Economy
Nigeria’s Economic Environment Still Tough—IMF
By Dipo Olowookere
The International Monetary Fund (IMF) has disclosed that economic environment in Nigeria is still very challenging “despite some signs of relief in the first half of 2017.”
The global financial institution made this disclosure at the conclusion of its visit to the West Africa’s biggest economy, which fell into recession last year.
From Thursday, July 20, 2017 to Monday, July 31, 2017, the IMF team led by its Senior Resident Representative and Mission Chief for Nigeria, Mr Amine Mati, “held productive discussions with senior government and central bank officials.”
During the visit, the team also met with members of parliament, representatives of the banking system, private sectors, civil society, and international development partners.
Mr Mati, while commenting on outcome of the visit, emphasised that the country’s “economic backdrop remains challenging, despite some signs of relief in the first half of 2017.”
According to him, “Economic activity contracted in the first quarter of the year by 0.6 percent, mainly as maintenance stoppages reduced oil production.”
However, following four quarters of negative growth, the non-oil economy grew by 0.6 percent (year-on-year), on the back of a rebound in manufacturing and continued strong performance in agriculture.
He said various indicators suggest an uptick in activity in the second quarter of the year. Helped by favourable base effects, headline inflation decreased to 16.1 percent in June 2017, but remains high despite tight liquidity conditions.
The IMF senior executive noted that, “Preliminary data for the first half of the year indicate significant revenue shortfalls, with the interest-payments to revenue ratio remaining high (40 percent at end-June) and projected to increase further under current policies.”
According to him, “High domestic bond yields and tight liquidity continue to crowd out private sector credit.”
“Given Nigeria’s low growth environment and the banking system’s exposure to the oil and gas sector, non-performing loans increased from 6 percent in 2015 to 15 percent in March 2017 (8 percent after excluding the four undercapitalized banks),” he said.
Mr Mati pointed out that, “Faced with these challenges, the government has started implementing a number of important measures.”
He described the Economic Recovery and Growth Plan (ERGP) as driving the diversification strategy, and security in the Niger Delta improved through strengthened engagement.
“The new Investor and Exporter FX window has provided impetus to portfolio inflows, helped increase reserves above $30 billion, and contributed to reducing the parallel market premium.
“Important steps have also been taken in implementing the power sector recovery plan, introducing a voluntary income and asset declaration program and moving forward the 60-day national action plan to improve the business environment. Progress is also ongoing within the oil and energy sector through implementation of a new funding mechanism for cash calls,” he observed.
“However, near-term vulnerabilities and risks to economic recovery and macroeconomic and financial stability remain elevated.
“At 0.8 percent, growth in 2017 will not be sufficient to make a dent in reducing unemployment and poverty.
“Concerns about delays in policy implementation, a reversal of favourable external market conditions, possible shortfalls in agricultural and oil production, additional fiscal pressures, continued market segmentation in a foreign exchange market that remains dependent on central bank interventions, and banking system fragilities represent the main risks to the outlook.
“Acting on an appropriate and coherent set of policies to enhance an economic recovery remains urgent. This includes implementing immediately specific priorities that will help achieve the goals of the ERGP.
“In the near term, a stronger push for front-loaded fiscal consolidation through a sustainable increase in non-oil revenues would be needed to create space for infrastructure spending, social protection, and private sector credit.
“This should be simultaneously accompanied by a monetary policy that avoids direct financing of the government and is kept sufficiently tight, a unified and market-based exchange rate, and rapid implementation of structural reforms.
Pursuing these policies would help reduce macroeconomic vulnerabilities and create an environment for a diversified private-sector led economy,” Mr Mati said.
Concluding, he thanked the Nigerian authorities and “all those with whom they met for the productive discussions, excellent cooperation, and warm hospitality.”
By Adedapo Adesanya
Three stocks further weakened the NASD Over-the-Counter (OTC) Securities Exchange by 1.12 per cent on Wednesday, April 8, with the Unlisted Security Index (NSI) down by 44.43 points to 3,930.91 points from the previous day’s 3,975.34 points, and the market capitalisation went down by N26.59 to N2.351 trillion from N2.378 trillion.
MRS Oil lost N11.00 during the session to close at N161.00 per share compared with Tuesday’s closing price of N172.00 per share, Central Securities Clearing System (CSCS) Plc dipped by N3.74 to N67.95 per unit from N71.69 per unit, and Afriland Properties Plc fell by N1.10 to sell at N15.95 per share versus N17.05 per share.
There were two gainers at the midweek trading session, led by IPWA Plc, which appreciated by 55 Kobo to N6.61 per unit from N6.06 per unit, and First Trust Mortgage Bank Plc improved its value by 4 Kobo to N2.32 per share from N2.28 per share.
Yesterday, the volume of securities rose by 620.4 per cent to 5.7 million units from 797,264 units, the value of securities increased by 25.1 per cent to N32.7 million from N26.1 million, and the number of deals climbed by 12.1 per cent to 37 deals from the preceding session’s 33 deals.
