Good morning to you, we hear you are enjoying 24 hours power supply now. The Minister of Power, Works, and Housing, Fashola says things are way better now.  

Are things that rosy in your area or you’ve just moved to another planet?

Economy


After 2 years, the little change that counts

It’s been a long time coming, The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), has officially cut the Monetary Policy Rate (MPR) to 13.50% from 14%.

What does this mean?

The Monetary price rate is the rate at which the central bank lends to commercial banks. Yes, even your bank borrows too.

The rate at which banks borrow from the central bank and other factors influence how much interest rate the commercial banks give out loans to businesses and individuals. Higher interest rates mean it’s costlier to get a loan and lower interest rate means it’s cheaper to get a loan.

Considering the fact that it’s been over 2 years since the MPR was adjusted, a 0.5% (50bps) reduction means a lot in the grand scheme of things.
 

Why this reduction?

The CBN Governor says it’s due to “The continued trade war between U.S & China, policy uncertainties in advanced economies, central banks persisting uncertainties surrounding Brexit negotiations, vulnerabilities in major financial markets and rising public debts in some emerging economies and developing economies.”

In summary, the goal is to make things easier, reducing the rate of unemployment and diversifying the country’s economy.

International Trade

Two Elephants in a Trade War

“When two elephants fight, it is the grass that gets trampled.” An African proverb

How can you promote locally produced goods in a country?

One way to go about encouraging locally produced goods is to increase the tax paid to import similar goods from other countries. This concept is called Protectionism, It is used to encourage people to create and buy locally produced goods instead of importing them. Now, what happens when the tax is too high or seems unfair, well that’s the beginning of a Trade war. 👿


The story goes like this…

The US takes a jab at China by imposing more than $250 billion worth of import tax on Chinese goods.

China returns with a $160 billion tariff on US goods – accusing the US of starting it.

While we’re still early in this fight and waiting for who would throw the next punch, we don’t expect the war to stop anytime soon because President Trump is still obsessed with making America Great Again.
 

K, How does this concern us?

Nigeria’s major trading partners in Q4 (October, November, December), 2018 were India, China, Spain, France and Netherlands. Yup, Where is the US? 🤔

Our friends at the National Bureau of Statistics (NBS) say that Nigeria exported N1.42 trillion in Q4 to Asia, while the highest import (31.5%) was N900 billion from China.

China is Nigeria’s major trading partner and the biggest trading partner for some of Africa’s most significant economies, including South Africa and Ethiopia.

What could happen?

China could turn its attention to Africa for better trade deals, more trade deals with African countries could mean more business for Africa. Sounds good right?

Also if we become reliant on China, any hiccup in China’s economy would affect us.

Auto

Did someone say Tokunbo?

Ramsey Nouah Tokunbo, the Nigerian actor who has sort of refused to age.
Wait but you know this isn’t about him right?

Okay, what is this about then?

It’s about the $526 million (N161 billion) spent by Nigerians on imported used vehicles (popularly known as Tokunbo) in 2018, as against $284 million (N87 billion) spent in 2017.

Wow, that’s a huge leap 😮
 

Why does this matter?
The increase in import of used vehicles can have different effects on the economy.

Less innovation and production of vehicles in the country.
Why should Innoson Motors (a Nigerian car company) keep on innovating and producing cars if we’d keep buying used cars?

More demand for Foreign Exchange which might put undue pressure on the exchange rate.
$526 million is a heap of dollars.
 

Difference between the monetary value of a nation’s exports and imports over a certain period is called Trade Balance. Increase in import is capable of worsening the trade balance of Nigeria, which will put the current account balance in deficit. We can’t afford to have more money flowing out of Nigeria than coming in.

Financials

How much did we make in 2018?


Last week we looked at a couple of banks, this week we’re looking at more banks and other companies who recently released their financial statement for the year 2018. Let’s look at how they performed.

We’d focus on Profit after Tax (PAT); how profitable the company is and the growth rate from the previous year.

Eco Bank made N101.9bn (US$2.8b), up by 46% from 2017

First City Monument Bank made N14.4bn (US$400m), up by 91% from 2017.

Sterling Bank made N9.4bn (US$261.1m), up by 16% from 2017.


