executive breakfast monthly economic review - september 2015: loot recovery???- restitution is no...

MONTHLY ECONOMIC NEWS AND VIEWS

September 2, 2015

byB.J. Rewane

Financial Derivatives Company Limited

LOOT RECOVERY???

Presented at Lagos Business School

Executive Breakfast Meeting

Restitution is No Retribution


2

Outline

Highlights - August without a rain break

Economic Conditions – China: The Economic Goliath Business Environment – Difference between Stock & Flows of Wealth Monetary Conditions – Tightness to SaturationMonetary Policy – Glide before you Slide (CBN Naira Strategy)

Equity Markets – Never a Dull Moment

Political Update – Restitution is no Retribution

AUGUST WITHOUT A RAIN BREAK


4

August 2015 had an

average rainfall of 15

days15% higher

than the previous month

The world is hit by China

blues2nd largest

economy in the world stutters

Nigeria’s GDP growth for Q2’15 came in at

2.35%3.65% lower than

the 5- year average

Confirming that Nigeria is officially in an economic slowdown

August Without A Rain Break


5

Business Cycle - Economic Slowdown

Slowdown

This is typically a stage before a recession in the business cycle


6

August Without A Break – Economic Slowdown

Economy at near a standstill

Because of absence of decision makers

Leading economic indicators are slowing

Lower oil production, sector down by 6.79% • Oil is now 9.8% of

GDPManufacturing was down 0.07%

Service sector growth declined by 2.39% to 4.67%


7

August Without A Break – Stagflation Again!!

Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15*

Q4'15*

01234567 6.21 6.54 6.23 5.94

3.96

2.35 2 1.8

Quarterly GDP Growth Rate (%) Annual growth estimate for 2015 is now as low as 2%

Q2 growth was impacted by election lull & economic stagnation

Fuel shortage, power cuts, Boko Haram insurgency, shrinking purchasing power taking its toll


8

August Without A Break

FBN PMI shrank in August to 49.2 from an earlier low of 50.6

Reduction in output across most sectors especially manufacturing

Jan Feb Mar Apr May Jun Jul Aug4446485052545658 56.4 56.2 55.2

54

49.4

56

50.649.2

2015 FBN PMI Index


9

August Without A Break – Power Output

Power output from the national grid in August spiked to 4,396MW

Average power outage and downtime in the Lagos Metroplex now 30%

Power supply now available 70% of the time Escravos- Lagos Gas Pipeline protected from

vandals and sabotage


10

August Without a Break

The price of diesel now down to N120 from N165 per liter in June

Oil prices tumbled to a six-and-a-half low of $42pb Brent futures now trading at $49.3pb 33.9% lower than the Q2 average of $63.55pb No emergency OPEC meeting to slash output

envisaged NNPC fires 38 top managers in major reorganization


11


Capital dollar inflow in Q2 down to $2.67bn according to CBN

50% down from $5.8bn in Q2’2014 External Reserves slightly down in August by

0.2% to $31.4bn The divergence between the IFEM rate and

the BDC rate shrank to N8.37 before slipping again to N20.03


12


NNPC MD hints that subsidy payments are not

sustainable

Cancels offshore processing transactions and

swaps

Reduces the number of oil lifters from 43 to 16

M2 in July was down to N18.43trn


13


2.05% lower than in June, as against a CBN

growth benchmark of 15.24% for 2015

YoY inflation in July was flat at 9.2%

Core inflation rose to 8.8% driven by exchange

rate restrictions and temporary fuel shortage


14

Inflation Trend & Outlook Inflation rate flat at

9.2% due to: Favorable harvest Abundant rainfall

dampened food prices August inflation

expected to increase to 9.4% Foreign exchange

restrictions have led to a decrease in imported goods

Lower inventory levelsSource: NBS, FDC Research

Jan'15

Feb'1

5Mar'

15Apr'

15

May'15

Jun'15

Jul'15

Aug'15

7

7.5

8

8.5

9

9.59.2

9.4Headline Inflation (%)


