CBN blames Sanusi, others for economic crisis – News24ng

Abuja – The Central Bank of Nigeria on Saturday blamed past political office holders who failed to take steps to save the country for Nigeria’s present economic woes.

The CBN said this in reaction to the several accusations of the Emir of Kano, Sanusi Lamido Sanusi, on the state and handling of the economy.

In a statement, the CBN acting Director, Corporate Communication, Mr. Isaac Okorafor, the apex bank blamed the nation’s economic crisis on “the failure of those who occupied public office in the past”.

“It is not true that CBN allocates dollars. There is no where in the world that the Central bank sits by and allows vicious speculators to solely distort the value of its currency endlessly. All central banks intervene to buy or sell in the market to ensure that the local currency is protected from dubious attacks”, Okoroafor stated.

“The channels for advice and contribution of ideas on the current economic situation by all patriotic Nigerians are open. It is rather unfortunate that some people have chosen to play to the gallery and to make statements to disparage those in leadership at this time in total insensitivity to the larger interests of the Nigerian economy.

“We should not forget that the seed of our current economic crisis was planted by the failure of those who occupied public office in the past but failed to act in the long term interest of the Nigerian economy. It is easy to criticize from outside.

“It is always easier and the grass greener when people are out of office. The challenge we face today is a choice between pandering to the established interest in Nigeria’s speculative economy and the protection of the wages of the real stakeholders who work hard on fixed incomes. For they are the core victims of Naira depreciation.

“At this critical time in the life of our country the CBN will continue to explore avenues with the Federal Government in order to find solutions to the current economic situation. Already Nigerians are waking up to the call to be more productive and to look inwards and to be less dependent on the importation of foreign goods and services.”

– News 24

How OPEC plans oil market stabilisation – NAN

Interview with the Secretary-General of Organization of Petroleum Exporting Countries

By Racheal Ishaya

After a historic agreement reached by the Organization of Petroleum Exporting Countries (OPEC) last week to curtail oil supply by 1.2 million barrels per day for the first time in eight years, OPEC Secretary-General, Mr Mohammed Barkindo spoke to our correspondent in Vienna, Austria.

First of all, to give perspective, the agreement was reached following extensive consultations with key non-OPEC countries, including the Russian Federation who have agreed to also cut supply by 300,000 barrel per day.

Nigeria and Libya were exempted from the cut due to the current economic, political challenges facing both countries.

The duration of this agreement is six months effective January 1, 2017,  extended for another six months to take account prevailing market conditions and prospects.

Nigeria is facing serious challenges in the oil sector chiefly the issue of militancy in the Nigeria Delta region. As a former NNPC Chief Executive how in your view can this be contained and is there any role OPEC can play to assist Nigeria in resolving the problem?

I will start by responding to the OPEC role. Nigeria is a very important member of OPEC. It has always been a leading advocate of market stability. What OPEC did in drafting the Algiers accord if you recall is to take into account the special circumstances of Nigeria plus Iran and Libya, to allow these other countries to restore their production capacity and capabilities before they can participate in any supply management.

On the domestic front, I have been talking to the Minister of State, Emmanuel Kachikwu and he assured me that discussions are ongoing with various groups, various stakeholders in other to get a lasting solution to the situation in the Niger-Delta.

 

First of all our ultimate objective as a group is to maintain stability on a sustainable basis. What we saw before the severe correction of oil prices in 2014 was run away prices that saw some crude yield going as high as 120-130 dollars per barrel.

 

When the correction came, we saw how our crude yield lost over 80 per cent  by January, February this year. OPEC is not interested in having such large fluctuations and volatility in the market. What we are interested in is stable market that will provide equilibrium prices that will be fair and not only to producers but consumers as well.

 

What exactly is the equilibrium price?

As I said earlier we saw prices reaching their peak of about a 120-130 dollars per barrel that was unprecedented in the history of oil, largely due to supply restrictions that took place in some of our member countries right from 2011.

 

In 2008 in response to the financial crisis that impacted on demand, OPEC in withdrew about 4.2 million barrels per day from the market. Shortly after that we had outages in Libya that practically lost nearly 1.6 million barrels per day.

 

Iran was also under sanctions that impacted on their production as well as their exports. And in our own country Nigeria, due to the circumstances in the Niger-Delta we saw production contracting by 700,000 to 900,000 barrels per day.

So the sum total of all this, brought severe shortages in the market and as a result prices skyrocketed and those prices gave rise to incremental supplies from high cost areas particularly the shell provinces in North America.

 

The United States also brought into the market an average of almost 7 million barrels per day that was largely unexpected. Most analysts did not project that the shale revolution that swept across North America particularly the United States would bring supplies to such very high levels that we saw.

 

Of course OPEC member countries were also now invited to ramp up their production in other to stabilize prices. So the joint action from both sides raised supply to very high levels and began to impact on stocks on inventories.

 

Inventories started rising gradually. In the industry we have a five year average and once stocks are above those five year averages, then prices begin to reduce.

The relationship between stocks and prices is an established inverse relationship. It’s mathematical. Once you have high stocks in the market, then you see prices going the other way round and vise versa.
Total commercial stocks round the world was probably over 3-4 billion barrels per day. If you do both OECD, non-OECD stocks, both commercial as well as strategic reserves, you are talking of nearly 7 billion barrels of stock both onshore and offshore.

