Economy
Investors May Soon Dump Nigeria, SA, Egypt for Kenya, Ethiopia—Report
By Modupe Gbadeyanka
According to the newly released Africa Risk-Reward Index developed by Control Risks and Oxford Economics, Kenya and Ethiopia may soon outshine Africa’s economic giants; Nigeria, South Africa and Egypt, in the competition for investments.
It was only this month that Nigeria and South Africa exited recession, but rising security risks and political instability in Egypt, economic downturn and militancy in Nigeria and escalating political risks in South Africa led to doubts whether the balance between risks and opportunities in these markets is still favourable for businesses.
In the report made available to Business Post, Senior Analyst for Africa at Control Risks and lead-author of the report, Mr Paul Gabriel, commented that, “Experienced investors – not only in Africa, but around the world – know that risk and reward are close companions.
“While no serious investor should overlook the economic giants of the continent, real competitive edge can only be achieved when investors manage to stay ahead of the pack in knowing what’s next.
“The Africa Risk-Reward Index helps investors to identify some of the more hidden investment opportunities in times where the heavy-hitters are struggling.”
Key findings of the report showed that Nigeria and its energy sector are too big to lose their appeal because the country’s reward score is 6.0 (out of 10), ahead of South Africa and Egypt.
Nigeria’s charms, however, fade against a risk score of 7.3 (out of 10), as President Muhammadu Buhari’s government struggles through its first term.
A fall in oil prices and lower production due to insurgent attacks in the Niger Delta have slashed growth from 6.3 percent in 2014 to 2.7 percent in 2015 followed by a sharp contraction of 1.6 percent last year.
Economic indicators for this year are more favourable, but still the report forecasts a real GDP growth of only 1.1 percent in 2017.
On the part of South Africa, its risk score of 5.0 remains below the region’s average, but the reward score of 4.6 is also low.
Whilst the country enjoys a deserved reputation as Africa’s pre-eminent constitutional democracy, several of its key institutions have gradually weakened over the past decade.
Economic prospects are closely linked to the outcomes of the ANC’s national conference in December.
The forecasted real GDP growth of 0.5 percent for 2017 is below population growth and certainly insufficient to reduce South Africa’s staggering 27.7 percent unemployment rate.
The report also said Egypt will test the most ardent optimist. President Abdul Fatah al-Sisi’s political position is stable, despite a series of economic and security challenges, reflected in the country’s risk score of 6.0.
Socio-economic grievances, a government crackdown on opposition and Islamist groups and persistent militancy will continue to have an impact on the business environment. The tourism sector remains depressed.
The country’s reward score of 5.5 reflects the measures the government has taken since mid-2016 to address its fiscal problems.
Real GDP growth is expected to slow in 2017 (to 3.8 percent, from 4.3 percent in 2016) owing to a slowdown in government and private consumption.
Ethiopia outperforms every African peer with its high reward score of 8.0. Notably, it attracted $3.2 billion of foreign direct investment in 2016 – more even than Nigeria, and double the figure for Morocco.
The East African nation is one of Africa’s fastest growing economies and continues to offer strong prospects.
Growth averaged 10 percent from 2010 to 2015 and although 2016 growth was slower at 6.5 percent the expansion remains impressive.
However, the omnipresent role of government in the economy raises concerns relating to public sector efficiency and financial management.
External debt is expected to increase to 38.7 percent of GDP by the end of this year, leading to a risk score of 5.8.
Kenya has achieved a period of strong GDP growth amid relative political stability: real GDP growth averaged at 6.0 percent in 2010-16. The 2017 growth forecast is at 5.4 percent. The country’s reward score is 6.7.
A well-educated workforce and an innovative service sector, the government’s continued investments in upgrading critical national infrastructure, and deepening integration with its neighbours through the East African Community (EAC) all allow the country to act as a gateway into the larger East Africa region.
Current fiscal concerns and a political system that remains closely tied to ethnic affiliation contribute to a risk score of 5.6 and reflects considerable room for improvements.
By Adedapo Adesanya
The United Arab Emirates has announced its decision to quit the Organisation of the Petroleum Exporting Countries (OPEC) to focus on national interests.
This dealt a heavy blow to the oil-exporting group at a time when the US-Israel war on Iran had caused a historic energy shock and rattled the global economy.
The move, which will take effect on May 1, 2026, reflects “the UAE’s long-term strategic and economic vision and evolving energy profile”, a statement carried by state media said on Tuesday.
“During our time in the organisation, we made significant contributions and even greater sacrifices for the benefit of all,” it added. “However, the time has come to focus our efforts on what our national interest dictates.”
The loss of the UAE, a longstanding OPEC member, could create disarray and weaken the oil cartel, which has usually sought to show a united front despite internal disagreements over a range of issues from geopolitics to production quotas.
UAE Energy Minister Suhail Mohamed al-Mazrouei said the decision was taken after a careful look at the regional power’s energy strategies.
“This is a policy decision. It has been done after a careful look at current and future policies related to the level of production,” the minister said.
OPEC’s Gulf producers have already been struggling to ship exports through the Strait of Hormuz, a narrow chokepoint between Iran and Oman through which a fifth of the world’s crude oil and liquefied natural gas supplies normally pass, because of threats and attacks against vessels during the war.