15


Exchange rate appreciation in the parallel market had limited impact on prices

The ineligibility of 41 items has led to shortages of some essentials

Unemployment in Q2 increased by 0.7% to 8.2% Underemployed Nigerians increased also by

1.7% to 18.3% Misery Index increased by 9.5% to 35.7


16


Revenue shared by all governments in August declined to N511.5bn

This was based on average oil prices in June of $63.75pb

Oil price/FAAC correlation Based on this correlation, FAAC estimated to

decline to N320bn in September

Jan-15

Feb-15

Mar-15

Apr-15

May-15

Jun-15

Jul-15 Aug-15

0.0010.0020.0030.0040.0050.0060.0070.00

49.7963.75

56.5648.21

Brent ($pb)


17


The average opening long position of DMB’S was at N75.81bn

Overnight rates averaged 32.28% and OBB was 29.88%

The volatility between top and bottom rates: OBB:94.33% O/N: 98%

The stock market had 11 negative days and 10 positive days

The market lost 1.64% in August


18


The Scottfree BC 30 index, a more reflective

measure of performance shows

Absolute return of -2.22% in 30days

Dividend yield of 3.03%

30-day Volatility: 27.51%

Trailing P/E of 6.83x


19

All Presidents Men – Fool me Once, you are the fool

The president formally announced his front office team

These are his trusted and reliable aides Announced on the anniversary of his

being toppled by the trusted but treacherous in August 1985

SSS have raised security alert levels at the Abuja and Lagos Airports and various parts of Southern Nigeria

0


20

Source: EIA ,FMDQ, OPEC, CBN, FSDH, FDC Research ; (* FDC’s forecasts)

Leading Economic Indicators (LEIs)Indicators

July’15 August’15 (Aug/Jul)% change September*Oil Markets

Spot price (avg $’pb) 56.56 48.21 14.76% 54Production (mbpd) 1.87

(Jun)1.85 (Jul) 1.07% 2.0

Money Markets (End Period)OBB (%)p.a 6.08 8.5 242bps 10Overnight (%)p.a 6.92 9.25 233bps 10MPR (%)p.a 13.00 13.00 - -CPI ( %) 9.20 9.40* 0.2% 9.5External Reserves ($’bn) 31.46 31.40 0.19% 30

Exchange rate (End Period)Inter-bank (N/$) 198.95 198.97 0.01% 199Parallel (N/$) 230.00 219.00 4.78% 230Market cap (N’trn) 10.34 10.21 1.26% 11FAAC 518.5 511.8 1.29% 400M2 (N’trn) 18.81

(Jun)18.43 (Jul)

12.14% 18FBN PMI 50.6 49.2 2.77% 50

Vacancy Factor (Residential %) 34 39 5% 40

Vacancy Factor (Commercial %)

24 30 6% 30

GLOBAL ECONOMIC UPDATE


22

US - Growth Accelerates

GDP expanded by 3.7% in Q2’15 Grew by 0.6% in Q1’15

Faster than initial estimates of 2.3% Led by growth in:

Business investment: 3.2% Government spending: 2.6% Consumer spending: 3.1%

Full year forecast is 1.8% – 2% Fed will weigh growth against volatility in

markets as it considers raising interest rates


23US – Unemployment Down

Consumer spending and new home sales rose healthily in July

Decline for orders for durable goods expected Reflecting weaker conditions in the energy and

manufacturing sectors Latest worries revolve around a slowing

Chinese economy and a strong dollar Unemployment is at a healthy 5.3% When Obama came to power it was 7.8%


24

A lesson in Global volatility

China has dominated headlines in August Chinese PMI shrank to 49.7 Yuan devaluation, weak export data and global

market volatility Markets are following a classic playbook of

uncertainty and modest de-risking A softening China has huge global implications


25


China is in the painful process of a changing

growth strategy

Now aiming for consumption and productivity

Rather than exports and capex

Market liberalization, floating the currency

are fundamental to this process


26


IMF M.D. says global expansion outlook is worse than earlier anticipated

A 4% drop in the yuan is large relative to its trading band

Is this China starting a currency war? Answer is No, the yuan movement is mild compared to

euro weakening, yen and Australia dollar China’s reduced demand for commodities is a big

problem for emerging markets


27

The New Financial Turbulence

Relevance of China in Global Economy: GDP of $10.3trn – 2nd largest in the world Holds $3.6trn in external currency reserves Consumes:

