Nigerians are Unemployed, have the highest unemployed in the world

E kaaro o, Ututu Oma, Barka da Safiya - Good morning, and a warm welcome to ThinkBusiness Nigeria, your Monday – Friday dose of commentary, contexts, and insights on business and economic news that matter to you.

Fifapro, the global body of footballers called out the Nigerian Football Federation (NFF) again yesterday, saying it would fight for the Falcons to receive all what is due to them. This has been on for weeks in the global public space. Is anyone in government hearing all of these or when will there be a concrete government response to demeaning Nigeria’s global reputation like this?

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Markets

• The NGX All-Share Index (ASI) pared 27.15 (-0.04%) points to close at 65,309.65, representing a week gain of 1.74%, a 4-week loss of 0.55%, but an overall year-to-date gain of 27.43%. Secure Electronic Technology share price declined 10%, Northern flour mills by 9.89%, John Holt by 9.52% and Tantalizers by 8.33%.

• Corporate Result – Indigenous energy company, Seplat Energy Plc, grew its gas revenue by 10.21%to US $63.7m H1 2023 compared to US $57.8m recorded in the same period in 2022, on the back of higher prices of 4.4% and volumes of 1.4%.

• Brent crude futures reversed course and rose above US $85 per barrel on Tuesday, hovering around four-month highs, after a monthly report from the U.S. Energy Information Administration projected a rosier outlook for the US economy. The EIA has also reversed its forecast of a supply deficit in the global oil markets for 2023 and now expects a sharper increase in non-OPEC OECD output than earlier, with US output expected to rise by 850,000 barrels per day to 12.76 million bpd in 2023.

• The forex supply shoratge continues. At the I&E window, Naira appreciated by 2.19%, closing at N757.51 against the US dollar. However, on the streets, the Naira down by 0.85%, reaching N895 against the US dollar, and crossed the N900 mark in some cases.

• US natural gas futures rose to over $2.75/MMBtu, the highest in nearly two weeks, driven by expectations of increased demand for air conditioning. Meteorologists forecast that hotter-than-usual weather will persist until at least August 19.

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National Headlines

• Unemployment in Nigeria – No one will be surprised that Nigeria tops the list of countries with the highest rate of unemployment, according to the latest statistics released by the World of Statistics. Nigeria led with 33.3%, followed by South Africa 32.9%, and Iran 15.55%. (See News Analysis).

• Nigeria and Niger – It is increasingly likely that the Niger crisis after a coup on July 26 will be one of the defining moments of President Bola Tinubu’s presidency. After the error of a 7-day ultimatum that angered the coup leaders in Niamey and the rejection of force by the Senate, the Economic Community of West African States (ECOWAS) has imposed economic and financial sanctions on the coup plotters. In response, planned ECOWAS delegation for this week were denied entry on security concerns. The coup has now clearly metamorphosed into global geopolitical fault lines with Nigeria and ECOWAS at the centre of it. There is a great deal at stake for Nigeria, especially because of the security dimensions and implications from the Sahel region. Also, an enduring stay of the coup leadership in power will accentuate the weakness in the Nigeria and ECOWAS leadership in the region. To add, Nigerians are vehemently against any military intervention in Niger. All eyes on Tinubu.

• Tax and fiscal committee inaugurated – The President yesterday inaugurated the committee charged with looking at how Nigeria’s low level of taxation can be improved on. Led by Taiwo Oyedele, formerly of PwC, the presidential committee on fiscal policy and tax reforms will focus on how to improve one of the lowest tax ratios in the world at less than 10%, less than Africa average of about 16%. The President carefully addressed the folly of inflation tax used extensively by his predecessor when he said he will end the “vicious cycle of borrowing simply to service previous debt”, setting a target of 18% in three years. What is not clear yet is if this committee is a standing committee because there is no indication of the time frame of their work. But the expectation is that Nigerians will begin to see changes to taxes ahead the next fiscal year that starts in January 2024.

• Super Falcons, Nigeria Football Federations and Nigeria’s reputation – In all of the globally dented country’s reputation following the dispute overpay with Nigeria Football Federation, I am not sure if I missed any response from the Nigeria government. Yes, Ministers have not been appointed but the Presidency or the ministry permanent secretary should be aware of these developments except I have missed it. Meanwhile, in matters of demeaning global reputation such as this, it is not sufficient to be working to fix it, it must be communicated and those involved sanctioned. This has been dispiriting.

Global Headlines

• Moody’s in moody mood – Following Moody’s downgrading of 10 small and midsized banks in the US, bank stocks fell on Wall Street. As reported by Bloomberg, Moody downgraded 10 banks, set a downgrade review for six, and set negative outlook for 11 banks, including Bank of New York Mellon (BK.N), US Bancorp (USB.N), State Street (STT.N) and Trust Financial (TFC.N). Moody’s concern is the funding approaches some of these banks have resorted to following increases in interest rates that reached 5.25% - 5.50% range in July, with the expectation one more rate hike before the end of the year. These circumstances are lowering profitability, Moody argued.

• The Italy government wants its share – Italy dealt a surprise blow to its banks yesterday, setting a one off 40% tax on profits from higher interest rates. Banks have benefitted from increasingly interest rates without passing it on to depositors, the government said. It follows Spain and Hungary that have instituted same measures.

• Niger’s trouble worsens as diplomatic connections bite – The sanctions are biting and will continue to bite. Sanctions have escalated in the last week since the coup leaders doubled down on their position. So far, the Economic Community of West African States (ECOWAS) and the West African Monetary and Economic Union have introduced rigorous measures, including freezing state assets. France, the European Union, the United States, and Canada have suspended financial support and cooperation. The World Bank has also paused disbursements, excluding cautious private-sector partnerships.

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News Analysis - Nigerians are Unemployed, have the highest unemployed in the world

World statitics data that shows that Nigeria’s unemployment rate is 33.3% is based on 2020 data, followed by South Africa 32.9% and Iran at 15.5%. Relying on National Bureau of Statitics (NBS) data, unemployment in Nigeria went from 27.1% in Q2 2020 to 33.3% in Q4 2020.

In the absence of a most recent data, it is widely accepted that unemployment would have risen signficantly since 2020. A recent KPMG report sugest a rate of 37.7% in 2022 and 40.6% in 2023.

In the last decade, since significant fall in oil prices in 2014, Nigeria has had three major economic shocks – the 2014 /15 fall in oil prices, the Covid – 19 Pandemic, and the Russia /Ukraine war of 2022. Those and the poor policy response to them to them have left the Nigerian economy on its knees, resulting in two economic recessions in 2016 and 2020. In 2023, all macroeconomic indices are off – high and sticky inflation, weak and volatile exchange rates, huge debts and rising borrowing costs, non-existent domestic and foreign direct investment, and rising insecurities of lives due to kidnapping and communal clashes. These are the factors driving unemployment and it may get worse before it gets better.

This Week

• United State will release its inflation rate for the month of July on Thursday, August 10, 2023. The annual inflation rate in the US slowed to 3% in June of 2023, the lowest since March of 2021 and compared to 4% in May and expectations of 3.1%

• On Friday 11^th July 2023, the United Kingdom will release its GDP data for second quarter 2023. Britain's quarterly economic growth was confirmed at 0.1 percent in the first quarter of 2023, remaining unchanged from the previous three-month period. Analysts expects that the GDP rate for Q2 might be 0.1%.