Economy
Index Reports Six Quarter High in Business Confidence
By Dipo Olowookere
A resurgence in economic confidence was experienced by credit professionals in the final quarter of 2016, according to the UK’s latest Credit Managers’ Index (CMI). Yet bad debt remains a risk with only 13% of credit managers expecting a decline in 2017.
Full results from the quarterly barometer of the Chartered Institute of Credit Management (CICM) have now been released; the CMI’s headline Index closed up 0.5 points to 59.8, ending a successive three-quarter fall. It is the highest result since Q2 2015 and only the fifth time in the CMI’s seven-year history it has climbed above 59.0.
The Index measures confidence in manufacturing (up 6.2 points to 61.2) and services (up 3.6 points to 59.0), in what Philip King, Chief Executive of the CICM, highlights as rising optimism from credit professionals across the board:
“What is also good to see is the Index is back on its historical tracking of the FTSE All Share, following the brief and negative divergence in Q3 2016,” he says.
The CMI retracted by 1.4% in Q3 while the All Share rose 2.3%. “This compares to the CMI’s 8.1% and All Share’s 3.1% rises in Q4,” Mr King adds. “Which means the CMI has easily mitigated its Q3 losses, and is now back on track with one of the UK’s most important measures of economic confidence.”
The CMI, sponsored by trade credit risk management experts Tinubu Square, is important because it gauges nationwide levels of credit being sought and granted by credit managers across the UK and acts as a primary indicator of actual levels of business being conducted. It consistently maps the FTSE All Share Index and the EU Economic Sentiment Indicator.
The survey also found 32% of respondents saw bad debts increase across 2016, with only 13% expecting bad debts to drop in 2017. 20% expect debts to continue rising, but most worryingly a further 28% remain unsure about how debts will change, and are budgeting for rises.
Michael Feldwick, Head of Tinubu Square UK, said: “The findings reflect conversations we are having across sectors, where there is a general concern about debt continuing to rise. Some seem more concerned than others however, such as the construction industry. It particular highlights the need to monitor and manage trade credit risks closely, some customers are telling us that trade credit insurers appear to be slowly becoming more cautious as their loss ratio and cost ratio increases.”
Further analysis of the results show regional differentiation – Wales, Northern Ireland and Yorkshire and Humber have all dipped below a 52-point threshold; six regions including the North West, South West and East Midlands are reporting scores of over 60.0 points; and London (which fell to a concerning 50.2 in Q3 2016) has risen over the threshold to close at 59.0.
“It is very important for London as the driving force of the UKs economy to display positive results, and it is good news to see that its decrease was only short-term,” Mr King adds.
Of the 19 sectors measured in the CMI, 16 have a CMI score above the 52-point threshold. Only Personal and Household Goods (44.0), Automobiles and Parts (45.0) and Banks (47.0) reported lower than hoped-for results.
“Meanwhile, volatility levels are continuing to stabilise and that may signal a positive future in terms of economic confidence and the outlook for growth,” Mr King continues. “But the uncertain geo-political circumstances surrounding the new US administration and Brexit have the ability to do lasting damage to our economic indicators.”
The CMI is a diffusion Index, producing scores of between one and 100 (typically in a range of 40 – 60). Ten equally weighted factors are included – three favourable and seven unfavourable and the Index is calculated on a simple average of the 10 factors.
By Dipo Olowookere
A 0.31 per cent gain was recorded by the Nigerian Exchange (NGX) Limited on Tuesday, helped by renewed bargain-hunting by investors, with the year-to-date return extending to 6.61 per cent.
It was observed that the growth achieved by Customs Street yesterday was supported by the banking and the industrial goods indices, which went up by 1.32 per cent and 0.69 per cent apiece.
They offset the losses recorded by the three other sectors, with the insurance counter down by 1.32 per cent, the consumer goods segment down by 0.23 per cent, and the energy space down by 0.17 per cent.
At the close of business, the All-Share Index (ASI) increased by 516.94 points to 165,901.57 points from 165,384.63 points and the market capitalization appreciated by N333 billion to N106.495 trillion from N106.162 trillion.
The market breadth index was positive yesterday after the bourse ended with 35 price gainers and 34 price losers, representing bullish investor sentiment.
The quartet of Industrial and Medical Gases (IMG), Union Dicon, Zichis, and Austin Laz chalked up 10.00 per cent each to sell for N34.65, N9.90, N5.06, and N4.07, respectively, while RT Briscoe appreciated by 9.95 per cent to N9.50.
On the flip side, Omatek lost 10.00 per cent to trade at N2.43, Cutix also fell by 10.00 per cent to N3.15, Union Homes shrank by 9.95 per cent to N76.90, Sunu Assurances declined by 9.94 per cent to N4.62, and Deap Capital crashed by 9.93 per cent to N7.62.