50% of world’s copper 45% of global steel

Central role in world trade World’s biggest exporter: exports account for over

11% of world trade


28

The New Financial Turbulence

Currently about $15bn in Chinese investments and credit to Nigeria Over 30% of Chinese investment in Africa

Nigeria holds 7.5% of its external reserves in yuan China is Nigeria’s leading supplier Chinese exports to Nigeria rose from 5% in 2003

to 25.5% in 2014 From airports to rail tracks, wagons and satellites China has been on a roll in Nigeria


29

Relevance Of China

A slowdown in the largest exporter & 2nd largest importer in the world would be likely to reverberate around the world

SUB SAHARAN AFRICA


31

Concerns over Chinese economic slowdown rattles commodity-linked African currencies

China is Africa’s largest bilateral trading partner – over $200bn

Many SSA economies would be at risk if China crashes and the flow of cash is curbed

Further weakening could curtail Chinese investment and Chinese financial support to SSA

Sub Saharan Africa


33Sub Saharan Africa African exports to China to fall as they become

more expensive Currencies of major exporters to feel the pressure

South Africa (gold & wine) Angola (oil) Zambia (copper)

Domestic products will face stronger competition from cheaper Chinese imports

Local wages will cost more for Chinese firms seeking to open shop on the continent

Retailers and consumers will have access to cheaper Chinese goods

COMMODITIES


35Commodity Prices In August The Bloomberg Commodity Index (BCOM) declined by

0.92% in August from July Almost all major commodities have fallen by 10-20% YTD

WTI ($/b)Brent Crude Oil ($/b)Natural Gas ($/MMBtu)Gold ($/ounce)Silver ($/ounce)Cocoa ($/mt)Sugar (US cents/pound)Corn (US cents/bushel)Rough rice ($/cwt)Wheat (US cents/bushel)PalmOil ($/tonne)

-40.00% -30.00% -20.00% -10.00% 0.00% 10.00%

YTD change


36

Global Oil Prices At A 6-year Low Brent fell to its lowest in 6 years due

to Chinese malaise and oversupply issues YTD low of $42.69pb

Fear that devaluation of yuan will reduce Chinese demand for imports

An unprecedented 3-day recovery in oil prices Strongest rally since 1990 Before crashing again to $49.23pb Now a roller coaster ride


37

Global Oil Prices At A 6-year Low

Oil prices may have bottomed out Markets will continue to exaggerate

sentiments from China And frackers have found more

efficient ways to increase production OPEC insists on battling for market

share but open to negotiation with non-OPEC members Producing above 30mbpd quota

WHEN WILL OIL PRICES BOTTOM OUT?


38

Outlook And Impact Bloomberg survey shows that US Fed increases interest

rates despite Chinese woes US dollar appreciation may push oil prices further down August FAAC down slightly by 1% but will fall sharply in

September – estimates at N350bn States beginning to receive CBN intervention fund of

N338bn Debt repayment will become difficult with a slide in oil

prices Some states have already restructured previous debt

obligations


39Softs Commodities

Soft commodities average price decline in August: 9.8%

Losses led by: Sugar: 24.56% decline YTD Palm Oil: 23.7% decline YTD Wheat: 16.56% decline YTD

Combination of negative sentiments from China and large stockpiles

Cocoa struggling to remain above $3,000/mt due to weak demand

Currency pressures offset gains from lower commodity prices for FMCGs companies

MAJOR POLICY CHANGES


41

Naira To Glide Before The Slide

Interest rates at the interbank oscillating between 10 and 80%p.a

The naira is now at N220 at the parallel market again and dropping

Monetary policy is back between a rock and a hard place

The MPC meeting of September 21/22 is the last before the World Bank annual meetings in Peru on October 9th 2015