 

When the offshore storage got filled up, we saw traders hiring vessels and because freight risk came down, it became cheap for them to store crude even on vessels, so that if there is an urgent need to supply somewhere, the vessel will just move there.

 

So both the onshore and offshore got filled up and the result is crash in prices.

 

So what OPEC is focusing on since i came is how we can rebalance this market and to do this, we have to withdraw supplies to the market and it is only then that you will be able to achieve the equilibrium price.

But to answer your question, we are not yet at that equilibrium price but we are on course.

Will the expected increase in the price crude lead to a rise in PMS price in Nigeria?

The greater concern today is the low oil prices to our national treasuries and to our central banks and to our economy. And this is not a concern only for OPEC but also to non-OPEC.

 

For the first time it’s not only producers but also consumers that are worried about the low crude oil prices.

 

Some months back, I was invited to the IMF meetings, and the main reason they invited me is to hear from OPEC to what efforts are you making to rebalance the market because we also are not benefiting from this low prices, high volatility regime in the oil and gas sector which is threatening future supplies.

 

Also, crude oil production is very capital intensive, if there is no consistent investments especially in the E&P and across the supply chain, then the future supplies are gradually and steadily being put at risk and this is of great concern to the rich industrialized countries, the consuming countries and that was why the IMF invited us.

 

For the first time we had a convergence of producers and consumers and we all agreed that this cycle that we have seen since 2014 to date is inimical not only to producers but also to consumers.

 

Cumulatively OPEC 14 member countries have lost revenue to the tune of over 1trillion dollars so we have been focused on this challenge.

 

The issue of how much, products will be sold in the individual countries is a domestic fiscal policy of every member country and we don’t normally get ourselves involved in these sovereign issues.

 

There is a committee set to monitor compliance of member countries  to the new agreement. Is there a mechanism to sanction any country that does not comply?

 

The committee that was set up yesterday in accordance with the agreement provides for a ministerial committee of five countries three from OPEC Algeria, Kuwait and Venezuela and two from non-OPEC countries.

 

Russia is expected name the countries. This committee will meet with the secretariat to draw up detailed mechanisms including the compliance framework for the implementation of the agreement.

 

When nations enter into these binding agreements, they are sovereign nations, they strive as much as possible to abide because it is a collective interest, from when the announcement was made prices rose by about 13 per cent.

 

I don’t know how many billions of dollars will accrue to member countries so it is a win-win solution not to OPEC member countries but to non-OPEC producers as well.

 

This is an effective, balanced, credible agreement that is based on the principles of equity, fairness, transparency and verifiable.

 

Secretary-General sir, does that mean you do not envisage some non-OPEC members increasing their production to still flood the market and thus keep prices down?

 

As we speak now, we are discussing and planning to meet with them this Friday 9th of December to work out the framework not only of their contribution but as you have heard Russia made an announcement pledging their support to not only what we did but also made their contribution.

Russia is also coordinating non-OPEC group and together we’re supposed to meet next week to address this.
What about the USA, how involved is the USA in this deal have they keyed into the agreement?

Well the USA has never met with us as a group for obvious reasons because of their laws when it suits them they refer to the anti-trust laws but what we are doing is in the interest of all producers and consumers.

 

At the last IMF meeting, I met with several institutions of government in Washington and they support what we are doing because we have seen that this year alone, their production shrank by almost 800,000 barrels per day, 100s of their companies have gone bankrupt so they are looking up to us to remedy the situation.

 

In Nigeria, we are battling to refine crude locally and the when you were at the helm of affairs at NNPC, you championed bringing back these refineries. Up till now we have not seen any improvements, what do you think we need to do to bring these refineries back to life and what is the international benchmark for running a refinery properly? 

The downstream part of this industry has always been the most challenging sector, through out the supply chain from upstream to midstream. You face more challenges as you go down.

The refining sub sector of downstream is the most challenging of the downstream sector because margins are very slim unlike in the upstream or midstream where investors can go to the bank to borrow even at high rates and recover their cost, make higher margins and reinvest.
In the refining sub sector, the margin traditionally is very slim.

Therefore governments in our own part of the world have to by necessity participate in this sector, they have to invest, its more of public service than a business in order to provide fuel for the domestic economy at home.

 

Almost all our refineries have aged we have not been investing consistently to maintain as well as upgrade these refineries to meet modern day requirements including capacity.

 

I recall that even at 100 per cent capacity utilization of all the four refineries we still have to import PMS and other products.

 

Our domestic consumption has grown over the years as the economy expanded, as our population increased and our borders became more and more porous where all our neighbours relied on us to get fuel.

 

These challenges will have to be confronted in a wholistic manner, reforms are necessary in a wholistic and consistent manner.

 

We have been approaching these issues on a piecemeal basis if and when we need to intervene from time to time but the capitalization of the refineries  to make them operationally independent, financially autonomous from government, to run them as a business paying for their inputs for their feedstock, charging for their processing services that they provide, retaining their earnings, reinvesting and with strong, independent regulatory body is the only way forward.

 

Sir you just suggested that government should invest in refineries, does this not go against the administration’s desire to divest from the refineries?

 

Government will have to continue to provide public service, it is elected to provide that. The provision of energy services particularly petroleum products in our own part of the world has been more or less public service, without the involvement of government and its institutions, the enabling environment for the private sector to borrow and invest and recover its cost and reinvest has not been put in place.

