Retail Prices Remained Stubbornly Static as Naira Strengthened at the New Forex Window - PROSHARE

April 28, 2017

The naira strengthened at the new forex window (investors and exporters) to close at N380/$. At the parallel market the naira also appreciated to N386/$. This concentric movement in exchange rates is beginning to reflect a more realistic value of the naira.

Retail prices have continued to remain stubbornly static except for diesel where the wholesale price has crashed by 5% to N190 per litre. In the oil markets, Bonny Light climbed marginally to $51.82pb on the news of lower than expected US output.

The attached report summarizes the commodity price movements for this week.

Burning Economic Issues


-FAAC shared in April: N466.93bn
-External reserves crosses $31bn - CBN Governor
-Naira strengthens at the new window to close at N380/$
-N388/$ at the parallel market
-Oil price increases marginally by 0.43% to $51.82pb on lower that expected US output
-Average power from the grid down 269MWh/h to 3720MWh/hour
-Wholesale diesel price sharply lower at N190 per litre

Economic News


The Good - Parallel market rate appreciates to N388/$
- External reserves at $31bn is naira positive
- Lower diesel price reduces operational cost for manufacturers
The Bad - Oil production falls to 1.5mbpd in March from 1.6mbpd in February
- Retail prices still sticky

Power Generation analysis & Impact


April 25th: On grid power output was 3720MWh/hour (down 269MWh/h)
- Total Power constraints: 2,163MW due to gas and line constraints
- Estimated loss: N1,038bn (annualised at N373.68bn /$0.93bn)
- System collapse in the early hours of 26th April
- Despite increasing gas supply, due to grid constraints, power sent out remains limited

Domestic Commodity Prices Movement




Stock Market



Oil prices


- Brent crude by 0.43% to $51.82pb
- Marginal increase driven by lower than expected US crude stock at 897,000 barrels
- Oil price under pressure with rising US crude production
- OPEC's oil production at 31.9mbpd remains close to record high levels

Oil markets today




Outlook - Oil Prices


- Bearish outlook for oil due to unrelenting US supply
- US increasing oil production will continue to set the tone for oil price
- Russian oil production expected to increase to the highest in 30 years

Outlook - Agric Prices


Grains
- Supply expected to fall due to unfavourable weather conditions

Soft
Sugar
- Subsidies for sugar producers expected to dampen prices further

Cocoa
- Prices will remain under pressure from huge global supply from Ivory Coast