DSS Has the CBN Governor!
4 Customs Street: 12 Jun 2023
Good Morning 😃
Happy Democracy Day !!!
Welcome to this week’s edition of 4 Customs Street, our weekly newsletter on the stock market.
The newsletter is divided into two:
Green White Green—focused on the Nigerian stock market.
Star-Spangled Banner—focused on the US stock market.
Green White Green Last Week
FBN Holdings earnings call
FBN Holdings (parent company of First Bank) held an earnings call during the week. Here are a few key points.
The bank has made prudent adjustments to its provisions for impairments on Ghanaian debt securities amounted to N5.9 billion.
The unification of the exchange rate has 3 possible ways it can impact the books of the bank:
RWA (Risk Weighted Asset) will increase as the dollar components of RWA gets revalued upwards in line with exchange rates. Risk-weighted assets, referred to as RWA, establish a connection between the minimum capital requirement that banks are obligated to maintain and the level of risk associated with their lending operations and other assets.
Benefit from earnings improvement in naira terms due to the diversification of books outside Nigeria into other currencies that get strengthened, and when you consolidate earnings in the group, earnings will be higher.
Improved domestic earnings from revaluation gains.
DSS has the CBN governor!
The suspended Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, is currently in the custody of the Department of State Services (DSS) for investigative purposes. The DSS made this announcement through a statement on their official Twitter account on June 10, 2023.
President Bola Tinubu had suspended Emefiele from his position, effective immediately, on Friday night. The suspension of the CBN governor is a result of the current investigation into his position and the upcoming reforms in the financial sector of the economy. Emefiele was instructed to hand over his duties to Adebisi Shonubi, the deputy governor (operations directorate), who will act as the CBN governor while the investigations are ongoing.
BUA Cement secures financing for expansion projects
BUA Cement has obtained a $500 million loan from a syndicate of development finance institutions led by the International Finance Corporation (IFC). The funding will be used to increase the capacity of its cement plant in Kalambaina, Sokoto to 8.0 million tonnes per annum and support the development of additional supporting utilities.
Lafarge Africa Plc welcomes new GMD/CEO
Mr. Lolu Alade-Akinyemi has been appointed Group Managing Director/Chief Executive Officer (GMD/CEO) of Lafarge Africa Plc and this takes effect on July 1, 2023.
This decision follows the retirement of the former Group Managing Director/Chief Executive Officer (GMD/CEO), Mr. Khaled El-Dokani, effective June 30, 2023. He will remain on the board as a non-executive director.
Power to the people!
President Bola Tinubu has given his approval to the electricity bill, which was passed in July 2022. The bill aims to repeal the Electricity and Power Sector Reform Act of 2005, replacing it with the Electricity Act. This new legislation consolidates all laws related to the electricity supply industry, providing a comprehensive framework to guide the post-privatisation phase and encourage private sector investments in the sector.
It also decentralises the generation, transmission, and distribution of electricity, granting states and individuals the authority to generate, transmit, and distribute electricity within their respective jurisdictions. However, inter-state or transnational distribution remains under a different regulatory scope.
The cost of cooking gas falls by 30%!
Over the past two months, the cost of refilling a 12.5kg cylinder of cooking gas (Liquefied Petroleum Gas) has decreased by 30%. This reduction can be attributed to lower crude oil prices and a decline in international gas prices. A recent survey conducted in major cities across Nigeria reveals that the price of refilling a 12.5kg cylinder of cooking gas has dropped from N10,000 to N7,000.
This development provides some relief to financially constrained households who have been battling with increased cooking gas prices since the beginning of last year, compounded by the recent rise in petrol prices due to subsidy removal.
According to an executive secretary of the Association of Local Distributors of Gas, Oga Adejo-Ogiri, LPG (Liquefied Petroleum Gas) is a globally traded commodity, with approximately 65% of the country's gas being imported. He explains that local prices are linked to the international benchmark known as Mont Belvieu, which has been experiencing a downward trend for the past couple of months.
Mont Belvieu is home to the largest underground storage facility for liquefied petroleum gas in the United States. The pricing indicator for the US LPG market primarily relies on the Mont Belvieu market, with daily reports from the US Energy Administration. As imported gas prices decline, this trend is reflected in the local market.
