ThinkBusiness Today - June 26th

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 is the beginning of a new week. It’s going to be a short working week as Muslim faithful celebrate Id el Kabir Wednesday and Thursday. In the context, let me keep this introduction short as well, and say please have a great week.

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Markets

• Markets open today after weekend. On Friday. The benchmark NGX All-Share Index (ASI) pared 4.63 (-0.01%) points to close at 59,206.63, a 1-week gain of 0.35%, a 4-week gain of 11.86%, and an overall year-to-date gain of 15.52%. Significant share price movement include that of NEM (-9.09%), ETI (-9.09%), CONOIL (-6.69%) and STANBIC (-4.07%).

• Oil prices settled lower on Friday. Brent crude closed 29 cents lower, or 0.4%, to US $73.85 a barrel, while US West Texas Intermediate (WTI) crude fell 35 cents, or 0.5%, at US $69.16. Crude oil price is expected to trade at US $74.13 per barrel by the end of this month / quarter, according to Trading Economics global macro models and analysts’ expectations.

• Naira continues to depreciate at both markets. At the I & E window, Naira was down 0.92% to N770.17, and at the street market by 0.76% to N766.67.

• Natural Gas price continues its step recovery into the weekend. The Natural gas price increased by 4.64% on Friday, supported by a combination of a hotter-than-usual start to the summer in most of the US and Europe stoking demand for Gas to power air conditioning and lingering concerns about Norwegian supply, which has taken Russia’s place as the main producer in the region.

Cocoa Prices continue to surge amid supply cuts

The global cocoa market experienced a surge in prices in 2023, reaching 8 year high. Data from NASDAQ revealed that cocoa prices has increased by US $517.20 per tonne, 19.85% year to date. In December 2022, prices were pegged at US $2,600 per tonne which rose by 12.81% to US $2,933 per tonne at the end of the first quarter 2023, climbed further to US $3,123 as of 25^th June 2023. On month on month, the price of cocoa declined by 1% in January, grew by 8% in February, 5% in March, declined by 11% in April, no growth in May but increased by 23% in June.

Cocoa Prices in 2023

There has been a global supply deficit resulting from a low level of cocoa bean supply from West Africa, particularly Côte d’Ivoire, as farmers struggle with unfavorable weather, lack of fertilizer and pesticides as the war in Ukraine has limited Russian exports of potash and other fertilizer worldwide

On production side, the current year-on-year reduction of 137,000 tonnes for cumulative arrivals in Côte d’Ivoire combined with the year-on-year increase of 53,013 tonnes in Ghana and 6,286 tonnes in Brazil resulted in a shortfall of 77,701 tonnes of cocoa beans. This decline represents a larger reduction of over seven times the year-on-year decline of 10,672 tonnes observed in grindings for the three main regional cocoa associations during the first-half of 2022/23 year.

Second, a Reuters report published on February 23rd revealed that Ivory Coast's cocoa regulator restricted 20 major traders, including Cargill and Barry Callebaut, from purchasing beans for export after they reached their buying limits. Cargill Inc and Barry Callebaut are the country’s largest cocoa grinders and the biggest buyers of cocoa beans produced in Ivory Coast. The two companies announced that they have entered negotiations with the Coffee and Cocoa Council (CCC).

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National Headlines

• Jamb and Universities Independence – The Joint Admission Matriculation Board (JAMB) has advised that the lowest cut off point for university admission be 140 for the 2023 admission. Of course, Universities are expected to set their cut off marks above that, but none can set it below. Some argue that the cut off is too low, but some universities argued that it is too high. But what most people agree on are two things – the general quality of university outcome is poor, and that the purpose of establishing a university has changed from scholarship to money. The same universities that argue that cut off point should be lower admit hundreds of students through pre- degree courses. I do hope that the quality of teaching, learning, and outcomes become urgent in this administration.