42

The naira has been held artificially stable by administrative measures

Supported by reduced leakages from oil and revenue management

Capital inflows have shrunk to as low as $2.6bn per quarter

Inflation has spiked 7 out of 9 months in 2015

Naira To Glide Before The Slide


43

Naira To Glide Before The Slide The lull in demand for forex is because of two

principal reasons: No cabinets in states and federal – so curbed

spending Interest rates have been at their highest level in

many years - naira liquidity tightening Once a cabinet is in place and spending starts The naira pressure will resume The CBN will yield to market pressure The Governor has done his best But markets usually win and policy makers

tend to buckle Like in China, Malaysia, Indonesia


44

The Way Out??

Allow the currency float and set a buying range of parallel market minus N10

Intervene with as many levers as the CBN can spare to ensure that the market rate is between (– and + 10%) of the PPP currency value - N189

The exchange rate will be approximately N210 – N215/$


45

Possible Scenario – Gliding Through Turbulence

Allow naira float downwards by 5%

Ahead of policy decision on fuel subsidies

Cut CRR from 31% to 20%

Leave MPR unchanged at 13%p.a

Reduce some of the administrative

measures


46

MPC Decision

Rationale: Administrative measures are temporary and

unsustainable Cannot guarantee long term conservation of, or

accretion in reserves The currency will be closer to fair value Encourage lending & stimulate economic growth

with accommodative monetary policy Remove the fear factor


47

MPC Decision

Impact: Slowdown in the depletion rate of the external reserves

level Relative stability of the exchange rate Increased banking system liquidity Short term increased inflationary pressure Risk investment flow reversal Lead to 2% decline in interest rates Govt borrowing costs will fall by N18.8bn in 2015

BUSINESS PROXIES


FAAC Allocation Down in August

FAAC allocation shared in August was N511.8bn

1.3% lower than N518.5bn in July

Actual allocation was N424.1bn

Exchange rate gain of N6.4bn

NNPC refunded N6.3bn

VAT: N74.95bn49Source: FMF, FDC Research

49


FAAC Allocation Down in August

Revenue loss in September will increase by at least 3% Oil price decline of 11% minus exchange rate depreciation

of 8% in June/July

50Source: FMF, FDC Research

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15300

360

420

480

540

600

500.13 518.5 511.8

FAAC (N'bn)

50


Ships Awaiting Berth Up Again Ships awaiting berth increased by 4% to 59 in

August From 57 in July

Slower increase due to forex restrictions and declining imports

September will be worse than August

51Source: NPA, CBN, FDC Research

Jan'15 Feb'15 Mar'15 Apr'15 May'15 Jun'15 Jul'15 Aug'150

10203040506070

050100150200250300

Ships Awaiting Berth Parallel Rate (N/$)

51


Rig Count Down

Active rigs in Nigeria down by 20% to 8 IOCs are retrenching people and equipment Producers likely to relocate to areas with lower

production cost Service contractors are giving up houses in Ikoyi

and Victoria Island The good news is that Schlumberger is acquiring

Cameron Schlumberger is the world’s largest oil servicing

company with revenues in excess of $48.6bn

Source: Baker Hughes

52


Rig Count Down

Source: Baker Hughes

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-150

200

400

600

800

1000

1200

1400

1600

1800

0

50

100

150

200

250

300

350

400

450

885

208

8

US Canada Nigeria

53


Power Generation Up

Average power output from the national grid remained stable

Rose to 4,396MW in August 2.2% higher than

4,300MW in July Peak: 4,748MW

Constraint is transmission currently capped at 5,000MW

Power output may decline in September due to Shell’s force majeure

Average Daily Power Generation (MW)

Source: Nigeria Power Reform

2000250030003500400045005000

40743926

4748

54

RETAIL INDUSTRY


56

Retail Industry - Luxury

Estimates of Nigerian destination shopping ranges from $500 – 1bn p.a.

