#Africa #Markets | 28 May

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Global Markets

  • Oil sinks while stocks gain on North Korea, euro shaken by Italy
  • S&P 500 futures up 0.4 pct, South Korea up 0.7 pct
  • Investors relieved Trump and Kim in talks to hold June 12 summit
  • Euro off low but vulnerable to political worries in Italy, Spain
  • WTI hits 6-week low on expectations OPEC will ease output curbs

Oil Markets

  • Oil prices fall as supply from top 3 producers set to rise
  • Saudi Arabia, Russia set to raise supplies by 1 million bpd
  • US output has surged by over 27 pct in two years
  • But climbing supply from top producers comes amid record demand
  • Brent crude futures down 0.6 pct at $76.02 per barrel (0016GMT)
  • US WTI crude futures down 0.8 pct at $67.36 per barrel

Grains (25 May)

  • Wheat up almost 5 percent at end of last week, near 10-mth high
  • Dry weather threatens crops in US, other wheat areas
  • Soybeans rose after China book export purchases
  • CBOT July wheat futures rose 2.4 pct to $5.43 a bushel, gaining 4.8 pct for the week
  • CBOT July corn futures rose 1-3/4 cents to $4.06 a bushel to gain 0.9 pct for the week
  • CBOT July soybean futures rose 5-3/4 cents to $10.41-1/2 a bushel to end week up 4.1 pct

Key African events or data releases over the weekend & early a.m today
[Posted & commented on some headlines below at my Twitter handle @DrRafiqRaji]

  • South Africa aims for ‘zero carbon’ buildings in green push
  • Labelled sorcerers, Cameroon children with sickle-cell disease face death
  • Anti-corruption group says Nigeria expanding use of opaque $670 mln “slush fund”
  • US proposes UN sanctions against six senior South Sudan officials – draft
  • Egypt’s top administrative court permits wheat with trace levels of ergot
  • Guinea’s president reshuffles govt as he faces strikes, civil unrest
  • South Africa’s opposition rejects report that party will split
  • Egypt detains prominent opposition leader, former Sisi supporter – sources
  • Libyan rivals set for crunch Paris talks to break political deadlock
  • Dozens killed in Cameroon’s restive Anglophone region
  • China wins back Burkina Faso, urges Taiwan’s last African ally to follow
  • Ethiopia pardons senior opposition leader sentenced to death
  • China, Burkina Faso sign agreement to establish diplomatic ties
  • Kenya moves to regulate fintech-fuelled lending craze
  • East African migrants escape from captors in Libyan smuggling hub
  • Cameroon court convicts Anglophone activists of rebellion and terrorism
  • South Africa’s Treasury says escaping “junk” a top priority
  • S&P affirms South Africa rating, keeps stable outlook
  • Africa Crude – Fresh Angolan on offer, Pertamina mops up some Nigerian
  • Ivory Coast needs over $1 bln for reforestation strategy
  • Kenyan filmmakers rise up against “archaic” 1960s restrictions
  • Nigeria’s Trans Ramos pipeline shut for past month due to leaks
  • South Africa’s Ramaphosa authorises graft probe into government departments
  • Germany’s ATON raises bid for South Africa’s Murray & Roberts, ups stake to 44 pct
  • Sierra Leone president to push review of mining law, contracts
  • Fear and suspicion hinder Congo medics in ebola battle
  • Algerian blogger accused of espionage sentenced to 10 years in prison
  • Botswana court backs regulator’s push for lower mobile call rates
  • South Africa investigates $80 million bitcoin scam
  • South Korean refiners replace Mideast crudes with US, Africa supply
  • Dozens killed in clashes between two Somali regions in land dispute
  • Kenyan shilling expected to weaken due to demand from companies

N.B. Full stories of above headlines are available on Reuters

macroafricaintel | Africa FX Monthly – June 2018

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Click here for PDF version

Currency   1 month

(29 Jun 2018)

3 month

(31 Aug 2018)

6 month

(30 Nov 2018)

12 month

(31 May 2019)

