Dear Subscriber,

Beware the Ides of March, was what the soothsayer said to Julius Caesar foreseeing that Caesar would be betrayed and assassinated.  The month of March for those of us who are superstitious is always pregnant with surprises and misfortunes.

Caesar as we know was betrayed by his close aides and stabbed by Brutus on March 15, 44 BC.

That is why most Nigerians are bewildered by the numerous challenges ranging from an avoidable bout of fuel scarcity, power outages, horrendous traffic and a wobbly naira including the spectre of stranded students in Ukraine.

The historians are also stunned as to why these things are happening just before and at the beginning of the month of March.

But there is some Good News

For investors and corporate leaders, who are wondering and pondering on what to do next.  The great news is that bonny light is now at a 15 year high of $118pb.  Theoretically, it should mean that Nigeria should be flushed with petrodollars, the forex market should be stable and the Naira should be appreciating big time.  But before your dreams become a nightmare, please remember that the crude oil being exported for revenue is coming mainly from the deepwater assets, where the production sharing contracts discriminate in favour of the operators.

PSCs are sometimes a poison Chalice

Typically in a PSC, Nigeria gets 30% of the oil and operators get 70%.  This is because of the production costs, recovery costs etc.  That is why we economists refer to this period as the paradox of oil era.

A doomsday economist was recently quoted as saying “Oil price down, Naira down, oil price up, Naira down.  Is the Naira doomed??”  Our answer is definitely NOT, the Naira is not doomed.  It will recover after a period of adjustment.  Why do we say this??  When you look at most currencies in SSA in the last decade, they have all been gutted by inflation, negative terms of trade etc.  But in Nigeria, we have failed to make some adjustments at the right time.  We have also failed to make decisions quickly.

But please look at the stock market, some investors have been making out like bandits, because of the artificially low interest rates and excess Naira liquidity.  Investors need to be cautious because these are signs of an asset bubble being pumped and like a cynic noted that there is a pin in the air that could puncture this bubble.  That is why we end this session of the LBS Breakfast with the quote again of the soothsayer called Spurinna “Beware the Ides of March”

In the download, Bismarck Rewane and the FDC Think Tank analyze the current developments in the market and economy.

Enjoy your read…