ThinkBusiness Today - May 10th

Where were you on this day in 1994?

On this day in that year, Nelson Mandela became South Africa’s first black president. It came after 300 years of white rule. I have since read his autobiography “Long Walk to Freedom”, also released in 1994. As Nigerians look forward to a new President at the end of this month, I hope to share some thoughts nearer the time on how politics and policies can dictate and shape a people’s freedom.

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Markets

• Gains recorded in some banking, and oil and gas stocks yesterday helped the market to sustain the positive sentiment. The benchmark NGX All-Share Index (ASI) inched up 26.99 (0.05%) points to close at 52,606.51, representing a 1-week gain of 0.59%, a 4-week loss of 2.64%, but an overall year-to-date gain of 2.64%. The market saw rally on the shares of Conoil Plc (10%), Transcorp Plc (9.5%), Guaranty Trust Bank (GTCO) Plc (0,4%%) and First Bank Holding (0.7%%).

• MTN Nigeria and Airtel Nigeria both renewed their 2100MHz spectrum licenses with the Nigerian Communication Commission (NCC), the companies announced. The spectrums, first launched in 2007, has been renewed for 15 years and run till April 30, 2037. In addition, NCC approved the spectrum lease by MTN Nigeria from Natcom Development and Investment Ltd (NTEL). These are the 5MHz in the 900MHz spectrum band and 10MHz in the 1800MHz spectrum band for two years.

• Oil prices fell on Tuesday, relinquishing some of the strong gains of the previous two sessions with the market cautious ahead of U.S. inflation figures for April, key to the Federal Reserve's next interest rate decision. The Brent crude price was down 84 cents, or 1.10%, at $76.16 and U.S. West Texas Intermediate (WTI) crude fell 50 cents, or 0.7%, to trade at $72.66. Both contracts had settled more than 2% in the previous trading session.

• The Naira strengthened in both the I & E window and the Parallel market. It increased by 0.11% at the I&E window, which closed at N462.25 and by 0.27% at the Parallel market, which closed at N740.

• Natural gas futures rose about 2% to a fresh one-week high on Tuesday on a decline in U.S. daily output and a drop in gas exports from Canada as wildfires shut in some oil and associated gas production. Prices climbed to US$ 2.24 despite forecasts for milder weather and less U.S. demand over the next two weeks than previously expected.

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National Headlines

• Do you know why vehicle prices are rising? According to Punch reports, vehicle imports into Nigeria declined by 128% in Q1 2023, when compared to Q1 2021. Vehicle importation fell for the second consecutive corresponding quarters. After the high of 117,830 in Q1 2021, it declined to 97,132 in Q1 2022 before falling again to 51,782 in Q1 2023. Rising foreign exchange costs and the reintroduction of the Vehicle identification Number (VIN) for duty purposes are the main reasons for the decline.

• To displace charcoal with clean cooking gas, also known as Liquefied Petroleum Gas, would cost Nigeria and other countries in Africa about $7.5bn for downstream infrastructure and stoves, the African Refiners and Distributors Association has said. It also stated that the continent remained the lowest in per capita consumption despite its huge abundance of gas, stressing that it was high time stakeholders came up with finance strategies and solutions to address the bottlenecks to clean cooking gas usage on the continent.

• The Central Bank of Nigeria has said it will sanction banks assisting the operations of unlicensed foreign firms. It stated on Monday in its ‘Guidelines for the regulation of representative offices of foreign banks in Nigeria’, signed by the Director, Financial Policy and Regulation Department, Muhammad Musa. ‘Any CBN regulated entity found to be assisting, supporting, harboring or facilitating the presence and/or operations of an unlicensed international financial institution in Nigeria shall be liable to severe sanctions including suspension or revocation of their banking licence,” it stated

Global Headlines

• The first meeting of the President of the United States and the House Speaker Kevin McCarthy failed to yield any breakthrough on raising the country’s debt ceiling of US $31.4 trillion. It is widely warned that the US government could default on its debt as early as June this year if the ceiling is not raised.

• Saudi state oil giant Aramco on Tuesday reported a 19% drop in its Q1 2023 earnings, recording net income of $31.9 billion, down from $39.5 billion the previous year amid falling oil prices. Analysts expected to see a dip in net profit this quarter compared to the previous year, as inflation and rising interest rates pressure global demand and stoke fears of a recession. Still, Aramco’s net income beat expectations of $30.5 billion, which was forecast by analysts polled by Reuters.

• China’s exports grew 8.5% in April in U.S. dollar terms, marking a second-straight month of growth, while imports fell 7.9% compared with a year ago. Economists polled by Reuters estimated exports would rise 8% in April, while imports were forecast to remain unchanged. In March, imports declined 1.4% year-on-year while exports saw a surprise jump of 14.8%, government data showed.

• LinkedIn, the social media network owned by Microsoft Corp (MSFT.O) that focuses on business professionals, said on Monday it would cut 716 jobs as demand wavers, while also shutting down its China-focused job application. LinkedIn, which has 20,000 employees, has grown revenue each quarter during the last year, but it joins other major technology companies including its parent company in laying off workers amid a weakening global economic outlook.

News Analysis

Ahead of the release of the monthly oil market report (MOMR) of the organization of the petroleum exporting countries (OPEC), in Nigeria, Africa’s largest economy, the focus will be on what happened to crude oil output in April 2023.

Nigeria’s crude oil output dropped by 38,102 barrels per day in March, translating to a cumulative loss of about 1,181,162 barrels in the month under review, and signaled the first plunge in oil production in seven months. In monetary terms, data from Country Economy, a global statistical firm, showed that the average cost of Brent, the international benchmark for oil, in March 2023, was $78.43/barrel. Therefore, by losing 1,181,162 barrels in March, Nigeria failed to earn a total of $92,638,535.66 (N42.71bn at the official exchange rate of N461/$), during the period under review.

Nigeria’s Crude Oil Production

This decline is not without reasons. First, pipeline explosion in Rivers State. The explosion occurred at a major export pipeline, the 180, 000 barrels per day Trans Niger Pipeline that passes through the Rumuekpe community. It was gathered that the explosion happened after a crude oil pipeline that belong to Shell Company in the community was tampered with by vandals.

Second, the drop in oil output volume is also ascribed to the general overhauling and maintenance of oil pipelines across Nigeria's key oil production locations, which may have resulted in the closure of several pipes during significant repairs. However, expectation is that the fall in oil production in March was only temporary and will not jeopardize the country's foreign earning.

However, there was an urgent need for the country to improve on its production output by addressing the oil bunkering and theft as well as illegal refining if it does not want to miss the output level needed for the 2023 budget, which stands at 1.69 million bpd for the year.

The Week Ahead

• The Central Bank Nigeria (CBN) will issue a total of N143.98billion treasury bills on Thursday 11^th May 2023 as the same amount will be maturing the same day. Africa's largest economy's big bank disclosed this on Nigeria's treasury bills programme released on its website on Wednesday. The bills are divided into 91-days, 182-days, and 364-days raising N4.5 billion, N5.4 billion and N134 billion respectively. The bills are also a roll-over of maturing bills for the corresponding period.

• UK Q1’23 GDP growth data is expected to be released on Wednesday 10^th May 2023 and the inflation figure for the United State is expected to be released on Wednesday 10^th May 2023.