Nigerians own significant real estate in London, New York and Miami

Destination weddings, birthday and anniversaries are now prevalent

The luxury goods segment is targeted at the Nigerian elite

And aspirants to climbing the social stratification ladder


57

Global Luxury Market - Bain

Global luxury goods market is growing – Bain & Co.

Total sales at 224bn euro in 2014 Estimated to reach 250bn euro in

2015 with a growth of 4%

Accessor-ies (e.g. Shoes)

Apparel Hard Luxury (e.g.

Watches)

Beauty Other0%

10%

20%

30% 29%25% 22% 20%

4%

Global Personal Luxury Goods Market by Category (2014 Estimate)


Global Personal Luxury Goods Market Evolution- Bain

Limited price awareness and consciousness Limited role of online

Market more balanced between tourist and local consumption 35% of sales were made

to tourists Approx. 140million

luxury consumers globally Chinese accounting for

less than 2% of total

Significant price awareness and growing price consciousness Many brands have

websites Huge role of touristic

spending 50% of sales made to

tourists About 350million luxury

consumers Chinese accounting for

over 30% of total

2000: Valued at €128bn 2015 Estimate: Valued at €228 - 233bn

58


59

Global Luxury Goods Market - Bain

Positive performance of mature markets and Middle East Oil price drop impacting spending in oil-dependent

economies like Russia and Nigeria

Europe Americas Asia-Pacific Japan Rest of World0%5%

10%15%20%25%30%35%40%

34% 32%

21%

8%5%

Global Personal Luxury Goods Market by Area (2014 Estimate)


60

Global Luxury Goods Market - Bain

Shoes are the top performing category

Men’s segment outperforming

Apparel hit by negative impact of Mainland China

Watches sales stable as Euro devaluation and Swiss franc movement offset Asia issues

New York

Paris London Hong Kong

Tokyo Milan 0

5

10

15

20

25Top Shopping Destinations

(€'bn)


61

What Are People Spending On??

Ready to wear Men: 26bn euro Women: 27bn euro

Casual wear maintaining momentum Urban style pushed by music and sports

celebrities Handbags: 3% growth to 37bn euro

Prices are 130% higher than in 2008


63

Shoes up 5% to 14bn euro Shoes outperforming leather goods first time

since 2007 Average prices at 1000 euro range Men’s shoes up especially made to measure Watches 0% growth at 35bn euro Key brands reducing production Price range 2k euro



64

Luxury jewels growth of 4% to 13bn euro

Global demand for diamonds registering

strong growth esp. U.S. Market

Wealthy women in Emerging Africa e.g. Nigeria

and Egypt



65

3 Broad Segments Of Luxury Goods

Absolute: 10%

Aspirational: 17%

Accessible: 11%


66

Domestic retail sales slightly up in August

FMCGs and white products: rose by 3%

In spite of falling disposable income and state

government salary arrears

All 22 states benefited from FGN bail out

package to meet salaries shortfall

Domestic Retail – Sales Marginally Up


67

Exchange rate volatility caused an increase in the prices of some goods Bag of rice (50kg): 5% higher Vegetable oil (3 litres): 6% higher Bed-side refrigerator: 3% higher

Weekday traffic increased slightly in tandem with daily needs Increased beverage demand for children on holidays

Cash-to-card ratio unchanged at 65:35

Domestic Retail – Sales Marginally Up


68

Outlook

Expect an increase in sales due to back-to-school shopping

Household spend may likely remain under pressure due to muted disposable income growth

Total retail sales growth remain constrained by slow credit growth and forex restrictions

Appointment of ministers and increased government spending may boost retail growth

REAL ESTATE UPDATE


70

Real Estate – South Africa

Rise in demand for properties in former apartheid areas like Soweto

Property prices in black townships rose 17% More than double the real estate market growth of 7%

