FEBRUARY 16, 2018

By Paul Wallace and David Malingha Doya

• Government of Nigeria sold 12-year and 20-year dollar bonds

• Finance ministry says order book in excess of $11.5 billion

Nigeria sold $2.5 billion of Eurobonds on Thursday as it sought to lower funding costs by using the notes to refinance higher-yielding naira debt.

Africa’s biggest economy sold $1.25 billion of 12-year securities at 7.143 percent and a separate 20-year tranche, also $1.25 billion, at 7.696 percent, the Finance Ministry said on its Twitter account. The nation’s fifth Eurobond sale received subscriptions in excess of $11.5 billion, according to the ministry. 

 

Proceeds will be used for “refinancing of domestic debt,” the ministry said in a series of tweets. The sale completes a dollar-debt program of selling more foreign debt to help reduce the burden of paying double-digit yields on local-currency bonds. That would free up funds needed to expand infrastructure, and help the economy sustain recovery from a contraction in 2016, the first in a quarter-century.

Nigeria sold a record $4.8 billion of Eurobonds last year, most recently in November, when it issued $3 billion of 10- and 30-year debt. Yields on the latter rose seven basis points to 7.71 percent by 5:32 p.m. in Lagos, the highest since they were issued. Nigeria’s local bonds have an average yield of 13.8 percent, according to data compiled by Bloomberg.

Citigroup Inc. and Standard Chartered Plc managed the deal, while Standard BankGroup Ltd.’s Nigerian unit was a financial adviser.

Nigeria follows Egypt, which became the first African sovereign to tap the market this year when it sold $4 billion of debt on Feb. 13. Angola, Ghana, Ivory Coast and Kenya have all said they are considering deals soon.

FEBRUARY 14, 2018

By Roseline Okere

There are indications that the United States may halt crude oil import from Nigeria by 2022, as it moves closer to becoming a net export of petroleum products.The United State Energy Information Administration (EIA) has projected that the United States will become a net energy exporter in 2022 in the newly released Annual Energy Outlook 2018, primarily driven by changes in petroleum and natural gas markets.

 

Nigeria saw a significant reduction in the US imports of its crude in recent years, starting from 2012, following the shale oil production boom.The U.S. imported a total of 28.53 million barrels of crude oil from Nigeria in the third quarter of last year, up from 18.88 million barrels in the same period in 2016; 10.13 million barrels in 2015; 5.10 million barrels in 2014; and 21.23 million barrels in 2013.

The Minister of State for Petroleum, Dr. Ibe Kachikwu said recently that Nigeria would explore the possibility of selling crude oil to African markets.He said: “Nigeria has to begin by looking at the country first. What do we do to encourage local companies to be able to compete in Africa? It is along these lines for example, that we have started product or sector specialisation which are the areas where we have the most competitive advantages.”

 

According to EIA, the transition from net energy importer to net energy exporter occured even earlier in some sensitivity cases that modify assumptions about oil prices or resource extraction. Sensitivity cases with less energy production project that the United States will remain a net energy importer through 2050.

It stated: “The transition of the United States to a net energy exporter is fastest in the High Oil Price case, where higher crude oil prices lead to more oil and natural gas production and transition the United States into a net exporter by 2020. In that case, higher crude oil prices also result in higher petroleum product prices and lower consumption of petroleum products, driving decreases in net petroleum imports.

“In the High Oil and Gas Resource and Technology case, with more favorable assumptions for geology and technological developments, the United States becomes a net exporter in 2020, and net exports increase through the end of the projection period. In cases with relatively low oil prices or less favorable assumptions for geology and technological developments, U.S. net energy trade still decreases, but the United States remains a net energy importer through 2050.

“In energy equivalent terms, the United States imported about 27 quadrillion British thermal units (quads) of energy in 2017 and exported 18 quads, which resulted in 9 quads of net imports. In 2017, the United States imported about 11 quads of petroleum and other liquids and exported two quads of coal and coal coke. U.S. natural gas trade in 2017 was nearly balanced between imports and exports, and net electricity trade with Canada and Mexico was relatively small. Petroleum and natural gas account for most of the changes EIA projects in U.S. energy trade.”

EIA said that U.S. net petroleum trade—crude oil, petroleum products, and natural gas plant liquids—has fallen in recent years, reaching 3.8 million barrels per day (b/d) in 2017 based on data through November.

He expressed concern that the country has not been able to capture the African terrain of the market, adding that the market must be captured in terms of contract awards, whether in crude, investment or other formulations.

