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Pay Attention to Nigerian Naira As US Interest Rate Rises; Further Depreciation Possible

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Naira USD

Central banks work mainly to stabilize or strengthen their currencies (to reduce inflation) and create employment by managing interest rates. Your Social Studies junior  secondary school teacher explained that in the section on the differences between commercial and central banks; he likely ended the class with “the central bank is the bank’s bank!”

When you reduce interest rates, companies and citizens can borrow cheaply. That triggers more economic activities, enabling the creation of more jobs. But excessive lowering of interest rates can “heat” up the economy and cause inflationary problems in the economy (money does not worth much as it is readily available, cheaply). 

The US central bank (Federal Reserve, as they call it) has increased the interest rate. The goal is to dampen and “slow” the economy by making it a little more expensive for companies and people to borrow money. So, right now in America, mortgage, credit cards, car loans, etc will see higher interest rates. As a result of those high rates, many people will think twice, and some will forgo acquiring some avoidable assets. If that happens at scale, you have slowed economic activity.

By doing just that, you can help the currency: it strengthens by reducing inflation. That strengthening of the currency is where I am interested in this note: Nigeria’s sovereign external loans are mainly in US dollars. If the dollars “appreciate”, it will cost Nigeria more to finance or obtain new loans.

The implication is that the pressure of this stronger US currency in a rising interest rate regime in the US can further cause the Naira to deteriorate; most Nigerian loans are denominated  in US dollars and some are not hedged or fixed which means there is a risk for them to float with US prime lending rates. Or even if the rates are fixed, Nigeria needs new loans to fund its budget, implying that next loans will be more expensive.

IMF projects that by 2026, more than 100% of Nigeria’s revenue will go into servicing debts. The debt service-to-revenue ratio has increased from 81.1% in 2020 to 96% in 2021, and continues to rise. A stronger US dollar will worsen the outlook.

Also, with higher interest rates, many US investors will see more avenues to deploy capital. During higher rates, safe assets like treasury bills will become more attractive. That change can affect how capital is allocated for emerging economies like Nigeria.

Watch out for stress on the Naira (more depreciation possible, black market is at N610/$ now). The cost of borrowing, for corporate and sovereign, will also rise. In other words, corporate bonds will be at higher rates; most of these bonds are Euro- or USD-denominated. 

For sovereign debts,  the government will borrow, even just to service old loans, and that can activate a vicious circle, triggering massive depreciation of Naira. Pay attention to the currency!

Comment on LinkedIn Feed

Comment: I think a stronger dollar may not cause much damage to the naira as Nigeria main revenue is also in dollar. Nigeria has no naira revenue to convert to dollar and pay debt, they either utilize the crude oil proceed or refinance through Eurobond. However, a higher rate in the US will reduce FPI. And I do not think the economy depends so much on FPI as Nigeria is not attractive to foreign investors. We also should not forget that OPEC has increased Nigeria’ quota and oil price is strong.

My Response: “I think a stronger dollar may not cause much damage to the naira as Nigeria main revenue is also in dollar.” Interestingly, Nigeria does not earn enough USD when compared to what Nigeria needs dollar for. If that is the case, it needs to find via other means. Your assumption is that Nigeria’s balance of trade and payment is optimal; not so. That is why we now use local tax revenue to service some of those debts.

“We also should not forget that OPEC has increased Nigeria’ quota and oil price is strong.” – Nigeria has not met its old quota due to theft. The issue of OPEC increasing Nigeria’s quota (to 1.772mbpd from 1.753mpbd) is a political statement EU needs to make Russia jealous. Nigeria is doing around 1.1mbpd now.