Great Nigeria Insurance (GNI) Plc ended the day as the most traded stock by value on a year-to-date basis with 3.4 billion units sold for N8.4 billion, trailed by CSCS Plc with 57.2 million units exchanged for N3.9 billion, and Okitipupa Plc with 27.5 million units traded for N1.8 billion.
GNI Plc also finished the session as the most traded stock by volume on a year-to-date basis with 3.4 billion units valued at N8.4 billion, followed by Resourcery Plc with 1.1 billion units worth N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units transacted for N1.2 billion.
By Adedapo Adesanya
Foreign Exchange (FX) demand pressure eased on the Naira on Wednesday, April 8, in the Nigerian Autonomous Foreign Exchange Market (NAFEX) after gaining N14.84 or 1.07 per cent against the greenback to quote at N1,371.82/$1 compared with the previous day’s N1,386.66/$1.
Also, the local currency appreciated against the Euro in the same market window at midweek by N1.54 to close at N1,604.07/€1 versus Tuesday’s closing rate of N1,605.61/€1, but lost N6.26 against the Pound Sterling to trade at N1,844.83/£1 versus N1,838.57/£1.
In the parallel market, the exchange rate of the Naira to the US Dollar remained unchanged yesterday at N1,410/$1, according to data sourced by Business Post.
There were indicators that the official FX market experienced a liquidity surge, which eased worries around the dominant US Dollar on Wednesday, as the Central Bank of Nigeria (CBN) revealed interbank deals rose to 220 from 71 reported the previous day.
The domestic currency has been in strong demand from foreign portfolio investors seeking to purchase OMO bills and other fixed-income instruments.
Forecasts also show that the local currency will remain relatively stable during the second quarter of the year, trading within the N1,340 to N1,430 per Dollar band on improved FX liquidity, stronger oil earnings, and rising external reserves, which have climbed above 50 billion dollars.
As for the cryptocurrency market, it fell after an initial ceasefire-fueled rally, with markets retracing Wednesday’s “ceasefire euphoria” as cracks emerge in the US-Iran truce while the Strait of Hormuz remains effectively closed.
Global risk assets face renewed pressure as geopolitical uncertainty combines with what analysts call “uncoordinated tightening” by major central banks, reinforcing higher-for-longer interest-rate expectations.
The price of Cardano (ADA) fell by 4.7 per cent to $0.2500, Ripple (XRP) slumped 3.7 per cent to $1.33, Dogecoin (DOGE) shrank by 3.5 per cent to $0.0915, Binance Coin (BNB) slipped 2.6 per cent to $600.02, Ethereum (ETH) went down by 2.5 per cent to $2,183.82, Solana (SOL) dipped 2.5 per cent to $82.24, and Bitcoin (BTC) depreciated by 1.1 per cent to $70,995.20.
However, TRON (TRX) appreciated by 0.4 per cent to $0.3173, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.
By Dipo Olowookere
The Nigerian Exchange (NGX) Limited rallied by 0.28 per cent on Wednesday despite weak investor sentiment, as the bourse ended with 18 price gainers and 38 price losers, implying a negative market breadth index.
The growth recorded yesterday by Customs Street was influenced by the 2.11 per cent rise posted by the energy index, and the 1.79 per cent jump achieved by the banking sector.
The other sectors experienced profit-taking, with the consumer goods losing 1.07 per cent, the insurance counter down by 0.36 per cent, and the industrial goods space down by 0.19 per cent.
Universal Insurance chalked up 10.00 per cent to sell for N1.21, Omatek improved by 9.78 per cent to N2.47, VFD Group expanded by 9.71 per cent to N11.30, CWG appreciated by 9.64 per cent to N21.05, and Livestock Feeds gained 9.56 per cent to close at N7.45.
On the flip side, UPDC REIT lost 10.00 per cent to settle at N6.75, Fortis Global Insurance shed 9.92 per cent to quote at N1.18, Deap Capital depreciated by 9.85 per cent to N5.40, Chams went down by 9.47 per cent to N3.06, and Japaul declined by 8.82 per cent to N3.10.
Yesterday, the All-Share Index (ASI) went up by 562.43 points to 202,585.53 points from 202,023.10 points, and the market capitalisation advanced by N389 billion to N130.404 trillion from N130.015 trillion.
During the session, 1.0 billion stocks worth N40.6 billion exchanged hands in 52,723 deals compared with the 1.1 billion stocks valued at N40.3 billion executed in 78,006 deals a day earlier, indicating an uptick in the trading value by 0.74 per cent, and a shortfall in the trading volume and number of deals by 9.09 per cent and 32.41 per cent apiece.
The activity chart was led by Access Holdings, which sold 233.0 million units valued at N6.1 billion, Fidelity Bank exchanged 113.1 million units worth N2.2 billion, Wema Bank recorded a turnover of 103.3 million units valued at N2.7 billion, Zenith Bank transacted 60.6 million units for N6.5 billion, and Chams traded 47.5 million units worth N154.6 million.
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