ThinkBusiness Today - July 31st

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.

It’s going to be a very busy week in Abuja. Those nominated by the President to be ministers are expected to be screened today. Once confirmed, the expectation is that we will also know their designated ministries before the weekend and perhaps even resumption at their duty posts.

Please have a great week.

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Markets

• The benchmark NGX All-Share Index (ASI) dropped 426.52 (-0.65%) points to close at 65,056.39, representing a 1-week gain of 0.08%, a 4-week gain of 6.71%, and an overall year-to-date gain of 26.94%. Key share price decline on Friday were Guinness (- 10%), Chams (-10%), John Holt (-9.84%) and Cadbury Nigeria (-9.78%).

• Oil prices rose on Friday and recorded fifth straight week of gains as expectations rise that rate hikes have peaked or near peak in the US and Europe. Brent crude settled 75 cents higher to US $84.99 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 49 cents to US $80.58 a barrel.

• Naira was mixed at the I & E and on the streets. At I &. E window, Naira appreciated by 0.29%, resulting in a closing rate of N775.76 against the US dollar. Simultaneously, on the streets, Naira slid by 1.75%, down to N870 against the US dollar.

• U.S. natural gas futures gained about 2% on Friday to close at US $2.65.

Naira’s exchange rate adjustment drags down Companies’ Profit

Following Central Bank’s adjustment of the exchange rate and the aggregation of all its windows into the I & E window in June, the July earnings season reporting has provided an indication of the impact on companies’ books and profits. The table below shows companies’ losses due to exchange rate adjustments in billions of Naira.

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The first ThinkBusiness Insight is here…

National Headlines

• CBN’s special investigator – The case of the government and Godwin Emefiele can be compared to that of a moving train on a journey towards a destination for which there is no clear path yet. The government arrested him without a case. When forced to present a case, they gave that of illegal possession of firearms. When that sounded laughable, they have finally hired a special investigator to look for a case. Jim Osayande Obazee, the Chief Executive Officer, Financial Reporting Council of Nigeria (FRCN), has been hired as a special investigator to investigate the books of the CBN under Godwin Emefiele and related entities. While that is ongoing, it looks like there will be no releasing him on any bail.

• Sukuk is not free – The government has reported that amount paid on Sukuk rentals was N8.17 billion in Q1 2023, and the same amount also paid in Q2 2023. As in all other bonds, the government will pay back the bonds in full when they mature.

• Russia and Africa – After the completion of the Russia – Africa summit in St Petersburg in Russia, it has come to light that Russia is involved in Nigeria and other African economies’ power projects. Russian companies are involved in 30 new power projects in Nigeria and 15 other African countries. Russian companies involved are Gazprom, Rosneft, Lukoil and Zarubezhneft and in countries that also include Egypt, Algeria, Cameroon, and Republic of Congo. Combined, the projects are expected to generate close to 4 gigawatts of electricity in Africa.

Global Headlines

• Growth and inflation – Inflation fell in Germany in July to 6.5%, compared to 6.8% in June. Canada’s economy largely remained flat in May and June, with 0.3% and 0.2% growth, respectively. Meanwhile, Brazil’s jobless rate fell in Q2 2023 to 8%, down from 8.3% in the previous quarter.

• Suicide bombing kills 55 in Pakistan – There was suspected suicide bombing in the Northwestern Bajur district of Pakistan, bordering Afghanistan, that killed at least 55 people, according to reports. It is also reported that about 135 people are injured. It was during a political rally.

• China, India, and the global economy – China’s factories contracted for the fourth consecutive month in July, while non-manufacturing slowed to its weakest this year. This is another clear indication that China, the global economy’s factory is slowing down and threatens regional and global growth. On the flipside, India can’t stop growing and it is now a question of whether India can fill the gap left by China. Given India’s growth dynamics, it is expected that the country’s demand for commodities like oil, coal, gas, copper, and steel could rise by more than 5% in this decade.

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This Week

• Euro Area GDP Growth Rate is expected to be released today 31^st July 2023. The Eurozone economy stalled in Q1 2023, instead of a 0.1% contraction which means the bloc avoided a technical recession, revised data showed.

• Bank of England monetary committee meets on Thursday 3^rd August 2023. The Bank of England raised its policy interest rate by 50 basis points to 5.0% during its June meeting, marking the 13th consecutive hike. This decision surprised market expectations of a smaller 25 basis point rate hike and pushed borrowing costs to their highest level since the 2008 financial crisis, all to combat persistent inflation.