FEBRUARY 14, 2018

By Femi Adekoya

Nigeria may have to do more under its diversification agenda and remove several restrictions to investments if it hopes to benefit from the extended trade deal, Africa Growth and Opportunity Act (AGOA) by the United States, the State Department’s Acting Director for Economic and Regional Affairs, Harry Sullivan said during a telephonic briefing on Tuesday.
  
According to data from the department, Nigeria accounted for a paltry volume of $9 million out of $2.7 billion agricultural exports recorded by the continent to the United States in 2017.
    
Specifically, Sullivan noted that an increasing number of countries took advantage of the benefits available under the legislation, adding that the low volume recorded in non-oil export was as a result of dependence on oil.Nigeria’s oil export to the U.S rose from $3.4 billion to $6 billion.

 

 
The U.S. however encouraged Nigeria to liberalize to attract greater foreign investment stating that there are many restrictions to doing business in Nigeria thwarting foreign and domestic investment.
  
In 2017, African exports of agricultural products increased by 10% to $2.7billion, compared to previous years where non-oil exports increased from $1.3billion in 2001 to $4.2billion in 2015.Overall, trade trend was also positive, with US-Africa trade rising by 15.8% in 2017, from $33billion to $38.5billion, while US exports to Africa rose 4% to $13.1billion and African exports to the US rose by more than 20% to over $24billion.

 

Between 2016 and 2017, Ghana saw its exports under AGOA quadruple to more than $300million, while Madagascar and Ethiopia took greater advantage of the market access granted for footwear and garments, with the two countries’ exports to the US rising to $152million and $92million respectively.
 
The United States (U.S.) had revalidated AGOA by 10 years, to elongate the flagship trade deal with the continent till September 30, 2025.The new window re-opened vista for Nigeria and other countries in the region to grow their non-oil exports to the U.S. to over $8 billion within the next 10 years, under the extended trade deal.
 
Essentially, under the programme’s extended regime, African countries would be engaged in the rules of origin to engender value-addition of raw materials as they could now include the cost of direct processing, as they share production from one country to another on their way to the U.S. market.  

 

 

Furthermore, African countries exporting to the U.S. can also use the programme across borders, thereby stimulating intra-African trade in regional markets, where value may be further added to export products.

 

  
Similarly, the reviewed scheme equally renews focus on the ability of Africans to meet food safety standards in the U.S. and other industrial standards that have been identified for export products.

 

The US determines whether countries in Sub-Saharan Africa meet its published eligibility requirements on a yearly basis and beneficiary status can be granted, or withdrawn, at the discretion of the US President.  Currently, 38 African countries are eligible for AGOA, which extends duty-free access to the US market across 6 000 tariff lines.

Increased oil exports, which are not covered by AGOA, accounted for a large share of the increase, but Sullivan said there were also some “encouraging signs of diversification”.

FEBRUARY 14, 2018

By Colleen Goko and Dana El Baltaji

• Currency erased day’s gain as ANC gives Zuma time to resign

• Some investors concerned that impasse may affect budget

 

ANC Gives Zuma More Time to Leave Office

For about five minutes, the world’s most volatile currency barely budged as a top leader of South Africa’s ruling party made the announcement that everybody had been waiting for: President Jacob Zuma has been ordered to resign.

 

Then the rand started giving up the day’s gain as traders digested the statement read by African National Congress Secretary-General Ace Magashule: the party hasn’t given Zuma a deadline to comply, leaving the country’s leadership crisis unresolved and investors unsure about prospects for the currency. Cyril Ramaphosa, leader of the ANC and Zuma’s designated successor, is still waiting in the wings.

Unless Zuma decides to resign soon, the ANC may have to order its lawmakers in parliament to approve a motion of no confidence in the president. The political impasse already forced the unprecedented postponement of last week’s scheduled annual state-of-the-nation address and may imperil the presentation of the budget next week, with Moody’s Investors Service poised to cut the country’s local-currency credit rating to junk.

That would spark the exit of the country’s bonds from Citigroup Inc.’s World Government Bond Index, resulting in capital outflows as funds that track the gauge are forced to sell, and pressure on the currency. The rand weakened 0.4 percent to 11.9841 per dollar by 3:45 p.m. in Johannesburg, paring its advance in the past three months to 21 percent.

Play Video

 

ANC Gives Zuma More Time to Leave Office

 

The African National Congress will replace Jacob Zuma as president of South Africa.