Demand is driven by: Boom in new shopping centres and gyms A revamp of stadiums for the 2010 FIFA world cup drew

more attention to those areas

Source: The Economist, FDC Research


71Real Estate – Domestic

GDP figures show real estate contributed 7.8% to Q2’15 GDP

Grew by 18.78% in Q2 from Q1’15 but only up 2.97% from Q2’14

Market sentiments still negative Banks are unable to find buyers for foreclosed

properties due to economic slowdown

71


72Real Estate – Domestic

Vacancy factor for both residential and commercial

properties increased in high end areas especially in

V.I

New office spaces in Adeyemo Alakija and Sanusi Fafunwa

Empty flats in Sinari Daranijo

Approximately 260,000 square metres of additional

office space in the Ikoyi & VI market72


73

Vacancy Factor Up

Source: FDC Research

0%10%20%30%40% 36%

25%

Victoria Island

0%10%20%30%40%

23%

9%

Ikoyi

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-150%

20%40%60%80% 58%

57%

Residential Vacancy Factor Commercial Vacancy Factor

Lekki

AVIATION UPDATE

AVIATION UPDATE


75

Aviation – Strong Financial Results

Global aviation benefited substantially from sharply lower oil prices

Oil prices are 54% lower than a year ago Airline share prices increased 4% in July Buoyed by stronger financial results 7.5%

average airline ROIC Global air travel rose by 5.7% in June year on

year


76

International travel on Asia-pacific carriers remained robust with a 6.8% increase

India stands out for strong passenger growth of 16.3%

European carriers recorded a 4.1% rise in international RPKs in June

A total market passenger load factor of 79.4% In SSA route rationalisation and market

consolidation is continuing

Aviation – Load Factors Up


77

B/A the legacy network carrier, has pulled out of Entebbe airport in Uganda

Lufthansa is pulling out of Accra Brussels airlines, a lower market player

owned by LH, will take over the Accra-route Lufthansa have returned to the more

customer friendly frequency in the summer schedule

Aviation – Lufthansa Reorganisation


78

Load factors outbound Lagos to European destinations average 90%

Inbound traffic average 80% Direct flights to the U.S. are enjoying average

load factors of 95% outbound Delta are reducing frequency into Lagos from

daily to 6 a week from October Emirates remains the leading carrier into

Nigeria Whilst Dubai is still the airport with the

highest international passenger traffic of 71m passengers a year

Aviation – Load Factors Up


79

2 helicopter crashes in one month: Bristow in Lagos with 6 casualties and 6 survivors And NAF in Kaduna with 7 casualties no survivors

National carriers are yesterday’s views and unlikely to take off

Government owned national carriers are mostly unviable Ethiopia Kenya SAA

Aviation – National Carrier


80


A 12-member ministerial committee to look into how to revive national carrier commences work

Establishment of national carrier is justified by economic considerations, national interest, national pride and job creation

Policies to stifle multiple-destination-designation of business carriers may be implemented


81

National carriers have bi-lateral service agreements Funding gap, inefficiency, proper management and

poor safety records are the major challenges to Nigerian national carrier

Domestic point-to-point carriers are at a disadvantage

Nigerian government lacks the business acumen to run airlines profitably


STOCK MARKET


83

Global Equities Market

Equity markets remained volatile throughout the month in reaction to equity market events in Shanghai

S&P 500 declined by 6.26% during the month Greece equities battered by Prime Ministers

resignation and headwinds from China Johannesburg stock exchange drops 4.00% in August Foreign portfolio flows to emerging markets turn

negative Spillover effect from China and fall in commodity

prices responsible for poor global equities market performance


Nigerian Stock Market Review

Scottfree’sBC30 index lost 2.22% in August as against 8.40% in July

Trailing P/E ratio of 6.83x 30 day volatility was 27.51% Dividend yield 3.03% 30 Sharpe ratio of (1.32)

Market performance mirrors Q2 GDP growth rate

Source: Scott free Index31-

Dec-14

24-Jan

-15

17-Feb

-15

13-Mar-

15

06-Apr-

15

30-Apr-

15

24-May

-15

17-Jun

-15

11-Jul

-15

04-Aug

-15

28-Aug

-15 20,000.00 23,000.00 26,000.00 29,000.00 32,000.00 35,000.00 38,000.00

NSE INDEXAugust

Source: NSE, FDC Research

84


85

August 2015 Stock Market Highlights

Sustained volatility as investors exited positions and speculators went bargain hunting

