Nigeria | NGX

According to the PPPRA template released in March 2021, petrol was supposed to be sold at a pump price band of N209.61 –N212.61/litre, a c.30.0% premium to the current market price of N162.00/litre. Given that crude oil price has raced to c.$65.91/barrel and the Naira has weakened to c. N411.67/$, PMS should be trading around N227.00/litre, suggesting a N65 subsidy per litre or monthly support of N114 billion, assuming daily PMS consumption of 58.4 million litres. This computation implies a potential annual subsidy outlay of c.N1.4 trillion (or c.18.3% of Nigeria's 2021 budgeted revenue).

Recently, major downstream player, TOTAL (“the company or the firm”) released its audited financial result for FY-2020. It was evident that the peculiarities of the economic lockdown, which included the cancellation of local and international flights and the restriction of economic activities (and consequently vehicular movement), disrupted the business of petroleum products marketers. As a result, TOTAL’s Revenue dipped across all business segments. Revenue fell by 29.1% y/y to N204.1bn in FY-2020, Cost of sales fell faster by 32.3% y/y to print at N173.9bn in FY-2020. Furthermore, due to the decline in sales, Gross Profit and Operating Profit declined by 12.3% y/y and 64.0% y/y to print at N30.7bn and N3.5bn, respectively. Overall, the company recorded a Profit before and after Tax of N2.9bn and N2.0bn respectively (vs Profit before and after Tax of N3.0bn and N2.2bn respectively in FY-2019). Earnings per Share (EPS) fell by 9.4% y/y to N6.08 per share in FY-2020.The firm proposed a dividend of N6.08 per share. Below, we highlight key details of the downstream operator’s performance and our expectations for 2021.

In the past week, the Senate approved $1.5bn and €995.0m worth of external loans for the Federal Government. The loans will be provided by the World Bank, Export-Import Bank of Brazil, and Deutsche Bank of Germany, to finance projects in States facing revenue challenges as well as drive mechanization of agricultural processes. In addition, we expect the loans to bolster the nation’s external reserves, providing the CBN with further headroom to manage the current FX liquidity crunch.On pricing, the loan from the World Bank will be broken into two. The first tranche of $750.0m will attract an interest rate of 2.45% with a 25-year tenor and grace period of 5 years. The second tranche of $750.0m has similar maturity terms but carry interest rate of 2.5%.

Last week, the local bourse recorded gains on all trading sessions as investors cherry-picked bellwether stocks on the back of impressive Q1:2021 earnings release. Consequently, the NSE All-Share Index was up 1.3% w/w with the YTD loss improving to -2.4% as market capitalisation increased to ₦20.6tn.

Recently, Unilever Nigeria Plc (UNILEVER) published its Audited FY-2020 and Unaudited Q1-2021 financial result. According to the reports, Revenue grew marginally in FY-2020, up 2.4% y/y to N62.0bn. In Q1-2021, Revenue surged 45.7% y/y to N19.4bn. However, the company’s revenue improvement remains undermined by huge cost pressures and impairment booking. As a result, UNILEVER recorded a loss of N4.0bn in FY-2020 and N0.5bn in Q1-2021. Below, we update our model estimates for UNILEVER, based on the recently published numbers and provide our expectations for the rest of the year.

Last week, the bears dominated the domestic equities market and consequently, the All-Share index fell 20 bps w/w to settle at 38,808.01 points. As a result, YTD loss worsened to -3.6% while market capitalisation declined ₦25.1bnto ₦20.3tn.