South African Rand (USD:ZAR) 12.7 12.3 13.0 13.3
Nigerian Naira (USD:NGN) 363.0 367.0 370.0 369.0
Ghanaian Cedi (USD:GHS) 4.5 4.3 4.4 4.1
Kenyan Shilling (USD:KES) 101.3 101.5 101.1 101.0
Ugandan Shilling (USD:UGX) 3,750.0 3,721.0 3,711.0 3,743.0
Tanzanian Shilling (USD:TZS) 2,277.0 2,271.0 2,275.0 2,280.0
Ethiopian Birr (USD:ETB) 27.6 27.7 28.0 28.1
Mauritian Rupee (USD:MUR) 34.9 34.7 34.5 34.6
Namibian Dollar (USD:NAD) 12.7 12.3 13.0 13.3
Botswanan Pula (USD:BWP) 9.8 9.7 9.8 10.0
Zambian Kwacha (USD:ZMW) 10.1 10.3 9.9 10.5
US Dollar Index (DXY) 94.0 94.1 93.7 95.3

macroafricaintel Weekly | 28 May

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Click here for PDF version

Date Data / Event Period Forecast Previous
31 May South Africa PPI, % yy (mm) Apr 2018 3.4 (0.1) 3.7 (-0.2)
Zambia CPI, % yy (mm) May 2018 7.9 (0.5) 7.4 (0.6)
Kenya CPI, % yy (mm) May 2018 3.9 (0.9) 3.7 (1.4)
Uganda CPI, % yy (mm) May 2018 1.5 (0.3) 1.8 (0.3)
Seychelles CPI, % yy (mm) May 2018 3.7 (0.2) 4.2 (0.0)
Tanzania CPI, % yy (mm) May 2018 4.1 (0.5) 3.8 (0.4)
Botswana CPI, % yy (mm) May 2018 3.9 (0.7) 3.4 (1.3)
Namibia CPI, % yy (mm) May 2018 3.8 (0.3) 3.6 (0.3)
Nigeria CPI, % yy (mm) May 2018 11.2 (0.7) 12.5 (0.8)
Ghana CPI, % yy (mm) May 2018 9.5 (0.7) 9.6 (0.9)
South Africa CPI, % yy (mm) May 2018 4.6 (0.4) 4.5 (0.8)
Ethiopia CPI, % yy (mm) May 2018 13.8 (0.9) 13.7 (0.9)
Mauritius CPI, % yy (mm) May 2018 2.9 (0.2) 3.7 (-2.0)

macroafricaintel | Nigeria: Why not a market solution to fuel shortages?

By Rafiq Raji, PhD
Twitter: DrRafiqRaji

Nigerians were in for a rude shock last Christmas. Fuel, hitherto abundant, suddenly became scarce. It was artificial, of course. With the political cycle in high gear, myriad negative events have been on the rise. President Muhammadu Buhari blames saboteurs; perhaps a vieled reference to opponents eyeing the presidency in 2019. While he did not say who they were, there is a consensus, amongst the top echelons of the government, at least, that the shortages were contrived. Senate president Bukola Saraki called it an “artificial scarcity” in remarks when the committee put to task to unearth the causes of the fuel shortages and recommend measures to ensure such misery would no longer be meted out to the citizenry again, presented its report. Typically calm, Mr Saraki’s response was a little emotion-laden; reflective of inflamed passions around the issue. Controversy has always trailed the very politically-sensitive issue of fuel supply in Nigeria. Once a subsidised commodity, it was one of the few benefits citizens could claim to get from the government. Verner Ayukegba, principal analyst for Sub-Saharan Africa at London-based IHS Markit suggests why the Buhari administration would be reluctant to raise fuel prices like other countries have done in tandem with crude oil price movements: “It is one of the few ways in which the government can reach a broad set of Nigerians, especially the struggling masses, with subventions.” John Ashbourne, Africa economist at London-based Capital Economics adds thus: “Raising fuel prices is obviously always quite painful – both economically and politically. The government might be hesitant to raise prices now, given that the economic recovery is still fragile and inflation has only just started to come down.” But there is a greater fear for the government should it choose to increase fuel prices at this time: “The potential fallout is negative public opinion against the government in the run-up to next elections”, opines Mr Ayukegba. Could the government mitigate this, though? “In theory, the optimal policy would be to provide targeted grants to lower income people”, says Mr Ashbourne. [But]…poverty alleviation initiatives – social programs – in Nigeria have often come up short”, Mr Ayukegba adds. There are other ways the government could manage to keep the current fuel price of 145 naira unchanged without paying a subsidy to marketers or at least, prevent a steep price hike in the event it decides to be bold. Capital Economics’ Ashbourne makes a suggestion: “In the short run, the government could reduce landing fees and taxes on importers and hope they pass on the savings.” This was also one of the proposals made by state oil minister Ibe Kachikwu when he made a presentation to the Senate committee in January. Mr Kachikwu also suggested that foreign exchange could be made available to fuel marketers at a rate that makes up for any difference between the landing cost and retail price. Another suggestion he made was for a multiple pricing regime whereby marketers would be able to import fuel and sell at any price that suits them while the state oil company sells its own imported fuel at the government approved price. All three suggestions imply some form of subsidy or in the third case, an average price increase.