Cadbury made N823m (US$ 2.3m), up by 174% from 2017

Julius Berger made N6.1bn (US$169.4m), up by 144% from 2017

Just so you know, there are other important metrics to look at in evaluating the performance of a company, feel free to pore through the financial statements if you’re that interested.

Telecoms

How much was spent on Airtime recently?

Nigerian Communications Commission has shared that Nigerians spent about N767.23bn on airtime purchase from November 2018 to January 2019.

Why does it matter?

To you

You might want to estimate how much you spent in the last 3 months.

To the Teleco companies

Revenue from airtime continues to rise despite predictions that the voice and messaging revenue would decline due to instant messaging apps such as WhatsApp.

These numbers provide validation to continue investing in network upgrades and expansion. There is clearly plenty of money in this business.

Brexit

It’s taking longer than expected

Source: Chappate

For nearly two years, Thursday 28th of March was supposed to be the day that the United Kingdom would officially leave the European Union but that didn’t happen and we don’t know when this would happen as UK lawmakers rejected Theresa May’s Brexit deal for a third time on Friday.

May had earlier offered to resign if Parliament passed her deal but with a 286 Yeses, 344 Nos response to the withdrawal Agreement it clearly wasn’t enough. The possibility of having a No deal scenario is looking more likely now.

What does a No deal mean?

A no deal Brexit means the UK would leave the European Union (EU) immediately, and there would be no agreements in place about what their relationship would be like in future. This could cause cancelled plane tickets, an increase in importation tax duties, loss of Jobs & more.

Elections

Both Parties shared it 50:50


Last Saturday 6 states in Nigeria had a re-run election and Interestingly the two parties ended up sharing the states equally.

PDP won 3 states ( Adamawa, Bauchi, Sokoto) and APC won 3 ( Kano, Plateau, Yobe).

The results could still be contested in the election tribunal court so let’s keep our fingers crossed. 

Talking about the Election Tribunal
In Osun State, it appears PDP is back in power as the election tribunal declared Ademola Adeleke – the Dancing Senator –  the winner of the September 2018 Ekiti state gubernatorial election.
 

The Market

Numbers are in Billions of Naira

The Nigerian Stock Exchange said the amount of money that moved in (foreign inflows) and out (foreign outflows) of the Nigerian in February increased by 91.24% (inflows) and 97.80% (outflows) in February as compared to January.

Why this massive increase?

One major cause – Elections. Elections come with uncertainty about what would happen next. It’s safe to say the storm is over.

Top Gainers and Bottom Losers

Source: African Exchange


Tbh, We are not sure what to do with this part of the newsletter, should we scrap it? How can we make it worth the while without it being filled with too many financial Jargons? 😭 You can reply to the mail with your suggestion. Here’s a list of the companies that made the top gainers and top losers list as at the end of the trading week.

How did the stock market fair in general? 
 

The equities market recorded mixed performance – the listed equities market recorded -0.31% loss compared to last week while the NASD OTC went up by +0.96%.

What else happened?

Apple: Your favourite tech company just became a Financial and Media House with a range of new services it reeled out earlier this week. 
Apple TV+ a TV subscription service with original content from the likes of Oprah and Steven Speilberg.
Apple News + gives you Access to 300 magazines and some major newspapers at $9.99.
Apple Card, a credit card in partnership with Goldman Sachs & MasterCard. And Apple Arcade offers you over 100 games in 150 countries available offline.
Whee! there’s so much more now.

Airbnb: From starting with the first three guests in 2007, the apartment renting platform announced this week that it hit 500 million guest arrivals. Half a billion! Also Hosts – People who make their houses available for rent – have earned over $65 billion.

Lyft’s IPO: The ride-sharing service opened up to the public for investment as it raised$2.34 billion in the stock market. More money than it initially planned to raise. While Lyft gave 18.6 million people at least one ride in Q4 of 2018, Lyft reported a loss of $911 million last year, which grew from $688 million a year earlier. Apparently, Investors don’t seem to mind that the company is losing money.

And that’s all for the week, Please share this newsletter with a friend and expect us in your inbox next week Saturday by 11 am ish.

Correction: Apparently we got carried away by the James Bond pun last week, Access Bank isn’t the First to issue a Green bond in Africa or Nigeria, it is the first to issue a Climate Bonds Initiative (CBI) Certified Green Bond in Africa. Argh! Everyone wants to be first in something sha.
Thanks, Ma-ranna for the nudge.