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West African Consumer Confidence Drop Slightly in Q3, 2019

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  • Ghanaian consumer confidence declines by four points
  • Nigerians consumer confidence also subdued

Lagos, 11 December 2019 – Ghana’s latest Nielsen Consumer Confidence Index (CCI) for the third quarter of 2019 shows a slight drop to 114 from the previous quarter’s buoyant 118, while Nigeria’s CCI has also decreased by five points to 122. These two sets of results present a fairly stable, albeit a slightly less positive picture of consumer sentiment across West Africa compared to the previous quarter.

Looking at Ghana’s overall performance, Nielsen Market Lead for West Africa, Yannick Nkembe comments; “The initial optimism experienced at the beginning of the year is waning in Ghana owing to the concerns around the economy. Though inflation levels dropped, these have not shown a meaningful impact at the ground level and Ghanaians continue to feel the pressure. Consumers have become cautious of spending as they are not certain of future prospects.”

This more subdued outlook is reflected by Ghanaian consumers’ curtailed view of their job prospects, with a substantial 12 point decrease to 51% saying job prospects will be excellent or good in the next 12 months. In terms of the state of their personal finances over the next 12 months, 72% say they are excellent or good, down from 74% in the last quarter. The number of Ghanaian consumers who feel now is a good or excellent time to purchase the things they need or want, has also seen an inconsequential drop quarter on quarter, from 46% to 45%.

Looking at whether Ghanaians have spare cash, only 42% say yes, down a substantial 10 points from the previous quarter. Once they meet their essential living expenses, the highest number of consumers (82%) still say they will put their spare cash into savings, followed by 66% on home improvements/decorating and 59% who will invest in stocks and mutual funds.

When looking at the factors that are having a negative impact on Ghanaians outlook, the top concerns over the next six months are increasing food prices (26%) followed by work/life balance at 22%, the economy and tolerance towards different religions, both at 18%, and job security coming in fourth at 16%.

In light of their outlook, more than three quarters (72%) of Ghanaians have changed their spending to save on household expenses compared to the same time in the previous year. The top three actions they have taken to save money are delaying the replacement of major household items (55%), looking for better deals on loans/insurance/credit cards (54%) and spending less on new clothes (53%).

A drop in sentiment in Nigeria

The third quarter also saw a drop in sentiment in Nigeria with consumer confidence decreasing by five points to 122, albeit it is still higher than the same quarter last year (118).

Commenting on the recent decline in consumer sentiment, Nielsen MD for Nigeria, Ged Nooy says; “Nigerians are experiencing a subdued confidence level considering that inflation has started to rise again and the proposed VAT increase bill, which is making people cautious. Furthermore, the rising sovereign debt and the anxiety around further Naira devaluation, continued to impact consumer sentiment in Nigeria in the third quarter.”

Looking at the consumer picture, Nigerians immediate-spending intentions has shown a large decline; with only 41% of consumers (versus 54% in the previous quarter) saying now is a good or excellent time to purchase what they want or need. Their perception around job prospects has also declined, with 55% viewing them as excellent or good – a five point drop from the previous quarter.

In addition, sentiment around the state of personal finances has also shown a decline, with 76% Nigerians agreeing their state of personal finances will be excellent or good over the next year, a six point drop from the previous quarter.

Looking at whether Nigerians have spare cash to spend, 47% said yes, versus 51% in the previous quarter. In terms of their spending priorities once they meet their essential living expenses, 76% would invest in home improvements/decorating, 72% would put their spare cash into savings and 62% say they will invest in shares/mutual funds.

Looking at the top concerns for Nigerians over the next six months, work/life balance tops the list with 28% – a one point increase compared to the previous quarter. This is followed by concerns around increasing food prices at 22% (the same as Q2’19) and tolerance towards different religions (19%) superseding the economy, which is now at 16% – a four point decrease compared to the previous quarter.

Elaborating on these results, Nooy says; “Nigerian consumer sentiment dropped this quarter, however it is still quite high compared to the cut off of 100, where anything above 100 reflects a positive consumer confidence. The key for marketers and retailers is to understand these fluctuating consumer sentiments and quickly adapt to the consumer’s needs.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Slide on China Demand Concerns, Brent Falls to $83.73

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Oil prices declined on Tuesday for the third consecutive day on growing concerns over a slowing Chinese economy and its impact on global oil demand.

Brent crude oil, against which Nigerian oil is priced, dipped by $1.12, or 1.3% at $83.73 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped $1.15, or 1.4%, to close at $80.76.

The dip in oil prices is largely attributed to disappointing economic data from China, the world’s second-largest economy.

Official figures revealed a 4.7% growth in China’s GDP for the April-June period, the slowest since the first quarter of 2023, and below the forecasted 5.1% growth expected in a Reuters poll.

This slowdown was compounded by a protracted property downturn and widespread job insecurity, which have dampened fuel demand and led many Chinese refineries to cut back on production.

“Weaker economic data continues to flow from China as continued government support programs have been disappointing,” said Dennis Kissler, Senior Vice President of Trading at BOK Financial. “Many of China’s refineries are cutting back on weaker fuel demand.”

Despite the bearish sentiment from China, there is a growing consensus among market participants that the U.S. Federal Reserve could begin cutting its key interest rates as soon as September.

This speculation has helped stem the decline in oil prices, as lower interest rates reduce the cost of borrowing, potentially boosting economic activity and oil demand.

