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Global Economic Roundup

Oil Prices Plunge Below $80 As Near-Term Demand Worries Grow

Oil prices crashed early on Wednesday, with Brent Crude falling below the $80 a barrel mark again, as concerns about immediate global oil demand intensified with soaring Covid cases in China and slowing economies globally. The U.S. benchmark, WTI Crude, had plummeted below $75 per barrel and traded down by 2.68% at $74.91. The international benchmark, Brent Crude, dipped below $80 and the front-month contract was down by 2.70% at $79.92. The recent sell-off in oil was the result of gloomy economic expectations from the International Monetary Fund (IMF) regarding the state of the Chinese and global economy in the early weeks of 2023, and a strong U.S. dollar. Surging Covid cases in China and a slowdown in the Chinese economy are expected to weigh on oil demand and prices in the immediate term.

US Stocks Close Higher Despite Hawkish Minutes

US stocks closed marginally higher on a choppy Wednesday, as minutes from the December FOMC meeting confirmed policymakers’ previous signals that interest rates must continue to rise and remain elevated for the foreseeable future. Officials also emphasized that investors should not interpret the slower 50bps rate hike as a dovish pivot, warning markets against pricing interest rate cuts this year.

The Dow added 130 points, while the S&P 500 and the Nasdaq added 0.8% and 0.7%, respectively. In the meantime, ISM PMI data showed that factory activity in the US contracted for a second straight month, adding to investors’ skepticism that the central bank can maintain high borrowing costs without major damage. Also, US job openings fell slightly to 10.5 million in December but remained at considerably high levels.

Nigeria’s Debt to Hit 77 Trillion Naira

Nigeria’s Debt Management Office (DMO) on Thursday said that the next administration will inherit a public debt of N77 trillion if the N23 trillion loans from the CBN are securitized. In recent weeks, there have been heated debates on the sustainability of Nigeria’s debt amid shrinking revenue and mounting CBN loans. Last week, President Muhammadu Buhari requested a delayed approval for the N23.7 trillion loan that had already been spent, causing an uproar in the Senate. Lawmakers rejected the request and accused the president of violating the constitution. They also demanded details of how the money was spent. The DG of the DMO, Mrs Oniha noted that Nigeria’s total debt stock rose to N44.06 trillion as of the end of September 2022, largely reflecting the weakness of the local unit, Naira. She added, however, that should the CBN loans be added to the debt profile, the nation’s debt portfolio would increase significantly. The DMO boss added that the projected debt stock for May 2023 remains at about N5.567 trillion.

Some of our recommended stocks are mentioned below;

NB PLC:

Nigerian Breweries Plc is projected to have an FY 2022 revenue of N576.07bn, up by 31.74% from N437.28bn in FY 2021. Profit after tax is estimated to grow from N12.67bn in FY 2021 to N16.70bn in FY 2022 with an EPS of N2.06.

Nigerian Breweries Plc Q3 2022 results showed an increase in revenue by 27.21% from ₦309.28bn in Q3 2021 to ₦393.45bn in Q3 2022. Operating profit advanced from ₦24.74bn in Q3 2021 to ₦35.39bn in Q3 2022, reflecting an increase of 43.06%. Profit before tax grew by 49.89% from ₦12.74bn in Q3 2021 to ₦19.09bn in the current period, as finance income grew by 172.63% and finance cost dropped by 48.82%. Profit after tax rose by 79.58% from ₦8.22bn in Q3 2021 to ₦14.76bn in Q3 2022. EPS increased by 78.43% to ₦1.82 in Q3 2022 from ₦1.02 in Q3 2021. Nigerian Breweries has a BVPS of ₦23.06, P/BV of 1.80x, and P/E ratio of 15.45x.

WAPCO PLC:

Lafarge Africa (WAPCO) Plc is projected to have an FY 2022 revenue of N366.68bn, up by 25.11% from N293.09bn in FY 2021. Profit after tax is estimated to grow from N51.03bn in FY 2021 to N63.81bn in FY 2022 with an EPS of N3.97

Lafarge Africa (WAPCO) Plc Q3 2022 results showed that earnings advanced by 23.11% from N219.20bn in Q3 2021 to N269.85 bn in the current period. Gross profit increased by 3199% to N134.77bn in Q3 2022 from N102.11bn in Q3 2021. In a similar tune, profit before tax advanced by 22.88% from N43.90bn recorded in Q3 2021 to N53.95 bn in the current period. Likewise, profit after tax grew by 11.15% from N40.40bn in Q3 2021 to N44.90bn in Q3 2022. Consequently, Earnings per share went up by 11.16% from N2.51 in Q3 2021 to N2.79 in Q3 2022. Lafarge Africa has a BVPS of N25.29, P/BV of 0.88x and P/E ratio of 5.98x.