NSE ASI declined1.64% in August, 14.35% YTD after a sharp recovery at the end of the month

NSE ASI lost 2.22% on Monday 24th August, mirroring sentiments in global equities markets

Market capitalization declined 11.06% YTD, N1.27 trillion investor funds lost

Average daily turnover decreased by 14.74% to N3.47bn from N4.07bn


86

Key Results Released in August

Tier 1 banks outperform industry peers with impressive H1 results

Access bank and GTB pay interim dividends of 25k


Sector Indexes Performance remained

negative across all sectors Banking sector is worst yet

again as impressive results of tier1 banks failed to spur a sector rally

Weak fiscal positions by states and federal government affects performance of industrial goods sector

Cuts in government revenue, spending and disposable income rubs off on consumer goods

NSE 30

Insurance

Banking

Oil & Gas

Consumer Goods

Industrial Goods

-15.00% -12.00% -9.00% -6.00% -3.00% 0.00%

Source: NSE, FDC Research

87


88

Stock Market Today

Bargain hunters ride mini-bull as key

appointments are made and oil prices

recover slowly

Net punitive CBN regulations continues to

weigh on the economy and the exchange


89

September Stock Market Outlook

Ministerial announcements and increased liquidity to bring about volatility in the market

Anticipated weak Q3 results will subdue mini-rally

Reforms in banking and oil & gas sectors will see transactions unwind, dampening sector performance

Banking sector performance to worsen as operating environment remains volatile and economic slowdown persists

POLITICAL RISK ANALYSIS


91

Political Risk and Update

Buhari’s 100 days Promise or Covenant Buhari under pressure to be more engaging He is trying very hard to shrug off his military

antecedents He is looking, living and acting like a dye in

the wool democrat Accused by opponents of being aloof and

distant from the political class They want him to be in government and also

in power


93


Insisting that he must dismantle the PDP infrastructure within the bureaucracy

Delays and poor sequencing of appointments is squandering political capital

The NASS ambush is a testimony to weakness in the political and strategic positioning

The presidency in Nigeria is a pivotal position with concentration of powers

There is a thin line between being effective and being autocratic


94


The appointment of personal staff is reflective of his demographic and personality profile

He is not a professional politician with numerous hangers-on

Unlikely to have far flung associates except within the old military

He is seeking to methodologically but slowly implement selectively the transition report

Is not able to accept the fundamental principles of economic reform


95


He has found out in 100 days that oil prices are out of the control of Nigeria

And that the forex market cannot be controlled

That what is necessary may not be sufficient to solve Nigerian economic problems

Political economics is a slippery and treacherous business

BUHARIMACRO-ECONOMIC

SCORECARD


97

Macroeconomic Scorecard (100 Days)

Exchange Rate• IFEM:•Parallel:

Oil Price (Brent)

FAAC

External Reserves

Inflation

Stock Market Cap.

May 29

•N197.93/$•N219/$

$65.56pb

N409bn

$29.6bn

8.7%

N11.66trn

Sept 2

•N197.55/$•N220/$

$48.67pb

N511.8bn

$31.32bn

9.2%

N10.27trn

Change and

Direction

•Flat•Flat

25.6% Negative

25.1% Positive

5.8% Positive

0.5% Negative

11.92% Negative


98

Unemployment

Misery Index

Power output

Price of Diesel

Vacancy Factor• Ikoyi•Victoria Island

Insurgency

May 29

24.1%

32.8

3,205MW

N160

•19%•11%

High Frequency

Sept 2

26.5%

35.7

4,396MW

N108

•31%•16%

Reduced Frequency

Change and

Direction2.4%

Negative

8.8% Negative

37% Positive

32.5% Positive

•12% Negative

•5% NegativePositive

Human Development Factors

QualitativeS/N Indicator Comment Positive/Negative

1 Security

• Insurgency attacks have decreased during the period• New service chiefs have been