(Source: Bloomberg)

Read more here about the latest twist in the Zuma saga

Here’s what investors and analysts are saying about the latest developments:

• Reezwana Sumad, Johannesburg-based analyst at Nedbank Group Ltd.:
  • “If this extends for more than a week without a resignation, the market could become quite fatigued, and this will likely be negative for the rand in the near term”
• Zaakirah Ismail, a fixed-income analyst at Standard Bank Group Ltd. in Johannesburg:
  • “The rand has been awaiting key policy signposts amid policy uncertainty and has been trading in somewhat overvalued territory in the hope that the political environment would become more certain before key events such as the SONA and budget. However, delays in certainty stemming from the politics will see the rand discount its gains based on these views while key events which are meant to be important policy signposts hang in the balance”
• Natalie Rivett, London-based senior emerging-market analyst at Informa Global Markets Ltd.:
  • “We expect to see a softer bias prevail for the rand should it look as though a Zuma exit will be dragged out further.  Latest comments from the ANC have done little to suggest otherwise, with no deadline provided, while the possibility that Zuma will have to be removed through a parliamentary motion appears more likely now”
  • “Still, with Zuma’s days as president ultimately numbered, we would expect the rand to stay rangebound, with limited upside past 12.20”
• Manik Narain, head of emerging-market foreign-exchange at UBS Group AG in London:
  • “We have to see this in the context of how things have evolved since Ramaphosa won in December. Since then we’ve seen that he has proven to be stronger than one initially expected. He has made significant changes, he has prevented Zuma from making the State of the Nation address.”
  • “As much as there is mild disappointment in the market as this news has broken, the market is taking the big picture as positive for South Africa, while Ramaphosa is strengthening his grip over the ANC, and Zuma looks like he’s hanging on for dear life. He’s probably only managed to buy a little bit of time. This hasn’t changed our view of South African assets.
  • “The focus should now turn to next week’s budget announcement. South Africa is still battling to maintain its local-currency investment-grade status. There’s between 2.5 percent and 3 percent of GDP of portfolio flow at risk if it loses its investment grade”
• Jaap Meijer, head of equity research at Arqaam Capital Ltd. in Dubai:
  • “The ANC wants Ramaphosa to take over as soon as possible ahead of the 2019 elections, though Jacob Zuma has not been given a hard deadline and ANC has not discussed a no confidence motion today The rand has strengthened almost 20 percent since October following the appointment of Cyril Ramaphosa, who is more centrist, investor-friendly and pragmatic than his predecessor”
  • “Bond markets are likely to remain firm though we keep an eye on the U.S. 10-year. We see room for 10-year South African bond yields to fall as well, as South Africa’s bond yields trade at a premium of 150 basis points to its inflation rate differential. We, therefore, expect 10-year bond yields to fall from 8.6 percent to 8.25 percent by year-end”
• Simon Quijano-Evans, emerging-market strategist at Legal & General Investment Management Ltd. in London:
  • “The wind of change came to South Africa in December and it will not change direction now. The rand’s price action since early December shows that the wind of change from the new ANC leadership is a strong positive for the country’s economy. Today’s ANC statement shows that the direction remains in place”

— With assistance by Arif Sharif

FEBRUARY 14, 2018

JOHANNESBURG, Feb 14 (Reuters) - South Africa’s rand jumped more than 1 percent to its firmest since June 2015 and bonds hit a one-week best on Wednesday after the ruling African National Congress (ANC) said it would proceed with a vote to remove President Jacob Zuma from office.

At 1140 GMT the rand was 1.1 percent firmer at 11.8200 per dollar. It earlier rallied to a session best 11.7975 just after the ANC’s parliamentary caucus said it would support a motion of no-confidence brought by an opposition party against Zuma and due to be heard in the house on Thursday.

The party’s chief whip Jackson Mthembu said the ANC hoped to elect party leader Cyril Ramaphosa as president of the country on Thursday, after the no-confidence vote, or on Friday, accelerating the end of Zuma’s scandal-plagued reign.

“We saw the rand strengthen about 10 cents on the announcement but the fear is it’s still not a done deal, so that’s why we’ve seen the rand bounce. Zuma could still have something up his sleeve,” Tradition Futures derivatives trader Gillian van Heerden said.

The rand’s fortunes have been closely tied to political outcomes over the past couple of years, with the impasse in the last few weeks over Zuma’s future weighing on the currency’s 2018 rally.