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Global Economic Roundup

Global Oil Demand Could Surge In 2023

Global oil demand could soar as much as 4% in the coming year if the world manages to fully emerge from Covid restrictions, hedge fund trader Pierre Andurand has told Bloomberg. Andurand says in a tweet that oil demand may increase by 3 million to 4 million barrels a day in 2023 helped by a switch to oil from gas. Crude prices rose a few weeks ago after China unveiled the most sweeping changes to its strict Covid-19 guidelines, including relaxing testing requirements and travel restrictions. Further, people infected with Covid-19 but have only mild or no symptoms are now allowed to isolate at home instead of convalescing in centrally managed facilities.

US inflation rate slows as fuel costs fall

US inflation was 7.1% over the 12 months to the end of November, dropping from 7.7% in October, figures from the US Labour department show. That was the slowest pace in nearly a year and better than analysts expected. But though the overall picture is improving, the cost of some items such as housing continues to climb. The US central bank has raised interest rates at the fastest pace in decades the past year, in an effort to get the inflation problem under control. Earlier in December, Federal Reserve chairman Jerome Powell said that the bank would start to move less aggressively to see how the moves are playing out in the economy. By boosting borrowing costs, the Federal Reserve is expecting to dampen demand for expensive items such as homes and cars, helping to slow the economy and ease the pressures pushing up prices.

Senate urges CBN to extend withdrawal date to June 30th

The Senate has urged the Central Bank of Nigeria (CBN) to urgently extend the withdrawal date of old currency notes from Jan. 31, 2023 to June 30. The upper chamber’s resolution was sequel to a point of order raised by Sen. Mohammed Ndume (APC-Borno) during Wednesday’s plenary. Raising Orders 41 and 51 of Senate Standing Rule, Ndume said that the call for extension of the date should be considered as a matter of urgent national importance in order to forestall imminent hardship on Nigerians. The lawmaker also said that access to the new notes would be compounded by recent circular by the CBN which limited the amount of cash withdrawal by corporate entities to withdraw within certain period of time. Contributing, Sen. Adamu Aliero (PDP-Kebbi) said that it was true that in rural areas, people were not even aware that there was going to be currency change. “So this motion is very apt and timely. If we insist on the date given by CBN, it will cause a lot of hardship for our rural dwellers.”

Some of our recommended stocks are mentioned below;

FIDSON PLC:

Fidson Q3 2022 results showed an increase in revenue by 44.48% from N21.75bn in Q3 2021 to N31.43bn in Q3 2022. Operating profit advanced from N4.29 bn in Q3 2021 to N6.35bn in Q3 2022, reflecting an increase of 48.03%. Profit before tax went up by 49.06% from N3.42bn Q3 2021 to N5.10bn in the current period. Profit after tax grew by 47.97% from N2.32bn in Q3 2021 to N3.44bn in Q3 2022. EPS grew by 35.14% to N1.50 in Q3 2022 from N1.11 in Q3 2021. Fidson has a BVPS of N5.92, P/BV of 1.52x and P/E ratio of 4.50x.

TRANSCORP PLC:

Transnational Corporation Plc Q3 2022 results showed that revenue grew by 12.45% from ₦85.59bn in Q3 2021 to ₦96.24bn in Q3 2022. Gross profit went up by 18.63% to ₦46.70bn in Q3 2022 from ₦39.36bn in Q3 2021. Operating profit advanced by 14.53% from ₦27.52bn in Q3 2021 to ₦31.52bn in Q3 2022. Profit before tax rose by 47.71% to ₦20.87bn in Q3 2022 from ₦14.12bn in Q3 2021, on the back of a 29.29% increase in Other Income and 14.91% decline in net finance cost. In the same vein, profit after tax grew by 41.38% from ₦13.47bn in Q3 2021 to ₦19.04 bn in Q3 2022. Consequently, earnings per share rose to ₦0.22 in the current period from ₦0.18 in Q3 2021. Transcorp Plc has a BVPS of ₦3.87, P/BV of 0.28x and P/E ratio of 3.65x.

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