appointed

2 Power grid • Improved national power supply, from 1,962 MW to 4,396 MW

3 Petrol queues •Reduced fuel shortages and queue

4 Investor confidence • Reduced investor confidence due to uncertainty in policy direction ???

S/N Goal Comment 0 - 25 26 - 50 51 - 75 76 - 100

1 Improved power supply

• Improved national power supply from 1,962 MW to 4,396 MW

2 Improved transparency

• New national psyche of accountability and responsibility

3 Reorganisation of the energy sector

• Downstream saboteurs have been silenced• NNPC management has been

reshuffled to improve accountability

4Enhanced

international perception

• Cleaned up the international image of Nigeria• Improved the immigration

service and passport process

5 Addressed fuel scarcity

• Reduced the fuel shortages and queues

6 Revamped EFCC • Got the EFCC to wake up after a 6-year slumber

AccomplishmentsPercentage of accomplishment

(%)

S/N Goal Comment 0 - 25 26 - 50 51 - 75 76 - 100

1 Fuel subsidies • Subsidies still in place and could be abused

2 Refineries • Refineries are up today and down tomorrow

3 Official appointments

• Appointments appear lopsided and responses to criticism are reactive• Delay in announcing the

cabinet is eating into the reputation of his assertiveness

4 Consolidation of APC

• He needs to engage the APC to drive the legislative agenda• APC needs to be reformed and

made an effective tool of civil society engagement

5 Transparency

• Emphasis on integrity and anti corruption is ideal• But there are no saints in hell• You go to war with the army

you have, not the one you wish to have – Don Rumsfeld

Unfinished BusinessPercentage of accomplishment

(%)


102

Outlook

Cabinet likely to be named in a few days The combination of technocrats, political

machine boys and retired military To be quickly followed by some juicy board

appointments This will settle the affirmative action and federal

character issues There will be major governorship and senatorial

election annulments by the tribunals


103

Outlook

This will alter the political chess board

Also the balance of power in the NASS and both

political parties

A wave of defections move into and out of the APC

More high profile investigation and indictments of

former ministers

OUTLOOK


105

Outlook for September

Oil price will trade between $45-55pb FAAC will decline towards N350bn August inflation will spike to 9.4% The TSA will sterilize approximately N0.5trn of banking

sector float Keeping interbank rates higher than levels of 18-

20%p.a. The stock market will trade sideways at current low

levels


106

Outlook for September

The naira will fall towards N230 at BDC level And N240 at electronic transfer market The MPC will leave things unchanged but reduce

the CRR from 31 to 20% A supplementary budget will be announced The nation will be relieved that a cabinet is

announced So that the business can start


107

Corporate Humour

107

Goodman Ace-

A Vegetarian is a person who eats nothing that can have children

- Anonymous

Familiarity breeds attempt.


108

Corporate Humour

108

A murderer is one who is presumed to be innocent until proven insane.

Women who miscalculate are called mothers.

Memorial Service : Farewell party for someone who has already left.

- Anonymous

Abigail Van Buren -

- Robert Byrne


109

Corporate Humour

109

A Holding Company is a thing where you hand an accomplice the goods while the policeman searches you.

A painter can hang his pictures, but a writer can only hang himself.

- Will Rogers

Edward Dahlberg


110

Corporate Humour

110

Diplomacy is the art of letting someone else have YOUR way.

A committee is a group of important individuals who singly can do

nothing but who can together agree that nothing can be done.

- Anonymous

Anonymous -


111

Corporate Humour

111

A man’s Will and last Testament. I owe much, I have nothing, the rest I

leave to the poor.

Two heads are better than none.

- Rabelais

Anonymous -


112

Bismarck J. Rewane, MD/CEO Financial Derivatives Company Ltd.

Lagos, Nigeria01-7739889

executive breakfast monthly economic review - september 2015: loot recovery???- restitution is no...

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