The Intersection of Finance, Geopolitics & Market Dynamics
Prologue
This edition of our weekly review focuses on the intricate interplay between finance, geopolitics, and market dynamics. Over time, the Nigerian Treasury Bills (NTBs) auction has been a crucial economic event, reflecting market sentiment and investor confidence. Against the backdrop of escalating global tensions in the Middle East, we analyse the key market highlights and developments both locally and globally. From significant acquisitions to policy reforms and economic projections, we consider the interconnectedness of markets and international affairs.
WTI Crude Oil and Brent Oil showed price fluctuations in the previous week and the week under review, with declines recorded between January 29 and February 2, 2024, and rebounds between February 5 and February 9, 2024. WTI Crude Oil dropped by 8.35%, from $78.90 to $72.28, while Brent Oil decreased by 8.08%, from $84.13 to $77.33, likely due to the global economic concerns and supply-demand dynamics. Subsequently, both saw increases, with WTI rising by 5.58% and Brent by 5.51%, indicating market resilience influenced by economic indicators and geopolitical factors. Despite significant volatility, the market demonstrated stability, with prices recovering from initial declines, showcasing a dynamic oil market influenced by economic, geopolitical, and market-specific factors.
The Nigerian Treasury Bills (NTBs) auction held on Wednesday saw significant investor interest with over N1.9 trillion subscriptions and about N1 trillion issued. There was over 90% subscription and allotment on the 1-year; this is surprising considering the fact that there was an increase of 1224 basis points (244.8%) on the 91-day tenor, 1050 basis points (140%) on the 182-day tenor, while the 364-day tenor only saw a 746 basis points increase. The performance begs the question as to whether the market is pursuing the opportunity for higher yields or whether there is an expectation of lower yields in the near future. Notwithstanding, what is clear now is that the Central Bank policy is using higher rates to attract FDIs, following the Governor’s alleged report to lawmakers that $ 1 billion came into the market in the past few days to improve liquidity.
The Intersection of Finance, Geopolitics & Market Dynamics
In a separate development, the CEO of the Nigerian National Petroleum Company Limited (NNPCL) and the Governor of the Central Bank of Nigeria (CBN) met to discuss the decision of the NNPCL to deposit a significant portion of its revenues and utilise banking services offered by the CBN. Both parties acknowledged the benefits of this decision, particularly in enhancing the management of cash holdings and obligor limits (that is, the maximum amount a bank is allowed to lend a single borrower or an individual in relation to the total shareholders’ fund of the bank) in commercial banks.
Furthermore, the CBN and Debt Management Office (DMO) have aligned their strategies, as evidenced by the recent issuance of NTBs in a coordinated manner, indicating improved collaboration between both entities. This could lead to an inverted yield curve with market interest primarily focused on longer-tenor bonds and bills. Additionally, local interest rates may not climb significantly at the long end until the markets expect higher yields, perhaps at the next auction, with secondary market yields trading higher than the last auction rates.
Amidst escalating tensions in the Middle East, concerns arose regarding the potential for a conflict involving multiple countries in the region. Although being monitored, the situation could have significant global ramifications, potentially impacting international relations and financial markets. Developments in the Russia-Ukraine conflict and the outcome of the upcoming US elections may further influence the geopolitical landscape and market dynamics, as Western forces may be forced to align with Israel based on religious sentiments. There appears to be potential for increased geopolitical tensions; despite this, international oil prices have not reacted significantly to the conflict, indicating a complex geopolitical world
Market Highlight: Vol. 92
- Nigeria’s FX reserves dip by over $2 billion in less than one month, hitting the lowest level in over six years.
- BDCs now buying dollars at ₦980/$, naira appreciating faster than expected – ABCON President.
- Customs’ revenue at Tincan Port increases by 139% in Q1 2024.
- UBA seeks shareholders’ approval to issue 10.8 billion shares.
- Nigeria records ₦234 trillion e-payment transactions in Q1 2024.
- NGX urges FG to drive listings to deepen the capital market and boost tax revenue.
- Transcorp Power reports N28.772 billion pre-tax profit in Q1 2024.
- Egypt, Ghana, Nigeria, and others emerge as African countries with the highest T-bill yields in Africa.
- Pension Fund Administrators (PFAs) channelled 72% of investments in fixed-income assets in 2023
Local News
FG speculates a 214% increase in Petroleum Profit Tax (PPT) from the oil sector in 2024.
FinTechs stop dollar transfers to Nigeria following the CBN’s circular to bar FinTechs from International Money Transfers.
FG disburses N200 billion in funds to support SMEs across Nigeria.
Nigeria’s food production to hit €62bn in 2024.
Global Developments
Toyota boosts US spending on EV(PLEASE WRITE IN FULL) production by $1.3 billion.
California resources will double oil output in the $2.1B Aera deal.
US imposes sanctions for violations of Russia oil price cap.
Israel launches new air strikes in Gaza after Biden criticism.
UAE says mediation efforts led to Russia and Ukraine swapping 100 prisoners each.
