Mortgage Rates now 24%

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.

Calamities everywhere in Africa. Africa is last frontier of economic development, and it is personally painful for me to see so much poverty, and those situations made worse by different levels of calamities such as flooding and earthquakes.

These things cannot always be fully prevented, but leadership is most critical in not only preventing them, but also in managing the crisis when they happen.

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Markets

• The benchmark NGX All-Share Index (ASI) rose to 67,318.88 after yesterday’s trading, an overall year-to-date gain of 30.26%.

• Oil prices jumped about 2% to a near 10-month high on Tuesday on a tighter supply outlook and OPEC optimism over the resilience of energy demand in major economies. Brent futures rose US $1.69, or 1.73%, to US $92.21 a barrel while U.S. West Texas Intermediate (WTI) crude rose US $1.99, or 2.3%, to US $89.28.

• Naira appreciated by 4.06% at the I&E exchange, closing at N742.10 to the US dollar. On the streets, Naira was down by 1.09%, reaching a value of N930.00 against the US dollar.

• U.S. natural gas futures climbed 6.10% to US $2.77, a one-week high on Tuesday on forecasts for warmer weather and higher demand over the next two weeks than previously expected. Traders also noted that prices rose on a big drop in daily in U.S. output.

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National Headlines

• Cargo Movement on Apapa Rail – After it was completed two years ago, the freight rail from Apapa to Moniya in Ibadan lifted containers for the first time in the last 48 hours. The rail line has not been used because there is a custom building obstructing it. The current operations have been done through a transition rail line and the expectation is that three rail lines out of Apapa port will be fully functional after the Customs building is removed on its path. It is not clear yet when the building will be removed. However, current plans will enable the movement of about 90 containers daily out of the Apapa port on rail. This is no doubt one of the most significant developments in both rail service and logistics in Nigeria. It will not only ease travel around the Apapa port but reduce logistics costs over time.

• What is fuel subsidy today? – From the graph above, oil prices have risen above US $90 since last week. Though these are future prices, it was clear even before now that the dynamics of fuel prices, if left to market, would have risen to about N750 per litre by now. Indeed, the President instructed the Nigerian National Petroleum Corporation (NNPC) that fuel prices should not rise beyond the N600 price. It brings us to the question of what is the level of fuel subsidy today? The challenge with fuel subsidies and the reason why it has never really benefitted the country is that it is shrouded in secrecy, leaving room for corruption and cross border smuggling.

• Mortgage Rates now 24% - Do you have a mortgage? It is estimated that mere 5% of the close to 14 million houses in Nigeria are financed by mortgages. In the last month, the average interest payments on those mortgages have risen from 17% early last year to 24%. This has not only tightened the market and squeezed many potential homeowners out but has been made worse by increases in the capital deposits required by mortgage lenders. For instance, while 18 – 24 months ago, mortgage providers request for 25 – 30% down payment, it is now between 40 – 50%. It thus means that for a house of N100 million, it will require a deposit of between N40 – N50 million. The Central Bank of Nigeria’s interest rate is currently 18.75%, from 13% in May 2022.

Global Headlines

• Huge death toll in Libya and Morocco – It is now estimated that the death toll following the flooding in Libya and the earthquake in Morocco has reached 8,000 lives. It follows the 6.8 magnitude earthquake that hit the High Atlas Mountains, 44 miles Southwest of Marrakesh, and the Storm Daniel hit of the city of Derna in Northeast Libya, causing severe flooding around the Mediterranean coast. The annual meeting of the World Bank and the International Monetary Fund (IMF) is scheduled to hold in Marrakesh next month October from 9^th to 15^th . The expectation is that the meeting will go ahead as scheduled, though no confirmation yet from the World Bank / IMF about any shift.

• 24 teams ready for 2024 AFCON – The 24 teams that will compete for the greatest Africa football prize in January 2024 in Ivory Coast are now complete. Cameroon, the five-time African champions, and Namibia were the two last countries to confirm their spots in the competition. Nigeria, three-time champion, and all the other top ten ranked teams (Morrocco, Senegal, Tunisia, Algeria, Egypt, Cameroon, Mali, Iviory Coast, and Burkina Faso) on the continent qualified for the competition and the expectation is that one of these top teams will win the competition.

This Week

• On Thursday, 14^th September 2023, The Nigeria Bureau of Statistics is expected to release the Q2’2023 Nigeria public Debt and the railway data for the same quarter

• On Friday, 15^th September 2923, the NBS will release the inflation report for the month of August.

• Also, On Wednesday, 13th September, the United State will release its inflation rate for the month of August. The unemployment rate in the UK increased to 4.2% in the three months to June 2023, the highest since late-2021 and above market forecasts of 4% and 4% in the previous period. The Consumer Price Index in the United States increased by 3.2 percent year-on-year to 305.691 points in July 2023, which was an acceleration from the 3.0 percent growth recorded in the previous month.