ThinkBusiness Today - June 6th

E kaaro o, Ututu Oma, Barka da Safiya - Good morning, and welcome to ThinkBusiness Nigeria.

Bumpy road to Reforms

We have the first bumps to President Tinubu’s journey on reforms. The NLC and TUC have called strike for Wednesday. But before then, there is still a lot of negotiation – another round of meetings scheduled for today. In 2012, the strike was for 12 days until President Jonathan reversed his decision on the removal of subsidies.

I hope they resolve it, and the President holds his nerves.

Stay ahead of the competition with ThinkBusiness Nigeria's daily newsletter - your essential source for strategic insights on markets, macro, and political economy.

Subscribe now and unlock the knowledge that drives business success.

Please, also share so we can continue to build a community of “business thinkers”.

Markets

• NGX All-Share Index (ASI) pared 13.41 (-0.02%) points to close at 55,807.09, a 1-week gain of 5.35%, a 4-week gain of 6.37%, and an overall year-to-date gain of 8.89%. Downstream oil sectors shares are responding to removal in fuel subsidies - CONOIL (9.94%), MRS (9.94%), ETERNA (9.73%).

• Following OPEC + meeting that ended Sunday, oil prices rose by more than 1% a barrel on Monday. Brent crude futures were up $1.02, or 1.34%, at $77.15 a barrel after touching a session high of $78.73. U.S. West Texas Intermediate crude gained by 87 cents, or 1.2%, to $72.61 after hitting an intraday high of $75.06.

• Naira closed at N464.67 /US $ at the I & E window on Monday, a 79 kobo increase from N465.46 traded in the previous session. Also, at the street market, Naira appreciated by 1.98% closed at N742.50 / US$.

• Natural gas prices are showing signs of a rebound, up 4.74% to close at US $2.28, as traders react to revised demand forecasts and record exports to Mexico. Despite near-record production levels in the United States and lower gas flow to LNG export plants, prices remain firm.

In partnership with

National Headlines

• Will a national strike go ahead? – Following the removal of fuel subsidies by the government, organized labour has called its members to down tools, starting Wednesday 7^th June. First, the federal government, through the National Industrial Court of Nigeria in Abuja has got an order restraining the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) from embarking on a strike.

  Prior to the court injunction, ThinkBusiness has seen copies of different trade union bodies asking their members to proceed on strike. They include the Nigerian Union of Teachers (NUT), Judiciary Staff Union of Nigeria, Nigeria Union of Local Government Employees (NULGE), the Non- Academic Staff Union of Educational and Associated Institutions, National Association of Nigeria Nurses and Midwives, Maritime Workers Union of Nigeria, Nigeria Union of Journalists, and National Union of Electricity Employees.

  The NLC have always been against increases in the price of fuel – 2004 and 2012, when it lasted 12 days. The major difference between then and now is that the Nigerian public have a greater level of understanding of fuel subsidies today than 11 years ago. Also, the appetite for strike is rather weak, given the prevalent macroeconomic and political economic dynamics.

  As at the time writing this, the NLC and TUC has scheduled a meeting with the federal government for Tuesday. A key element of the meeting is the minimum wage.

• More than a minimum wage! – As expected, one of the prevalent conversations happening since the removal of subsidies is that around minimum wage. The graph below shows the dynamics of minimum wage in Nigeria – infrequent and non-systematic. Since 2011, the minimum wage has remained largely flat and started to decline in US $ terms, a sign of severe price instability.

Minimum Wage in Nigeria in Current Naira and US Dollars

For the cushion of the effects of price increases in response to removal of fuel subsidies, the government needs to do more than just raising the minimum wage. In most cases, the minimum wage is so small that it is not widely applicable, except in governments in low-income areas. It will also not affect those in the informal sector. Nonetheless, the government can use this opportunity to improve the way the minimum wage is determined. It should be set per hour and not per month. Per hour wages have proven to be more effective in respect of effective minimum wage. It encourages flexible working arrangements and easy to monitor. It should also be regional, with different regions having different minimum wages.

• Why are firms delisting from the market? – Over a 20-year period, spanning 2002 to 2022, 121 companies have delisted from Nigeria’s capital market. The Securities and Exchange Commission (SEC) is concerned about such statistics. The Director General, Lamido Yuguda says the regulator will work with the Nigeria Employers Consultative Association (NECA) to find a solution. At ThinkBusiness, we look forward to that. Ahead of that, they should look at three elements – a. the role of price instability b. also related to a, the role of depth of capital in the market. c. level playing field for minority shareholders.

Global Headlines

• Apple, Apple, Apple – Are you a fan of Apple products? In California in the US yesterday, Apple announced a series of new products that will be in the markets soon. The event, known as its Worldwide Developers Conference 2023, it announced a new headset “Vision Pro”, first major product since 2014, which will cost US $3,499 – about N2.6 million, using the street market rate. It also announced iOs 17 with a feature that allows you to see call transcriptions in real time before you pick the call. Through Facetime, you will be able to record a video call for someone to see later. Other products launched include the 15-inch MacBook Air, iPadOS 17 for iPAD etc. Intel shares fell on this announcement, as Apple has now migrated all its computers to its own designed processor.

• Escalation of Russia / Ukraine war – The war between Russia and Ukraine escalated yesterday after Ukraine began counteroffensive measures in the Eastern part of the country, especially Bakhmut. As reported by CNN and other foreign media agencies, the counteroffensive measures are in several directions.

• US SEC accuses Binance of irregularities – The US SEC filed 13 charges against Binance yesterday. The largest cryptocurrency exchange in the world was accused of bypassing its own rules and trading with itself to prop up prices. The exchange has over 120 million registered users and trade volume more than US $38 billion. Binance allows traders in Nigeria through its peer-to-peer platform.