ZERO EQUILIBRIUM

- By Chinedu Okoye  China stops short of African Debt Relief, pledges more cash - Reuters 50.7 billion USD pledged over three years in credit and investments at this weeks triennial summit with African Leaders. These funds will go mostly to a select 30 infrastructure projectsto improve trade links, a much influx for a continent with a $100 billion infrastructure lending gap. Beijing urged other countries to participate in the restructuring of African Debt. As it held out a lesser than expected checkbook for flashy deals expected by African leaders. Fed Must Decide If Quarter-Point Cut Will Be Enough for Workers - Bloomberg  https://www.bloomberg.com/news/articles/2024-09-07/fed-to-weigh-if-quarter-point-rate-cut-can-support-us-economy-jobs "The Federal Reserve is set to begin unwinding its tightening campaign this month as inflation cools and the labor market slows. The big question policymakers now face is whether a small interest-rate cut will be enough to keep the e

By Chinedu Okoye  Summary: - The NNPCL will begin lifting petroleum motor spirits from Dangote on September 15, marking the end of fixed pricing. - Petrol prices will be determined by forex rates and market forces, as NNPCL will sell crude to refineries in Naira at prevailing market exchange rates. - Global market prices will influence local pricing. Whilst lower oil prices will increase costs for NNPCL it reduces costs for local refiners. - Sustained oil production is crucial for stabilizing FX and fuel prices. Exchange rates and crude oil supply will significantly impact fuel prices. The End of Fixed Prices: The NNPCL expects the roll out of petroleum motor spirits on the 15th of September. The company also announced the exit of a fixed pricing system for the petroleum, stating that forex rates and market forces would determine the cost of petrol.  This means the NNPCL would sell crude to the Refinery in Naira at prevailing market exchange rates and pricing would

By Chinedu Okoye  Summary: - Nigeria has struggled to capitalize on its natural resources due to limited production scaling and reliance on raw exports. The launch of Dangote Refineries, which enables local refining and value addition, is a major shift - This model must extend to sectors like agriculture, mining, and manufacturing to reduce imports and boost foreign exchange (FX) earnings. - Expanding industrial capacity requires policy support, including subsidized credit and tax incentives, to encourage businesses to invest in value-chain creation. - The goal is to drive sustainable growth through local value creation in key industries. Local Value Creation and Resources Wealth Maximization: Similar to many African Countries, Nigeria, has failed to leverage its natural resources to deliver sustainable growth. This stems from the struggle for businesses to scale up production or venture into new industries. For a long time most of Nigerian economic activities in key sector

By Chinedu Okoye  Crude Oil drops as both BRENT and WTI Breach Technical Support Levels: As of today, Brent crude oil is trading at $73 per barrel, and WTI has dipped to $69, breaching the critical $75 and $70 thresholds, respectively. The slide in prices reflects mounting concerns about a global economic slowdown, particularly in China and the US.  (WTI intraday Chart |  9:33 am September 04) Despite OPEC's efforts to manage supply, these concerns have overshadowed the impact of Libya's production decline. (BRENT) Gold Drops but holds at Key Levels: Gold, a traditional safe haven asset, has also faced market pressure but remains above key resistance levels, with XAU/USD at $2,480 and Gold spot at $2,511 per ounce. The relative resilience of gold compared to oil suggests that investors might be preparing for tougher economic conditions ahead. (XAU/USD as at 9:31 am Nigerian Time) If bearish factors continue to dominate, as seen in

By Chinedu Okoye  Naira Weaken on Bleak Macro Outlook: The Naira continues to experience pressure on the NAFEM even as the Central Bank intervened using the retail dutch auction system to supply FX directly to verified customers. There has continued to be low FX turnover suggesting that investors are still wary about Naira Fundamentals. The Oil and Gas sector is marred by challenges and the country periodic debt obligations to settle. With T-Bills repayments due as early as the first quarter of 2025. The National Oil Company (NNPCL) is also faced financial distress, with debts up to $6 billion. The Naira pressure is expected to continue as long as the above issues linger, especially in its Oil and Gas sector as fuel prices (largely imported at the moment) and exchange rate pressures are interconnected. Prior Zero Equilibrium Position: As posited in our prior paper referenced below, to stabilize the Naira the monetary authorities might have to tweak its exchange rate policy. We suggeste