 

Until you Reform the industry and provide that environment, those companies that you need to come and set those refineries and other processing plants will be shy because the credit institutions may not be cooperative because the returns are not attractive and the risks are very high, with all what is happening particularly in the Delta where naturally we would have needed more refineries there.

 

However,  from what I have heard from minister Kachikwu, they’re doing everything possible to restore normalcy in the Niger Delta and then to embark on these much needed reforms that eventually in the fullness of time will provide the enabling environment for any investor both with and outside Nigeria to come and invest particularly in the down stream maybe together with government or independently.

 

On the issues between Saudi Arabia, Iraq and Iran, you have been credited with recording a diplomatic achievement in bring them together, what concession did OPEC make for them to agreed to this deal?

Both Islamic Republic of Iran and Iraq, they are founding members of this organization.

 

This organization was born in Baghdad in 1960, it was Iraq that invited other members like Saudi Arabia, Kuwait, Venezuela, together with Iran in 1960 to create this organization but, Iraq has been facing difficult challenges over the years.

 

Right now they are facing a war within their country against the Islamic State, several of their fields are under occupation by the ISIS. Iran is another founding member, very important member, that is just emerging out of the international sanctions that were imposed on them by the western countries.

Both of these countries are very important  within OPEC, therefore no agreement  will be effective without their participation.

 

I had to go to Baghdad and Tehran to meet their leaderships, because at some points, the issues became more political and therefore necessitated the need to meet with their leaderships to seek for their understanding, supports and to facilitate dialogue within the group.

When I met with President Hassan Rouhani of Iran in Tehran, he assured me that Iran, as a founding member of OPEC, will always corporate with OPEC, will do everything possible to have a stronger and more effective and efficient OPEC in the interest of Iran and all member countries.

 

He explained to me that as a result of the sanctions imposed on them, their production shrank. Before the sanctions, they were producing about 2.8 million barrels a day, but it came down to less than 1 million barrels a day, with several consequences on their economy and industry itself.

They just came out of this. So it’s a process, it will take them time to be able to rehabilitate their fields, raise their production capacity and restore their level of production.

 

Therefore he urged me to work with other member countries to see how we could address that concern but he assured me as a president, Iran will continue to be in the mainstream of OPEC.

 

With that, I proceeded to Baghdad, I met with the Prime Minister, Mr Haider al-Abadi who also explained to me the war situation and show me on a TV the war in Mosul, the northern part and Tajikistan area, which is a significant part of where their production comes.

He was very considerate and corporative and assured me that come November 30, 2016 his country will join the consensus and both countries fulfilled those pledges, which I expressed my deep appreciation and gratitude for showing that leadership as well as flexibility.

 

What about the Saudi Arabia?

Saudi Arabia, we never had issues with them , they are the biggest producers, as you can see, Is the de facto leader of this group, and when it comes to decision like this, they are taking the biggest heat more than any other country, despite the fact that they are also having their own domestic challenges but they are taking this leadership with great responsibility.(NAN)

The Guardian view on aid for Nigeria: return corrupt cash to the poor – The Guardian UK

A preventable, human-manufactured disaster appears to be unfolding in north-east Nigeria. While the spotlight of media attention is facing elsewhere, the spectre of starvation stalks an area staked out by jihadists as their caliphate. One small state in Nigeria has more displaced people than the entire refugee influx that arrived in Europe last year. The brutal armed conflict has sent a million children out of school. Health services have been decimated and cholera and polio, once eradicated, have returned. The violence of Boko Haram, the jihadist group that still controls parts of the region, is characterised by child killing, abductions and sexual abuse – an oppressive, murderous atmosphere hardly conducive to stable government in a part of Africa the size of Belgium.

Farmers are unable to harvest their crops and aid agencies say they are unable to reach isolated communities. The region is now entering its third season without a harvest. Where food is available, prices have soared – partly due to a decision to depreciate Nigeria’s currency, the naira.

There are clear warning signs that a famine looms while the international community stands by, watches and waits. The concern is that the world springs into action after it is too late. It’s what happened in Somalia six years ago when a quarter of a million people, half of whom were children under five, died.

Now Save the Children is warning that there is a “real and immediate” threat to the lives of 400,000 children who are malnourished and starving. The charity rightly says the crisis is being crowded out of the humanitarian agenda by the more highly visible disasters affecting Syria, Iraq and Yemen. There are concrete steps the world can take. On Monday the United Nations will convene its yearly attempt to assess needs, decide response strategies, and present plans to donors for the areas of greatest global need.

Nigeria cannot excuse itself as a failed state. It is Africa’s second-biggest economy. However, more imaginative ways of helping the country are also needed. Save the Children suggests turning ill-gotten gains into crisis-denying cash. Since September illicit Nigerian cash laundered through Britain and seized by British police can be returned to Africa to help with development projects.

The sums are not small: recently a former Nigerian state governor pleaded guilty to a £50m fraud. In 2001, it emerged that a former Nigerian dictator laundered $1.3bn through London banks. Nigeria ranks 136 out of 167 in Transparency International’s corruption index. Its current president asked Britain to return assets held by dishonest Nigerians, shrugging off David Cameron’s suggestion that his nation was “fantastically corrupt”.

British aid needs to be spent wisely and we need sanctions, not rewards, for City institutions that aid capital flight. The proposal is a good way of returning money stolen from Africa’s poorest – and filling the gap between rhetoric and reality in the financing of humanitarian assistance.