IMF Warns That Debt Servicing Might Gulp 100% Of Nigeria’s Revenue By 2026

ANALYSIS: How Digital Personality and Popularity Shaped Ekiti 2022 Election Results

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On June 18, 2022, the journey of several months of preparing by political and electoral players for the 2022 Ekiti State Governorship election came to an end as eligible voters cast their votes at various polling units around the state. It also came to an end on June 19, 2022, when the State Returning Officer revealed the election results. Three major political parties fought tooth and nail in the election. Party primary elections were held prior to the election, with various difficulties surrounding the results, leading to defection of certain members, particularly from the main opposition party (PDP), to other parties. Former governor of the state, Engineer Segun Oni, was one of the politicians that switched to other parties. He switched to the Social Democratic Party and ran for office. Internal strife erupted among the main opposition party as well, allegedly as a result of the imposition of a particular candidate.

Our analyst says that, as with prior elections in the state, the expectation is that crises will affect election outcomes, particularly when reconciliation discussions fail to produce the intended results. The ruling party received 187,057 votes, while the Social Democratic Party received 82,211 votes, according to the electoral commission. The largest opposition party received 67,457 votes in total. The results show that the ruling party won in 15 of the 16 local governments, while the Social Democratic Party candidate won in only one. Prior to the election, popular opinion was divided on which of the two parties, the PDP and the SDP, would keep the ruling party on its toes. Our analyst notes that the former governor retains a strong personality and popularity in the state, which would have aided the PDP if he had been chosen as the flagbearer instead of Mr. Olabisi Kolawole. Mr. Oyebanji Biodun, the ruling party’s candidate, was previously the state government’s secretary.

Nigerians, particularly indigenes and residents of the state, have been experiencing mixed feelings about the results since they were announced a few hours ago. According to our analysis, the PDP’s defeat was caused by candidate imposition and internal issues, while the ruling party won the poll based on party popularity and the performance of the incumbent governor, Dr Kayode Fayemi. According to another set of public and political affairs observers, the ruling party won the election due to Senator Bola Ahmed Tinubu, the APC presidential election candidate’s popularity. While our analyst acknowledges that these submissions may play a role in deciding the winner, it’s equally important to note that low voter attendance should be considered. Before the election, 989,224 persons were registered to vote, according to the Independent National Electoral Commission. A total of 36.94% of this group took part in the election. This means that the decision was determined by less than half of registered voters. Again, the validation of 97.35% of all votes cast (360,753) implies that voters who contributed to voided votes were also important decision-makers.

Emerged Lessons from Stakeholders’ Participation

There are lessons for political parties, politicians, and voters to be learned from these insights. While political actors are adept at regrouping after elections and continuing to reap mutual benefits, it is critical that qualified voters carry out their civic responsibilities diligently. It is remarkable that netizens, particularly those in the state, who used social media to express their opinions about the election were unable to mobilize themselves for physical voting. In fact, the outcome suggests that elections cannot be won through social media platforms. Aside from the important takeaways, our analyst examines how the election outcomes were influenced by the candidates’ and political parties’ digital popularity six days before the election and on election day.

Political actors, as in past elections in the state, used a variety of digital media to promote candidates and parties’ positions on topics and demands. In this regard, our analyst observes that the actors and their supporters believe that, because Nigeria is one of the countries with the highest number of internet and social networking site users in the world, reaching out to the netizens via social media and the internet will help them gain the minds of eligible voters (netizens). The actors and supporters established and maintained a digital personality while marketing the politicians and parties. It becomes digital popularity, according to our analyst, when netizens engage in constant searching of the candidates and parties using search engines (especially Google) with the intention of applying prior knowledge gained from news media and/or opinion leaders.

Candidate Versus Party Personality, Popularity

Using the volume of searches each party and candidate received based on Ekiti public searches between June 12 and June 18, 2022, our analyst calculated digital personality and popularity. There were a total of 2, 965 volume searches for all three candidates and 3,250 volume searches for political parties. According to the analysis, the public was more interested in the SDP and APC candidates than the PDP candidate six days before the election and on election day (see Exhibit 1). When it came to political parties, analysis revealed that the public was more interested in the ruling party than the PDP and SDP. The comparison of public interest in the candidate and the party reveals a notable discrepancy between public interest in the SDP’s candidate and the party itself, while the PDP’s candidate’s unpopularity, as reported by some groups in the physical setting, pierced into the digital setting.

