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Published On: Wed, Jan 4th, 2017

2017: Oil, Stocks, Naira, Tumble on First Trading Day

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LAGOS JANUARY 4TH (URHOBOTODAY)-The key indexes of crude oil, stocks and naira for brighter economy for Nigeria started the 2017 trading day on a negative note, figures have shown.
The much-talked about crude oil price started on a positive note yesterday where it rallied to its strongest level in 18 months at $58.15 a barrel in the first hours of trading, then gave up most of the gains to close at $55.42 a barrel.

Also investors at the Nigeria Stock Exchange (NSE) lost about N100billion as it closed with -0.96 in both capitalisation and index while the naira at the parallel market depreciated by about N3 or -0.61 to the United States dollar.
Analysts said lack of clear commitments by the Oil Producing Countries to honour the first production deal in eight years by some OPEC and Non –OPEC member countries was behind boom and bust of the oil price yesterday.
In September, 2016 an agreement by the Organization of Petroleum Exporting Countries (OPEC) and some non-members to cut 1.8 million barrels of crude a day was reached and the group in their Ordinary General Meeting in Vienna, Austria on November 30 adopted the pact and fixed January 1, 2017 to start the output cut.
Crude oil rallied by about 15 percent after the announcement, and finished 2016 up by 45%, its biggest annual gain since 2009.
However, until yesterday there were no signs by both OPEC members and non- member of the huge cut as adopted which left the trader on speculative mode.
The West Texas Intermediate crude oil futures, the US benchmark, gained as much as 2.4% to $55.01 per barrel, before slumping 1% to trade near $53.17.
Brent crude, the international benchmark, rose 2.3% to as high as $58.15.
Saudi Arabia, the defacto leader of OPEC in a statement yesterday, according to Reuters, urged members to implement their agreement.
Also, higher oil prices have encouraged US shale drillers to ramp up production. The count of active oil rigs rose last week for a ninth straight week, increasing the combined tally to the highest level in one year, according to Baker Hughes.
“A US production hike would offset some of the production cut and effectively earn more market share,” said Jason Pride, director of investment strategy at Glenmede, in a note. “As prices rise, US drillers will boost supply, limiting price increases beyond $60 per barrel.”
At the Nigerian equities side, investors maintained a bearish sentiment on stocks. Consequently, the NSE-ASI weakened by -0.96% (-257.73pts) to berth at 26,616.89pts with corresponding market capitalization of N9.16trillion.
The Nigerian stock market maintained a bearish outlook to close the year 2016 on a negative note by 6.17% as against 17.36% loss posted in the year 2015. This translates to an average monthly loss of 0.27% as against 1.34% recorded for the previous year.
While the equities market extends 2years losing streak to post 3yrs loss of -34.97%, investors’ confidence remained significantly low as market net worth had declined by N3.98trillion in the last three years. A waning bearish momentum was observed in the year when compared with the previous year performance.
Sell pressure on NB (-138.28pts), GUARANTY (-59.98pts) and ZENITHBANK (-31.99pts), which cancelled out the gains in STANBIC (+20.09pts), FBNH (+5.22pts) and UCAP (+1.39pts) could be largely blamed for yesterday’s decline.
Activity levels as measured by volume and value traded was however mixed as investors exchanged over 296m units of stocks valued at N1.3bn in 2,033 deals. This represented a +89% jump in volume traded while value turnover declined by -13%. OMOSAVBNK and GUARANTY were the most actively traded stocks with 190m and 28m units respectively.
There were 13 gainers led by UAC-PROP (+4.96%) as against 18 decliners topped by CCNN (-5.00%).
Major sectoral indexes closed negative; Banking (-2.38%), Consumer (-1.99%), Oil & Gas(-0.49%) and Industrial (-0.18%).
Experts comment
Experts had predicted that the index would open the year on a bearish note, given the current fragile macro outlook, and advised a gradual building of positions in quality names for investors with a medium to longer term horizon.
Naira also was hit at the parallel market as the scarcity of the forex continues, the local currency dropped by -0.6 to close at 491 to a dollar, it maintained its values at Central bank and interbank at 305 and 314 a dollar respectively.
A trader, Abubakar Sadiq said the naira ended the year at 488 to a dollar on Friday said he was not surprised with the trading yesterday because of scarcity of the forex in the market.
He said the forex supply gap has continued despite the remittances by some Nigerians in diaspora and those who came back home for the new year celebration. “Normally at the end of the year like this, the naira appreciates due to the increase in supply of the forex but this time, the gap is huge.
He said if care is not taken the local currency will continue with negative sentiment till the end of the first quarter.
Ahmed Yusuf, CEO of Coral Spring Group said the oil price will not rise as expected because there are other factors that determine the oil price beside the production cut.
He said the change in the government in the United States and the relationship between Donald Trump and Putin of Russia, the Syrian Crisis, US/Isreal relationship and the commitment to honour the obligations by the OPEC and non-Opec member are all factors the investors are considering.
On the local currency, Ahmed said the naira can only appreciate if we can provide from 50-60 percent of our demand of goods and services,that is when the forex scarcity will reduce.
He said with government policy of buy made in Nigeria goods, and when all our military and para-military will start to patronse uniforms and shoes from local markets it is then the value of naira will appreciate.
On the stocks, Yusuf said the only investors in the market are the institutional investors who take many things into consideration before taking decision. Those individual investors have not been encouraged to return to the market since the crash of the market in 2008, therefore the market is not a reflection of the economic performance at the moment.
Presidency: Things will work this year
Meanwhile, the Presidency has expressed optimism that things will work for the country in the new year.
The Special Adviser to the President on Media and Publicity, Mr Femi Adesina, said this yesterday in a statement on his twitter handle. The presidential spokesman stated that the 2017 is a defining year for the country.
According to Adesina, 2017 is a year of harvest for the country, “First working day of 2017. Things will work for Nigeria. It is a defining year. We have sown in tears, now to reap in joy. Harvest comes,” he stated.

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