Being an Analyst Note issued by Proshare Research on January 26th 2023

Insufficient New Naira Notes Create Anxiety in Commodity Markets

Despite the scarcity of the new notes and pleas by citizens for an extension of the currency change deadline, the CBN has maintained its stance on not extending the deadline. With 4 days to the deadline, trade activities in the country are still heavily carried out in the old notes with little availability of new notes. The pressure to avoid having the old notes after the deadline has resulted in some Nigerians rejecting the old notes and the inadequate availability of the note has created a dilemma for citizens. Although there will be a huge adoption of online transactions from literate citizens, the major concern is the unbanked illiterate individuals (particularly market traders). With ATMs at the urban centres still dispensing old notes, the fate of the rural areas is definitely worse. The CBN claimed to have launched a cash swap programme in rural areas on January 23, but the circulation of the currency has not seen any significant improvement. Analysts are concerned that this drastic step can impede economic activities and worsen the welfare of average Nigerians, who would possess valueless currency. 

Africa’s Leadership of OPEC May Attract Fresh FDI 

Analysts believe dwindling investments, poor infrastructure, and other challenges have threatened the growth and sustainability of energy in Africa. Nigeria’s Minister of State for Petroleum Resources, Timipre Sylva, has appealed to the presidency of OPEC to promote the course of Africa and attract more investments into the oil and gas industry in the continent. The minister made the appeal when he received Gabriel Lima, Equatorial Guinea’s Minister of Mines and Hydrocarbons who also doubles as the 2023 President of OPEC and Gas Exporting Countries Forum (GECF). Lima expressed the need for Africa to focus on reducing its energy poverty while the world is focusing on energy transition as there are over 600 million Africans without access to electricity and other products. Analysts say that with Africa accounting for seven out of the thirteen OPEC members and occupying critical positions, the continent needs to become a major force in the cartel, defend its energy policy, and attract investment for its oil and gas industry. 

Excess Demand Pulls Down Rates at the Nigerian Treasury Bill Auction  

In the face of rate hikes, higher inflation, and negative real return, investors’ interests remained strong in the fixed-income market, particularly in the short-term end of the market. Rates at the Nigerian treasury bill market have dropped to a record low compared to the previous year when they rose to double digits. At the treasury bill primary auction conducted on Wednesday, the Debt Management Office (DMO) offered N220.53bn but had an oversubscription of N1044.22. The DMO sold exactly the amount offered with the stop rates of the 91-day, 182-day, and 364-day dropping to 0.29%, 1.80%, and 7.78% respectively. Analysts can attribute the robust liquidity and bearish equity market to the buying interests, which should persist in today’s trading session (see table 1 below). 

Table 1: 

NGX to Launch USSD Integrated Payment System

The Chief Executive Officer (CEO) of Nigeria Exchange (NGX) Ltd, Mr. Temi Popoola, at the NGX Weathers Global Market Downturns in 2022 Seminar disclosed that the Exchange plans to launch an Unstructured Supplementary Service Data (USSD) to unlock Africa’s capital markets payment systems through collaboration with telecom companies and banks. The CEO said the adoption of the USSD will further simplify the continent's capital markets through integration with Afreximbank’s Pan African Payment Settlement System. Analysts noted that investors do not trade directly with the Exchange and must go through stockbrokers who already offer USSD payment options. The new initiative is said to be directed at targeting the development of new products aimed at attracting youths' participation with the creation of digital assets products powered by Blockchain technology. Analysts also noted the difficulties in banks repatriating funds back to the telecommunication companies which is one of the reasons using USSD as a payment method has experienced difficulties as a means of payment. Analysts would be interested in knowing how NGX will be able to overcome such difficulties.

Airtel Announces Introduction of eSIM, Joins 9mobile and MTN 

Leading telecommunication services provider, Airtel Nigeria, has announced the launch of eSIM (embedded SIM), a digital SIM that enables customers to access the same functionality when using a physical SIM. The eSIM offers some benefits over the traditional SIM cards as it is quick and simple to set up online, it is planet-friendly (plastic-free/zero carbon emission) and provides an easy extra line as you can use two numbers without needing two handsets. With the introduction, the telecom operator becomes the latest to launch embedded sims joining the likes of MTN and 9mobile who launched the service last year. The eSIM journey in Nigeria started in 2022 with the Nigerian Communication Commission NCC approving MTN and 9mobile to commence a trial of the technology. Analysts believe eSIM is more secure than physical SIM and it eliminates the frequent complaints of damage or loss of SIM cards. Additionally, frequent travellers will find the eSIM very convenient for switching network operators at a much easier rate. Currently, eSIM-enabled phones are limited. However, a few latest devices from the top mobile manufacturers are built with these capabilities. 

US Senator Proposes Bill to Make Bitcoin Legal Tender

A well-known US senator in Arizona state Wendy Rogers has newly introduced a bill that seeks to make Bitcoin a legal tender in the state. This is the second time the well-known senator will be introducing a set of bills to the state legislature. The new policy will be aimed at providing a legitimate method of payment to acknowledge the rising use of digital currency where Bitcoin will be a legal means of payment for goods and services in the state. Analysts believe that if the bill is finally adopted into law, the government will have to agree with crypto businesses in the state such as settling debts, taxes, and other financial obligations. Although the bill is only limited to Bitcoin alone and no other cryptocurrencies, Analysts hope Bitcoin could serve as a steppingstone for other currencies to be known and adopted as legal tender.