Economic Progression: the road to the economy getting better – Businessday

It’s a brand-new year, as entrepreneurs and household money managers we want to know what will happen in money terms in 2017, but no analyst can predict the future, we can only identify economic triggers and attempt to estimate their impact.

In this article, we have identified six of such triggers we should watch carefully as they will have substantial impact.

However, where do we stand coming into 2016?

  • Economy in recession, GDP growth negative all year.
  • Inflation continues to rise, now double digit, destroying savings
  • Unemployment up
  • 2017 FGN budget submitted, spending up, revenue sources not firm.
  • Chatter of $29.9b loan grows, will NASS approve?
  • Interbank market distorted: with DSS “intervention” the ability of the parallel market to perform “price discovery” evaporates

 

This is not an economy that fills anyone with confidence, capital controls are literally starved the economy to death. So back to 2017, what triggers should we track?.

 

  1. Donald Trump energy plan & OPEC decision on production quotas.
  2. FGN Deficit financing
  3. Central Bank of Nigeria forex policy
  4. Escravos Pipeline integrity
  5. Harvest and delivery to markets of local food
  6. China buying of commodities

U.S. Republican presidential candidate Donald Trump speaks at the Family Leadership Summit in Ames, Iowa, United States, July 18, 2015. REUTERS/Jim Young

Donald Trump’s energy plan emphasizes maximizing internal American hydrocarbon sources. If America drills more oil and even exports, then oil prices will remain low, thus severely increase Nigeria budget deficit. OPEC has agreed a significant output cut (Nigeria secured an exception), should this cut be carried out, then output fall and oil prices will rise, increasing Nigeria forex earnings which will be positive.

Deficit Financing, how the Federal Government will finance its 2017 budget deficit will largely drive interest rate direction. If the foreign loan component to fund the budget is rejected, the local borrowing will go up and will be more expensive, affecting SMEs in America. Should the US Federal Reserve also raise interest rates, then foreign borrowing component will also rise also increasing the deficit.

CBN Forex Policy points to tighter control over supply of forex to fund the CBN interbank market. If the interbank market works as envisaged, and supply of forex improves, then manufacturers and importers get foreign currency on time and in sufficient quantities. A market driven forex regime is also key to the subsidy regime for imported petrol.

The Escravos to Lagos Gas pipeline supplies gas to power the gas fired power plants in Nigeria’s manufacturing base in the South West. This is key, no pipeline integrity means no electricity causing economic output and thus GDP to fall, increasing unemployment. So watch if the integrity of the pipeline will be maintained.

Food Harvests: Food comprises a key component in the computation of the CPI figure for inflation. If food harvest and distribution to key markets improve, it contributes to regression of inflation in the economy. So its not just harvests, but storing and transporting that harvest to market.

China Commodity buying, China has been a buyer of commodities, minerals, and energy from Nigeria. These trade flow with China has boosted our export revenues, boosting local currency values and consumption. Should the Chinese buying slowdown, our export earnings will fall, creating holes in budget funding.

Best Case scenario

American domestic energy plan does not kick in as expected, leading to stable demand for crude oil. Parrell to that is OPEC agreement on output, leading to oil prices north of $60 stabilizing Federation forex revenues.

Stable forex flows, should make a better case for foreign loan which take pressure off local bond markets allowing greater flexibility in CBN funding of interbank market. Attacks on gas pipelines diminish, leading to vastly improved power in the SW, creating more jobs, growing fiscal revenues. Food prices fall, as harvests are processed with greater efficiency.

 

Worse Case Scenario

OPEC fails to implement production cuts, America ramps up renewables and domestic Shale drilling, depressing oil prices to below $50. This fall in crude oil prices increase pressure on the fiscal deficit, leading to higher borrowing and a crowding out of private credit and pushes interest rates above 20%, killing SMEs

Fiscal deficit forces CBN to tighten forex availability, killing off imports, crashing the productive base. Fuel imports cannot be funded, attacks on gas pipes continues, snuffing out local production, increasing unemployment, deepening stagflation.

 

What can we do?