Exhibit 1: Candidates’ Share of Search Between June 12 and June 18, 2022

Source: Google Trends, 2022; Infoprations Analysis, 2022

Exhibit 2: Main Political Parties’ Share of Search Between June 12 and June 18, 2022

Source: Google Trends, 2022; Infoprations Analysis, 2022

Digital Personality, Popularity and Election Outcomes

Between June 12 to June 18, 2022, the public conducted an irregular search of both candidates and parties. From June 16 to June 18, 2022, the Ekiti public had a strong interest in the ruling party and wanted to know what was going on with it. This was done for the opposition parties as well (see Exhibit 3). Despite his party’s popularity, Mr. Kolawole Olabisi was the sole candidate who did not pique the public’s curiosity. Engineer Segun Oni also piqued the public’s curiosity more than the ruling party’s candidate. On the day of the election, Mr. Oyebanji had over 31% of the total volume of searches (n=944), which was also the day Engineer Segun Oni had his greatest percentage of searches (33.89%).

Exhibit 3: Trends of Search of Interest Per Candidate and Party

Source: Google Trends, 2022; Infoprations Analysis, 2022

Our analyst used these shares as a representation of eligible netizen voters in order to better understand how digital personality and popularity influenced election outcomes. In the parties’ results, there is a positive and negative proportion of share of search. While the ruling party’s personality and popularity resulted in a favourable conclusion, the candidate’s own performance was bad. For the largest opposition party, the PDP, candidate personality and popularity had little effect, however party personality and popularity had a beneficial impact (see Exhibit 4).

Exhibit 4: Percentage of Share of Search Prediction in Party’s Results

Source: Google Trends, 2022; Independent National Electoral Commission, 2022; Infoprations Analysis, 2022

According to our findings, the ruling party’s positive personality and popularity contributed to the party receiving over 60,000 votes out of the total votes released by the electoral authority. Based on its digital personality and appeal, SDP received over 33, 000 votes. The PDP received over 18,000 votes. According to our findings, winning significant votes from eligible netizen-voters is more a function of the party’s valuable personality and popularity than of the candidates’ personality and popularity.

Exhibit 5: Determined Votes from Candidates and Parties’ Share of Search

Source: Google Trends, 2022; Independent National Electoral Commission, 2022; Infoprations Analysis, 2022

TikTok’s US Data Accessed in China, Posing A Fresh Scrutiny Challenge for the Short-Video App

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The brand is growing

TikTok’s database is being accessed by employees in China, casting a fresh doubt on the assurance of the social media platform last year that personal information of US users is kept away from the reach of China.

The report was made by BuzzFeed on Friday, citing audio recordings obtained from employees. According to the report, the recordings contain 14 statements from nine different TikTok employees indicating that engineers in China had access to US data between September 2021 and January 2022, at the very least. From the nine statements by eight different employees, the recordings described situations where US employees had to turn to their colleagues in China to determine how US user data was flowing. US staff did not have permission or knowledge of how to access the data on their own.

“Everything is seen in China,” said a member of TikTok’s Trust and Safety department in a September 2021 meeting quoted by BuzzFeed. In another September meeting, a director referred to one Beijing-based engineer as a “Master Admin” who “has access to everything.”

This comes contrary to every defense TikTok has put up regarding the US government’s concern that the Chinese Communist Party may use the app as a backdoor to private data of Americans.

In an October 2021 Senate hearing, TikTok said that a “world-renowned, US-based security team” decides who gets access to this data. The testimony helped to calm the onslaught that former President Donald Trump launched against TikTok, following the 2019 investigation into the national security implications of TikTok’s collection of American data by the Committee on Foreign Investment. In 2020, Trump had moved to ban the app through executive order.

