The Markets Today

E kaaro o, Ututu Oma, Barka da Safiya – Good morning, happy workers day, and welcome to ThinkBusiness Nigeria.

ThinkBusiness Nigeria newsletter provides essential strategic information on markets, macro, and political economy issues and dimensions that drives business and markets. It provides the highly mobile professional, investor, businessperson with the essential information and intelligence he or she needs to know.

It summarises the markets, but provides insights on key shifts and changes and what they mean for your investments. It scans the entire Nigeria and foreign news landscape and distills what really matters from many noises around, and share them with you. In addition, ThinkBusiness Nigeria ensures you understand the factors driving those developments by providing required background and contexts.

Strategy and personal development are important, so ThinkBusiness Nigeria also incorporates strategy for winning in business and life, drawing experiences from businesses, sports, history, life etc to give simple but powerful analogies about life and success and their underlying patterns.

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Markets

• Markets are close today. The gains seen at the Nigerian Exchange (NGX) lately was maintained on Friday as the benchmark NGX All-Share Index (ASI) climbed 167.63 (0.32%) points to close at 52,403.51. This represents a 1-week gain of 2.33%, a 4-week loss of 2.51%, but an overall year-to-date gain of 2.25%, supported by impressive Q1’23 results released last week. This informed the sustained buying pressure across the major sectors - consumer goods sector appreciated by 0.61 per cent, and the insurance space improved by 0.93 per cent and the banking index which marginally rise by 0.94%.

• Brent crude futures rebounded with 0.73% rise to $79.54. The small uptick in prices reflects continued market jitters over the US economy, with new data released on Thursday showing that US GDP grew by 1.1% in Q1 2023.

• The Naira gained at I & E Window and the parallel market. Naira closed at N462/$ at I & E window, up 0.12%, and gained 0.27% in the black market to close at N739.

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National Headlines

• Are you surprised by the spate of U turns by the federal government? The latest is that the census planned for 3 – 7 May will no longer go ahead on those dates. Prior to that, the government said it merely expanded the committee charged with defining the process and modalities for removing fuel subsidies to include members of incoming administration. The census was planned for 3 – 7 May, 17 years after the last effort, while the subsidy removal was expected to take effect June. But no one really believed those two major activities will go ahead as planned. If you do, you must have an overstated view of institutional capacity in Nigeria. The dates were put close to the resumption date of a new administration, so it will be used as an excuse, and so it turned out.

• Did you try to export or waited in vain for an import in the last week? The strike by the Association of Nigerian licenced custom agents (ANCLA) entered its fifth day at the weekend, according to reports by BusinessDay. ANCLA is protesting the 100% increase in handling prices by the two major aviation handling companies – NAHCO Aviance and SAHCO.

• What happened to Naira circulation after the Central Bank of Nigeria (CBN) released the old Naira notes after the gubernatorial elections of March 18^th ? Data released last week shows currency outside banks rose 66% to N1.4 trillion in March 2023, from N843 billion in February. It fell by 70% in January after the original deadline was set for 31 January and later 10^th February 2023. Though the process was flawed, the question remains whether the progress made on digital payments during the period can be sustained.

• Attempts at evacuation by different countries of their nationals in Sudan continued weekend, even as fighting resumed, situation reports monitored on CNN shows. The federal government of Nigeria is making frantic efforts to evacuate estimated 5,000 Nigerians, mainly students, stranded in the war torn country. The evacuations are concentrated in Port Sudan and Wadi Halfa, 926km journey from Khatourm and it takes about 13 hour by road. After such horrendous and risky journey, they face diplomatic hurdles at the border between Sudan and Egypt.

Global Headlines

• Into last weekend, the shares of First Republic, the US latest embattled mid-sized bank dropped by 40%. By weekend, according to CNBC, the US regulator has intensified the midwifing of a buyer for the bank. The contenders are JP Morgan Chase, PNC, and Bank of America, repeating the same pattern with Signature Bank. So far, according to the FT, JP Morgan Chase, PNC, and Citizens have submitted bids. For us in emerging markets, the crisis becomes a global problem when it becomes a systemic risk in the US. There is no concrete evidence of that yet.

