The Monetary Policy Committee (MPC) will hold its penultimate meeting for the year on September 19 and 20, 2019.
This is the fifth meeting for the year and will afford the committee an opportunity to critically evaluate the quality of its previous decisions vis-à-vis the state of the Nigerian economy.
We expect that the Committee will consider current conditions in the global economy, principally the accommodative posture adopted by monetary authorities in advanced economies to catalyse weakening growth.
[READ MORE: MPC upholds monetary policy status quo]
We also envisage that the Committee will consider the ongoing trade tensions, geopolitical pressures and oil price cum demand-supply dynamics. On the local front, we expect that the MPC will assess the impact of its various initiatives at stimulating business and economic expansion.
It will also be imperative that the Committee considers current inflationary pressures and the risks recent restrictions (such as the closure of land borders) pose to the single-digit inflationary target.
After due consideration of the aforementioned factors, we envisage that the committee will favour maintenance of the status quo.
International Economies and Developments
Weakened International Trade Spurs Monetary Easing
Weakened growth remains the overarching theme for the global economy as we near the end of the third quarter of 2019. The escalation of trade tensions between the U.S and China continues to dominate headlines, dampening the outlook for international trade and oil prices, and causing disruptions to the global supply chain. However, both countries have attempted to defuse tensions with delay in tariff implementations and tariff exemptions for some U.S goods, ahead of negotiations in September.
Nevertheless, global manufacturing has continued to bear the brunt of weakened trade. Global Manufacturing PMI data for August reveal a fourth consecutive monthly slowdown to 49.5, with Germany among the countries recording the steepest PMI readings.
In the advanced economies, the European Central Bank (ECB) announced a 10bps cut in deposit rate from -0.4% to -0.5% in September while signalling its intention to restart its quantitative easing program. This has become pertinent as the E.U continues to battle slow growth and low inflation due to weakened international trade, structural challenges in some member countries and the lingering Brexit conundrum.
Also, the Fed is widely expected to follow in the steps of the ECB and cut rates in its next meeting in September, in order to provide support to the US economy amidst the weak global economic backdrop. Elsewhere in China, recently released data shows that GDP slowed to 6.2% in Q2:2019, its lowest level in recent years, as the Orient nation continues to writhe under the impact of the trade tensions. This has prompted the People’s Bank of China (PBOC) to also adopt easing policies to cushion the effect of the trade dispute on its economy.
Monetary easing has been a recurring theme across most major economies, with the declining yield environment spurring capital outflows to most emerging and frontier markets. These factors provide a good case for a rate cut by the MPC, however, other risk factors inherent in the economy such as unstable oil prices and the ongoing P&ID dispute might prevent this decision. Hence, we expect the MPC to maintain status quo at the next meeting.
Geopolitical Tensions Provide Much-needed Buffers for Oil Prices
Since the start of the second half of 2019, oil prices have trended further downwards, averaging USD60.90pb since the last MPC meeting. Concerns about the unresolved trade war and its implication for oil demand are mounting and have subdued any positive triggers for prices. OPEC+ has maintained its production adjustments, with output reaching a new 5-year low of 29.61MMbpd in July, led by Saudi Arabia’s aggressive cuts. Meanwhile, the political impasse in Venezuela and the sanctions on Iran continue to artificially constrain supply from these two sources of heavy oil.
There have also been sizeable inventory drawdowns in the US, even as geopolitical strife in the Persian Gulf has persisted. All of these do not seem to count for much, as international agencies including the Organization for Petroleum Exporting Countries (OPEC), the International Energy Agency (IEA) and the Energy and Information Administration (EIA) have consistently adjusted demand outlook downwards; the IEA revised oil demand growth for 2019 to only 1.1MMbpd from the 1.5MMbpd projected at the beginning of the year and expects even slower growth in 2020.
In August, oil prices averaged only USD59.50pb, as the market was awash with a flurry of negative regards regarding the trade war. However, on 14th September, Houthi rebels from Yemen attacked two of Saudi-Arabia’s key facilities, the Abqaiq – which is the world’s largest crude oil processing facility and the Khurais, its second-largest oilfield. The drone strikes shut in at least 5.7MMbpd, equivalent to 58.13% of Saudi’s August production and 5.7% of global supply. The attack was unprecedented in the oil markets, and immediately hurled prices at least 20% upwards to c. USD71.95pb on fears that Saudi might be unable to promptly recover from the disruption.