The audio tapes mean that the scrutiny is likely going to be resuscitated. Rep. Cathy McMorris Rodgers (WA), the top Republican on the Energy and Commerce Committee, said the BuzzFeed report should serve as a wake-up call.

“For TikTok to knowingly allow the Chinese Communist Party to access American user data is unacceptable and a complete betrayal of our trust,” McMorris Rodgers told the Washington Examiner in a statement. “TikTok has gone on record numerous times claiming that they do not share U.S. user data with the Chinese government, CCP, or any Chinese state-owned entities. We now know that is not the case and cannot be allowed to happen without consequence. … This should be a wake-up call for anyone who believes Americans deserve online privacy and data security protections. Big Tech must be exposed for how it sends Americans’ data to China.”

TikTok said in response to BuzzFeed’s findings that the company is working to clear all security doubts about its operation.

“We know we’re among the most scrutinized platforms from a security standpoint, and we aim to remove any doubt about the security of U.S. user data,” TikTok spokeswoman Maureen Shanahan told the outlet. “That’s why we hire experts in their fields, continually work to validate our security standards, and bring in reputable, independent third parties to test our defenses.”

In a blog post on Friday, the high-flying social media app, maintained that it “has long stored US user data in our own data centers in the US and Singapore” and takes the responsibility to “protect against unauthorized access to user data” seriously.

But experts have pointed out that, even though it mitigates some risks, storing data in the US and Singapore does not address the fact that China-based employees can access the data.

TikTok added in its blog post that it’s been working with Oracle on several measures as part of its commercial relationship to better safeguard the app, systems, and the security of US user data.

“We’ve now reached a significant milestone in that work: we’ve changed the default storage location of US user data. Today, 100% of US user traffic is being routed to Oracle Cloud Infrastructure. We still use our US and Singapore data centers for backup, but as we continue our work we expect to delete US users’ private data from our own data centers and fully pivot to Oracle cloud servers located in the US,” it said, adding that it is working closely with Oracle to develop data management protocols that Oracle will audit and manage to give users even more peace of mind.

This is understood to be part of Project Texas, a contract that TikTok is currently negotiating with cloud services provider Oracle and CFIUS. Under the CFIUS agreement, TikTok would hold US users’ protected private information, like phone numbers and birthdays, exclusively at a data center managed by Oracle in Texas. This data would only be accessible by specific US-based TikTok employees, per the report.

Project Texas, once completed, is supposed to protect US data to a large extent. But according to the audio recordings, employees are worried that it will not solve the problem as there are many technical challenges to address. It is not clear if these new findings will prompt the US government to launch a fresh investigation into TikTok’s activities. President Joe Biden had last year, rescinded most of Trump’s executive orders against Chinese apps.

Rights of a tenant against rent increment by landlord

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A lawyer posted on Twitter the other day that “Your landlord cannot wake up any day and just unilaterally increase your house rent, both of you must agree to it first before he can do that”. This post generated a lot of controversies and stirred a lot of arguments from netizens; some social media users expressed unbelief over this and some are just plain ignorant about it.

Some can’t believe that a house owner or a Landlord (as we prefer to call them) have no right to increase his house rent while the rent of a tenant still subsists without first consulting the tenant. It sounds like “a story for the gods” but that is what the law says. A landlord cannot increase a house rent when a tenant is still in occupation of the house without first approaching the tenant and coming into agreement with the tenant. Yes, you read right.

In this part of the world, tenants, especially the uneducated or semi-educated ones have no idea that there is something called “tenant rights” which gives a tenant right against the landlord and protects the tenant from the oppression of the landlord. Some of such rights of a tenant are; the right to enjoy peaceful possession of the property, the right against trespass from anybody including the landlord or the house owner, and also the right of the tenant against exorbitant and unnecessary rent increment from the landlord.

A landlord is expressly prohibited by law to visit the house of a tenant without first getting the permission of the tenant. If the landlord enters the apartment of the tenant without the tenant’s permission the Landlord has committed trespass and breached the right to privacy of the tenant which is actionable by law. The tenant is to also enjoy peaceful possession of the apartment he’s occupying devoid of disturbances from anybody including the owner of the house.