  1. Remove capital controls, aggressively seek Investments and Remittances
  2. Refocus on rural roads, to increase food supply to towns reduce food wastage by increasing local processing.
  3. Ensure ‘peace” with Niger Delta agitators, pass PIGB, ensure gas flows.
  4. Boost household incomes, if incomes don’t rise consumptions won’t restart, economy won’t restart
  5. Pursue import substitution especially for imported food
Kalu Aja is a Financial Planner and economic strategy consultant with over 18 years’ expertise in the financial services industry. He runs a financial advocacy blog; www.kaluaja.com which focus on personal financial and the economy. His handle is @FinPlanKaluAja

BITCOIN QUIETLY RAGES ON WHILE GLOBAL CURRENCY MARKETS IMPLODE – Newsweek

The digital currency ‘quietly doubles in size year-on-year, it’s covering more and more territory, surprising more and more pundits, and being adopted by more and more people.’

It’s been a year since I argued that bitcoin was too big to fail, but it has only got stronger. And yet, you don’t have to look far to find a new death knell for the digital currency.

These prognostications may be loud and frequent but each is more wrong than the last. For instance, December found many asking whether bitcoin was dead only to be faced with a rally that saw the digital currency cross the $1,000 mark. We saw similar rallies following the Brexit vote and U.S. election when bitcoin became a safe haven in the face of geopolitical risk that brought the security of our most trusted fiat currencies into question.

Over the course of 2016, bitcoin’s value grew by over 122 percent. Closer to home, we saw our most impressive quarter to date in Q4 2016, with our number of wallets crossing the 10 million mark and transaction volume doubling. Now is a perfect time to reflect on why that’s the case.

Some pretty strong language has been used to describe the past 12 months, including “roller coaster,” “catastrophic,” “dangerous,” and “volatile.” Amazingly, these words do not apply to bitcoin, but rather to the implosion of global currency markets.

It started in June, when traders were caught off guard by the U.K.’s decision to leave the Eurozone. Since the referendum, the GBP has dropped by more than 17 percent in a colossal collapse of confidence. In a country that imports 78 percent of its goods, everything has become a lot more expensive and some economists speculate it will get worse.

bitcoin price blockchain nic caryThe price of bitcoin more than doubled in 2016.COINMARKETCAP

Britain’s experience was not an outlier. In Africa, the Egyptian pound dropped 59 percent and the Nigerian naira fell 37 percent. In South America, the Argentine peso plummeted over 17 percent and the Venezuelan bolivar tumbled so far off a cliff it’s difficult to measure—even bricks of cash are worthless for everyday purchases there.

Perhaps most dramatically of all, India, the world’s second most populated country, introduced a stunning policy of demonetization declaring banknotes illegal overnight. This drove hundreds of millions of people to scramble for alternative stores of value. The price of gold instantly traded at a premium, as did digital currency.

During this time period, and partially in response to it, the price of bitcoin surged. This phenomenon is known as antifragility, a property of systems that increase in capability and resilience as a result of stressors, shocks, attacks, and faults. Bitcoin was again declared the world’s best performing currency in 2016 by Bloomberg. In fact, it’s held that title every year since 2010, with the notable exception of 2014, when it was the worst. Still, five out of the past six years is a powerful signal. When the New England Patriots do that well we call it a dynasty.

Bitcoin walletA bitcoin paper wallet with QR codes and a coin, La Maison du Bitcoin, Paris, France, May 27, 2015.BENOIT TESSIER/REUTERS

Bitcoin also trounced the stock market from a performance perspective. Brand names like McDonald’s, Home Depot and Disney grew at a paltry 1.6 percent or less; bitcoin outpaced them by over 70 times.

Exponential technologies have incredible impacts on our society. They reimagine the world in ways that inspire and surprise us. Every year, from transaction growth, to new users coming online, the bitcoin network and the block chain have been doubling in size.

I’ve found that people have a difficult time understand exponentials, which makes sense because we don’t really run into them that often. An old French parable explains it well. Imagine a small lily pond with a single lily pad in it. The next day, there are two. Then four the day after, etc. If the pond is full on the 30th day, which day will the pond be half full? The answer may surprise you, but it’s the 29th day.

So while bitcoin quietly doubles in size year-on-year, it’s covering more and more territory, surprising more and more pundits, and being adopted by more and more people. 2017 looks very promising, indeed.

Nicolas Cary is the co-founder and president of Blockchain, the world’s leading software platform for digital assets.

