ZERO EQUILIBRIUM

By Chinedu Okoye  Summary:   The new 15% Tarrifs on petroleum imports by the federal government of Nigeria has sparked outrage from skeptical and idelogical experts, on the X (formerly Twitter) and LinkedIn platforms. This is understandable, however there are various other factors, and implications at place which critique is haven't looked at, save for a few. We digest the tarrif and implications in detail for a more concise view, adding factors that have been largely ignored. These include; Complimentary policies; other underlying price determining factors; policy optics and a tilt towards refined products.     Federal Government, Tarrifs and Public Objection: The Dangote Refinery is one of the most consequential and more recently controversial developments in Nigeria’s industrial history. Not only does it promise to transform Nigeria from a net importer of refined petroleum products into a ...

By Chinedu Okoye  Summary: • China's Economy Grows by +4.8% (Year-on-year) in Q3. A slowdown compared to the previous two quarters. • However this hasn't been reflected in the markets and is viewed as a non-issue in the the Zero Equilibrium camp. And perhaps by China a well. • This is as relative to it's peers, China has a more balanced and stable macroeconomic outlook with debt and reserves strategically positioned, and aligned with Beijing's economic ambitions. • China is armed with more fiscal space and monetary ammunition than it's peers, with lower inflationary pressures and a sizeable amount of gold in it's reserves insulating the domestic economy from exchange rate and price fluctuations. Growth Slows Down the Most in Q3: Economic growth slowed to 4.8% between July and September after being adjusted for inflation. Absent those adjustments, growth was under 4% given prices falling for the 10th straight quarter. The Property Market Effect: T...

By Chinedu Okoye  The Dynamics and Current State of Global Sovereign Debt: Public spending come to the forefront of the paper seem as it is the catalyst for deficits.and sovereign debt increases. Government debt is a global problem facing countries to varying degrees, depending on the level of monetary sovereignty. As at 2024, Japan's debt to GDP was 250%, the US, 120%, France 110%, Australia 45% For EM; China leads at near 90%, with Brazil and India coming a close second and third, and South Africa debt/GDP ratios at ~70%.. Developed economies with more monetary sovereignty seems to have saturated the market, and need fiscal consolidation to foster economic stability. For emerging market economies, who's debt is currently sought after by yield hungry investors, a balanced approach is necessary to avoid the dent trap situation currently plaguing DMs. Frontier markets must curb fiscal excesses and improve spending efficiency to support...

By Chinedu Okoye  As the Fed continues to unwind its balance sheet, the corresponding drain on bank reserves is beginning to show up across short-term funding markets. In these markets, liquidity conditions have tightened, pushing repo rates higher and bank reserves lower — a sign that quantitative tightening may be nearing its limit.. The balance sheet unwind was meant to be a correction of the massive balance sheet expansion seen in the last decade and a half, –quantitative tightening. However this measure has seen liquidity depressed, a steady rise in ultra short-term rates, “as the treasury is rebuilding its cash pile” – to quote Bloomberg's Lisa Cook.¹ This could also be a major factor in the inflation stickiness experienced in the struggle to get it within the feds 2% target. On Ultra-High Short-term Rate; Because of this liquidity squeeze; the difference between Secured overnight financing rates (SOFR) and the effective feds funds rate (th benchmark rate of the U...

- By Chinedu Okoye  Summary: • The Central Bank of Nigeria intensified monetary tightening through aggressive liquidity mop-ups; via OMO sales, CRR debits, and higher SDF rates, essentially draining cash from banks. • Credit contracting deepens with a 45% CRR (and 75% for public deposits), banks are left with limited funds for private lending, compressing credit growth and money supply. • The current monetary policy tweaks and stance, seems to one that prioritizes near-term exchange rate and inflation stability at the expense of investment and output expansion. • Excessive tightening risks keeping the apex bank behind the curve, dampening non-oil export competitiveness as a stronger Naira erodes FX revenues. • We expect potential Naira weakness by Q1–Q2 2026 amid lower liquidity, slower credit growth, and dependency on external inflows (oil, remittances, FPIs). Monetary Policy Extremism: The Central Bank of Nigeria is moving from strict data-driven monetary policy that...

By Chinedu Okoye  Intro: As at the end of last year, I released a paper on ZE's Financial Markets Outlook Per Asset Class for 2025 . This outlook featured five asset classes; Commodities; Equity (Indexes); Cryptocurrency; and; Fixed Income Sovereigns [Bonds]. The calls and expectations for select assets on our watchlist and/or portfolio are presented below together with the outcome for a three-quarter(s) year review (¾ FY2025). 1. Equities: ZE's position per the 2025 Outlook  was that “Equities stand out as the most promising—or at least stable—asset class...”. expecting it to be the least volatile or most stable, with potential for decent upsides. The VIX chart below confirms this position this far as the index dipped -21.48% to 16.3 showing low volatility on a year-on-year basis, as US and other country equities rose. (S&P Volatility Index (VIX) year-on-year)   Though some volatility was seen around April, (owing mostly to trade tensions), an...

By Chinedu Okoye  The US President has made a new demand to the EU demanding confessions on the bloc's non-negotiables. This reignites inflationary fears and heightens economic uncertainty. It is however bullish for DXY, as low or restrained US import demand reduces the supply of USD in the international market through the trade channel. Businesses exposed have been able to absorb the additional tarrif costs, but this has also coincided with negative moves in the US Manufacturing employment PMI, as the last reading saw it move deeper into negative territory. Employers are eating costs from tariffs and offsetting them with a cap on additional labor, as the trade debacle accelerates the marginal utility of labor and other production goods. Add this to the bank reserve decline at their respective reserve accounts in the Fed, to below $3 trillion, it seems only a matter of time before more labor layoffs and a passthrough to consumer prices. A Progress Derailed: Per B...