Nigeria’s steel imports to hit $15.11bn annually – Punch

By Success Nwogu

Nigeria imports of steel will soon hit $15.11bn per annum, the Group Deputy Managing Director, Kam Industries Nigeria Limited, Mr. Bola Awojobi, has said.

 

A report of the Central Bank of Nigeria shows that Nigeria currently imports steel, aluminum products and associated derivatives of approximately 25 metric tonnes per annum from advanced countries estimated at $4.5bn, according to Awojobi.

He stated that the trend was worrisome, adding that there was an urgent need to reverse the situation.

Awojobi said it required the support of the Federal Government for steel manufacturers in Nigeria to reverse the trend and conserve foreign exchange.

He spoke during a working tour of delegates from the National Defence College, Abuja to Kam Industries in Ilorin, the Kwara State capital.

Stating that the steel subsector was strategic to national industrial growth, Awojobi urged the government to accord special consideration to indigenous players in the industry.

He said, “The Federal Government should ensure that the Nigerian Iron Ore Mining Company at Atakpe, the major source of iron ore in Nigeria remains in the hands of Nigerians. For strategic reasons, China, Japan, India, Australia and the United States use their indigenes to develop their steel industry. Nigeria should emulate these countries.”

The Vice-Chairman, KAM Industries, Alhaja Bola Yusuph, said the new project of the company’s steel melt shop and rolling mills at Jimba Oja, would, on completion, produce 200,000 metric tonnes per annum of high grade 5.5mm steel wire rods in coils, ASTM 615 and BS 449 rebars of 12mm – 32mm diameters from 100 per cent local raw materials, using modern technology.

She stated that lack of infrastructure, insufficient access to credit, reduced purchasing power, lack of skilled labour, policy somersault, inflation, high interest rates and declining value of naira were major challenges of the steel industry.

Moroccan investors ready for business in Nigeria despite recession – Businessday

A Nigeria-Morocco business meeting in Lagos has seen different government agencies and representatives of the Nigerian business community making efforts to pitch the viability of doing business in the country despite recession which according to many stakeholders, is an opportunity which investors should take advantage of.“These are difficult times and you may ask yourself, why should I come to Nigeria?” Yewande Sadiku, executive secretary, Nigerian Investment Promotion Comission (NIPC), asked rhetorically.

Sadiku went further to explain that history had shown many companies that venture into Nigeria at times when things were considered hard in the country, in the end, have seen their investments in Nigeria turn out to be among the best in their investment portfolios. Using the example of a particular telecomm company, Sadiku explained that some staff that made the decision to set it up in Nigeria were sacked, but today, their investment in Nigeria has turned out to be the company’s best investment decision by a long mile.

Laoye Jaiyeola, CEO, Nigerian Economic Summit Group (NESG), one of the organisations at the forefront of the renewed calls for increased Nigeria-Morocco business relations, explained that trade between both countries was barely $100 million. The meeting he hoped, would open up a new chapter for increase in trade.

Jaiyeola, when asked for specifics on the potential value of increased trade between Nigeria and Morocco and increasing the present $100 million, said: “I don’t know. I just know that we must grow it and it takes all of us to put our hands on deck to grow it. Everybody should grow whatever it is.”
“For us our works are based on evidence and things that can be proven,” said Jaiyeola who in this instance was unable to respond in showing NESG had data and factual research to demonstrate just how much value the increase in bilateral trade being promoted could potentially achieve from the present $100 million. “We have the potential to build a new shared future which will link businesses and create jobs,” said Miriem Bensalah, Chaqroun, president of CGEM.

Bensalah also explained that for Nigeria-Morocco trade relations to improve, the number of direct flights from Casablanca to Lagos (presently one), need to be increased to encourage more members of the Moroccan business community to regularly visit Nigeria in exploring investment and bilateral trade opportunities.

Sidi Aliyu, who represented Segun Awolowo, CEO of Nigeria Export Promotion Council (NEPC), explained that there are business-friendly provisions in Nigerian laws to ensure investors get value for their money and have sustainable businesses. He also said that a business may be registered to target only the domestic market 100 percent or set up to target the export market and doing this has a guarantee of 100 percent retention of export proceeds, as well as repatriation (when required). “If you set up your business in Nigeria, you are not only after the 180 million people that we have in Nigeria alone, but the entire population of the ECOWAS sub-region because Nigeria, traditionally, and at present, dominates the manufacturing hub in the region. Nigerian made products are not only consumed in Nigeria, but they trickle down to most of the ECOWAS countries.”

 

CALEB OJEWALE

CBN denies reports of allocation of dollars – Businessday

The Central Bank of Nigeria (CBN) has denied reports from some quarters that it allocates dollars unilaterally.

A statement by Isaac Okoroafor, Acting Director, Corporate Communications on Saturday in Abuja, decried the way some Nigerians chose to disparage those in leadership at this time in total insensitivity to the larger interests of the Nation’s economy.

He added that the CBN had set up an inter-bank foreign exchange market where anyone who wishes to buy foreign exchange could bid for and buy through their banks.

”It is not true that CBN allocate’s dollars.

‘There is no where in the world that the Central Bank sits by and allows vicious speculators to solely distort the value of its currency endlessly.

”All central banks intervene to buy or sell in the market to ensure that the local currency is protected from dubious attacks.”

He said that the channels for advice and contribution of ideas on the current economic situation by all patriotic Nigerians were open.

Okoroafor  pointed out that the seed of the nation’s current economic crisis was planted by the failure of those who occupied public office in the past but failed to act in the long term interest of the Nigerian economy.