Federal Reserve Chair Jerome Powell noted on Monday that the three U.S. inflation readings over the second quarter “add somewhat to confidence” that the pace of price increases is returning to the central bank’s target in a sustainable fashion.

This has led market participants to believe that a turn to interest rate cuts may be imminent.

Also, U.S. crude oil inventories provided a silver lining for the oil market. According to market sources citing American Petroleum Institute figures, U.S. crude oil inventories fell by 4.4 million barrels last week.

This was a much steeper drop than the 33,000 barrels decline that was anticipated, indicating strong domestic demand.

The International Monetary Fund (IMF) also weighed in, suggesting that while the global economy is set for modest growth over the next two years, risks remain.

The IMF noted cooling activity in the U.S., a bottoming-out in Europe, and stronger consumption and exports for China as key factors in the global economic landscape.

In summary, while oil prices are currently pressured by concerns over China’s economic slowdown, the potential for U.S. interest rate cuts and stronger domestic demand for crude are providing some support.

Market watchers will continue to monitor economic indicators and inventory levels closely as they gauge the future direction of oil prices.

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OPEC+ Production Cuts Set to Balance Global Oil Market, Says Russian Deputy PM

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In a statement on Monday, Russian Deputy Prime Minister Alexander Novak expressed confidence that the global oil market will achieve balance in the second half of 2024, thanks to the production cut strategies implemented by the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+.

OPEC+, which includes major oil-producing countries such as Saudi Arabia and Russia, has been actively managing oil output to stabilize the market since late 2022.

In their most recent meeting on June 2, the group agreed to extend their latest production cut of 2.2 million barrels per day (bpd) until the end of September. This cut is scheduled to be gradually phased out starting in October.

“The market will always be balanced thanks to our actions,” Novak stated, emphasizing the importance of the coordinated efforts by OPEC+ in maintaining market equilibrium.

The U.S. Energy Information Administration (EIA) recently projected that global oil demand will surpass supply by approximately 750,000 bpd in the latter half of 2024 due to the continued reduction in OPEC+ output.

This outlook was echoed in a report by OPEC last week, which highlighted an anticipated oil supply deficit in the coming months and into 2025.

Novak’s remarks come at a crucial time for the global oil market, which has experienced significant volatility over the past year.

The OPEC+ alliance has been pivotal in mitigating some of this instability by adjusting production levels in response to fluctuating demand and other market dynamics.

Analysts suggest that the measures taken by OPEC+ will play a vital role in ensuring that the oil market remains stable as the world continues to navigate economic uncertainties and fluctuating energy demands.

The production cuts are expected to support oil prices by limiting supply, thereby helping to balance the market.

The impact of these production cuts is already being felt, with oil prices showing signs of stabilization.

However, the market remains sensitive to geopolitical developments and economic trends, which could influence future supply and demand dynamics.

As OPEC+ prepares to unwind some of its production cuts in the coming months, industry observers will be closely monitoring the market’s response.

The gradual phasing out of the cuts is designed to prevent any sudden shocks to the market, allowing for a smoother transition and sustained balance.

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Oil Prices Steady Amid U.S. Political Uncertainty and Middle East Tensions

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Oil

Oil prices held firm on Monday as the political uncertainty in the United States and ongoing tensions in the Middle East persist.

Brent crude oil, against which Nigerian oil is priced,  fell slightly by 13 cents, or 0.2%, to $84.90 a barrel after a 37-cent drop on Friday.

Similarly, U.S. West Texas Intermediate crude stood at $82.15 a barrel, down 6 cents, or 0.1%.

The dollar’s strength, which followed a failed assassination attempt on U.S. presidential candidate Donald Trump, exerted some pressure on oil prices.

A stronger dollar typically makes oil more expensive for buyers using other currencies, leading to reduced demand.

“I don’t think you can ignore the uncertainty that the weekend’s assassination attempt will cast across a deeply divided country in the lead-up to the election,” said Tony Sycamore, market analyst at IG.

In the Middle East, efforts to end the Gaza conflict between Israel and Hamas stalled over the weekend.

Talks were halted after three days, although a Hamas official indicated that the group had not withdrawn from discussions.

The situation escalated further when an Israeli attack targeting a Hamas military leader killed 90 people on Saturday, maintaining the geopolitical premium on oil.

Despite these geopolitical tensions, oil markets remain supported by supply cuts from OPEC+. Iraq’s oil ministry has pledged to compensate for any overproduction since the beginning of the year, reinforcing the market’s stability.

Last week, Brent fell more than 1.7% after four weeks of gains, while WTI futures slid 1.1%. The decline was largely attributed to a fall in China’s crude imports, which countered robust summer consumption in the United States.

“While fundamentals are still supportive, there are growing demand concerns, largely emanating from China,” noted ING analysts led by Warren Patterson.

China’s crude oil imports fell 2.3% in the first half of this year to 11.05 million barrels a day, with disappointing fuel demand and reduced output by independent refiners due to weak profit margins.

Also, crude throughput at Chinese refineries dropped 3.7% in June from a year earlier to 14.19 million barrels per day, marking the lowest level this year, according to customs data.

China’s economy has slowed in the second quarter, weighed down by a protracted property downturn and job insecurity, keeping alive expectations that Beijing will need to implement more stimulus measures.

In the United States, the active oil rig count, an early indicator of future output, fell by one to 478 last week, marking the lowest level since December 2021, according to energy services firm Baker Hughes.

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