Global Economic Update: Oil Declines Slightly Amid Middle East Crisis

Taiwo  Adekeye, FMVA

January 16, 2024

Oil prices weakened slightly on Monday as the Middle East crisis limited impact on crude output prompted profit taking after oil benchmarks gained 2% last week. Brent crude futures was down by 14 cents settling at $78.15 a barrel. However, there was no settlement for U.S. West Texas Intermediate crude due to the U.S. Martin Luther King Jr. Day holiday, but the benchmark was down by 18 cents closing at $72.50

Nigeria: Inflation surges to 28.92%

Nigeria’s inflation rate rose to its highest in more than 27 years in December as food prices surged, exacerbating a cost-of-living crisis and putting more pressure on the CBN to raise interest rates. Consumer inflation rose for the 12th straight month in December to 28.92%YoY from November’s 28.20% while the food inflation rate, which accounts for the bulk of Nigeria’s inflation basket, rose to 33.93% in December from 32.84% a month. CBN Governor Olayemi Cardoso is yet to hold a rate-setting meeting since taking office in September.

SOUTH AFRICA:  The Rand declined against the USD

The Rand weakened as the U.S. dollar firmed on Monday, but it was trading in a narrow range with no major local economic data releases to give direction. The rand traded at 18.6950 against the dollar, 0.3% weaker than its previous close. The dollar was last up about 0.1% against a basket of global currencies. On the Johannesburg Stock Exchange, the Top-40 index closed down about 0.9%. South Africa’s benchmark 2030 government bond was weaker, the yield up 5 basis points to 9.725%.

Tanzania: Tanzania terminates approval for Kenya Airways flights

Tanzania has terminated approval for Kenyan national carrier Kenya Airways to operate flights between the Kenyan capital Nairobi and Dar es Salaam. Tanzania claimed the move was made in retribution for Kenya denying its national airline, Air Tanzania, the ability to run cargo flights between the two nations. Tanzania is one of the largest tourist destinations in Africa, drawing over a million visitors annually with its abundance of game-filled wildlife reserves and mountains.

China: China’s 2023 bank lending hits a new record high amid struggling economy

New bank lending surges less than expected in December, but 2023 lending hit a new record as the central bank kept policy accommodative to support an unexpectedly shaky. Chinese banks extended 1.17 trillion yuan ($163.31 billion) in new yuan loans in December, up from November. For the year, new bank lending hit a record 22.75 trillion yuan, roughly an equivalent of the UK’s GDP and up 6.8% from 21.31 trillion yuan in 2022. The world number 2 economy has struggled to regain traction, with a disappointing and short-lived post-COVID pandemic bounce.

India: India lowers the windfall tax on crude oil

India cut its windfall tax on petroleum crude to 1,700 rupees ($20.53) a tonne from 2,300 rupees a tonne with effect from Jan 16th. Close to 18months, India has imposed a windfall tax on crude oil producers, and extended the levy on exports of gasoline, diesel and aviation fuel as private refiners sells fuel overseas to make gains from robust refining margins instead of selling locally. However, it revises the tax fortnightly.