BusinessDay 11 Dec 2017

Monday 11 December 2017
Markets Intelligence
C002D5556
BUSINESS DAY
33
COMPANIES
Militancy, strikes could undermine
Nigeria’s oil production target
OLADIPO OLADEHINDE
The budget’s production
assumption
of 2.3 million barrels
per day(mbpd)
would represent
a six-year production high
and a further meaningful and
sustained increase on current
levels of around 2.0 mbpd
would lead to an increase
in oil revenue which would
boast and also improve our oil
dependent economy.
Improvements in security
and oil infrastructure have
boosted production in the last
18 months, but events such
as insurgent activities in the
Niger Delta, sabotage, theft,
and the unpredictablity of
strike actions of oil workers
union are risks to production
forecasts.
Following Nigeria’s oil production
trends,at the end of
2016, Nigeria recorded oil production
of 1.556 mpd, however
in first quarter 2017 there was
a slight reduction to 1.512 mpd.
In the second quarter of
2017 Nigeria there was slight
improvement to 1.594mpd due
to relative peace at the Niger
Delta region oil production. In
q3 2017, There was increase
in production which was
attributed to the return to
normalcy in the Niger Delta
region and resumption of oil
export at the Forcados Terminal
after many months, oil
production recorded a spike to
1.769mpd.
In august 2017, oil production
reached it highest peak
in 2017 at 1,802mpd, while in
September oil production hit a
slide to 1.792mpd, also in october
and november it maintain
the partten of production at
1.738mpd and 1.7mpd respectively.
With oil revenue projected
at N2.442 trillion, higher revenue
is key to deficit reduction.
Spending has typically
been lower than budgeted,
but improved financing conditions
should support stronger
execution of capital expenditure
plans in 2018.
Nigeria is currently enjoying
exemptions from the
OPEC/non-OPEC oil output
cut and so adopting a lower
oil output may jeopardise the
country’s chances in future
negotiations with the other oil
producing nations.
Organization of Petroleum
Exporting Countries (OPEC)
had earlier last month decided
to extend its current
production agreement entered
with participating Non-OPEC
oil producers for another 9
months including pegging
Nigeria oil production to 1.8
mbpd.
Investors lose appetite for tech stocks despite technology boom
...As all seven firms show zero/negative YTD growth
Ethel Watemi
Investors have dumped
technology stocks as firms
are yet to recover from a
severe dollar shortage and a
sharp in oil price that tipped
the country in its first recession
in 25 years.
The country has however
existed a recession as GDP
grew by 0.55 percent, and
1.40 percent in the first and
second quarters of the year,
according to a recent report
by the National Bureau of
Statistics (NBS).
While the financial services
and the consumer goods
sectors have seen improvement
in operating activity
on the back of improved
dollar supply-thanks to the
introduction of the Investors’
Day data, the YTD of chams
plc, Couteville, E-tranzact
and omatek stood at 0.00 per
cent which shows no growth.
While CWG stood at -4.87 per
cent, NCR at -22.27 per cent
and triple gee at -22.06 per
cent.
As the world is moving to
a technology based environment
Nigeria not exempted
there has been a significant
increase in government investment
in this sector. Despite
this surge in technology
development worldwide,
most of these firms are still
underperforming as investors
are not investing in their
shares. This could be as a
result of these firms inability
to bolster operating performance.
Investors are mostly at-
tracted to the stocks of firms
that record growth in sales or
profit. Based on an analysis of
the growth in profit of each
firm between nine months
2017 and nine months 2016,
NCR profit declined by 134.9
per cent in nine months 2017,
E-tranzact fell by 103 per cent
and chams plc also fell by 270
per cent from a profit after
tax recorded at N94,867 in
nine months 2016 to a loss of
N161,312 in 2017 of the same
period.
Some other firms experienced
a per cent growth increase
in profit compared year
on year from nine months in
2016 to nine months in 2017.
These include CWG plc ,
Courteville and triple gee.
Omatek has no up to date financial
statement but the latand
Exporters’ (I &E) by the
central bank-it is perhaps
worrisome that impact of
the policy hasn’t been felt by
tech firms.
The average year to date
(YTD) return of the seven ICT
firms listed on the Nigerian
Stock Exchange (NSE) traced
by BusinessDay was at a
decline of 7.03 per cent as at
Monday 27th of November,
which is 45.77 percentage
points away from the NSE allshare
index valued at 38.74
per cent as at that date.
The seven ICT firms listed
on NSE include; Chams plc,
Courteville business solutions,
CWG, E-tranzact int.
plc, NCR(Nigeria) plc, Omatek
ventures and Tripple Gee and
company.
According to the Businessest
statement shows a decline
in profit from N225.23M in
December 2012 to N182.28M
in December 2013.
Also, Analysis of their financial
statements shows
that most of the firms do not
pay dividend with the exception
of E-tranzact and triple
gee. This could also be as a
result of low earnings. Due
to this, investors are likely to
lose appetite for their shares.
The inability of these firms
to boost returns may be due
to inability to raise funds
through the capital market
to further develop the firms,
it could also to be linked the
continuous fluctuation in
the Nigerian FX market and
also, the contraction in the
country’s GDP from 2016 to
Q1 2017.