He said it was easy for people to criticize from outside when they were already out of office.

According to him, the challenge the nation faced today was a choice between pandering to the established interest in Nigeria’s speculative economy and the protection of the wages of the real stakeholers who work hard on fixed incomes.

He said those were the core victims of the Naira depreciation.

He, however, assured Nigerians that the apex bank and the Federal Government will continue to explore avenues to find solutions to the current economic situation. (NAN)

    OPEC to Cut Crude Oil Production in January …Oil and Gas Stocks Advance – Punch

    The Nigerian equities market recorded mixed reactions during the week, appreciating on three (3) out of the five (5) trading days. Subsequently, the NSEASI advanced by 1.61% WoW, thus pushing the YTD return to -10.13%. Volume of transactions increased significantly by 291.14% WoW, following investors’ buy sentiments on some low-valued stocks. Market turnover also increased (+55.40%), albeit at a moderate pace.  Market breadth settled at 0.90x, indicating 28 gainers versus thirty one losers during the week.

    MOBIL emerged as the top gainer for the week, after its share price grew by a whopping 55.11% to NGN324.13. PORTPAINT (+31.16%), WEMABANK (+9.62%), CADBURY (+9.55%), OANDO (+9.27%), and GUARANTY (+9.21%) followed accordingly. On the flip side, the losers’ chart was led by NEIMETH (-12.00%) even as UNITYBNK (-10.17%), HORNYFLOUR (-10.09%), UAC-PROP (-9.72%), and CCNN (-9.60%) made up the list.

    We attribute the market’s performance to positive sentiments on Banking and Oil & Gas stocksduring the week. The Oil & Gas sector rally may not be unrelated to the announcement of OPEC’s decision to cut crude oil output by 1.2mbpd.

    In the coming week, we expect mixed sentiments in the market, barring the inflow of positive market news to sustain the current positive momentum.

    This report reviews events in the current week, with emphasis on different segments of the financial market, while presenting our expectations for the coming week.

    Fixed Income: Naira closes at NGN305/USD

    System liquidity tempered in the week, following the OMO mop-up which occurred yesterday. The OBB rate remained flat at 10.00% at the close of today’s trades, while the OVN rate pegged at 10.50% bringing the average money market rate to 10.25%.

    The outcome of the Primary Market Auction (PMA) which held on November 30th revealed an oversubscription across all tenors auctioned. The stop rate for the 91-day instrument was maintained at 13.99%; the 182-day bill advanced marginally to close at 17.49%, while the rate for the 364-day bill pared, settling at 18.69%.

    Sentiments in the secondary market, however, were somewhat muted as the average yield at the close of trades for the week advanced to 18.46% (+0.23%).

    Activities in the treasury bonds space were relatively calm in the week with marginal movements in yields across instruments. At the end of today’s trading activities, average bond yield advanced to 16.71% (+0.08%), reflecting some level of bearish sentiments.

    The Naira closed at NGN305.00/USD up from NGN305.25 which it closed last week in the interbank FX market. Average forward quotes on the other hand, pegged at NGN323.29.

    Agric Sector: OKOMUOIL Rallies

    Market reaction was positive for the Agricultural sector this week. The MERI-AGRI index advanced by 2.16% WoW to peg YtD return at 29.61%.  At the close of trading on Friday, there was one gainer and loser apiece. OKOMUOIL emerged as the lone gainer for the week, appreciating by 5.00% WoW to close at NGN38.01. Conversely, LIVESTOCK extended its prior week’s loss, paring by 7.69% WoW to close at NGN0.72.

    The sector’s strong performance was driven by positive sentiments towards OKOMUOIL, after persistent downtrend in the prior week.  In the coming week, we do not expect significant activity in the sector considering the dearth of news inflow to stimulate investors’ interest.

    Banking Sector: MERI-BNK Index gains 5.28% WoW

    The MERI-BNK index, which measures activities in the banking sector, left the negative zone this week, bringing the year to date return to 4.11%. There were bargain hunting activities on some counters this week, as the sector appreciated by 5.28% at the end of the week. Sector breadth (1.80x) signified nine (9) gainers against five (5) laggards.

    WEMABANK (+9.62%), GUARANTY (+9.21%), ETI (+3.89%) UBN (+3.46), and FBNH (+2.93%) populated the gainers list for the week while UNITYBNK (-10.17%), FCMB (-4.76%), SKYEBANK (-3.85%), ACCESS (-3.17%)and DIAMONDBNK (-3.16%) populated the laggards chart.

    Activities in the sector mirrored the general market mood, as investors’ sentiments were particularly skewed towards the sector, thus resulting in a strong WoW performance. We advise investors to take position in fundamentally justified stocks currently trading below their intrinsic value.

    Consumer Goods Sector: Sentiments Favour GUINNESS

    The Consumer goods sector index  closed the week in the positive region, as MERI-CMG index appreciated by 0.35% WoW to settle the YtD return at -4.55%. Sector breadth at 0.25x, represented three (3) gainers and twelve (12) decliners in the week.

    GUINNESS (+5.95%)steered the gainers’ chart to close at NGN89.00. The counter was followed by NB (+0.72%) and NESTLE (+0.62%) respectively. Conversely, HONYFLOUR led the loser’s chart, after paring by 16.24% to close at NGN0.98. The counter was trailed by PZ (-15.56%), CADBURY (-14.98%), 7UP (-14.25%) and NASCON (-13.75%) in that order.