This incident has introduced a new dynamic that might provide some support for prices in the coming months. In the domestic space, production numbers have seen some progress in the last 3 months, aided by relative calm in producing areas. However, early in September, the Nembe Creek Trunk Line was placed under Force Majeure for undisclosed reasons. Further, there have been no major policy announcements in the sector since Q2 when the National Assembly passed the redrafted PIGB to the President for assent.
Oil production (including condensates) have averaged 1.98MMbpd in 2019 but remains well below the budget benchmark of 2.3MMbpd. With the recent incident, we expect OPEC to deemphasize the production cuts for a while, to allow Saudi Arabia some scope to recover from the attack.
This, alongside the fact that Brent prices should remain above the support level of USD60pb, are positives for Nigeria, triggering accretion to foreign reserves from oil exports. However, higher under-recovery costs on refined products could temper reserve growth.
In the near term, we expect Brent crude to trade between USD60pb – USD70pb, which augurs well for fiscal spending. The MPC should consider the impact of this on oil receipts and Nigeria’s external reserves, as well as its influence on the CBN’s ability to support the Naira in its decision to hold MPR at 13.50%.
Skills Africa needs for sustainable development
Over a billion people with 5 official working languages – Arabic, English, French, Portuguese and Swahili , will again celebrate Africa Day this year.
From Addis Ababa to Durban, Lagos to Cairo, from the Sahara Dessert to the Nile River, over a billion people with 5 official working languages – Arabic, English, French, Portuguese and Swahili – will again celebrate Africa Day this year.
A day to remember, reminisce and celebrate successes recorded against the struggles for independence, freedom from apartheid and colonization. Although, with the new normal brought about by Coronavirus, the 2020 celebrations would be quite unlike previous years.
The Africa Union (Formerly OAU) has recorded good milestones in terms of political independence and self-governance. So now is a good time for Africa to reflect on our independence.
On reading the objectives of the Africa Union (AU), words like independence, territorial integrity, human rights, security, cooperation are splattered across the pages. Significantly, none of the AU objectives seeks economic autonomy for Africa or her member states. This is a fundamental flaw which speaks directly to Africa’s issue of having a large population without the requisite skills for growth.
Our education is largely dependent on the western curriculum and narrative. There is hardly any major infrastructure, industrial or development project in Africa with 100% African content in manpower, materials or capital.
It is now well established and more evident that political independence without economic independence is like a car without an engine. Economic empowerment is the nucleus of national development. No fewer than 14 West African countries currently use CFA Franc, with some having used the currency for at least 75 years. This goes beyond nameplate as the Bank of France holds half of those countries’ currency reserves. This is effectively cutting their growth capacity by 50%.
8 of those 14 countries will relinquish the CFA franc for the new ECOWAS currency, ECO (to be launched in July 2020). However, there is no indication that the affected African leaders would ask France for compensation for the years of economic sabotage to their countries. The introduction of the ECO was to bring a ray of hope, but we hope the real difference would not just be in the colour of the currency. This is because the ECO will not be autonomous but would be pegged against the Euro.
France is not alone in the economic sabotage of Africa, they are in the good company of the United Kingdom, the US and Belgium, to mention a few. However, are these foreign countries to blame? Africa got her independence, but African leaders refuse to be independent and the dependent mentality is also enshrined in the AU objectives.
One of the AU objectives states “to work with relevant international partners in the eradication of preventable diseases and the promotion of good health on the continent.” The statement looks good superficially, but it is enlaced with aid orientation, the lack of drive for self-reliance, and a beggarly mindset.
Let us educate Africa to pursue the development of its people, with core skills that are necessary to deliver the quality of the progress and growth that Africans desire. African construction companies should make African infrastructure and 100% African content should be the target in automobile engineering, healthcare, information technology,
Necessity is said to be the mother of invention. The need for Africans to lead Africa out of poverty, tyranny and underdevelopment is a matter of great importance, far beyond just necessity. Every African must desire to get skilled, and not just education, as we currently have it. We must have the competence to develop our agriculture system, mine Africa’s natural resources and add value by processing them locally.