• Nigeria’s debt nearing 40% of GDP ceiling – The Debt Management Office (DMO) has projected that Nigeria’s total public debt could rise to 37.1% of its GDP, nearing the self-imposed target of 40% of GDP. The recent rise is due new borrowings and the Central Bank of Nigeria (CBN) loan to bond swap at the twilight of President Buhari’s administration. It says Nigeria’s debt service will reach 73% at the end of the year. This data does not reflect the recent changes to the exchange rate, which is bound to change the dynamics for the US dollar equivalent of Nigeria’s debt.

Global Headlines

• Wagner Mercenaries surrendered in Russia – The previously united front in the Russia war against Ukraine suffered a crack weekend. Yevgeny Prigozhin, a former ally of President Vladimir Putin initially turned against him weekend, before fleeing to Belarus. At a point, the insurrectionists controlled the city Rostov-On-Dov, a critical city in Southwestern Russia near Ukraine, about 1,000Km to Moscow, the capital of Russia. The Russia President has pledged to punish everyone involved in the armed rebellion. While the situation is now under control, the question is, how much damage has this done to the stature and progress on the war against Ukraine? The following days, weeks, and months will tell. Going by history, this has weakened the Russian President.

• What’s the point of Africa Summits? – Last week, President Bola Ahmed Tinubu joined many other African leaders in Paris for the Summit for a New Global Financing Pact. The summit, hosted by the French President Emmanuel Macro, is like those Africa +1 summits. Frank conversations around debt, climate, and financing for Africa, but questions remain about the effectiveness of these summits. For instance, another Africa summit is scheduled to hold next month in St Petersburg, Russia 27 – 28 July. No doubt, the last decade has seen increasing focus on Africa from the rest of the world. The symbol of this focus are the many summits with Africa, including the US -Africa summit; the China – Africa cooperation; AU – EU Summit; UK – Africa Investment Summit; Tokyo International Conference on African development; India – Africa Forum Summit; Germany’s Compact with Africa Conference; Turkey – Africa Partnership Summit. But I can’t help thinking if all these Presidents would not have achieved more staying at home more.

• The Federal Reserve and BIS in rhyme – The US Federal Reserve Bank has plans to keep hiking interest rates to stem inflation, and this has been echoed by the Bank of International Settlements (BIS), who called for more interest rate hikes, warning the world economy was now at a critical point as countries struggle to rein in inflation. Many major economies of the world are battling inflation of the type last seen 40 years ago. It follows incredible quantitative easing since 2008 /09 global economic crisis and fiscal and monetary support for economies during Covid – 19 pandemic.

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Strategy for Winning - Repeatable Patterns

If you are a keen reader and observer of success, one of the things I believe you would have noticed is that success is not only replicable, but it also always has underlying patterns. Great authors such as Simon Sinek – Start with Why, Leaders eat last, the infinite game etc.; and W. Chan Kim and Renee’ – Blue Ocean Strategy, have discussed this extensively in their books.

This week, whether you think about your business, your personal growth or Nigeria as a country, or Africa as a continent, I want you to think of why it’s difficult to repeat success. I say repeat success because everyone and every nation has recorded one success or the other. The challenge is always in repeating them.

So, the strategy for winning this week is about asking those questions:

• Where have I or my business won in the past? Or perhaps where have I or my business failed in the past?

• Why did I / we succeed or fail?

• How did I / we succeed or fail?

• What were the conditions that allowed me / us to succeed? Are those conditions replicable?

Often, in this part of the world, the reason for repeatable failures is because we don’t do the following:

• Build a template for every replicable activity

• Build a system of constant review that also details how the process can be improved

• Build a system intolerant of mediocrity but always striving for excellence.

I hope you find this useful, try it and let me have your feedback.

The Week Ahead

• This morning, the Debt Management Office (DMO) will sell between N320 billion and N400 billion worth of FGN bonds. The Bonds are 14.55% FGN APRIL 2029, FGN JUNE 2033, FGN JUNE 2038 and FGN JUNE 2053.

• On Wednesday 21^st June 2023, The United Kingdom is expected to release the inflation report for the month of May. The Bank of England Monetary Policy Committee meets on Thursday 22 June 2023. In its last meeting, it raised interest rates for the 12th meeting in a row by 0.25 percentage points to 4.5%.