    Pursuant to the provisions of Clause 15 of the General Undertaking, Appendix III  Rulebook of the Exchange, 2015 (Issuers’ rules), the Nigerian Stock Exchange (NSE) notified dealing members of the delisting of MANDRID and PREMBREW from the official daily list of the exchange with effect from December, 1, 2016.

    The sector performance for the week was a reflection of the general market mood. Although, we foresee some bargain hunting on specific sector stocks, we expect the sector’s performance in the coming week to be dictated by the general market mood, in the absence of any positive news inflow.

     

    Industrial Goods:   PORTPAINT Advances by 31.16%

    Investors’ reaction to the industrial goods sector was somewhat positive this week, as the MERI-IND index advanced by 0.84% WoW to settle the YtD return at -9.94%. During the week, there were equal numbers (3) of gainers and losers.

    PORTPAINT led the gainers’ chart, advancing by 31.16% WoW to settle at NGN1.38. Similarly, BERGER and DANGCEM appreciated by 2.73% and 0.01% to close at NGN6.40 and NGN160.00 respectively. On the flip side, CCNN (-9.60%),CUTIX (-4.55%) and PAINTCOM (-4.11%)emerged as the losers for the week

    The sector’s performance was largely driven by appreciable bargain hunting on selected stocks which currently trade at low levels. In the coming week, we expect a continuation of bargain hunting, particularly on large cap stocks in the sector.

    Insurance Sector:AIICO Emerges as Lone Gainer

    The insurance sector, as measured by the NSEINS10, declined by 2.04% at the end of the week, bringing the YtD return to -13.33%. The sector breadth (0.33x), signified one (1) gainer against three (3) laggards.

    AIICO emerged as the lone gainer, after advancing by 3.51% to close at NGN0.59. On the flipside, MANSARD (-8.99%), CONTINSURE (-3.00%) and CUSTODYINS (-2.11%) were the losers in the week.

    Profit-taking activities were sustained on sector stocks amidst the general bearish sentiments. We expect activities in the sector to reflect the general market in the coming week.

    Oil & Gas Sector: Rally Continues on MOBIL

    After four (4) weeks of consecutive decline, the Oil & Gas sector closed the week on a positive note having gained on four (4) out of the five (5) trading days of the week. Consequently, the NSEOILG5 advanced by 9.97% WoW, to settle the YtD return at -19.29%.  There were five (5) gainers against a lone decliner in the week, reflecting a sector breadth of 5.00x.

    MOBIL steered the gainers’ chart after the counter’s price climbed by 55.11% WoW, the counter was followed by OANDO, ETERNA, FO and TOTAL with respective gains of 9.27%, 4.91%, 3.92%, and 2.01%.  On the flip side, SEPLAT alone featured on the losers’ chart after recording a marginal loss of 0.01% to close the week at NGN 342.

    At the OPEC meeting on Wednesday, 30th November, 2016, members agreed to an output freeze. The organization set an output ceiling of 32.5mbpd, which implies a 1.2mbpd freeze, effective January 1, 2017. This move is expected to drive up global oil prices as the oil glut gradually fizzles out. Brent crude has since appreciated to USD53.78pb as at December 2, 2016.

    Significant rally was also witnessed on MOBIL, as the news of the NIPCO transaction, valued at c.USD1.4 per share (or NGN427 per share at NGN305/USD) filtered into the market.

    In line with the expectation of a reasonable growth in oil demand (c.1.2mb/d) vis a vis the expected OPEC output freeze in 2017, we expect a further uptick in the price of crude, which may positively affect the performance of some of the counters in the sector, especially those operating in the upstream segment of the Oil & Gas market.

    Services Sector:LENNARDS Delisted from the NSE

    The MERI-SER index recorded a WoW decline of 1.63% which dragged Year-to-date return to -17.19%. Sector breadth for the week remained at 0.25x with one (1) advancer against four (4) laggards.

      WEEKAHEAD-AFRICA-FX- Nigeria’s naira seen under pressure in tight market – Reuters

      NAIROBI Dec 1 (Reuters) – Nigeria’s naira is seen weakening further next week amid a crackdown on black market currency traders, while the Kenyan shilling may strengthen.

      NIGERIA

      The naira is seen weakening further against the greenback next week in the parallel market as dollar scarcity persists in Africa’s top economy, while forex demand by small businesses is set to surge ahead of holiday season sales.

      The local currency fell 2.08 percent week-on-week on Thursday to 480 to the dollar on the parallel market against 470 a dollar last week, while it was quoted by commercial lenders at 314.80 a dollar on the interbank market. The naira has, however, consistently closed around 305.5 a dollar level since August via the official window.

      “The consistent clampdown on black market operators by security agents has driven some currency retailers underground, putting more pressure on available hard currency,” one dealer said.

      KENYA

      The Kenyan shilling could strengthen against the dollar in the coming week due subdued to importer demand and increased inflows from overseas remittances, traders said.

      At 0742 GMT, commercial banks quoted the shilling at 101.80/102.00 to the dollar, the same as last Thursday’s close.

      “From the data we’ve seen in the past, we normally tend to see an uptick in diaspora inflows during this month of December,” said a trader at a commercial bank.

      GHANA

      Ghana’s cedi is expected to regroup in coming weeks on improved forex inflows as the central bank launches a $40 million fortnightly interbank auction, traders say.

