ThinkBusiness Today - May 16th

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100 hours. Yes, 100 is the magic number. After beating the record set by Lata Tondon, Hilda Baci went on for another 13 hours to clock 100 hours of marathon cooking. Her achievement is greatly remarkable than many would think or imagine. It is a superb demonstration of preparation, skill, and endurance. Talking about endurance, it is a combination of physical, mental, psychological, emotional, endurance.

Are there other Nigerians on the Guinness World Records (GWR)? Oh, yes. See Vanguard, The Nation, and Punch for other Nigerians with GWRs.

https://www.vanguardngr.com/2023/05/hilda-baci-other-nigerians-in-guinness-world-records/, https://thenationonlineng.net/45-nigerians-who-are-guinness-world-records-holders/ 

https://punchng.com/10-most-recent-nigerian-guinness-world-record-holders/.

Congratulations Hilda. You made us all proud!

Markets

• The benchmark NGX All-Share Index (ASI) inched up 16.67 (0.03%) points to close at 52,231.29, representing a 1-week loss of 0.66%, a 4-week gain of 0.53%, and an overall year-to-date gain of 1.91%. The market is expected to remain stable this week as investors await the Monetary Policy Committee's decision on the policy rate next Tuesday.

• Oil prices edged up on Monday as the prospect of tightening supplies due to OPEC+ production cuts and a resumption in U.S. buying for reserves outweighed concerns about fuel demand in top global oil consumers the United States and China. Brent crude futures were up US $1.21 or 1.74% to US $75.46 a barrel while U.S. West Texas Intermediate crude was at $70.41 a barrel, up 37 cents or 0.5%.

• Despite new weather reports predicting low national demand, natural gas prices traded higher on Monday. This upward movement is a continuation of the bullish trend that began on Friday, resulting in a 5% rally. Natural Gas future increased by 3.47% yesterday to settle at US $2.35. The catalyst for this surge was a report indicating that the number of oil and natural gas rigs in the United States declined to its lowest level in nearly a year, while Gas rigs experienced their largest weekly drop since February 2016, according to energy services firm Baker Hughes Co.

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National Headlines

• Unholy Inheritance – Governors planning to handover on May 29 will leave behind about N3 trillion in debts for their successors, according to Punch reports. There will be 18 new governors on May 29^th , and their 18 States account for 42.51 % of the N5.34tn total domestic debt and 38.34 % of the US $4.46 billion total foreign debt in 2022. These states are Rivers, Cross River, Abia, Enugu, Kano, Kaduna, Jigawa, Delta, Ebonyi, Benue, Akwa Ibom, Sokoto, Plateau, Kebbi, Niger, Zamfara, Katsina and Taraba. These States debt (both External and domestic debt) increased by 75% (or N1.73trillion) while the combined internal generated revenue of these states declined by 46% to N296billion in 2022 from N552billion in 2016.

• What’s your pension? – The assets under the Contributory Pension Scheme rose by N590bn in Q1 2023 to N15.58 trillion, about 20.3% of Nigeria’s GDP, figures from the National Pension Commission (NPC) shows. According to PenCom, 65.44 per cent of the funds, totaling N10.19tn are invested in FGN securities, while the rest are invested in corporate debt securities, money market instruments and mutual funds. It has recorded growth of N4.7 trillion in net assets in three years.

Global Headlines

• What’s a gaming company worth? – A lot. The European Union regulator yesterday approved Microsoft’s proposed US $69 billion acquisition of US gaming firm Activision Blizzard, a major hurdle before the completion of the deal. Activision revenue was US $8.8 billion and 7.53 billion in 2021 and 2022, respectively. Activision had grown to become the largest gaming company in the world through various mergers, acquisitions, and successful content performance. Microsoft has been acquiring video game companies, seen fusion with its platforms and mobile as big motivating factors. In Nigeria, the video gaming industry is growing, but still estimated at less than US $200 million annually.

• The debt ceiling and the US dollar – The dollar slid from a five-week high on Monday, pressured by a weak manufacturing index in New York state and as it consolidated gains made last week amid fears about the debt ceiling and the U.S. economy. The dollar's fall came after it notched its best weekly performance on Friday since September last year.

News Analysis - Nigeria’s Inflation and Exchange Rate to the US $ under President Buhari

Yesterday, the National Bureau of Statistics (NBS) released the final inflation data before President Buhari leaves office on the 29^th of May. As expected, inflation rose to 22.2%, from 22.04% in March. The graph below shows the dynamics of inflation and the Naira’s exchange rate to the US $ under the President. This is the fourth consecutive monthly increase and the highest inflation rate since September 2005. Though the rate of increase has slowed, inflation has not peaked yet.

Nigeria’s Inflation Rate and Exchange Rate with the US $ under President Buhari

The graph above is shows the movement between the country’s rise in the costs of goods and services and the exchange rate to the US $. It clearly shows the results of the three macroeconomic shocks under President Buhari – the one he inherited in 20215, Covid – 19 global economic shock, and the Russian /Ukraine war that would have been net positive or at best neutral if domestic economic conditions and management were right. While the shocks were the source of the macroeconomic imbalances, President Buhari’s catastrophic economic policies made it worse through his Idi Amin’s style monetary policy accommodation, as now evidenced by the N22 trillion “buy now, pay later” inflation tax.

Between 2014 and 2016, the Central Bank of Nigeria (CBN) devalued the Naira 8 times from N161 in September to N305 in Sept 2016, while gaps and arbitrage opportunities started to emerge, as the parallel market rate increased from N175 in Nov 2014 to N431 in Sept 2016. The same patterns emerged after the Covid – 19 and the Russian / Ukraine war shocks.

Next week May 22 – 23, the monetary policy committee (MPC) of the CBN will meet whether to raise of leave the monetary policy rate (MPR) at 18%. It had signaled in the last meeting that it will continue to tighten on the expectations that the government will remove fuel subsidy. That is not going to happen anymore. It said at after the meeting, and it has shown again, that the rate of increase has slowed, but inflation is still very sticky. My expectation is that the MPC will leave rates at 18%.

As in other macroeconomic imbalances, the expectation is that the new administration will provide concrete measures to provide confidence that it can stabilize the economy in the medium term. Three of such measures will include a credible economic team, a weak appetite for deficits, and closing the distortionary gap between the I & E window and parallel rates of Naira’s exchange rate to the US $.

This Week

• Invest In Africa Summit 2023 will hold 16^th May 2023 in Amsterdam, Netherlands. The summit is specifically to promote and facilitate investment and trade between Africa and Europe. The theme for 2023 Summit: is “Unlocking Digital Transformation, Investments and Trade Opportunities in Africa”.

• 21^st Africa Business Summit organized by London Business School Africa Club holds on Saturday 20 May 2023. The theme of the 20th Summit is “The Future is African”. The Summit will emphasize Africa’s major transformation in partnership with the rest of the world, opening up massive investment opportunities and providing innovative solutions.

• The African Development Bank's Asia External Representation Office (PEXT) and African Natural Resources Management and Investment Center (ECNR) will jointly host a policy dialogue on 16^th May 2023, A New Vision for Africa: Asia-Africa Cooperation on Natural Gas.