ThinkBusiness Today - June 14th

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.

As expected, yesterday, Senator Godswill Akpabio and Tajudeen Abass emerged Senate President and Speaker of the House of Representatives, respectively. As our democracy evolves, two things are increasingly happening. First, the National Assembly is increasingly understanding its role, growing its independence from the executive, and starting to make laws that shape the socio-economic direction of the country.

Second, and this is very important. We have had stable National Assembly since 2007. Between 1999 and 2003, we had four Senate Presidents – Evans Enwerem, Chuba Okadigbo, Anyim Pius Anyim, and Adolphus Wabara. Between 2003 and 2007, we had two – Adolphus Wabara and Ken Nnamani. But from 2007, we have had David Mark, Bukola Saraki and Ahmed Lawan, all spending their full terms as Senate Presidents. The House of Representatives have fared better but still had two speakers between 1999 and 2003, and 2007 and 2011.

What do I most look forward to? It is for the National Assembly to get a grip on Nigeria’s fiscal dynamics – how we earn and spend money, perhaps by setting up a National Assembly Budget Office (NABO). Therein lies the future prosperity of the nation.

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Markets

• Emefiele bounce - The market reacted positively to the suspension of the embattled Central Bank Governor Godwin Emefiele. NGX All-Share Index (ASI) soared 2,232.62 (3.99%) points to close at 58,163.59, the second highest daily gain this year. This shows a 1-week gain of 4.22%, a 4-week gain of 11.39%, and an overall year-to-date gain of 13.49%. The positive sentiment was driven by upward movement in large cap stock. Access Holdings led the gainers with 10% share price appreciation closing at NGN 14.30 per share, followed by National Salt Company (+10%), Guaranty Trust Holding (+10%) and Zenith Bank (+10%).

• Crude oil prices climbed on Tuesday. Brent crude increased by 2.62% to close at US $74.46, with West Texas Intermediate soaring by 3.68% to close at US $69.59.

• Naira remains flat at the I & E Window at N472.5/$. However, at the street market naira depreciated slightly by 1.32% closed at N765.00 per dollar.

• U.S. natural gas prices edged up about 3% to US$2.33 on Tuesday on forecasts that hot weather will boost air conditioning demand in late June.

• Seplat Energy CEO Roger Brown’s work permit in Nigeria has been restored, the company’s chairman released a statement yesterday.

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National Headlines

• Unity of Purpose? – The President has no doubt successfully got both houses in the National Assembly to vote for his preferred candidates. That is often a good start. A former governor of Akwa Ibom State, Godswill Akpabio, emerged as the Senate President of the 10th Assembly, after garnering 63 votes, leaving his rival, Yari Abdulaziz, to 46 votes. Tajudeen Abbas, won by a landslide. The focus now shifts to the confirmation of Ministers by the Senate when the President submits the list and how the 10^th Assembly will confront the three huge problems confronting the country – stagnating economy, insecurity, and poor socio-economic environment with poor health and education standards as the greatest symptoms.

• Naija no dey carry last! – On the day that the Guinness World Records confirmed that Hilda Effiong Bassey (HildaBaci) is now the record holder for the longest cooking marathon (individual) with a time of 93 hours 11 minutes, we have another Nigerian, Chef Dammy, an Ekiti based Chef attempting to beat the record, hoping to cook for 120 hours. I dare not summarise, nor repeat the conversations on twitter on this. I will reserve my comments until there is a confirmation from GWR.

Global Headlines

• US inflation rose 4% in May, lowest in 2 years – Ahead of the Fed meeting to decide whether to raise rates or stop, the inflation figures for last month shows progress on costs of goods and services in the world’s largest economy. The consumer price index, measure of changes in prices of multitude of goods and services, increased just 0.1% for the month, bringing the annual level down to 4% from 4.9% in April. That 12-month increase was the smallest since March 2021, when inflation was just beginning to rise to what would become the highest in 41 years. Also, the dollar dropped to a three-week low on Tuesday on news of the smallest annual increase in inflation in more than two years, cementing expectations that the Federal Reserve will pause interest rate hikes at its two-day meeting ending on Wednesday.

• War rages on in Sudan – Fighting between the Sudanese Armed Forces (SAF) and the paramilitary Rapid Support Forces (RSF) continues to rage in Sudan, now mearing the end of its second month. Al Jazeera reports that fighting has intensified in West Darfur, about 1000km from Khartoum, the capital of Sudan. An estimated 25 million people need aid and protection, while about 2 million are already displaced. However, getting humanitarian assistance to them have been unsuccessful due to the volatility and intensity of the conflict.

News Analysis – Nigeria’s Production Up 19%

Yesterday, the OPEC released its monthly oil report for June. Total OPEC-13 crude oil production averaged 28.06 mb/d in May 2023, lower by 464 tb/d m-o-m. Crude oil output increased mainly in Nigeria, IR Iran, and Angola, while production in Saudi Arabia, the UAE and Kuwait declined. While there was an improvement in the Nigeria crude production from less than a million barrel per day in May, specifically 990,000, to 1.18mbpd, a 19% higher. With this, Nigeria regained its first spot as the largest producer of crude oil in Africa after being last month. The graph below shows that Nigeria’s crude oil production has been downward since the peak of 2.11mbpd in July 2019 and this 44% lower than the current production.

Nigeria’s Crude Oil Production May 2019 – May 2023

This Week

• US Federal Open Market Committee meets on concludes its two-day meeting today. The Fed reserve in the last meeting raised its benchmark rate to 5.25%. Following inflation data released yesterday, market expects the Fed to pause on 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.