      The cedi has been fairly stable this year but began sliding last month on a seasonal surge in end-of-year import demand and election-year shocks. It was trading at 4.3000 to the dollar at 1020 GMT on Thursday, compared with 4.1000 a week ago.

      “We see the local unit potentially taking back some gains should the regulator keep the amount offered at $40 million in the upcoming fortnightly auctions,” Barclays Bank Ghana analyst Andrews Akoto said.

      UGANDA

      The Ugandan shilling is seen trading broadly stable in the coming days, helped by hard currency inflows from Ugandan workers abroad returning for Christmas holidays and a large central bank local currency liquidity mop-up.

      At 0840 GMT, commercial banks quoted the shilling at 3,620/3,630, little-changed from last Thursday’s close of 3,625/3,635.

      “There are small-sized inflows from those individuals but all combined they will offer substantial support,” said Joel Serubiri, trader at Housing Finance Bank. The Bank of Uganda on Thursday also removed a total of 669 billion shillings ($185 million) via a 7-day repo and a 28-day deposit auction.

      TANZANIA

      The Tanzanian shilling is seen trading in a tight range against the dollar in the days ahead, helped by a slowdown in demand for greenbacks ahead of the holiday season.

      Commercial banks quoted the shilling at 2,180/2,183 to the dollar on Thursday, barely moved from 2,179/2,184 a week ago.

      “The isn’t much activity in the market as we approach the year-end festive period,” said Mohamed Laseko, a dealer at CRDB Bank.

      ZAMBIA

      The kwacha is expected to remain rangebound next week due to limited activity in the market ahead of the Christmas holidays.

      At 1156 GMT on Thursday commercial banks quoted the currency of Africa’s second-largest copper producer at 9.8500 per dollar from 9.8300 a week ago.

      “We expect activity to slow down in December and the first half of January. The thin market will sometimes cause the currency to swing,” the Zambian branch of South Africa’s First National Bank (FNB) said in a note. (Reporting by Oludare Mayowa, Kwasi Kpodo, Elias Biryabarema, Fumbuka Ng’wanakilala and Chris Mfula, John Ndiso; compiled by Katharine Houreld; Editing by Hugh Lawson)

       

       

      Nigeria and Morocco sign gas pipeline deal to link Africa to Europe – Reuters

      ABUJA Dec 3 (Reuters) – Nigeria and Morocco have signed a joint venture to construct a gas pipeline that will connect the two nations as well as some other African countries to Europe, Nigeria’s minister of foreign affairs said on Saturday.

      The agreement was reached during a visit by the Morocco’s King Mohammed to the Nigerian capital Abuja, Geoffrey Onyema, the minister, said, adding that the pipeline project would be designed with the participation of all stakeholders. 

      “In this agreement both countries agreed to study and take concrete steps toward the promotion of a regional gas pipeline project that will connect Nigeria’s gas resources, those of several West African countries and Morocco,” Onyema told reporters in Abuja.

      Onyema said the project aimed to create a competitive regional electricity market with the potential to be connected to the European energy markets.

      No timeline was given for when the pipeline construction work will start and how much it will cost.

      Nigeria is rich in hydrocarbons but produces little electricity, making its industries uncompetitive. Its economy now faces a recession caused by a plunge in crude prices.

      Militants in its oil producing heartland of the Niger Delta have also blown up pipelines in a quest for a bigger share of Nigeria’s oil wealth, which has cut crude output this year.

      “Nigeria and the Kingdom of Morocco also agreed to develop integrated industrial clusters in the sub-region in sectors such as manufacturing, Agro-business and fertilizers to attract foreign capital and improve export competitiveness” the foreign minister added. (Reporting by Felix Onuah; Writing by Chijioke Ohuocha; Editing by Toby Chopra)

       

        Fitch’s Bank Rating, a Reflection of Current Economic Realities – Thisday

        Broad street, Lagos, Haven of Nigerian banks

        Olaseni Durojaiye, in this report, reviews the recent Fitch Ratings’ assessment of Nigerian banks and presents the perspectives that the rating mirrors the current economic realities

        Barely a month after some Nigerian banks came under the spotlight via the Moody’s rating, the sector is again back under the klieg lights as a leading global rating agency, Fitch Ratings, published its Sovereign Support Rating Floors of 19 Nigerian banks. This followed a reassessment of potential sovereign support for the lenders.

        While the rating does not connote insolvency or any imminent banking industry crisis, observers and analysts however, contended that it is a pointer that the industry might be defaulting in meeting obligations to foreign investors as well as paying for maturing bills, which is an assessment of the banks’ status with respect to their abilities to attract foreign capital and meet their foreign obligations.

        The cause, according to analysts is traced to the scarcity of the United States Dollar (USD) and depleted external reserves, which already constrain government from playing its supporting roles when banks face such tough times.

        While the recent rating should not come as a surprise to analysts and observers of happenings in the economy, considering that financial institutions outlook in emerging markets revealed negative trends, it nevertheless reiterates the current economic challenges in the country’s economy.

        The Fitch Ratings

        Fitch Ratings publishes opinions on a variety of scales. The most common of these are credit rating, but the agency also publishes ratings, scores and other relative opinions relating to financial or operational strength. For example, Fitch Ratings also provides specialised ratings of servicers of residential and commercial mortgages, asset managers and funds.