Cheap fuel, shady deals
Upon the assumption of the Buhari administration, subsidies were stopped. Even so at about 50 US cents for a litre, Nigeria’s petrol is very cheap. Inevitably, savvy entrepreneurs have been making a good trade of either hoarding the commodity or smuggling it to neighbouring West African countries where petrol is dear. Umar Ajiya, chief executive of PPMC, the state oil company’s distribution arm, reeled out the statistics in a media interview in January to support this supposition. Nigeria’s typical daily consumption of petrol is less than 30 million litres. His firm, the PPMC, supplies about 40 million litres a day. During festive periods, the daily supply could be as much as 60 million litres. Mr Ajiya also asserted that at least one ship cargo of 50 million litres is imported by the PPMC daily. Ordinarily, the PPMC should be a marginal player in a supposedly quasi-deregulated market: although the fuel price is set by the authorities, a reasonable margin is incorporated to make the venture profitable for marketers. Considering the price of crude oil and its distillates in the international markets tends to be volatile, marketers would only be able to make a profit if the set price is adjusted with almost as much frequency as the crude oil price changes. Unfortunately, this is not the case; especially when the price rises. In the recent past, the Buhari administration was able to make upward adjustments to the petrol price, when it still had much goodwill. Now in re-election mode, it has become more cautious. To increase the fuel price at this time would be considered very bold indeed. And it could not now say that it has resumed subsidies on fuel products; after having campaigned to remove them in the first place. It used to be a major conduit for corruption.

Liberalise, deregulate and diversify
But it is abundantly clear that the official price of 145 naira for a litre of petrol is not realistic, having been set when the crude oil price was much lower than current levels of above $60. At a landing cost of 171 naira for a litre of petrol, the authorities take a loss of 26 naira on each litre of petrol sold to the public. Marketers complained the authorities were not making up for the difference and insisted on being paid before resuming imports. With the authorities unyielding, in light of the complication that doing so would also imply an acknowledgement that subsidies were being paid, PPMC became the sole importer of petrol. But if it were still selling at 145 naira and importing at a higher cost, how then was it funding the difference? When pressed hard during the earlier mentioned TV interview, Mr Ajiya classified it as an operating cost. Since PPMC is wholly-owned by the government, that operating cost is borne by taxpayers. Simply put, the authorities have been paying subsidy on petrol. As such payments are extra-budgetary and an infraction by the executive branch, Mr Buhari could ideally be impeached because of them; not that this is likely, though. Another suggestion made by Mr Kachikwu is for the country’s moribund refineries to be repaired and perhaps new ones built. As a lot of resources has been wasted in the past to do so, it is probably a bad idea. They could be sold to private investors instead. Incidentally, this was done before; during the administration of former president, Olusegun Obasanjo. Africa’s richest man, Aliko Dangote, was one of the buyers. The sale was revoked by the next administration, however. Instead, Mr Dangote is now building his own refinery from scratch. It is perhaps why the authorities likely reckon they could continue to take losses on fuel imports to ensure the retail price for petrol remains unchanged at 145 naira in the hope that the Dangote refinery would become operational as scheduled in 2019. When completed, the refinery would be able to refine 650,000 barrels of crude oil into petroleum products daily; enough to supply all of the country’s fuel needs with extra to export. But is this a wise strategy? “I would worry about putting so many eggs in one basket”, says Capital Economics’ Ashbourne; “from a pure efficiency perspective, the best option would be to liberalise prices and then deregulate the import stream to allow more competition.

Postscript
Since the publication of the above article by African Business magazine in early February 2018, which I authored, the Nigerian government has since admitted paying subsidy on fuel imports: “an under-recovery of N774 million [$2.2 million] every day.” At the African Development Bank Annual Meetings in Busan, South Korea, which concludes today (25 May), a former central bank governor put the figure at about 1.4 trillion naira (circa $3.9 million). And even as the authorities refused to call it what it is, the legislature has since given it the proper nomenclature. Sadly, with the Muhammadu Buhari administration already in election mode, the principal of which is actively seeking a second term, the likelihood that market forces would be allowed to determine fuel prices anytime soon is very slim. The opportunity cost of this supposed “political necessity” is sobering indeed.

