Ratings, Rescues, and Risky Bets
Moves that Matter
Hello, people! As we gear up for the holiday season (and that epic December lineup of movies), let’s take a moment to tune into some of the big stories lately.
From Trump’s comeback shaking up global markets to Nigeria’s fast-food nostalgia with Tantalizers, and even a quick dive into how nations get “rated” on their creditworthiness—we’re unpacking a lot in this digest.
Macro Economics
DT Wins
Donald Trump’s victory in the 2024 U.S. Presidential election has left many in anticipation. This geopolitical change has substantial implications beyond the United States, as Trump's America-first policies are probably returning.
Trump will likely increase U.S. economic protectionism as part of his America-first policy, which might be detrimental to emerging markets like Nigeria. Previous trends indicate that protectionist policies, which aim to increase domestic (US) production and exports while restricting imports, tend to result in a stronger dollar. When the dollar appreciates, emerging market currencies like the naira are subject to downward pressure. In an already difficult economic climate, Nigeria's central bank may find it more difficult to control inflation and exchange rates if the dollar rises, which could affect the stability of the Naira.
In the past, Trump's government has supported more domestic energy production and been supportive of the US oil and gas sector. There could be serious repercussions for Nigeria's oil-dependent economy if he continues this policy. Nigeria, one of the biggest oil producers in Africa, depends largely on oil exports to generate foreign exchange. Nigeria's export revenue could be adversely impacted by a decline in the world oil price brought on by an increase in U.S. oil production.
Africa relations are another important factor to keep an eye on. Unlike the Biden administration, Trump’s foreign policy in 2016 was more focused on other regions and less aggressive towards Africa. Reverting to this position for his second term would result in fewer grants, and less engagement with African nations in general, including Nigeria. Nigeria may see fewer economic prospects with the United States and less assistance for development projects if Trump's "America-first" stance becomes more pronounced. This would motivate Nigeria to look for other international alliances.
So What?
To the economy as a whole, these scenarios may seem daunting, but Trump’s win could encourage Nigeria to double down on trade diversification, exploring markets beyond the U.S. and focusing on regional and inter-African trade. The African Continental Free Trade Area (AfCFTA) presents an opportunity for Nigeria to strengthen its position within the African market, reducing its reliance on Western economies. Additionally, a more inward-focused America could push Nigeria to fast-track its plans to diversify its economy by investing in agriculture, tech, and manufacturing. In doing so, Nigeria could move closer to economic resilience and be less affected by global economic policy shifts.
Because of its implications for everyday Nigerians, you may be wondering how this win affects your japa plans. While it is still possible, Trump’s plan to implement stricter immigration policies might make it more challenging. These policies could affect Nigerian students and professionals, potentially making it harder to obtain visas, especially for those looking to work in the U.S. or attend American universities. Nigerian families may also experience delays or additional requirements if they’re seeking to reunite with family members in the U.S.
Since Nigeria is an import-oriented country, inflation might increase if Trump follows through with plans to increase tariffs. This would likely raise the cost of importing goods, and the added costs would shift to consumers. For example, electronics, cars, and other imported consumer goods could see price hikes, making everyday purchases more expensive for Nigerians. Higher costs could also impact Nigerian businesses that depend on imported raw materials, increasing their production expenses.
On a positive note, if you are an investor in any U.S.-based companies, the election results are probably good news to you given the turn of events in the market. The stock prices of certain companies (NVIDIA) have risen due to anticipated tax cuts and possible deregulation, which could boost corporate profits. Forex traders also saw favourable market movements with the election, as the U.S. dollar strengthened amid market optimism.
Market Highlight
From Hot Spots to Hard Times
Tantalizers used to be the spot for a Sunday lunch with the family after church, but fast forward to today, and it seems like people no longer remember the brand. With over 30 outlets nationwide, Tantalizers was once a trailblazer. But times have changed, and stiff competition from modern players like Chicken Republic and Domino’s Pizza has left it struggling to stay relevant. A key weakness we have seen recently is its poor performance in online sales.
Tantalizers posted a ₦231 million pre-tax loss for the first nine months of 2024, following losses of ₦284 million in 2023 and ₦241 million in 2022. To stop the freefall and year-on-year losses the company secured over ₦1 billion in fresh funds from private equity investors, with Messrs Food Specialties and Organics Limited and Banklink Africa Private Equities Limited taking majority stakes.
This capital boost is supposed to fund a strategic overhaul—optimizing outlets, updating menus, and fixing its digital strategy to appeal to Nigeria’s increasingly tech-savvy consumers.
So What?
Tantalizers’ story mirrors the challenges of adapting to a fast-changing market. For investors, it’s a chance to see how legacy brands can (or can’t) reinvent themselves in the face of digital disruption and economic challenges.
This capital injection signals a vote of confidence by the investors in Tantalizers ability to turn the tide around through strategic investments. But here’s the thing: despite the cash, Tantalizers’ sluggish adoption of online tools and its weak e-commerce presence remain glaring issues.
And let’s not forget Nigeria’s economic realities. With inflation rising and purchasing power shrinking, fewer people can afford to eat out regularly. Even with a fresh start, the odds are stacked against Tantalizers unless they make bold moves to modernize and reconnect with a younger audience.
If Tantalizers gets it right, it could serve as a blueprint for other struggling brands. If not? It’ll remain a memory of what once was.
Learn Finance
You don’t rate me?
If you have watched enough American movies, you would have heard of credit cards and their accompanying metric, the credit score. A credit score is a numeric representation of your creditworthiness. This number can affect your ability to get loans for a house, car, or any other thing you want to buy on credit. The higher your credit score, the more creditworthy you are, and the lower the interest rates you will generally encounter.
The credit bureaus that give the scores use a lot of data points, leveraging your credit history, that is, all the other times you have bought things on credit and how quickly you repaid those loans. They also use information like your government identity and other public data records about you to evaluate your ability to pay back loans. This number is helpful as it means that lenders do not have to start researching every single person, they loan money to. They can simply rely on the work done by the credit score companies.
Now imagine you want to lend to a nation (Abraham vibes), would it not be nice to have the nation’s credit score on hand? Introducing, rating agencies. Rating agencies are effectively credit bureaus for nations and companies. They do the work of analysing the creditworthiness of a nation and its large corporations. For the national ratings, they look at things like GDP growth, ability to pay back foreign debt, policy consistency, currency stability, and inflation. The rating they give can largely be divided into investment grade and junk status. Investment grade means that the nation is a creditworthy borrower, while junk bonds mean that there are doubts about the nation’s ability to pay its debt. No prizes for guessing which category Nigeria currently falls into.
The rating of a nation affects the rating of the organizations that operate within it because the nation’s macroeconomy effectively dictates the growth opportunities of the companies operating within its borders.
While these agencies are not perfect, there have been a lot of calls, especially by African leaders, for the development of a new credit rating agency outside of the big three (Moody, Fitch, and Standard and Poor’s). These three are still the most recognized and will continue to be the go-to by international investors in the meantime.
On the Radar
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