The cost of insurance on the rand also rose sharply, with the price of one-week options increasing nearly 30 percent.

Bonds also firmed, with the yield on the benchmark 2026 paper down 6 basis points at 8.395 percent.

Stocks gained, with the Johannesburg bourse’s index of 40 blue-chip shares up 0.5 percent at 50,658 points, while the All-Share index rose 0.5 percent to 57,501 points. (Reporting by Mfuneko Toyana; Editing by Dale Hudson)

FEBRUARY 14, 2018

CAIRO, Feb 14 (Reuters) - Egypt’s GDP growth for the second quarter of the 2017/18 fiscal year rose to around 5.3 percent from 3.8 percent in the same period last year, Planning Minister Hala al-Saeed said on Wednesday.

Egypt’s fiscal year begins in July and ends in June.

Egypt’s economy has been struggling since a 2011 uprising drove foreign investors and tourists away, but a $12 billion IMF deal signed in November 2016 is hoped to put the country on the right track. (Reporting by Moemen Writing by Arwa Gaballa; Editing by Alison Williams)

FEBRUARY 14, 2018

By Lananh Nguyen

Vontobel CEO Staub Says Volatility Is a Return to Normal

U.S. regulators are keeping a keen eye on liquidity in the world’s largest financial market.

“As far as the foreign-exchange market goes, we’re concerned about any market that loses liquidity,” Andrew Busch, the Commodity Futures Trading Commission’s first chief market intelligence officer, said at the TradeTech FX conference in Miami Tuesday. “It gets to the central question: Where is it? Is it there? Is it pretend liquidity, is it ghost liquidity?”

The ability to buy and sell currencies when needed has been a focus for participants in the $5.1 trillion-a-day market amid stricter regulation and increased electronic trading. Declining liquidity has been blamed for flash crashes in foreign-exchange markets, including the British pound’s plunge in October 2016.

 

Ensuring liquidity is a key priority for asset managers and hedge funds seeking to execute currency transactions, while Bank of America Merrill Lynch has noted that reduced activity is spurring a battle for market share among dealers. A survey published last year by the organizers of the Miami conference noted that finding alternative methods to source liquidity was among the biggest priorities for many currency trading desks.

“We are for safer markets, but we’re also for markets that function efficiently,” said Busch, who joined the CFTC in April. “We worry about the fragmentation, the different pricing that will occur, the different pockets of liquidity that people have to access.”

FEBRUARY 14, 2018

By Lananh Nguyen

• Turbulence coincides with jump in activity: JPMorgan, CLS

• Price swings in focus as currency industry gathers in Miami

BOJ to Drive Dollar-Yen by Year's End, Says Nomura's Rochester

The past week’s financial-market turbulence is keeping foreign-exchange traders busy, boosting volumes along with volatility.

Price swings in the $5.1-trillion a day currency market have jumped at the start of 2018 to the highest since November 2016 on a monthly basis, according to a JPMorgan Chase & Co. gauge. The turmoil coincides with surging trading activity, say JPMorgan and CLS Group Holdings AG, which settles global foreign-exchange transactions.

As heads of currency trading from the world’s biggest asset managers and banks gather at the TradeTech FX conference in Miami this week, they’re fixated on whether the turmoil will persist. If it does, it could be a boon for speculators, while complicating the tasks of hedgers who prefer more placid waters.

“Volatility is natural to markets -- low volatility is not natural,” said Isaac Lieberman, chief executive officer of Aston Capital Management LLC in New York.

Managers of $1.7 Trillion Say Currency Volatility Here to Stay

Market gyrations have returned to FX after a subdued 2017, which was the calmest year since 2012, according to the JPMorgan gauge. As other central banks look to follow the Federal Reserve in withdrawing monetary accommodation against a backdrop of strengthening global growth, there are plenty of catalysts that could whipsaw markets.

“Market activity is really taking off,” said David Puth, chief executive officer of CLS Group.

CLS settled an average of almost $2.1 trillion of currency trades a day from Monday to Thursday last week, up 14 percent from January’s average, the company said in a statement.

As markets became more volatile over the last two months, JPMorgan’s clients boosted their use of the bank’s currency algorithms, according to Richard James, co-head of macro markets execution in London. The number of users trading on the bank’s electronic platform also grew, with every day last week exceeding the highest level seen in 2017.