#Africa #Markets | 25 May

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Global Markets

  • Asian shares shaky after Trump ditches summit with North Korea
  • South Korean shares down 0.65 pct
  • Vix at 4-mth low as investors used to Trump tactics
  • Oil dips on speculation output cuts may be relaxed

Oil Markets

  • Oil prices ease after Russia says it may gradually raise output
  • Russia has been withholding supply with OPEC since 2017
  • OPEC, non-OPEC producers to meet in June to discuss production
  • Russia says supply restrictions could be eased “softly”
  • Brent crude futures down 1 cent at $78.78 per barrel (0024GMT)
  • US WTI crude futures down 2 cents at $70.69 a barrel

Precious metals

  • Gold prices slip but hold above $1,300
  • Spot gold down 0.2 pct at $1,302 per ounce (0100GMT)
  • US gold futures for June delivery down 0.2 pct at $1,301.90 per ounce

Grains

  • Wheat set for weekly gain pct as dry weather threatens global output
  • Most active CBOT wheat futures up 0.2 pct at $5.31-1/2 per bushel (0038GMT)
  • Most active corn futures up 0.1 pct at $4.04-1/2 per bushel
  • Most active soybean futures up 0.3 pct at $10.38-1/2 per bushel
  • Most active rice futures down 0.5 pct at $11.51 per hundredweight

Soft commodities (24 May)

  • Sugar at 8-week highs as truckers strike in Brazil
  • July raw sugar settled up 0.2 pct at 12.38 cents per lb
  • August white sugar settled up 0.6 pct at $351.40 per tonne
  • July arabica coffee settled up 1 pct at $1.2055 per lb
  • July robusta coffee settled up 0.2 pct at $1,755 per tonne
  • July London cocoa settled down 0.9 pct at £1,865 per tonne
  • July New York cocoa settled down 0.6 pct at $2,603 per tonne

Key African events or data releases today
[Posts & comments at my Twitter handle @DrRafiqRaji]

  • African Liberation Day today
  • Final day of AfDB Annual Meetings in Busan, South Korea, today

Key African events or data releases yesterday & early a.m today
[Posted & commented on some headlines below at my Twitter handle @DrRafiqRaji]

  • Impact of fighting on civilians in Libya’s Derna ‘devastating’ – UN
  • Algeria’s Sonatrach hopes for Exxon Mobil deal on shale gas
  • Egypt state security orders prominent blogger Wael Abbas detained for 15 days
  • Morocco’s Rif protest leader on hunger strike, father says
  • Burundi opposition push to annul vote extending president’s term
  • Nigeria’s Bodo community claims win over Shell after latest UK court ruling
  • South Africa authorities halt flights of state-run SA Express
  • Militia attacks Banro Corp’s east Congo gold mine – geologist
  • South African central bank holds repo rate at 6.5%, sees upside risks to CPI
  • US raises concerns over Egyptian activists’ arrests – W.House
  • Yields on Kenya’s 91-day, 182-day and 364 day t-bills dip at auction
  • South Africa probe into influence peddling to start hearings in August
  • Angola central bank holds benchmark rate at 18 pct
  • South African child who was kidnapped for bitcoin is found
  • Tunisian parties discuss cabinet reshuffle, exit of prime minister
  • Infection alert after dying Ebola patients taken to Congo prayer meeting
  • China applauds Burkina Faso decision to cut ties with Taiwan
  • Kenya’s treasury avoids dealing with rate cap in draft law
  • Kenya aims to issue green sovereign bond in 2018/19
  • Sudan says committed to Yemen military campaign, weeks after signalling doubts
  • South Africa confirms Hadebe as CEO of struggling Eskom
  • Kenya’s treasury wants to regulate ‘predatory lending’ – official
  • Kenya’s central bank sells dollars to the market after shilling weakens – traders

N.B. Full stories of above headlines are available on Reuters

#Global #Markets | 25 May

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Time Data/Event Previous Consensus
0800GMT Germany Ifo Business Climate MAY 102.1 102.7
0830GMT UK GDP Growth Rate QoQ 2nd Est Q1 0.4% 0.1%
0830GMT UK GDP Growth Rate YoY 2nd Est Q1 1.4% 1.2%
1130GMT India Foreign Exchange Reserves 26/MAY $417.7B
1130GMT India Deposit Growth YoY 12/MAY 8.2%
1130GMT india Bank Loan Growth YoY 12/MAY 12.6%
1230GMT US Durable Goods Orders MoM APR 2.6% -1.4%
1400GMT US Michigan Consumer Expectations Final MAY 88.4 86.9
1700GMT US Baker Hughes Oil Rig Count 25/MAY 844