ThinkBusiness Today - June 13th

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.

Nigeria’s 10th National Assembly

Today, Nigeria’s 10^th National assembly session will be inaugurated. The first assignment will be to elect their presiding officers. After, the focus will shift to the Senate for the confirmation of Ministers, depending on when the President submits the list. But given the pace of activity since his inauguration, the expectation is that it will be swift.

Before then, a clip emerged yesterday that suggested the outgoing Senate President Ahmed Lawan would have preferred to “off the mic”. Senator Adamu Muhammad Bulkachuwa, in what is believed to be his valedictory speech, spoke of how his wife, Justice Zainab Adamu Bulkachuwa, who was President of the Court of Appeals 2014 – 2020 used to help his colleagues. Since the clip came to limelight, we have not heard from the former Justice. I failed in checking the cases that were decided on her watch – See courtofappeal.gov.ng.

Notwithstanding, our democracy is evolving and maturing. The legislators are now passing bills that affect Nigerians. An example is the “Access to Higher Education Act” signed yesterday by the President. See News Analysis for my thoughts.

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Markets

• Crude oil prices began this week with by declining further, with West Texas Intermediate slipping below US $70. Both benchmarks shed about 4% as traders took a cautious approach to the possibility of the Federal Reserve announcing yet another rate hike. WTI traded down 3.88% at $67.45, for a $2.72 loss on the day. Brent crude traded down 3.48% at $72.19, for a $2.60 loss on the day.

• Naira remains flat at the I & E Window as the market closed for democracy holiday. At the street market naira appreciated slightly by 1.76% closed at N755.00 per dollar.

• U.S. natural gas prices declined 1% to a one-week low on Monday on forecasts for less demand than previously expected over the next two weeks, cutting futures volatility to a 13-month low. That price decline came despite a drop in gas exports from Canada due to wildfires and as the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants remained low due to maintenance work.

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National Headlines

• Minimising IUUs – Nigeria has become the 9^th country, and second African nation, to ratify the World Trade Organisation (WTO) fisheries subsidies agreement signed in 2022. The agreement, which becomes operational after two third of member countries have ratified, will prohibit certain forms of fisheries subsides that contribute to overcapacity and overfishing, and contributes to illegal, unreported, and unregulated (IUUs) fishing. The agreement will put a stop to harmful fisheries subsidies, which are key factor in the widespread depletion of the world’s fish stocks. Nigeria is the fifth-largest African fishing nation and is estimated to lose about US $ 70 million annually to illegal, unreported, and unregulated fishing.

• US $46 billion lost to oil theft – The Energy and Natural Resources subcommittees of the Advisory Council of President Bola Tinubu, revealed that Nigeria lost an estimated US $46.16bn to crude oil theft between 2009 and 2020. Nigeria also lost US $10 billion to fuel subsidies annually and missed out on investments of about US $70 billion following the delay in passing the Petroleum Industry Act that was signed into law last year by President Muhammadu Buhari after a 20-year rigmarole.

Global Headlines

• Cocoa prices up 20% this year – As shown in the data above, Cocoa prices are up 20% this year. According to CNBC reports, markets expect prices to go up further this year following declining stocks. Nigeria is the fourth largest producer of Cocoa in the world, after Cote’ Ivoire, Indonesia, and Ghana. Average Cocoa beans production is estimated at 400,000 tonnes per year in the country, with Ondo the largest producing State in the country.

News Analysis - Students Loan Act, Education Funding and Other Reforms

Yesterday, President Bola Ahmed Tinubu signed into law the student loans bill. The Act will establish an Education Bank that will provide student loans to “indigent” families of incomes less than N500,000 per annum. The applicable students will be able to apply through their institutions. By this policy, Nigeria is returning to the era under General Yakubu Gowon in 1974 when students could apply for an annual loas of N300, N400, or N500, covering tuition, books, transportation, and accommodation. The loan was repayable within 20 years after graduation.

Our democracy is evolving and maturing. It also means that the tools and elements of democracy should be dynamic and responsive. I expect further reforms in higher education, especially given that this does not address the most fundamental problems of quality. Other reforms should deal with the following:

• First, is there a need for an education bank? I hope the current legislators will avoid setting up institutions for every problem and bill. The US and UK have been providing loans to students without an education bank. We don’t need one. Also, the N500,000-income level is insignificant and static.

• Grant Nigeria’s higher education institutions full autonomy in academics (already the case), administration (largely the case, but critical appointments still made by the government – VCs, Rectors, Provosts, Pro Chancellors etc.), and finance (full control over revenue and expenditure – currently nonexistent).

• A set of reforms, including other funding reforms, that put students in control as “customers” of higher education. The era of “anything goes” in Nigeria’s higher education has led to poor quality and only poor household children attending State institutions.

This Week

• Today, 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 today Tuesday 13^th and tomorrow 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 today Tuesday 13^th June.