ThinkBusiness Today - July 5th

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.

Yesterday, the Senate resumed and immediately went about filling other leadership positions. Now that we have that concluded, it is time for the President to move swiftly on sending the list of ministerial appointments to the Senate for confirmation.

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Markets

• The NGX ASI declined by 1,234.2 (1.99%) points to close at 60,715.04, showing a 1-week gain of 2.55%, a 4-week gain of 8.79%, and an overall year-to-date gain of 18.47%, following sell off in PZ (-10%), Wema (-10%), BUACEMENT (-9.9%).

• Saudi Arabia announced it will extend its voluntary oil production cuts into August. Crude oil prices rose slightly in response. Both West Texas Intermediate (WTI) and Brent crude experienced marginal gains, as WTI surpassed the US $70 mark and Brent approached US $75, both benchmarks increased by more than 1%.

• Naira had mixed performance in the market yesterday. At the I & E window, there was a significant depreciation of 3.63%, resulting in a closing rate of N768.44 against the US dollar. Conversely, in the street market, the Naira experienced a slight strengthening of 0.95%, reaching N765.67 against the US dollar.

• On Tuesday, U.S. natural gas futures increased by 1.62% closed at US$2.75 supported by a smaller-than-expected stock build, rising demand, and decreased supply.

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National Headlines

• MTN and IHS – Slowly, the shareholders arguments at IHS, Africa’s largest telecoms infrastructure company, is being debated in the media. MTN, Africa’s telecoms giant and largest shareholder in the company has gone public with its dissatisfaction regarding the share performance of the company and what it perceives as non-transparency. Though it has 25% shareholding in the company, it has voting rights capped at 20% because it is also the largest customer of the infrastructure giant. IHS is listed on the New York Stock Exchange (NYSE), then at US $16.69 a share but now trades at about US $10 per share. In two years, with 30% of its operations in Nigeria, and the rest in six other African countries, Latin America, and the Middle East, it has been unfortunate that its listing has coincided with difficult economic conditions in emerging markets.

• The President and ‘Investors’ – As expected, it is becoming clearer that President Tinubu will seek to rely on international investors to boost investment in the country. Since he became President, he has received delegations from ExxonMobil, Shell, Bank of America etc. It is also clear that he wants to focus on gas investments. Nigeria is in dearth need of capital. I reckon we need investments in the region of US $20 – 30 billion in the medium term, so ramping up gas and other forms of investments is the right way to go. It is also pleasingly different from what we had over the last eight years. Final investment decisions take time, so I hope there is enough preparation on the ground to work with, and now is the time to appoint Ministers.

Global Headlines

• Twitter, Threads, and Bluesky – The platform battles rages on. This Thursday, Meta, the parent company of Facebook and Instagram will launch Threads, a social microblogging site to directly compete with Twitter. On the App Store, it is called ‘Threads, an Instagram app’, signaling that Meta will rely on its 2.35 billion monthly Instagram users, over 12.2 million of those in Nigeria, to get the app going. It is also expected that people will be able to log in through their Instagram account. When launched, Threads will not only compete with Twitter, but also with Bluesky. Currently, Bluesky requires you to have an invite code to be able to join. In the last few months, deepening uncertainty about the direction of Twitter, have left many disillusioned.

• UK is struggling with inflation – The next UK elections will hold no later than 28 January 2025. Current UK Telegraph poll of polls put the labour party ahead at 46%. For as long as the conservative lags behind, currently at 26%, the government will wait until the last minute to call the election (yes, it is the government of the day that decides when to hold general election, but not later than 5 years of parliament). However, inflation is now a major problem. According to data from the Organization for Economic Cooperation and Development (OECD), the United Kingdom stands alone among the Group of Seven (G7) nations experiencing continued rise in inflation. The OECD reported on Tuesday that year-on-year inflation in the G7 declined to 4.6% in May, down from 5.4% in April, marking its lowest level since September 2021. However, the U.K. experienced a slight increase in consumer prices across all items, reaching 7.9% in May.

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News Analysis – Banks’ borrowing from the CBN rise y/y

Latest data from the Central Bank of Nigeria suggest banks are relied on the apex bank to maintain liquidity in the last six months. H1 2023, banks borrowed N10.3 trillion, a 140% rise on the same period last year.

Nigerian Banks’ Borrowing from the Central Bank of Nigeria.

The borrowing is from CBN’s standing lending facility (SLF). The rise in demand by the banks, especially in March and April followed the change in policy of the Naira redesign policy after the general elections in March. Following the change in policy, banks require greater level of liquidity to meet the pent-up demand from the public that had been suppressed while the Central Bank struggled to print new notes in the previous three months.

This Week

• The United State Unemployment rate is expected to be released on Friday 7^th July 2023.