Nigeria’s economy in dire straits

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Markets

• Oil prices nearly flat in Monday trade as Russia relaxed its fuel ban, after earlier gains on a tighter supply outlook, while investors eyed elevated interest rates that could curb demand. Brent crude futures flat at US $93.37 a barrel while the U.S. West Texas Intermediate crude was down 25 cents at US $89.78.

• US natural gas futures traded around US $2.6/MMBtu in the last week of September, driven by strong demand and slightly reduced production estimates, even as the market entered the shoulder period characterized by lower power demand. Gas production in the US eased to 102.11 bcfd in September, down from the August record of 102.3 bcfd

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Africa Headlines

• Nigeria’s economy in dire straits – Ahead of the end of Q3 2023 this week, the growth data for the quarter will be keenly expected. Nigeria’s economy recorded a growth rate of 2.51% Q2 2023 compared to 3.54% in the corresponding period in 2022. As the graph below shows, both oil and non-oil sector growth are largely on downward trend. The data pattern resembles that of 2015 that culminated in a recession in 2016. The economy today is squeezed on all fronts. News from the agriculture sector points to a weak outlook next year on the back of rising input and energy prices, trading is squeezed by exchange rate volatility and accompanied inflation, while manufacturing is squeezed by rising input prices and exchange rate volatility as well. The oil sector that should have provided the base for Nigeria’s next wave of growth is strangled by oil theft and weak investments. Meanwhile, according to Premium Times report, Russia’s 34,000 tones of fertilizer export to Nigeria is stranded in EU ports for over a year, buttressing the point on rising input prices and outlook for lower agricultural output next year.

• Kenya seeks to raise funds by leasing ports – The Kenyan government has plans to lease out sections of its ports to private investors to raise much needed fund, according to the Nation. The seaports in consideration include the Kilidini Harbour, Dongo Kundu Port, Lamu Port, Kisumu Port, and Shimoni Fisheries Port. The government plans to raise US $304 million from the lease of Lamu Port for 25 years. Kenya, like most African economies, have been hit by rising prices, including energy and food prices. The International Monetary Fund (IMF) in July completed the fifth review of its extended fund facility and extended credit facility arrangement that it has so far disbursed US $2.04 billion since April 2021.

• AFCON to name hosts of 2025 and 2027 competitions tomorrow – The Confederation of Africa Football (CAF) president Patrice Motsepe will tomorrow announce the winning hosts of the Africa Football competition for 2025 and 2027. The right for the 2025 edition is between Algeria, Morocco, Zambia and a co-hosting bid of Nigeria and Benin while the 2027 hosting rights is between Algeria, Botswana, Egypt and the joint candidacy of Kenya, Tanzania, and Uganda. The 2023 edition, holding January / February 2024 will be in Cote d’Ivoire.

Global Headlines

• It’s the familiar, again – The US government is set to shut down in about a week without a stop gap funding bill by the Congress. The potential shut down of the US government have become an intensely familiar development to anyone conversant with the US fiscal institutional arrangement. As expected, Moody says it would have negative implications for its credit assessment. The shutdown will affect federal workers pay, food services, sections of education etc. The government and congress have till Saturday midnight to avoid the shutdown by reaching a deal.

• China’s US $100 billion for SOEs – The Chinese government is launching a US $100 billion fund for investments in new industries and technology, including artificial intelligence, biotechnology, and new materials. Anchored on the State-owned China Reform Holdings Corporations, the goal is to nurture cutting edge industries for new growth engines. Meanwhile, outbound travel from China is surging ahead of the country’s holiday period since the it allowed international travel to resume despite slowing economy.

Chart of the day