• Key economic data in India, Japan and the US regarding their manufacturing purchasing managers index (PMI) is scheduled for release later today. Investors will watch with keen interest, following the shrinking of the same data from China last week.

News Analysis

As we mark workers day, no doubt the welfare conditions of millions of workers and the job market outlook will form the core of concerns and debate.

It is therefore interesting, and I suspect you would have come across it by now, that a new report released early this year, but popularised by news reports such as that in BusinessDay (See https://www.picodi.com/hk/bargain-hunting/minimum-wage-2023, and https://businessday.ng/news/article/nigeria-among-top-5-countries-with-longest-time-to-earn-1million/), shows that it will take more than five or six generations for anyone earning the minimum wage in Nigeria to make a million US $.

Piodi, an e commerce company calculated how long it will take someone earning a minimum wage in a number of countries to reach a million US $. The original research was to compare and provide an indication of the standard of living across countries, using the US $ as the standard, in the face of rising costs of goods and services and sticky inflation. But for our purpose, we can extend the implications and insights from the data.

First, Nigeria’s minimum wage is not only ridiculous, but the changes are infrequent, nonsystematic and non-methodical. The last time there was a change in minimum wage was 2019. Before then, it was 2013, 2011 and 2001 (see graph and data below).

Minimum Wage in Nigeria in Current Naira and US Dollars

But there is also another point. Nigeria’s minimum wage is not widely applicable. It is largely applicable in government jobs, both in Federal and in the States. In the private sector, it is rarely in conversation. One, in most formal companies, the least pay is largely above the minimum wage. In informal companies and businesses, it is largely non applicable even when workers are paid less than the minimum wage. In these cases, the labour “contract” is largely informal as well.

There are many problems with enforcing the minimum wage. First is obviously the large informal sector. Second is that some of the wages come in kind – e.g. food. Third, some workers are part of the extended family and other kinds of informal arrangement. Fourth, tied to all the reasons provided above, there is no formal contract.

Above all this is the scale of poverty and the loose labour market in Nigeria. Nonetheless, there are ways it can be improved. First, set it in regional terms or let there be both Federal and State minimum wages. In the context, State legislations can take into careful consideration their peculiar labour market conditions, including considerable differences in regional standard of living, costs of labour, and prevalent types of work.

It should also be set per hour and not per month. Per hour wages have proven to be more effective in respect of effective minimum wage. It encourages flexible working arrangements and easy to monitor. For both employees and employers, flexible working arrangements that minimum wage allows helps them to manage and improve their working relationships.

The Week Ahead

• The NBS is expected to release the State Disaggregated Mining and Quarrying Data (2022) on Friday.

• This weekend, the coronation of their Majesties King Charles III and Queen Camilla will take place Saturday 6 May in London. King Charles, formerly known as the Prince of Wales, became king on the death of his mother Queen Elizabeth II on 8 September. Nigeria, as part of the commonwealth family, is still connected to the throne. Lightheartedly, Tiwa Savage, one of Nigeria’s truly global music global stars, will perform at one of the concerts celebrating the coronation on Sunday 7 May.

Winning! My weekly thoughts on how you can “win”

The inspiration to “winning” this week comes from an interesting article and interview in the May - June 2023 edition of the Harvard Business Review (HBR) – pg 56 – 59. HBR spoke with Tim Simmons, the chief product officer of Sam’s Club, a membership only retailer with 600 stores in the US and Puerto Rico.

According to interview, Sam’s Club has recorded a 43% increase in net sales after making six operational changes in their business. Four of those changes were related to how they improved the conditions in which their workers now serve their customers, including changing workers specialty roles by broadening job roles, streamlined shifts and made them predictable and supporting workers lifestyle, used technology to support workers productivity and increased average pay by 31%.

What is the take? Out of six elements and changes made to get result, four of those changes were related to the conditions that supports improving workers productivity. Indeed, Tim Simmons said in the interview, “you’ve got to set your people up to succeed”

I could not agree more. Let winning for you this week start by thinking of how you can support your staff and colleagues to win – How can I improve productivity in my business by innovating and supporting those that work in the business serve customers and clients?