ThinkBusiness Today - June 5th

The Age of Reforms!

President Bola Ahmed Tinubu starts his second week as President today. After the removal of fuel subsidies, the question many would be asking is, what next? Fiscal reforms are critical for growth, and there was no better place to start than dealing with the 50-year-old unsustainable fuel subsidies.

See my 2016 article on it here: https://businessday.ng/columnist/article/removal-of-subsidy-semantics-half-truths-and-dithering/

Now, successful reforms are based on careful sequencing and balance. So, I do not think the focus should shift immediately to exchange rate adjustment. It is the rate at which petroleum products are calculated. If you use the street (parallel) rate, PMS will sell for above N900 per litre.

So, my take, and it is about balance, the next reform should focus on government expenditure and deficits. Under Buhari, there was no alignment between government revenue and expenditure. That should be the focus of the President now. Then, with some gains on these two sets of reforms, both important fiscal set of reforms, we can then begin to deepen reforms in the coming months.

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

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Markets

• The benchmark NGX All-Share Index (ASI) inched up 12.25 (0.02%) points to close at 55,820.50, a 1-week gain of 5.68%, a 4-week gain of 6.75%, and an overall year-to-date gain of 8.92%. After the above 5% one day rise Tuesday last week following the President’s inaugural speech, the market has remained largely flat.

• Market expectations - Glaxo SmithKline’s AGM Wednesday 7^th June 2023, with plans for 55k dividends for every ordinary share to be paid Thursday 8^th of June; AIICO Plc’s AGM Thursday 8^th June 2023, with plans for 3k dividends for every ordinary share to be paid Thursday 15^th June 2023; ECO Bank Plc will pay 11 cents (or N50.6k) dividend per share on Tuesday 6^th June 2023.

OPEC maintain status quo amid Nigeria’s inability to meet its Quota

On Friday, crude Oil prices rose 2% to US $76.13 /barrel. Since then, the debt ceiling agreement has been signed by the President and default avoided, jobs data came out stronger than expected, and OPEC + met yesterday.

In its meeting on Sunday in Vienna, OPEC+ made no changes to its production targets for the remainder of 2023, but Saudi Arabi will voluntarily cut output by 1 million in July 2023. Oil price rose in early trading in Asia this morning. In 2024, it will limit combined output to 40.5 million bpd. Since the last surprise cut on April 2, 2023, the market rebounded to a peak of US $87.33 / barrel in April 12, but this was short-lived as the prices declined in the second half of April to US $80.33 / barrel. The downward sentiment continued in May as the crude oil process shed 10% it closed at US$72.6/barrel. (See graph below).

Brent Crude Price Dec 2022 – June 2023

From Nigeria’s perspective, most of the voluntary reduction in OPEC output have come from the country’s inability to meet its OPEC quota due to crude oil theft and underinvestment. As the graph below shows, for a long time now, Nigeria has given her breakfast, lunch and dinner to peers to eat. This is where the President should focus next.

OPEC Quota and Nigeria’s Crude Oil Production

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National Headlines

• Minimum Wage Review – Following the removal of subsidy, President Bola Tinubu has promised to review the minimum wage to align with the current economic realities in the country. According to him, the federal and state governments need to look at the minimum wage together and strengthen the source and application of the country’s revenue. The current N30,000 minimum wage was reviewed in 2019 and the government made payment in August 2019. Nigeria's minimum wage of N30,000 translates to about $67 per month. See May 1^st analysis on minimum wage. In the meantime, negotiations continue to avert a national strike called by labour Wednesday over the removal of fuel subsidies.

Global Headlines

• US and global economy this week – All positive from US economy entering this week. Saturday, the US President signed into law the bill passed in both US Congress and Senate to raise the US debt ceiling and avert a US default. Last week, a stronger than expected jobs report was released, showing that US economy added 339,000 jobs in May, higher than market expectations. Also, in reports monitored on CNBC, the head of the International Monetary Fund (IMF) Kristalina Georgieva has said that there is no slowdown in lending by US banks yet, which may yet mean a raise in interest rate when Fed meets June 13 - 14.

Strategy for Winning - Burna Boy

On Saturday, Burna Boy performed at the London Stadium (home of West Ham United) in front of an 80 thousand sold out concert, the first African artist to do so.

So, first, let me own up. The first time I heard of Burna Boy was when he performed at Madison Square Garden in New York with Yousson N’Dour last year (I am old School). I came across the clip of the performance on Twitter. What struck me immediately was the same feeling I had when Nwankwo Kanu and the 1996 Olympic team beat Brazil in the semifinal of the football competition. In the whole of that week, I had goosebumps “walking” the streets of London, knowing that someone have just made you a proud Nigerian.

While I have a very limited knowledge about music, reading about and watching Burna Boy, I have been to distil three important “winning” lessons.

1. Excellence is universal – whether it is a product or service, excellence is universal. There is often this myth that “excellence” can only be appreciated by a few. It may be at first, but eventually, growing excellence becomes universal. So, do not stop improving your product or service. Some may argue that this is only possible in a digital age. Not really. Digital age ensures unbelievable scale within the shortest possible time, but Fela did it then, and even across generations. Pursue excellence, always.

2. Peer Recognition is important – Burna Boy was already doing his thing. But winning the Grammy Award catapulted him to another level. He won Grammy at the 63^rd (was nominated in the 62^nd ) for best global music album for his album ‘Twice as Tall” in 2021, a first for a Nigerian solo artist.

3. Talent is not enough – Yes, you would have heard this before. Diligence is critical for success. But other things are also important – collaborations. Burna Boy have been excellent in collaborating with musicians of different backgrounds, both on his albums and in concerts. Yousson N’Dour, Ed Sheeran, Stormzy, Popcaan etc.