ThinkBusiness Today - June 12th

E kaaro o, Ututu Oma, Barka da Safiya - Good morning, and welcome to a new week.

Our democracy is evolving, maturing, and can be enduring

If you have just subscribed in the last week, a warm welcome to ThinkBusiness Nigeria, your Monday – Friday dose of commentary, contexts, and insights on business and economic news that matter to you.

This week is packed. Nigeria celebrates “Democracy Day” today. For those still “young enough”, June 12 was the date of the 1993 presidential election won by late Chief MKO Abiola, that was later annulled by General Babangida. Since 1999, after return to democratic rule, I believe our democracy is evolving. Is it flawed? Oh yes, but it is evolving, maturing, and can be enduring. As part of that evolving democratic rule, the 10^th National Assembly will be inaugurated tomorrow. As usual, there are jostling for positions, itself a sign of an evolving and maturing democracy. What I most look forward to is the Ministerial list I expect PBAT to submit later this week. I suspect we will see a repeat of the pattern in the past – the submission of ministerial list without their assigned portfolio. I also know that we will arrive at that progress soon. That way, the confirmation process is specific and rigorous.

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Markets

• On Friday, the benchmark NGX All-Share Index (ASI) pared 25.62 (-0.05%) points to close at 55,930.97, a 1-week gain of 0.2%, a 4-week gain of 7.23%, and an overall year-to-date gain of 9.13%.

• Market Expectations – Jaiz Bank and Sunu Plc AGM holds Wednesday 14th June 2023. They plan for 5k and 3k dividends, respectively, for every ordinary share to be paid 14^th and 15^th , respectively. AIICO will pay 3k dividends each for every ordinary share on Thursday 15th June 2023. Julius Berger and CAP AGM comes up on Thursday 15^th June 2023 and will pay N2.50k and N1.55k for every ordinary share respectively on Friday, 16^th June 2023.

• Oil prices fell more than a dollar a barrel on Friday to record a second straight weekly decline. Brent crude futures fell US $1.17, or 1.5%, to settle at $74.79 a barrel, while the U.S. West Texas Intermediate crude fell US $1.12, or 1.6%, to $70.17 a barrel. The crude oil market will closely monitor if the US Fed pauses on interest rate when meets later this week – June 13 /14.

Natural Gas price crashed by 74% in one year

US natural gas futures fell 3% on Friday on forecasts for less demand over the next two weeks than previously expected, while mild weather so far this year has cut historical volatility in futures to a 13-month low. Fig below shows gas prices declined by 74% in the last one year, from US$8.6/MMBtu in June 2022 to US$2.3/MMBtu as of 9^th June 2023. It shows a dramatic return to long term trend after escalating prices, following the invasion of Ukraine by Russia February 2022.

Natural Gas Price June 2022 – June 2023

Though stable, natural gas price dynamics continues to be determined by recovery of Chinese demand, EU sanctions and price caps on Russian oil and gas, mild winter in Northern hemisphere, and geopolitical tensions in key producing regions.

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National Headlines

• Not so fast – contrary to the growth target set by the President in his campaign, KPMG has released its report that the goal cannot be achieved in four years. Transitioning from a low average growth rate of less than 3% in the last few years to 6% is overly ambitious, the report says. I think everyone agrees with that. To grow the Nigerian economy, the overarching focus should be on stabilising the economy that will attract investments. The economy cannot grow without a succinct and progressive action on stabilizing the economy through proactive fiscal reforms.

Global Headlines

• Calm after the storm? – CNBC has reported “calm” in bitcoin prices after the chaos of last week. The US Sec had instigated lawsuits against two of the largest bitcoin traders in the world – Binance and Coinbase for security violations. Markets responded by a decline of more than 20% in some cases. Prices have now stabilized.

• Will the Fed Raise Rates? – The US Fed will meet tomorrow and Wednesday to consider whether to raise rates. In its last meeting, it raised the band by 25 basis points to 5.25%. After that meeting, it was not clear whether the fed will pause its rate hike or not. The Fed Chairman Jeremy Powell hinted at the time that future data direction will be critical. Since, the worries of financial instability has eased slightly, while there has been strong data on jobs and inflation still high. The Fed thus have a careful balancing act to carry out this week to prevent further financial crisis and return inflation to its long-term trend.

• Russia extended its interest-rate pause at 7.5% - The Russian central bank extended its 7 years rate pause at 7.5%, signal a possibility of a rate rise in its next meeting in July. The Bank’s inflation forecast for 2023 is at 4.5 – 6.5% range but expects it to settle at 4% next year.

Winning - Enduring Success

In this section, I use experiences from outside of business to share lessons on winning. Since I started sharing these lessons, it has really forced me to think about the patterns of success across many different areas of life. I hope you do, too.

Last weekend, we had three examples of enduring success.

First, on Saturday, Manchester City Football Club became the second English Premier League Club to complete the treble. That is, winning the league, the FA Cup, and the European Champions League. The first team to accomplish that was Manchester United in 1999, the year that Nigeria returned to democratic rule.

Second, Novac Djokovic beat Casper Ruud to win the French Open, one of the four grand slams in the Tennis calendar. By that feat, Djokovic now has 23 grand slams single titles, more than any other man in the world. The French Open was his 7^th final. He is also the oldest player in Roland Garros (venue of French Open) singles champion history at 36 years and 20 days. Ruud, after the defeat, has this to say about Djokovic, “It’s tough to explain how incredible it is and how good you are and what an inspiration you are”.

Third, Enyimba International Football Club of Aba, led by Finidi George, won the Nigeria Premier Football League on Sunday. They have now won it for a record 9^th time, becoming the most successful football club in the country. They won their first in 2001, followed by 2002 and 2003. Then won it again 2005, 2006, 2010, 2015 and 2019.

Across these three different kinds of accomplishment is an enduring success streak. Enduring success is difficult to accomplish in life and in business. It is the reason why very few accomplish it, even in business. But it is possible, and it can be learnt.

One quality always stands out – consistently raising the standards through investments in people and processes. Christian Sadler in Harvard Business Review (HBR) of July – August 2007, looking at 40 European companies older than 100 in Fortune Global 500 of 2003. They concluded there are four principles of enduring success –

https://hbr.org/2007/07/the-four-principles-of-enduring-success

• Exploit before you explore – Exploiting existing assets and capabilities over exploring new ones

• Diversify your business portfolio – they know when to diversify

• Remember your mistakes – great companies tell and retell of past failures to make sure they don’t repeat them

• Be conservative about change – seldom make radical changes.

This Week

• Tomorrow, the 10^th Assembly of the Federal Republic of Nigeria, the 7^th since the return to democratic rule in 199, will be inaugurated.

• US Federal Open Market Committee meets on Tuesday 13^th and Wednesday 14^th June 2023. The Fed reserve in the last meeting raised its benchmark rate to 5.25%. Investors expect the Federal Reserve to take a breather at its June 13-14 confab after ten consecutive meetings with rate hikes.

• The National Bureau of Statistics (NBS) is expected to release the CPI and Inflation Report May 2023 on Thursday, 15^th June 2023. We will have to wait until next month’s report to have the first indication of the impact of the removal of fuel subsidies on inflation.

• Other reports from NBS to be released this week are National household kerosene price watch May 2023 and Premium motor spirit (PETROL) Price watch May 2023 to be released on Saturday 17^th June 2023

• United Kingdom will release its employment rate statistics on Tuesday 13^th June 2023, United State will release its report on inflation on this same day.

• OPEC will release its monthly oil report tomorrow Tuesday 13^th June.