When a tenant’s rent is increased arbitrarily without the landlord first consulting the tenant over it, the tenant is to approach the court for the court to declare that the increase in the rent by the landlord is unreasonable. This is the succinct provision of 37.-(1) of the Lagos State Tenancy Law of 2011 and it provides thus: Subject to any agreement to the contrary, an existing tenant may apply as in form TL 11 to the Court for an Order declaring that the increase in rent payable under a tenancy agreement is unreasonable.

By the provision of the section of the law, a Landlord cannot just increase his house rent based on his mood without going through the due process of notifying the occupant of the property and negotiating the proposed increment with the tenant, and getting the express approval or nod of the occupant over the rent increment. A tenant is to challenge any arbitrary and unilateral increase of rent by the landlord immediately after it happens.

Please note that this piece is not made to encourage in any way tenants to owe rents. Tenants should also do their parts of the bargain like paying their rents as at when due to be able to enjoy their rights in law because he who comes before equity must come with clean hands.

Amazon Discloses Plan To Deliver Parcels To Shoppers By Drone

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American multinational e-commerce company, Amazon recently disclosed that it will begin to deliver parcels to shoppers by drone for the first time later this year, pending final regulatory approval.

The e-commerce company has been reported to have promised drone delivery for years but has been faced with delays and setbacks. However, the shopping giant has disclosed plans to roll out the service more widely.

The company revealed that its drone deliveries will start from Lockeford, California in the USA. The “prime air” delivery drones will be programmed to drop parcels in the backyards of customers in Lockeford, which has a population of about 4,000 people.

The drones will fly beyond the line of sight, which means that they don’t have to be controlled by a visual observer, rather there will be sensors installed in them, for them to be able to avoid aircraft, obstacles, people, pets, etc.

The aim of the “prime air” is for customers to get their packages safely and quickly in less than an hour. Amazon has relentlessly been working hard to strengthen its endeavors towards expanding its quick delivery services that have seen them maintain its dominant position in the e-commerce space.

No doubt, Amazon is doing everything possible to remain a dominant player in the e-commerce space, because lately, the company has been faced with stiff competition from its competitors like GOOGL, Alphabet, and Walmart, which have already debuted their drone delivery services.

For online shoppers, delivery time has now become a crucial issue which is why they are now selective of companies that offer swift delivery services. As a result of this, companies are now adopting the drone delivery service which is growing rapidly among retail industries and companies, to improve delivery speeds and gain a competitive advantage in sales.

One of the primary motivations for the adoption of delivery drones is majorly to reduce the time it takes to deliver packages. Due to the wide growing adoption, the global drone delivery service market size was $520.0 million in 2019 and is expected to reach $9.51 billion by 2027.

No doubt, drone delivery services are gradually drifting to a place where they will likely be the future of the e-commerce space. It will greatly be beneficial to both companies and their consumers.

Some of the advantages of this drone delivery service are;

  • It will enable companies to save money on shipping costs, which would also favor consumers where they will be charged with less shipping fee.
  • It will enable fast delivery, as sometimes delivery trucks are faced with traffic challenges. Unlike drones that will transport customers’ packages without being hampered by road traffic. Customers can also receive their deliveries within an hour.
  • It will reduce environmental pollution, because these drones will deliver customers’ packages efficiently and conveniently without any pollution whatsoever, unlike delivery vans that emit carbon into the atmosphere.

This drone delivery service is a very great initiative, unfortunately, a lot of delivery people will lose their jobs to automation, while those who would remain will have their job limited which can possibly lead to a reduction in their salary.

Amazon delivery drones “prime air” have been permitted to deliver packages safely to its customers. Will this drone delivery service be the future of e-commerce? I will say yes, looking at it’s widespread adoption and efficiency, it is indeed here to stay.