ThinkBusiness Today - July 25th

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.

Nothing much to say. The Nigerian economy is drifting too widely. We need all hands-on deck to repair the awful damage of the Buhari presidency.

This is time to announce the ministers.

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Markets

• On Monday, NGX ASI went up by 0.41%, gaining 264.89 points to reach a closing value of 65,268.28, a week gain of 3.69%, four-week gain of 10.23%, and an impressive year-to-date gain of 27.35%. Among the top gainers, National Salt Company (10%), Glaxo Smithkline Consumer (10%), FTN Cocoa Processors (10%), and Lasaco Assurance (10%).

• Oil prices climbed 2% to a near three-month high on Monday on tightening supply, rising U.S. gasoline demand, hopes for Chinese stimulus measures and technical buying. Brent futures rose US $1.67, or 2.1%, to settle at US $82.74 a barrel, while U.S. West Texas Intermediate (WTI) crude rose US $1.67, or 2.1%, to settle at US $78.74. Those were the highest closes for Brent since April 19 and for WTI since April 24, as both contracts were pushed into technically overbought territory above their 200-day moving averages.

• Naira’s decline and volatility contiinues. At the I & E window, the Naira depreciated by 1.83%, closing at N792.04 against the US dollar. Simultaneously, in the street market, the Naira depreciated by 9.72%, reaching a value of N866.75 against the US dollar.

• On Monday, U.S. natural gas futures maintained stability in the market despite certain factors that impacted the supply and demand dynamics. The rise in gas output and forecasts indicating lower demand for the following week countered the projections for higher demand during the current week. The weather outlook indicated persistently hotter than normal conditions until early August, particularly in Texas.

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National Headlines

• Nigerian Banks are raising capital – In the last week, Fidelity says it will raise additional capital through public share sale and rights issue. It follows Access Bank’s additional US $300 million for expansion within and outside Nigeria in April. The reason is simple. Nigerian banks, like other companies and businesses in the country are being battered by inflation, eroding the real value of their capital; exchange rate volatility and weakness, lowering their international value of capital and awful business environment, lowering the profitability. More will come raise capital in the coming weeks and months.

• Oil price and Nigeria – The story is clear by now. Oil prices remain elevated at about US $80 per barrel but Nigeria is not optimising its assets due to crude oil thefts and inability to attract new investments into the industry. Those two elements are now key to Nigeria’s immediate stronger economic performance. Without progress on oil theft and key asset sales in the coming months, Nigeria’s street, and I & E window exchange rates will continue to widen, threatening the ongoing economic reforms of the President.

• Ibom Air’s MRO and the Aviation Industry – Ibom Air has become the most preferred airline for most passengers because of its new aircrafts and timeliness, which is considered above the industry average in Nigeria. The airline is now set to unveil a new maintenance, repair, and overhaul (MRO) facility. The company says the facility will save the economy US $1 billion annually spent on maintenance of aircraft in foreign countries. It has been recognized for a long time that Nigeria needs an MRO that can conduct aircraft repairs to the point of C check. Aero contractors have an MRO as well. Then, the question is why are aircrafts are not collaborating to deliver a critical scale MRO that can serve the industry?

Global Headlines

• Slower Chinese Economy is bad for global economy – For over two decades, the world got used to China growing 8% - 10% on average, lifting millions of people out of poverty in the country. Has Chinese growth peaked? It appears so. The Chinese economy grew 6.3% in Q2 2023, lower than expectations of 7.3%. It is not as impressive as it sounds because the economy is emerging from Covid economic decline. While the Chinese authorities are ramping up measures to support the economy, the global economy is concerned about effects on commodity prices and growth in immediate Asia environment. China is the largest importer of crude oil.

• Key week for interest rate decisions – As mentioned yesterday, the Fed begins its July meeting today, and it’s expected to conclude an increase of 25 basis points on its rate tomorrow. The European Central Bank (ECB) and the Japanese Central Bank are meeting this week as well. The ECB is expected to follow the Fed and raise rates while the Bank of Japan is to leave rates unchanged.

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