance

  • Gainers:
  • Oil and Gas Index: Up by 3.5%.
  • Insurance Index: Increased by 1.9%.
  • Banking Index: Rose by 0.4%.
  • Losers:
  • Industrial Goods Index: Declined by 4.9%.
  • Consumer Goods Index: Dropped by 1.4%.

Key Factors Influencing the Market

  • Profit Taking: Investors engaged in profit-taking across various sectors, especially in high-cap stocks, leading to a pullback in the market. This activity is part of a broader trend of sector rotation and portfolio rebalancing, as investors adjust to changing market conditions.
  • Economic Reforms and Volatility: The market is experiencing mixed momentum due to the ongoing economic reforms in Nigeria. While fiscal and monetary policies have been introduced, their impact has yet to fully stabilize the economy, leading to continued volatility in the market.
  • Oil Prices and Currency Depreciation: The fluctuating oil production and declining naira value have also contributed to market uncertainty, despite oil prices rebounding to just below $80 per barrel in the international market.

Corporate Updates

  • Regency Alliance Insurance: Announced a board meeting.
  • Oando: Completed a $783 million acquisition of ENI’s subsidiary, Nigerian Agip Oil Company.
  • Airtel Africa: Continued its share buyback program.
  • Jaiz Bank: Appointed a new non-executive director.
  • MTN Nigeria, Cutix, and Ucap: Informed the Exchange of insider dealings in their shares.

Market Outlook

Analysts expect the market to continue experiencing mixed sentiments, with opportunities for bargain hunting and profit-taking. Despite the market’s recent downtrend, some stocks are seen as undervalued, providing potential buy-low, sell-high opportunities for investors. Portfolio repositioning is likely to persist as investors seek value in an oversold market region.

Rising Cement Prices in Nigeria: Factors and Impacts

Key Factors Behind Price Increase

  • Production Costs: The cost of producing cement in Nigeria has surged by 121% due to various factors, including the depreciation of the naira and high inflation rates. These increases have significantly affected the profitability of cement manufacturers, even as their revenues have grown.
  • Smuggling: The illegal export of cement to neighboring countries like Chad and Cameroon, where prices are much higher (ranging from $120 to $150 per 50kg bag), is contributing to the rising cost of cement within Nigeria. The exchange rate exacerbates this, as the price in these countries translates to about ₦240,000 to ₦270,200 per bag, compared to the local price of ₦8,000 to ₦9,000.
  • Energy and Import Costs: A significant portion of the cement industry’s costs comes from energy consumption, which is indexed to the dollar, and the importation of critical components like gypsum and polypropylene bags. The volatility in exchange rates has further driven up these costs.

Impact on the Industry and End Users

  • Profitability: Despite an 84.5% increase in combined revenue for the top three cement manufacturers (Dangote Cement, Lafarge Africa, and BUA Cement), profitability has declined by 4.1% due to the steep rise in production costs.
  • Consumer Strain: End users, particularly block molders and builders, are feeling the pinch. The high price of cement, which now averages ₦8,000 to ₦9,000 per bag, coupled with a decline in purchasing power, has made construction more challenging.
  • Calls for Government Intervention: Industry stakeholders, including the National Association of Block Moulders of Nigeria (NABMON), are urging the government to reduce import duties on cement manufacturing components to attract more foreign investment and help stabilize prices.

Outlook and Future Measures

  • Compressed Natural Gas (CNG): In response to rising transportation costs, Dangote Cement plans to convert its fleet to run on Compressed Natural Gas (CNG) by 2025, in alignment with government initiatives.
  • Expansion Plans: Dangote Cement is also constructing a new plant in Ogun State, expected to produce 6 million metric tonnes annually. This expansion may help boost supply and potentially stabilize or reduce prices in the long term.

The ongoing economic pressures, smuggling activities, and exchange rate fluctuations indicate that the hope for lower cement prices in Nigeria remains uncertain, with both manufacturers and consumers bearing the brunt of these challenges.

