Being an Analyst Note issued by Proshare Research on March 30th, 2023

Nigeria May Review Trade Alliances as BRICS Becomes More Assertive

China and Brazil on Wednesday reached a deal to trade in their currencies, dumping the US dollar. The deal will reduce their dependence on the US dollar given that China is Brazil’s biggest trading partner, with a record US$150.5bn in bilateral trade in 2022. The deal comes months after Pavel Knyazev, Deputy Director of the Russian Foreign Ministry’s Foreign Policy Planning Department stated that the BRICS countries are working on establishing a new reserve currency to better serve their economic interests. The BRICS, a bloc of emerging market economies comprising Brazil, Russia, India, China, and South Africa accounts for 26% of global GDP and 20%of global trade. As of Q4 2022, exports to BRICS accounted for 16% of Nigeria’s total exports, while exports to the US were at the same period only 7.15%. Analysts say that the increasing influence of BRICS requires that Nigeria strengthens diplomatic ties with the BRICS while diversifying the complexity of its exports. According to data from IMF, the dollar as a component of the global foreign reserves has diminished from over 70% in 1999 to 59% in 2021 while that of emerging markets has risen from 2% to 10% over the same period (see chart 1 below).

Chart 1: 

Government’s Borrowing Rate Doubles at NTB Auction 

Stop rates adjusted upward at the NTB primary auction yesterday as the 50bps rate hike made investors bid for higher interest rates. The 91-day, 182-day, and 365-day rose to 6.0%, 8.0%, and 14.74% from 2.55%, 5.0%, and 9.49% at the last auction. Despite the tight liquidity, the auction still experienced a large subscription of N168.53bn as against N145.47bn offered. Analysts expect the market to trade bearish today as old bondholder selloff to prevent further losses (see table 1 today).

Table 1: 

Moniepoint Leads Payday’s US$3trn Seed Round

Payday, an African fintech, just secured US$3m in its newest fundraising round, bringing the total investment to US$5.1m. Fintech startup, Moniepoint led the seed round with contributions from angel investors and existing investors like Techstars. The new capital is for improving their talent base, and further their expansion initiatives in Canada and the UK. Moniepoint noted that they intend to leverage Payday’s infrastructure to deepen their suite of financial products for merchants.

Analysts raised concerns regarding Moniepoint’s participation in the seed round, acquiring a minority stake in Payday, rather than initiating a mergers & acquisition arrangement which is usually the choice for collaboration amongst startups. Moreover, analysts note that growth in the European fintech market has been supported by regulation and proximity to major global financial hubs. Europe has raised more funding in recent years that has been primarily focused on early-stage funding. Even during 2022’s funding slowdown, they were not as severely impacted as other regions like Asia which fell -39% compared to Europe’s -25%, per Crunchbase data. 

FG to Spend N24.2bn on Free internet Facilities in Airports, Markets

The minister of Communication and Digital Economy, Professor Isa Pantami mentioned to the state house correspondent after the last federal executive council (FEC) meeting that no fewer than 20 Airports (local and international), 75 public places, and 43 higher institutions at federal and state levels including 6 marketplaces nationwide have been earmarked for the provision of free broadband internet coverage. The selected local and international airports were drawn from six geo-political zones, with three airports from each on average across the 36 states of the federation and Abuja. The projects are part of the moves to achieve 70% broadband penetration in the country by the year 2025 as set in the Nigeria Broadband Plan (NNBP 2020-2025). According to data from NCC, broadband penetration hit 48.49% in February 2023 with its subscription rising to 92.56m. Analysts believe that a 50% penetration target in 2023 that was set by the FG is not the best for Africa’s biggest population, aiming to become a fully digital economy, but with the implementation of free internet facilities, it should exceed 50% by the end of 2023.