Dear Subscriber,
Liberation Vs. Retaliation
Mutually Assured Destruction (MAD)
Newton’s third law states, “For every action, there is an equal and opposite reaction.” That is why what was supposed to be a day of economic liberation has turned into a day of global retaliation. Markets have plunged, commodity prices have dived to record lows, and investors have lost their shirts. As the saying goes, “If you go to war, dig two graves—one for your enemy and one for yourself.”
At various times in history, from the 1987 market crisis to the 1998 Southeast Asian financial debacle to the subprime mortgage crisis of 2008. The global economy has always recovered, and markets have remained resilient. Therefore, despite the ongoing retaliation and market turmoil, we believe that economic normalcy will return in the short run.
For Nigeria and Sub-Saharan Africa (SSA), which largely remain non-aligned in the geopolitical and economic universe, we say: “When elephants fight, the grass will prosper this time.
However, the risks cannot be understated for Nigeria and other countries with high exposure to global trade. Imported inflation and currency risks will emerge as market jitters and fears of a global slowdown heighten.
As Peter Drucker wisely noted, “The greatest danger in turbulence is not the turbulence—it’s acting with yesterday’s logic.
NNPC – New hard-nosed board
NNPC has been accused of being the Achilles’ heel of Nigeria. It is opaque, inefficient, and corrupt. The latest move of firing the entire board was an unexpected masterstroke. The problem will be if the new guys get “married to the natives” and become new wine in old bottles. Investors and analysts are optimistic about the quality and pedigree of the new board.
J.P. Morgan Chase was one of the few that endorsed the move. The proposed listing of NNPC on the NGX is expected to boost corporate governance, increase oil production, enhance fiscal revenues, and export earnings – though it will be a tall order to expect it to become the Aramco of Nigeria in the near future.
Net external reserve rises to $23.11bn—What’s next?
First, the naira is expected to stabilise within the range of ₦1,540/$ to ₦1,600/$ as the CBN maintains forex supply at current levels. Second, inflation figures will likely moderate temporarily to 22.8%, reflecting positive base effects. However, consumers will remain trapped in a bubble of higher living costs due to telco tariff hikes, a further increase in PMS prices toward ₦1,000/litre, and rising transportation costs. Notably, there is a 92% correlation between petrol prices and transport fares. “These recent developments could potentially alter the inflation deceleration trend, leading to an increase in inflation in the month of April.
In this edition of the LBS Breakfast Session, Bismarck Rewane and the FDC Think Tank analyze Nigeria’s vulnerability to global uncertainties associated with the current tariff wars. It also discusses the likely impact on the policy reform direction of this administration.
Enjoy your read!