Naira firms up at N305 against Dollar at interbank FX Market – ProShare

Today, Naira maintained stable trading pattern, holding its key support level atN304.00 against the dollar at the interbank market. It closed flat to settle atN305.00 and N399.00 at  the interbank FX market and parallel market respectively as trading data had indicated.

Analysis reveals that the Naira closed flat at the interbank FX market to end the week with no price movement posture.  Further analysis revealed a sustained stable trading outlook, similar to the trading pattern recorded in the previous week as Naira recorded low volatility in both markets during the week.

The sustained sale of the dollar to BDCs and the stiff measures towards road-side currency traders had played significant role in achieving the stability observed, particularly at the parallel market level. However, speculative tendency and scarcity of FX remain the driving factors depressing the value of Naira.

Furthermore, the Nigerian currency still maintained its support level at N304.00 at interbank market while Naira sustained its strong hold at N399.00 atparallel market as trading pattern in both markets had indicated.

In addition, post Flexible FX regime analysis revealed that Naira had lost 8.21% and 15.65% in value at interbank and parallel markets respectively as at end of trading session today. The spread between the interbank and parallel market rates remained flat at 30.82% as against 30.82% recorded in previous week.

Seme Border Rakes In N1.5b In December Enforces Ban On Vehicle Imports Through Land Borders – NTA

Taupyen Selchang, Seme: The Nigeria Customs Service Seme Area Command collected the sum of One Billion, Five Hundred and Twenty One Million, Three Hundred and Fifty Nine Thousand, Five Hundred and Sixty Four Naira Seventy Three Kobo (N1,521,359,564.73) as revenue in the month of December 2016. The amount exceeded the monthly revenue target of the Command and the amount collected in the corresponding year 2015 with N499, 558,434.40 and N101, 129,228.70 respectively.

The Command also made a total of seventy-four (74) seizures with a Duty Paid Value (DPV) of fifty-five million, six hundred and forty-one thousand, one hundred and twenty-four naira fifty-six kobo (N55,641,124.56) in the same month of December 2016. The Enforcement Unit of the Command has succeeded in suppressing smuggling activities to the barest minimum.

Commenting on the success recorded the Customs Area Controller of the Command, Compt. Dimka Victor David disclosed that apart from the commitment of his officers and men, the feat recorded is also attributed to the recent policy pronouncement of the Federal Government banning the importation of new and fairly used vehicles through the land borders.

He said, “the policy statement on the restriction of new and fairly used vehicles through the land borders brought about an upsurge in the number of vehicles escorted into Seme border, which translated to the increase in the Command’s revenue figure realized”.

The Customs Area Controller further disclosed that the quest of the command to remain passionate and resolute in enforcing the fiscal policies of the Federal Government cannot be over emphasized.

Ten Billion Five hundred and three Million, Eight Hundred and Ninety Four Thousand, Eighty Nine Naira, Eighty-One Kobo only (N10, 503,894,089.81) was collected from January to December 2016 on general cargoes and vehicles. Duty and taxes accrued from escorted transit vehicles accounted for 56% of the total revenue generated in the same year.

The Command recorded an unprecedented number of seizures (848) with a Duty Paid Value (DPV) of N608, 219,970.94 from January to December 2016. There is a corresponding decline in smuggling activities occasioned by the aggressive anti-smuggling operation of the Command in order to ensure total compliance with the policy thrust of the Comptroller General of Customs and the Service extant laws.

Responding to the media on the Federal Government ban on new and fairly used vehicles, the Customs Area Controller said, “the Command is battle ready to implement the Federal Government policy to the latter.” He re-stated that because the wisdom of the Federal Government is above every common sense, the Command have strategized and is still re-strategizing towards the implementation process bearing in mind that the daredevil smugglers can be brutal and deadly. However, he reiterated that the command is battle ready and equal to the task.

The Customs Area Controller further disclosed that presently, the vehicle seat in Seme border Command has been disbanded and its officers re-deployed to beef up border patrols for effective implementation of the Federal government policy. He said, the way smuggling of rice was drastically suppressed by the command, it is also fully committed to implementing same for vehicles that will be smuggled through the land border after 1st January 2017.

He enjoined the general public, stakeholders to be adequately sensitized and stay away from buying vehicles through the land borders to avoid loss.
The Comptroller re-emphasized that facilitating legitimate trade is one of the service core mandates, however, he noted that legitimate trade in new and fairly used vehicles into Nigeria is now strictly facilitated in the seaports.