Here are some other views on volatility expressed at the event:

• “FX market participants worry that any further round of equity volatility will spill much more heavily into FX than last week’s episode did,” said Steven Englander, head of research and strategy at Rafiki Capital. “The strong consensus is that the VIX will fall back sharply but stabilize closer close to historical norms around 15 or just under. VIX futures build in a relatively quick downward move.”
• “What we’re seeing right now is the start of the volatility -- I think that continues,” said Lee Ferridge, head of macro strategy for North America at State Street Global Markets. If the turbulence persists, it could prompt the Fed to back off its tightening cycle, he said.

FEBRUARY 14, 2018

Okechukwu Nnodim, Abuja

Employees of the defunct Nigeria Airways, who worked in the United Kingdom and Ghana, got their full entitlements when the airline was liquidated but their Nigerian counterparts were not paid, the Federal Government announced on Tuesday.

According to the Minister of State for Aviation, Senator Hadi Sirika, the lack of a strong enabling Act that backs Nigerian workers in cases of liquidation was one major reasons why the affected employees of the defunct airline could not get their entitlements when the carrier went under.

 

Sirika, who spoke at the annual retreat of the Joint Union Negotiating Council in Abuja, stated that it was time for workers to fight more on institutionalising procedures instead of struggling for less significant concerns.

Nigeria Airways was liquidated by ex-President Olusegun Obasanjo’s administration in 2005, and the workers of the defunct airline based in the country had staged nationwide protests over their unpaid entitlements.

The minister, who was represented by the Commissioner, Accident Investigation Bureau, Akin Olateru, said, “You will agree with me that NITEL, Nigeria Airways, PHCN, etc., all laid off staff; and at every point, the staff had to fight to get their entitlements. It is good to fight for money, better condition of service and training, but we need to fight more on institutionalising some procedures.

“I’ll give you an example; when Nigeria Airways was declared comatose, the people in the United Kingdom got full payment, those in Ghana got full payment, but why is it that we in Nigeria did not get same? It is because we don’t have a very strong enabling Act that supports staff after the liquidation of their firms.”

Sirika added, “So to union leaders, don’t let us fight for just what we are eating today, but let’s put the right systems in place to help our future. If you need to take this to the National Assembly, I think it is a worthy course. Today, it is Nigeria Airways and people are carrying placards and crying; tomorrow, we don’t know who’s next.”

FEBRUARY 14, 2018

The Chairman of the Commonwealth Enterprise and Investment Council (CWEIC), Lord Marland of Odstock, has said it was time for the UK to set up a post-Brexit trading zone, with Nigeria, Singapore and Malaysia offering major opportunities.

Speaking in an interview with the British newspaper, The Telegraph, ahead of the 2018 Commonwealth Business Forum (CBF), thenigerianvoice.com, quoted Lord Marland as saying: “The UK doesn’t want to be seen to be initiating anything but actually people look to the UK for leadership. If the UK wants to initiate something, which is a starting block for a commonwealth trade zone, it will start.”

“There are one or two really encouraging, optimistic places on the horizon. You’ve got the big populations such as Nigeria, which is going to be 320m people – bigger than the United States – in under 10 years. They love British products…it’s a huge consumer market. Fundamentally there is a lot of disposable wealth.”

 

Asked which other products Nigerians were particularly keen to buy, he replied: “Everything.”

Lord Marland added that leaving the EU’s customs union was one of the UK’s “great negotiating strengths,” as it would grant the freedom to stimulate trade by lowering tariffs and other trade barriers.

The benefits of doing so would extend beyond the Commonwealth, he said, as a potential free trade deal with Japan was already “worrying” German car manufacturers who rely on exports to the UK.

Britain is Nigeria’s second-largest trading partner, after South Africa, with the bilateral relationship worth around £3.8billion per year.

The CBF will be organised alongside the biennial Commonwealth Heads of Government Meeting (CHOGM), set to take place in April 2018 in London, for the first time in 20 years. Discussions will focus on key themes such as:easing the pathway for business and growth; harnessing Commonwealth technology and innovation; creating a new attitude to sustainable business; mobilising an export economy, and attracting inward investment

With the Commonwealth’s cumulative population standing at 2.4 billion, the combined Gross Domestic Product of the nations is set to reach US$14 trillion by 2020. Intra-Commonwealth trade, which was estimated to be worth $525 billion in 2015, is projected to surpass $1 trillion by 2020.

CWEIC’s ambition is to encourage and grow intra-Commonwealth trade and investment, and assist member organisations in developing high quality trade and investment opportunities.