What To Expect From The Markets This Week - 260721 - PROSHARE
- In its recent report titled: 'Of Roads Less Travelled: Assessing the Potential for Migration to Provide Overseas Jobs for Nigeria's Youth', the World Bank noted that Nigeria is experiencing its worst unemployment crisis as the unemployment rate rose five-fold, from 6.4% in 2010 to 33.3% in 2020. The report identified the two recessions suffered by the economy has resulted in high unemployment rates in the country forcing many to seek refugee status in other countries.
- President, Major General Muhammadu Buhari inaugurated a 15-member Board of the Nigeria Extractive Industries Transparency Initiative. Speaking at the event, the President stated that the NEITI is essential for achieving the country's economic goals, while at the same time ensuring transparency in the management of the nation's natural resources as well as in oil, gas, and mining industries.
- According to the Nigeria Inter-Bank Settlement System (NIBSS), POS transactions in Nigeria increased to N3.01 trillion in 462.11million transactions as of June 2021, this represents a +50% increase compared to the N2.03trn recorded in the corresponding period of 2020. In comparison to the value of POS transactions in H2 2020, the current figure (N2.72 trillion) represents a +10.3% increase.
- According to the Chairman, Nigerians in Diaspora Commission, Abike Dabiri-Erewa, the COVID-19 pandemic has resulted in a -20% reduction in annual diasporan remittances from $25bn to $20bn in 2020. The Chairman disclosed that several programmes are being undertaken by the government to shore up the deficit. Meanwhile, the World Bank had earlier said remittances by Nigerians in the Diaspora fell by -27.7% from $21.45bn in 2019 to $15.5bn in 2020. Remittances represent over 83% of the national budget and 6.1% of the Gross Domestic Product.
- The Central bank of Nigeria has announced October 1 as the date for the launch of the E-Naira, in a webinar with the fintech community the CBN noted that the digital currency would promote cross border trade, the efficiency of monetary policy, financial inclusion and targeted social intervention.
- The price of Liquefied Petroleum Gas, also known as cooking gas, has surged by +60% to a record high of N500 per kilogramme, on the back of the devaluation1 of the naira and lingering inadequate domestic supply of the fuel. In addition to unemployment and an already high poverty level, increases in prices of essential products such as LPG is bound to increase the country's misery index.
- The Chinese government has imposed counter-sanctions on US individuals including former US Commerce Secretary Wilbur Ross in response to US sanctions on Chinese officials with the Liaison Office in Hong Kong. The sanctions are the first imposed by China under its new anti-foreign sanction law, which was passed in June. China also imposed unspecified "reciprocal counter-sanctions" on the current or former heads of a range of organisations, including the Congressional-Executive Commission on China, US-China Economic and Security Review Commission, National Democratic Institute for International Affairs, International Republican Institute, Human Rights Watch, and the Washington-based Hong Kong Democracy Council.
- The Conference Board, A New York-based think tank, noted that its Leading Economic Index (LEI) for the U.S. increased by 0.7% in June to reach 115.1 index points, June's gain in the U.S. LEI was broad-based and so it gives economists reasons to expect that the U.S. will see an uptick in growth although at a slower pace.
- According to the US Labour Department, the number of Americans seeking unemployment benefits rose last week even as the job market appears to be rebounding on the back of a recovering economy. State officials stated that weekly jobless claims increased from 368,000 the previous week to 419,000, the highest in 8weeks. The increase is however regarded as a blip as a result of some irregular movements in the week-to-week data.
- Despite a global chip shortage, Japan's exports soared in June arising largely from U.S. demand for cars and China-bound shipments of chip-making equipment, lending credence to an export-led recovery in the world's third-largest economy. Exports rose 48.6% in June from 2020, the fourth straight month of double-digit appreciation, although growth was largely exaggerated by a low base effect.
Summary and Outlook
Despite oil prices rising above $70/barrel, optimism about greater fiscal space is being dampened by the emergence of the new strand of covid 19 virus questioning once again the revenue diversification efforts of the government. Asides from oil proceeds, the government plans to fund critical infrastructure by raising the tax rate but economists recommend as a counter-cyclical policy that the government embarks on a largescale public-private partnership.
The MPC meeting scheduled for next week would likely see the MPC hold parameters given that recent inflation figure (17.75%) suggests that prices would continue to fall although it is expected to still remain high. The MPC would also consider positive developments in the external sector as current account deficits reduced in June to less than 2% of GDP from 3% GDP last year.