During the trading day, 736.4 million stocks worth N24.7 billion exchanged hands in 46,026 deals compared with the 762.8 million stocks valued at N18.4 billion traded in 55,374 deals a day earlier, indicating a rise in the trading value by 34.24 per cent, and a slip in the trading volume and number of deals by 3.46 per cent and 16.88 per cent apiece.
The activity chart was led by volume on the second trading session of the week by GTCO with 65.9 million equities valued at N6.5 billion, Chams transacted 55.7 million shares worth N249.8 million, Custodian Investment traded 49.8 million stocks for N2.2 billion, Universal Insurance sold 36.1 million equities valued at N51.5 million, and Zenith Bank exchanged 35.4 million shares worth N2.6 billion.
By Adedapo Adesanya
The oil market was up by nearly 2 per cent on Tuesday after the United States shot down an Iranian drone approaching an aircraft carrier and armed boats in the Strait of Hormuz, stoking concerns talks aimed at de-escalating US-Iran tensions could be disrupted.
This action caused the Brent futures to rise by $1.03 or 1.6 per cent to $67.33 per barrel, as the US West Texas Intermediate (WTI) futures jumped by $1.07 or 1.7 per cent to $63.21 a barrel.
Both crude benchmarks dropped more than 4 per cent on Monday after President Donald Trump said Iran was seriously talking with America.
However, the US military shot down an Iranian drone that “aggressively” approached the Abraham Lincoln aircraft carrier in the Arabian Sea on Tuesday.
In the Strait of Hormuz between the Persian Gulf and the Gulf of Oman, Iranian gunboats approached a US-flagged oil tanker in what US and British maritime security sources describe as a failed attempt to interfere with the vessel’s transit.
Members of the Organisation of the Petroleum Exporting Countries (OPEC) including Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq export most of their crude via the strait, mainly to Asia. The Strait of Hormuz, through which roughly a fifth of the world’s oil supply passes, remains Iran’s most obvious pressure point.
Despite the latest development, the UAE urged Iran and the US on Tuesday to use the resumption of nuclear talks this week to resolve a standoff that has led to mutual threats of air strikes. Iran, meanwhile, is demanding that talks be held in Oman not Turkey.
In Ukraine, President Volodymyr Zelenskiy accused Russia on Tuesday of exploiting a US-backed energy truce to stockpile munitions, and using them to attack Ukraine a day before peace talks. This boosted worries that Russia’s oil would remain sanctioned for longer.
On Monday, President Trump announced a trade deal with India, one of the world’s biggest economies and oil importers, on Monday to cut tariffs to 18 per cent from 50 per cent in exchange for the country halting Russian oil purchases and lowering trade barriers.
The American Petroleum Institute (API) estimated that crude oil inventories in the US decreased by 11.1 million barrels in the week ending January 30. Crude oil inventories decreased by 247,000 barrels in the week prior.
Official data from the US Energy Information Administration (EIA) will be published later on Wednesday.
By Adedapo Adesanya
The Africa Finance Corporation (AFC), the continent’s leading infrastructure solutions provider, has reiterated its commitment to playing a pivotal role to support transformative reforms in Nigeria’s power sector.
This is as it act as co-Financial Adviser to the Nigerian government on the successful issuance of the recent N501 billion inaugural tranche under the Presidential Power Sector Financial Reforms Programme (PPSFRP), as part of the N4 trillion Power Sector Bond Programme, aimed at resolving over a decade of legacy debt obligations in Nigeria’s electricity supply industry and restoring financial stability across the sector.
AFC provided comprehensive financial advisory services to the federal government, including the design of the Programme’s negotiation strategy framework, support in negotiating and executing Settlement Agreements with Power Generation Companies (GenCos), and structuring the bond issuance. Working in partnership with CardinalStone Partners as co-Financial Advisers, AFC deployed its deep sector expertise and strong local market knowledge to deliver the landmark transaction.
The programme was overseen by the Presidential Power Sector Debt Reduction Committee (PPSDRC), with technical leadership from the Office of the Special Adviser to the President on Energy, and implemented through NBET Finance Company Plc, a special purpose vehicle of Nigerian Bulk Electricity Trading Plc (NBET). Proceeds from the issuance will be used to settle verified, overdue receivables owed to GenCos for electricity supplied between February 2015 and March 2025, injecting liquidity into the power sector and extinguishing long-standing claims.
Commenting on AFC’s involvement, Mr Banji Fehintola, Executive Board Member and Head, Financial Services at Africa Finance Corporation, said: “The successful issuance of the inaugural tranche under the Power Sector Bond Programme underscores AFC’s commitment to supporting transformative reforms in Nigeria’s power sector. By resolving long-standing liquidity challenges and restoring confidence among investors and operators, this transaction lays the foundation for sustainable growth and improved electricity supply across the country.”
When fully implemented, the programme is expected to impact approximately 5,398MW of electricity generation capacity by Nigerian GenCos and finalise settlement for 290,644.84GWh of electricity billed since 2015. It will also strengthen companies serving about 12 million active registered customers, creating a solid platform for new investments in capacity enhancement and expansion.
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