Olufola Wusu, partner and head of oil and gas at Megathos Law Practice, highlights that crude oil prices typically have an impact on domestic LPG prices in the global market. When crude oil prices rise, LPG prices often follow suit. Additionally, factors such as the increased costs of local and international shipping, as well as the surge in demand for LPG during cold winters, affect the price of LPG.
Green White Green This Week
Julius Berger, Jaiz Bank, Sunu Assurances, and Chemical and Allied Products, will be holding their Annual General Meetings (AGMs).
If you held your shares within the qualification period, expect your dividends after the AGMs.
Star Spangled Banner Last Week
Apple Vision Pro
Apple announced its headset on Monday during its Worldwide Developers Conference — an annual event where Apple showcases its latest software updates, technologies, and developer tools.
The $3,499 headset is Apple’s first major product since the Apple Watch in 2014.
The Vision Pro will allow users to see apps in a new way, in the spaces around them. Users can use their eyes and hands to navigate through apps and search with their voices. The headset can be used to watch movies, including in 3D, with spatial audio, view pictures or videos, and play video games. It can also be used for work with videoconferencing apps, Microsoft Office tools or Adobe Lightroom.
Apple let some people try out its new mixed-reality headset, the Vision Pro, on Monday, and there's a lot of chatter about the company's buzzy device
People genuinely seem impressed by Apple's technology, but the device is notably heavy, and some users were left with questions about what the headsets will ultimately be used for.
Will Amazon's New Ad Tier Cost You More?
According to a report from The Wall Street Journal, Amazon is considering the introduction of an ad tier for its streaming service, Prime Video.
An ad tier is a subscription option offered by streaming services where you can choose between a lower-priced plan that includes advertisements and a higher-priced plan that is ad-free. If you opt for the lower-priced ad tier, you will see ads during your streaming experience, similar to commercial breaks on traditional television.
This move could potentially result in higher subscription costs for users who prefer an ad-free experience. Ad tiers have gained popularity in the streaming industry as a means to increase revenue per user.
While details are not finalized, discussions have revolved around offering existing Prime Video subscribers ad-supported content by default, with the option to pay more to remove the ads. The report mentions that the ad breaks would be brief.
Advertising Meets AI
Microsoft and Google are delving into new territory by experimenting with ads in their respective AI-driven platforms.
Microsoft is testing ads within the Bing AI chatbot, while Google, according to Jerry Dischler, Google's general ad manager, is exploring ad placements in AI-generated search snapshots.
These early-stage initiatives involve relocating traditional search ads and incorporating them into AI responses and search experiences.
Advertisers currently cannot opt out of these tests, and both companies are actively engaging with advertisers to gather feedback and refine their approaches.
Treasury's Borrowing Bonanza
The U.S. Treasury's intention to embark on a massive $1 trillion borrowing spree has sparked anxiety within the banking sector. The U.S. Treasury refers to the United States Department of the Treasury, which is a government agency responsible for managing the finances and monetary functions of the United States federal government.
Due to the significant increase in the national debt, the U.S. Treasury Department has been compelled to borrow additional funds in order to cover government expenditures. The legislative constraint imposed on this borrowing is commonly referred to as the debt ceiling.
The debt ceiling is the maximum amount of money that the U.S. government can borrow to meet its financial obligations.
Once the Treasury Department reaches the maximum amount allowed under this ceiling, it requires Congress to vote in favor of either suspending or raising the borrowing limit.
The substantial borrowing carries the risk of inflating government debt yields and potentially draining bank deposits.
When we talk about "inflating government debt yields", it refers to a situation where the interest rates or returns on government-issued debt, such as Treasury bonds, increase. The term "inflating" here does not refer to the rise in prices but rather to the growing yields or returns on those bonds. In practical terms, it means that investors demand higher interest rates or returns on government debt because they perceive it as riskier or less desirable.
Consequently, banks may need to increase interest rates on savings accounts due to the anticipated rise in yields.
While increasing interest rates on savings accounts can have benefits, there are also potential dangers to consider like:
1. Reduced Consumer Spending
2. Slower Economic Activity
3. Borrowing Becomes Costlier
4. Potential Capital Outflows
5. Impact on Housing Market
“capital outflows" refers to the movement of funds or capital from one country to another. It means that money or investments that were previously held in the US could potentially flow out of the country and into other destinations.
