Being an Analyst Note issued by Proshare Research on February 1st 2023

Petrol Scarcity Threatens General Election but INEC Remains Positive

Analysts note that the sensitivity of general elections in Nigeria requires that it is unaffected by logistical issues and handled by non-partisan personnel. Analysts expressed concern that the lingering fuel scarcity could undermine the transportation of materials for the election. In line with that, the chairman of the Independent National Electoral Commission (INEC), Prof. Mahmood Yakubu, has said it would meet with officials of the Nigerian National Petroleum Company Limited (NNPCL) to mitigate the effects of persistent fuel scarcity which could affect the distribution of electoral materials. Public Policy observers believe that securing the supply of fuel from the NNPCL would ease the scarcity concern. However, the INEC partnership with the National Union of Road Transport Workers (NURTW) may heighten concern around the affiliation of a candidate with the union. With 24 days into the election leaving no room for the review of the distribution mechanism, analysts say INEC needs to watch against partisan tendencies of its distribution channels.  

Nigerians Can Remit Old Notes to CBN After February Deadline 

At the HOC committee meeting with the House of Representatives yesterday, the CBN governor gave clarity about the status of the old notes after the deadline date (February 10). In line with the provision of section 20 (3) of the CBN Act, Nigerians can still redeem the face value of the naira but only at the Central Bank. He stated that the collection of old notes after the deadline is subject to certain conditions which were not disclosed. The duration for the acceptance of the old notes after the expiration was not specified but the old notes seize to be a legal tender after February 10 and can no longer be used for any form of transactions afterward. Analysts acknowledge that the adjustment will help Nigerians from losing the value of the old notes but does not address the challenge of new notes availability. The scarcity of the new notes has generated a naira black market, where agents now charge a minimum of 10% and above on every withdrawal. The large volume of unbanked population in the country will continue to put pressure on the demand for cash which might further encourage the black market. 

Production Cost for EVs Under Threat as Countries Consider Taxing Nickel 

Following the decision by Indonesia to ban the export of nickel ore in 2022, The second-highest producer of the metal, the Philippines has also suggested imposing a 10% export tax on Nickel ore to encourage local processing rather than selling unprocessed ore. Indonesia claims to have benefitted from the export tax as it has helped increase the investment in mineral processing plants in the country, a move the Philippines aims to follow although the Philippines nickel association seems to kick against it saying it could force local producers to close shop. Nickel, a silvery-white, hard, malleable, and ductile metal is a good conductor of heat and electricity, is slightly radioactive, and exposure could cause cancer in humans. However, its uses range from the production of coins to making wires and is a critical ingredient in the production of lithium-ion batteries. At a time when Electric Vehicle (EV) makers are offering discounts on EVs to increase patronage of EVs, this development could serve as a deterrent to low pricing as these bans could put pressure on the supply of Nickel globally.

Geregu Plc’s N8 per share Dividend Payment Pricks Investors’ Attention

Geregu Power Plant releases its audited financial statement for the period ended December 31, 2023, which showed a decline of -32.89% Y-o-Y from N70.96bn in 2021 to N47.62bn in 2022. The decline in revenue was attributed to a reduction in retail and whole energy consumption during the period. The statement further showed a N10.17bn profit after tax, representing a slide of -50.5% Y-o-Y compared to the previous year. The power plant, with a recent market price of N193.60 per share, saw a 10% rise in its quoted value in the last trading session with a year-to-date (YTD) rise of +29.93% after starting the year at N149. The company proposed a dividend of N8.00 per share, which came to N20bn. Analysts observe that the company’s free float, a measure of the number of shares available for public trading, stands at 1.07% or N3.9bn which is 80.5% lower than the N20bn minimum threshold value for companies listed on the NGX mainboard. Further observation is that on a recent market price of N183.60 per share, the company provides investors with a current dividend yield of 4.36%. A bit of interpretative ambiguity surrounds the power company’s statement that it would pay a dividend of N20bn from a full-year profit after tax of N10.2bn. Observers expect that the company would explain this situation at a future analysts’ conference call, as normal best corporate governance practice suggests that dividend pay-outs should be made from companies’ post-tax profits. The company can, however, dip into retained earnings to augment shareholders’ dividends, which may be the case in this instance (see chart 1 below). 

Chart 1:

French Protests against Pension Age of 64 Years Intensifies

The second wave of pension-age protests in France was bolstered by participants from eight trade unions. The protests are driven by factors such as the poor state of public services and not just a desire for early retirement. Rising pension age trends across Europe have also seen countries move to raise the official retirement age. This decision is spurred on by low aggregate contribution as a result of the skewed proportion of working-age contributors and elderly beneficiaries. However, we see a slightly divergent discourse in Nigeria where there’s pressure from members of the workforce to increase the retirement age to 70 years. This increase aims to improve access to experienced teachers and doctors, amongst others.

Elon Musk Set to Apply for Regulatory Licence on Twitter to Ease Payments Functionality.

Elon Musk, the Twitter boss, is considering applying for the license to use crypto as payment for Twitter. Esther Crawford, Twitter payments division head, is working on bringing crypto and fiat payments to the app. The Twitter owner is also mulling the creation of an Everything App, an application that provide a suite of services for users such as messaging, peer-to-peer payments, social networking, and e-commerce shopping. Owning to Elon Musk experience with Crypto payments when he adopted Bitcoin as a means of payment to Tesla, he is now considering crypto payments for Twitter, which requires a regulatory licence with the US Treasury as a payments processor. He is applying for state licenses, with the goal of completing the process within a year. Analysts believe Dogecoin could be used as a stable payment for Twitter due to Elon Musk influence and how he has promoted the coin. This could also fuel the increase in price of DOGE as they hope to reach the strong psychological resistance level of US$0.15 before Q2 2023. Dogecoin currently trading at US$0.0920 at the time of writing.