Black Market Dollar to Naira Exchange Rate on August 26, 2024

As of today, August 26, 2024, the exchange rate for the US dollar to the Nigerian naira in the black market is as follows:

  • Buying Rate: ₦1,600 per USD
  • Selling Rate: ₦1,610 per USD

It’s important to note that these rates are based on transactions in Lagos and might vary slightly depending on the location and the specific Bureau De Change (BDC) operators.

Central Bank of Nigeria (CBN) Official Exchange Rate

The official exchange rate provided by the Central Bank of Nigeria (CBN) for today is:

  • Buying Rate: ₦1,591 per USD
  • Selling Rate: ₦1,592 per USD

Dangote Refinery Update

The Dangote Petroleum Refinery is currently conducting test runs for the production of Premium Motor Spirit (PMS), commonly known as petrol. The refinery, which has a capacity of 650,000 barrels per day, is expected to start full operations by mid-September 2024. This development is anticipated to significantly impact Nigeria’s fuel supply, reducing its reliance on imported refined products and transforming the fuel trade between Europe and Africa.

Federal Government, Dangote Refinery Discuss September Petrol Rollout

The Federal Government’s committee, established to facilitate the sale of crude oil to local refineries in naira, is set to finalize discussions on the pricing of petrol from the Dangote Petroleum Refinery, scheduled to be released next month. The committee, led by Finance Minister Wale Edun, will focus on setting a benchmark price for the crude oil that Dangote will purchase in naira.

Oil marketers have raised concerns that petrol from the Dangote refinery could be priced higher than current pump prices, with the actual market price potentially around ₦1,117 per liter. The current retail price of petrol in Nigeria ranges from ₦600 to ₦700 per liter, while the landing cost stands at approximately ₦1,200 per liter.

The Nigerian National Petroleum Company Limited (NNPCL) has been shouldering a significant subsidy burden, with its Chief Financial Officer, Umar Ajiya, revealing that the company has been selling petrol at about half the landing cost under government directives, covering a shortfall of ₦7.8 trillion in the first seven months of this year.

As the government contemplates whether to reintroduce petrol subsidies or allow market-driven prices, it is clear that without intervention, the cost of petrol from the Dangote refinery could be beyond the reach of many Nigerians. The final decision is expected in the coming weeks, with the sale of crude to Dangote in naira already agreed upon and scheduled to commence on October 1, 2024.

Marketers and government officials acknowledge that the only viable solutions are either reintroducing subsidies or allowing Nigerians to bear the full cost of petrol, though both options carry significant economic implications. The ongoing discussions are expected to clarify the government’s approach and the future of petrol pricing in Nigeria.

Ex-BBC Editor Soyinka Released After Hours of DSS Detention at Lagos Airport

The Department of State Services (DSS) has released Adejuwon Soyinka, a former editor of the BBC Pidgin Service, after detaining him for several hours at Murtala Muhammed International Airport in Lagos. Soyinka, who is also the West African editor of The Conversation Africa, was arrested upon his arrival from the UK on Sunday morning.

The DSS did not disclose the reason for Soyinka’s detention, although it is believed to be part of an increasing crackdown on journalists in Nigeria. Initially, DSS spokesperson Peter Afunanya denied knowledge of the arrest, but later confirmed that Soyinka was held at the request of another agency.

The International Press Institute (IPI), a global network of editors and media executives, intervened, leading to Soyinka’s release. However, his international passport remains in the possession of the DSS. IPI condemned the arrest, describing it as an attempt to intimidate journalists under President Bola Tinubu’s administration, and demanded the immediate return of Soyinka’s passport. The IPI also called for an end to the harassment and intimidation of journalists in Nigeria.

Struggling MSMEs Turn to Phone and Online Orders to Survive Economic Pressures

With the ongoing surge in prices severely impacting profits and capital, many Micro, Small, and Medium Enterprises (MSMEs) in Nigeria are finding innovative ways to stay afloat. Business owners like Mrs. Bolanle Rasheed and Mrs. Marvin Godonou have resorted to using phone calls and online messaging to maintain customer relationships and keep their businesses running. These strategies, though challenging, have allowed them to continue serving their communities despite the economic difficulties, ensuring that their families are provided for in these trying times.

Zimbabwean Bishop Arrested in Nigeria Amid United Methodist Church Leadership Crisis

A Zimbabwean bishop, Eben K. Nhiwatiwa, of the United Methodist Church, has been arrested in Yola, Adamawa State, Nigeria, during a visit aimed at initiating the process of electing a new bishop following the resignation of the former bishop, John Wesley Yohanna. Bishop Nhiwatiwa was reportedly detained by the Nigerian Immigration Service (NIS) and later transferred to their headquarters in Abuja.

The church, which has been embroiled in internal conflicts since an international conference in the U.S. where some members supported same-sex marriage, expressed deep concern over the bishop’s arrest. In a statement, Pastor Salisu Waziri suggested that members of a breakaway faction of the church were behind the arrest, despite Bishop Nhiwatiwa possessing all necessary documents.

The Taraba State Government has responded to the church crisis by closing all United Methodist Church branches across the state, citing concerns over potential violence as factions struggle for control of church properties. Further arrests of church members, including pastors, are feared as the situation escalates.

Okonjo-Iweala Criticizes Nigerian Politicians for Exploiting Insecurity, Calls for an End to the Practice

Ngozi Okonjo-Iweala, Director General of the World Trade Organisation (WTO), has strongly criticized Nigerian politicians for weaponizing insecurity for political gain. Speaking at the Nigerian Bar Association’s 2024 Annual General Conference in Lagos, Okonjo-Iweala emphasized that socioeconomic development is impossible without security and condemned political actors who instigate unrest to undermine their opponents.

In her keynote address titled “A Social Contract For Nigeria’s Future,” the former finance minister called for an end to this harmful practice, stressing that it often results in the loss of lives and property. She also highlighted the availability of technological solutions to combat crude oil theft in Nigeria, urging authorities to take decisive action against those responsible.

Court Freezes 32 Bank Accounts Linked to #EndBadGovernance Protest, Orders Arrest of Account Holders

A Federal Court in Abuja has frozen the bank accounts of 32 individuals and companies linked to the #EndBadGovernance protest, pending investigation and prosecution. Justice Emeka Nwite ruled in favor of the motion filed by the Inspector-General of Police, Ibrahim Mohammed, directing banks to place a Post-No-Debit order on the accounts and to apprehend any persons transacting on them.

The accounts, spread across various banks, are suspected to be involved in unlawful activities, including terrorism financing and treasonable felony. The ruling comes as authorities intensify efforts to investigate the financial networks behind the 10-day protest.

Atiku Demands Explanation from Tinubu Over Nephew’s Fast-Tracked Approval in Oil Asset Acquisition

Former Vice President Atiku Abubakar has called out President Bola Tinubu for allegedly giving his nephew undue advantage in the acquisition of significant oil assets in Nigeria. In a statement released by his Special Assistant on Public Communication, Phrank Shaibu, Atiku questioned why Oando Plc, a company owned by Tinubu’s nephew, received expedited approval to purchase AGIP and ENI’s onshore assets, while other transactions like the Shell/Renaissance and Mobil/Seplat deals remain delayed.

Atiku criticized the Tinubu administration for favoring family interests in the oil and gas sector, accusing it of undermining democracy. He also took aim at the House of Representatives for not adequately addressing concerns related to the Nigeria National Petroleum Company Limited (NNPCL), which he claimed has been “mortgaging the country’s national oil assets to vested interests.”

Atiku argued that democracy under Tinubu has devolved into a government that serves the President and his family, rather than the people of Nigeria. He highlighted the speed with which the Nigerian Upstream Production Regulatory Commission (NUPRC) approved Oando’s acquisition, contrasting it with the stalled Mobil/Seplat deal, whose consent letter remains on Tinubu’s desk.

Furthermore, Atiku accused the NNPC of disregarding a directive from the House of Representatives to suspend its acquisition of OVH assets pending an investigation. Despite ongoing issues in the oil sector, key officials continue to retain their positions, which Atiku views as a sign of their loyalty to Tinubu’s interests.