GameStop's Boardroom Bombshell
On Wednesday, June 7, GameStop fired CEO Matthew Furlong and appointed Ryan Cohen as executive chairman.
GameStop is an American retail company that specializes in video games, consoles, and related merchandise. It operates a chain of retail stores where customers can buy new and used video games, gaming consoles, accessories, and collectibles.
GameStop has not disclosed the specific cause for the termination of its CEO. The company's shares also experienced a significant decline of over 20% in extended trading following the announcement last week.
Extended trading, in simple terms, is the period before and after the regular trading hours of the stock market when investors can continue to buy and sell stocks. It extends the opportunity for trading beyond the typical market session.
Golf's Mega Merger Raises Eyebrows
After a two-year-long battle, the PGA Tour and Saudi Arabia's LIV Golf have astonishingly announced their merger.
The PGA Tour is a professional golf organization founded in 1929 that oversees and operates the main professional golf tournaments in North America.
LIV Golf began in late 2021 with the former PGA Tour player Greg Norman as its commissioner and billions of dollars in backing from the Saudi sovereign wealth fund, which is known as the Public Investment Fund.
PGA Tour Commissioner Jay Monahan, anticipating criticism, acknowledged the potential hypocrisy but accepted the backlash. American lawmakers, commentators, and sports enthusiasts see the deal as "hypocritical," accusing the PGA Tour of accepting "Saudi blood money" and engaging in "sports washing."
Financial analysts, on the other hand, foresee the merger as a means to promote golf on a global scale and provide new opportunities for expanding its fan base.
Binance US Assets may be locked down
The SEC has requested a federal judge in Washington, D.C. to freeze the assets of Binance's U.S. subsidiary, citing allegations of the company and its founder, Changpeng Zhao, demonstrating a "disregard" for U.S. law.
The term "SEC" commonly refers to the U.S. Securities and Exchange Commission. It is a federal regulatory agency in the United States responsible for overseeing and enforcing securities laws. The SEC's primary role is to protect investors, maintain fair and efficient markets, and facilitate capital formation.
The SEC is seeking to freeze the assets of Binance's U.S. platform and repatriate both fiat currency and cryptocurrency held by its customers.
Fiat currency is any government-issued currency that is not backed by a physical commodity like gold or silver. It derives its value from the trust and confidence placed in the issuing government and its legal status as a means of exchange. Examples of fiat currency include the United States dollar (USD), the euro (EUR), the British pound (GBP), and many other national currencies around the world.
The freezing order specifically applies to Binance's U.S. holding companies and does not extend to the non-U.S. regulated international exchange. The order would impact numerous accounts held at financial institutions such as Axos Bank, the now-defunct Silvergate Bank, Prime Trust, and others.
Turkish Lira Takes a Dive
Turkey's efforts to protect its currency, the lira, have relaxed, resulting in a significant decline as the new economic team under President Recep Tayyip Erdoğan introduces more "sensible" measures.
On Wednesday, the currency experienced a substantial drop of 6.9 percent, reaching a record low of 23.17 against the US dollar. This marks a nearly 10 percent decrease since the appointment of Mehmet Şimşek as finance minister over the weekend. According to Refinitiv data, the lira hasn't seen such a significant decline in a single day since December 2021.
Star Spangled Banner This Week
Adobe Inc., Oracle Corp., John Wiley and Sons, Kroger, and Lennar Corporation are set to release their earnings reports this week.
Mark your calendars for the latest updates from the Bureau of Labor Statistics! On Tuesday, they will unveil their newest report on consumer inflation, offering valuable information on changes in the prices of goods and services. Then, on Wednesday, prepare for the release of the producer price data, giving us a glimpse into price fluctuations at the wholesale level.
The Bureau of Labor Statistics (BLS) is a U.S. government agency that provides statistical data and analysis related to labor economics and the job market.
Inflation refers to the general increase in prices of goods and services in an economy over time.
On Wednesday, the Federal Reserve will conclude a two-day policy meeting where they will decide whether to proceed with interest rate hikes or opt for a pause. The outcome of this decision will be disclosed at the conclusion of the meeting.
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