        Fitch Ratings’ credit rating provide an opinion on the relative ability of an entity to meet financial commitments, such as interest, preferred dividends, and repayment of principal, insurance claims or counterpart obligations. Credit rating is used by investors as indications of the likelihood of receiving the money owed to them in accordance with the terms on which they invested. The agency’s credit rating covers the global spectrum of corporate, sovereign (including supranational and sub-national), financial, bank, insurance, municipal and other public finance entities and the securities or other obligations they issue, as well as structured finance securities backed by receivables or other financial assets.

        The Recent Rating

        In its revision of the rating of 19 Nigerian banks, Fitch Ratings downgraded the long term issuer Default Ratings of First Bank of Nigeria Limited, FBN Holdings Plc, Diamond Bank Plc, Fidelity Bank Plc, First City Monument Bank Limited and Union Bank of Nigeria Plc from ‘B’ to ‘B-‘in line with their stand-alone credit worthiness as defined by their Viability Rating.

        In the same rating, the agency affirmed the long-term IDRs of Zenith Bank Plc, Guaranty Trust Bank Plc, United Bank for Africa Plc, Wema Bank Plc and Bank of Industry.

        According to a statement released in London, the agency explained that, “The downgrade of nine banks’ SR and revision of 10 banks’ SRFs to ‘No Floor’ reflects Fitch’s view that senior creditors can no longer rely on receiving full and timely extraordinary support from the Nigerian sovereign if any of the banks become non-viable.

        “Fitch believes that the Nigerian authorities retain a willingness to support the banks, but their ability to do so in foreign currency is weakening due to Nigeria’s eroding foreign currency/reserves, as well as limited confidence that any available foreign will not be used to execute other policy objectives. Therefore, Fitch takes the view that supports, if ever required by the banks, cannot be relied upon”.

        According to Fitch, the long-term IDR of Diamond Bank Plc, Fidelity Bank Plc, FCMB and Union Bank are downgraded to ‘B-‘ as they are now underpinned by their VRs of ‘B-’ rather than their SRFs, as was previously the case.

        The Fitch Ratings statement added that, “The downgrade of FBN’s long-term IDR reflects both revision of its SRF and a downgrade of its VR. The latter reflects Fitch’s view that the bank’s capital base is no longer commensurate with its risk profile, reflecting questions about asset quality, particularly its level of unreserved impaired loans to Fitch Core Capital (54 per cent as at the end of 2016) and pressure on its regulatory capital adequacy ratio.

        “The VR of FBNH has also been downgraded, which drives the downgrade of its long-term IDR to ‘B-’.

        Fitch also noted that it had also downgraded the national long-term ratings of Diamond Bank, Fidelity Bank, FCMB and Union Bank to ‘BBB (nga)’ from ‘BBB+’ (nga) following the rating actions on their long-term IDRs.

        Analysts’ Opinions

        Reacting to the rating, Executive Director, Corporate Finance, BGL Securities, Olufemi Ademola, told THISDAY in an interview that the rating was not abstract but reacting to a bad situation.

        According to him, “The rating is nothing abstract; it is reacting to a bad situation that the banks find themselves. It’s not surprising to discerning observers because the problem cuts across all sectors, be it oil and gas, power or sales (fast-moving consumer goods).

        “With the likelihood of another round of devaluation of the naira, banks with high USD denominated loans are in trouble because what the situation translates to is that their liability has doubled. This has weakened their balance sheet. GTBank was smart to have paid off their Euro bond in advance before it matured,” he stated.

        Ademola contended that lending at this time would attract higher interest due to the perceived higher risks involved adding that since there is the likelihood of another round of devaluation of the naira, the banks are weaker than they were before.

        “The banks are weaker than they were before and there is the tendency of a further devaluation of the naira. Lending at this time will attract a higher interest because of the perceived higher risk involved as some will (have) high concern around ability to repay,” he submitted.

        On his part, a Lagos-based analyst with a foremost economic advocacy group, Rotimi Oyelere, argued that the rating did not connote insolvency or banking industry stress but a pointer that the industry might be defaulting in meeting obligations to foreign investors as well as paying for maturing bills. He views it as an assessment of the banks’ status with respect to their abilities to attract foreign capital and meet their foreign obligations.

        According to him, this is as a result of the scarcity of the greenback, depleted external reserves, which already constrain government from playing its supporting roles when banks face such tough times.

        “It thus raises the question as per the quality of the assets of the banks. It appears toxic assets, non-performing loans (NPLs) and other highly risky investment are once again gathering momentum. I think the banks failed to build substantial buffers especially in assets denominated in foreign currency in the era of plenty. This would have shielded them from the current pervasive volatility. With possibility of further depreciation of the naira, the banks’ buffers may suffer further attacks.

        “Another contributory factor to the asset quality generally is the number of high valued loans/facilities that have been restructured, particularly in the oil and gas sector. This is why it is important for the banks to apply appropriate metrics when pricing their risks especially in times of boom,” he said.

        Speaking further, Oyelere stated that, “In times like this, the apex bank must raise its games to minimise regulatory risks, or perhaps contractions in the industry.

        “Banks may explore the bonds market for raising fresh capital to finance maturing bills. Access Bank successfully raised about $350 million some months back,” he argued, adding that, “The viable bailout for the banks and even for the economy in the short term is restoration of peace in the Niger Delta region, if it will restore output to budget benchmark of 2.2 million barrel per day and then more foreign flows to the national account. If we can at least produce good quantity consistently, some of these currency depreciation risks would be averted,” he maintained.