The UAE had been a member of OPEC first through its emirate of Abu Dhabi in 1967 and later when it became its own country in 1971.
The oil cartel, based in Vienna, has seen some of its market power wane as the US has increased its production of crude oil in recent years.
Additionally, the UAE and Saudi Arabia have increasingly competed over economic issues and regional politics, particularly in the Red Sea area.
The two countries had joined a coalition to fight against Yemen’s Iran-backed Houthis in 2015. However, that coalition broke down into recriminations in late December when Saudi Arabia bombed what it described as a weapons shipment bound for Yemeni separatists backed by the UAE.
By Adedapo Adesanya
Central Securities Clearing System (CSCS) Plc bested four price decliners on the NASD Over-the-Counter (OTC) Securities Exchange on Monday, April 27. The alternative stock market opened the week bullish during the session with a 0.03 per cent uptick.
According to data, the security depository company added N2.61 to its share price to close at N76.26 per unit compared with the preceding session’s N78.87 per unit.
As a result, the market capitalisation of the platform increased by N820 million to N2.425 trillion from N2.424 trillion, and the NASD Unlisted Security Index (NSI) gained 1.38 points to finish at 4,053.97 points compared with the 4,052.58 points it ended last Friday.
The four price losers were led by NASD Plc, which slumped by N3.80 to sell at N34.70 per share versus N38.50 per share. FrieslandCampina Wamco Nigeria Plc fell by N1.45 to N98.10 per unit from N99.55 per unit, Food Concepts Plc slid by 27 Kobo to N2.43 per share from N2.70 per share, and Geo-Fluids Plc dipped by 9 Kobo to N2.91 per unit from N3.00 per unit.
The value of securities transacted by market participants went down by 82.0 per cent to N7.4 million from N41.3 million units, the volume of securities declined by 28.5 per cent to 319,831 units from 447,403 units, and the number of deals dropped by 34.1 per cent to 29 deals from 44 deals.
Great Nigeria Insurance (GNI) Plc was the most active stock by value on a year-to-date basis with 3.4 billion units worth N8.4 billion, followed by CSCS Plc with 59.6 million units sold for N4.0 billion, and Okitipupa Plc with 27.8 million units exchanged for N1.9 billion.
Also, GNI Plc was 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 traded for N415.7 million, and Infrastructure Guarantee Credit Plc with a turnover of 400 million units worth N1.2 billion.
By Adedapo Adesanya
The first trading day of the week in the currency market was bearish for the Naira in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Monday, April 27.
Yesterday, it lost N5.80 or 0.43 per cent against the United States Dollar to trade at N1,364.24/$1, in contrast to the N1,358.44/$1 it was traded last Friday.
In the same vein, the Nigerian currency depreciated against the Pound Sterling in the official market by N13.70 to close at N1,847.72/£1 versus the preceding session’s N1,834.02/£1, and slumped against the Euro by N11.56 to sell at N1,602.29/€1 versus N1,590.73/€1.
Also, the Nigerian Naira tumbled against the greenback during the trading day by N5 to quote at N1,385/$1 compared with the previous rate of N1,380/$1, and at the GTBank FX desk, it traded flat at N1,370/$1.
The poor performance of the domestic currency could be attributed to liquidity shortage at the official currency market on Monday, which came amid surging demand for international payments. At $76.50 million, interbank liquidity printed higher across 79 deals, up from the $43.572 million reported on Friday.
Nigeria’s gross external reserves declined to $48.45 billion amid a month-long decline in inflows, amid uncertainties in the global commodity market. The depletion of foreign reserves could be partly attributed to the Central Bank of Nigeria’s intervention in the FX market.
The market remains perturbed by persistent concerns over liquidity constraints, policy transparency, and weakening confidence in Nigeria’s FX market, while boosters, including oil prices, continue to look rocky due to stalled discussions and unclear ceasefire negotiations between the US and Iran.
A look at the cryptocurrency market, Bitcoin (BTC) has been rejected near $79,000 three times in eight sessions, leaving the level as the de facto ceiling of its current trading range even as major cryptocurrencies trade lower over the past day. It lost 0.9 per cent to sell at $77,003.61.
Analysts say that upcoming US Federal Reserve policy decisions and top tech firms’ earnings this week could provide the catalyst to push bitcoin decisively above $80,000.
The market also continued to weigh Iran’s interim deal proposal to reopen the Strait of Hormuz, which failed to advance over the weekend. The White House said US officials were discussing the latest Iranian proposal but maintained “red lines” on any deal to end the eight-week war.
Solana (SOL) dropped 1.8 per cent to $84.25, Ripple (XRP) went down by 1.6 per cent to $1.39, Ethereum (ETH) depreciated by 1.3 per cent to $2,290.00, Binance Coin (BNB) declined by 0.5 per cent to $625.18, and Cardano (ADA) fell by 0.2 per cent to $0.2480.
However, Dogecoin (DOGE) rose by 2.0 per cent to $0.1002, and TRON (TRX) appreciated by 0.2 per cent to $0.3242, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.
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