Africa Day would only be truly worthy of celebration when African people and countries are skilled enough to accomplish our dreams of self-reliance and economic independence.
Article written by Olatunde Akintola. Olatunde is a Fellow of the Institute of Chartered Accountant of Nigeria and alumni of Manchester Business School. He writes from Lagos.
Tiktok’s In-App revenue surges amid lockdown
ByteDance Ltd’s brainchild, TikTok, together with Douyin ranking tops globally on mobile apps with the highest revenue generated for the month of April.
The meme-making business has proven to be worth all the fuss, with TikTok, as well as its Chinese twin app, Douyin, ranking tops globally on mobile apps with the highest revenue generated for the month of April.
Sensor Tower, notes that just in the first quarter of this year, ByteDance Ltd’s brainchild, TikTok, together with Douyin which caters to the Chinese market, generated 315 million downloads globally, from the 187 million it had just a year earlier.
The ranking, which was based on their in-app purchases, reveal a tenfold increase, as the companies garnered a whopping $78 million in revenue. The Chinese market is said to have contributed 86.6% of Douyin’s revenue, followed by the U.S market which contributed 8.2%.
This places them ahead of older names like Netflix & YouTube. As opposed to using subscriptions like these established brands, TikTok and Douyin allow users to purchase virtual currency to spend on their favorite content creators.
(READ MORE: Does YouTube stand a chance against TikTok?)
While ByteDance is exploring the world of online commerce, it continues to rely on advertising as its primary income source. However, Emarketer projects that more than 75 million US social network users will make at least one purchase from a social channel in the year 2020.
Sanwo-Olu to virtually inaugurate projects as he presents scorecard of first year in office
Some of the projects to be commissioned will be done virtually, while a few will be done on-site.
Lagos state governor, Babajide Sanwo-Olu, will virtually inaugurate housing, education, and road projects on May 29, as part of activities to mark his first year in office.
According to a report by NAN, the projects are part of the government’s efforts to renew infrastructure in critical sectors and to make the commercial centre a smart city.
Some of the projects to be commissioned will be done virtually, while a few will be done on-site.
Lagos state Commissioner for Information and Strategy, Mr Gbenga Omotoso, listed some of the projects in an official statement. He said:
”In the education sector, Sanwo-Olu will conduct virtual inauguration of completed classroom blocks in Maya Secondary School, Ikorodu; Eva Adelaja Junior School, Bariga; and Saviour Primary School, Ifako-Ijaiye, among others.
“Virtual inauguration of completed works such as the Concrete Jetty in Baiyeku, Ikorodu, Aradagun-Ajido- Epeme Road in Badagry, and the Maryland Signalisation project also form part of the itinerary to commemorate the anniversary.”
Omotoso also stated that the Governor would inaugurate the 360-unit Lagos Homes in Ikorodu, and then visit Igbogbo Baiyeku IIB Estate, Lekki, and the Courtland Villas on Femi Okunnu Estate during the week.
Plans for celebrating Children’s Day
In a related development, Governor Sanwo-Olu will deliver an address on Wednesday May 27 to mark the children’s day celebration, and the 53rd anniversary of Lagos state.
Omotoso, however, noted that all celebrations would be kept on the low in reflection of the current challenges and realities of the COVID-19 pandemic.
Presenting one-year scorecards
The activities for the week are expected to begin with press briefings at J.J.T Park in Alausa on May 27, where members of the State Executive Council will present their scorecards in line with the six pillars of the state’s T.H.E.M.E.S Agenda.
According to the information commissioner, there will be two sessions of press briefings daily from May 27 to June 3, as the Governor considers it expedient to render a stewardship account of the last one year.
“Three special publications highlighting the achievements of the Babajide Sanwo-Olu administration and testimonies of beneficiaries of various initiatives of the government are slated for presentation to the public by the governor and his Deputy, Dr Obafemi Hamzat,” he added.