Being an Analyst Note issued by Proshare Research on January 20th 2023   

Resolving Pricing Issues Will Ease Petrol Scarcity

While oil prices sell between N200 and N300 per litre at filling stations in major cities in Nigeria, black marketers discharge the product at between N350-450 per litre, depending on the location. Media reports suggest that the federal government, through the downstream regulator, has quietly raised the approved petrol price from N165-170 per litre to about N185 per litre. Analysts observed that oil marketers have already adjusted their pump prices to the new price while labour unions have kicked against the price adjustment. Although the price adjustment was meant to provide respite for oil marketers by raising their margins, analysts say without addressing the fundamental issue of subsidy and the non-market reflective pricing, fuel scarcity will persist with a higher level of severity. In Lagos, the situation will be dearer following the directive by the Lagos State Commissioner for Transportation asking oil marketers along major roads to operate only between 9 am and 4 pm daily. Whereas the directive was intended to facilitate the free flow of traffic, shortening operation time will lengthen the queues at operating hours and further halt traffic flows leading to a ‘Cobra’ effect where the solution is worse than the initial problem. 

Scarcity of New Notes Drives up Demand for US Dollar at the Parallel Market

As the deadline for the phase-out of old currency notes draws closer, the circulation of the new notes remains relatively low. Most banks are yet to adhere to CBN’s instruction to load their automated teller machine (ATM) with strictly new notes, seeing that the majority of the ATMs still dispense old notes. The ticking clock (11 days) is beginning to make people opt for other means of safekeeping their funds with the demand for the US dollars having picked up in the parallel market. The naira fell to N757/US$1 yesterday from 745/US$1 in the previous session. The demand pressure at the parallel market might worsen if the money supply remains low.  The CBN plans to sanction banks still issuing old notes through their ATMs. Analysts expect the sanction to slightly improve money in circulation, however, 11 days seems insufficient for effective circulation (see chart 1 below).

Chart 1:

Oil Prices Surge for the Week on Rebound in Chinese Demand

Oil prices are on track for a second straight weekly gain partly spurred by the brightening economic prospects for China following the lifting of strict Covid-19 curbs and partly spurred by uncertainty around the Russian oil industry striving under sanction. Price dipped in a few trading sessions after China posted its weakest economic growth in decades and the US reported a build in oil inventory and declines in retail sales and manufacturing outputs. Analysts expect the market to tighten further in the coming week on rising fuel demand in China and the dovish tendency of monetary authorities. In the local market, analysts expect petrol prices to trade above N200 per litre across major and independent filling stations on inactions of the regulator to check the differential pricing. 

Netflix Beats Expectations on Subscriber Numbers as Co-CEO Steps Down 

Netflix founder Reed Hastings is giving up his CEO role, a position he shared with Ted Sarandos since 2020. Netflix will maintain the co-CEO structure in Hasting’s absence, promoting COO Greg Peters to the role with Sarandos. Hastings will stay involved with the company as the chairman of the board. The news came shortly before Netflix reported its Q4 earnings boosting the company’s share price by 6%. The company beat expectations in Q4, adding 7.7m subscribers well over the 4.5m expected. The company brought in US$7.85bn during the final quarter of 2022, extending its recent trends of slowing revenue growth. Like most tech, Netflix’s stock price has fallen short of previous pandemic highs over the last year, but the company did recover from its midyear lows of US$180 a share, trading at US$315 before its Q4 report. Analysts expect Netflix revenue to maintain its upward growth in Q1 2023, mainly driven by more paid memberships. Meanwhile, the first quarter will mark Netflix’s preliminary rollout of its paid sharing program, which aims to make money from users who previously shared passwords with people outside their own homes. 

Musk’s Favourite Memecoin, Dogecoin, Sees a 25% fall in its Carbon Footprint

Dogecoin (DOGE) becomes the only memecoin in 2022 to expressly cut its carbon footprint by 25% in a year. This great move was possible due to the partnership of developers and the social media Twitter owner Elon Musk. Dogecoin’s annual carbon emissions declined by about 25% in 2022 following a joint effort from chain developers and Elon Musk, Twitter owner. The blockchain emitted 1,063 tons of CO2 in 2022, marking a 25% reduction from the 1,423 tons emitted in 2021. Elsewhere, Ethereum experienced the largest reduction in CO2 emissions in 2022 after switching to a proof-of-stake consensus mechanism. Its annual emissions were 8.3 times more than Dogecoin, albeit Dogecoin was the only memecoin to have recorded a large decline in carbon emissions. The progressive reduction in Dogecoin’s Carbon emission could be attributed to the influence of Elon Musk who suspended Bitcoin (BTC) payments for Tesla cars and adopted DOGE as a means of payment for its merchandise. Analysts expect further global adoption as cryptocurrencies go greener with Ripple sets to go Carbon free by 2030 and XRP classic making a plan to promote eco-friendly ReFi using blockchain (see chart 2 below).

Chart 2: