Economy
Nigeria to Quit Recession 2017, Devalue Naira Again—FBNQuest Research
By Modupe Gbadeyanka
A research carried out by FBNQuest Research has predicted that Nigeria’s economy will leave recession this year and grow by 2 percent.
However, it pointed out that there would be another devaluation of the Naira in 2017.
In June 2016, the Central Bank of Nigeria (CBN) floated the Naira in a bid to give the local currency strength at the foreign exchange market. But this seems not to have worked because the Naira has lost over N150 against the Dollar since then.
At the moment, the Naira is N516 to $1 at the parallel market compared with about N342 it was sold in June 2016.
In the report titled ‘2017 Outlook So much to do; so little time,’ it was noted that the fiscal stimulus for this will be the main driver, supported by a recovery in oil production and selective private investment.
“Beyond our forecast horizon, household consumption will recover, leading to an acceleration in growth,” part of the report said.
According to FBNQuest Research, “The 2017 budget proposals are still more expansionary than the previous year’s, set a heady target for capital releases and maintain the level of personnel costs. If the FGN is able to hit its revenue targets and implement its proposals, we will see a sizeable fiscal stimulus. We could have the rare bonus of a relatively fast passage of the budget.”
It described the 2017 budget proposals as “ambitious”, noting that it contains aggregate spending of N7.30 trillion including unprecedented capital releases of N2.24 trillion, aggregate revenues of N4.94 trillion and a mouth-watering FGN deficit of N2.36 trillion.
The report identified these as “hefty increases on the 2016 budget and even larger increases on the likely outturn for 2016. “
It said one change for the better is that the FGN has produced more realistic projections for non-oil revenue collection, and assumed that the oil economy will generate more revenue than the non-oil.
“The fiscal expansion is the base of our GDP growth forecast of 2 percent for this year. We hear that we are being overly hopeful: we would reply that the population is said to be growing at 3.2 percent per year and that we are forecasting a decline in per head incomes.
“Our forecast is supported by selective private-sector investment (as in agriculture and petrochemicals) and by a pick-up in oil production.
“Our thinking is that the FGN has no choice but to reach a compromise to restore stability to the Niger Delta.
“It has said repeatedly that the diversification of the economy hinges ironically upon healthy oil revenues.
“Initially, it did not want to continue paying the allowances to militants in the delta but has reluctantly changed its position,” the report noted.
FBNQuest Research says it sees a rise in crude production including condensates to 2.10 mbpd this year from an estimated 1.82 mbpd. The FGN is assuming 2.20 mbpd in its proposals.
It said further that, “On the average oil price assumption of $44.50/b for this year, in contrast, the proposals are conservative.
“Our expectation is $57/b with some upside. The FGN therefore should have some welcome headroom, which it will value if production underperforms. Our thinking is based on hints from OPEC that, when it next meets in May, it may make further cuts in production quotas if it is not happy with the direction of the price.”
Also, the report observed that the “signals from the CBN, the MPC and the political leadership indicate otherwise but we think that there will be devaluation in Nigeria in 2017.”
It explained that, “While we cannot detect any changes in the official mindset on the exchange rate, we see another devaluation this year in the ‘last resort’ category. The CBN will struggle to resist the urge to manage the rate in some way.”
It pointed out that the economy has need of sizeable autonomous forex inflows to meet legitimate import demand, close the gap between the interbank and other forex markets, and create a market in which the CBN is not the dominant player.
The report argued that the monetary authorities are not equipped to counter both GDP contraction and rising inflation. Their task will be clearer when positive growth returns and inflation starts to slow on positive base effects.
It said, “The next rate moves by the MPC should be downwards, in line with (or perhaps anticipating) steady declines in headline inflation.”
Commenting on the stock market, the report said it expects the market to trade sideways for the most part until some clarity on the forex situation emerges.
“If a resolution leads to a free float regime (or very close to it), we expect a surge in capital inflows. Our base case scenario is a 10 percent rise in the ASI for 2017 based on our fair value forecasts. A resolution of the forex situation could lead to a gain of at least 20 percent.
“We see upside potential of up to 10 percent for the banks sector on average; a marked resumption of capital inflows from offshore portfolio investors could lead to a much stronger performance.
“We forecast the average ROAE for our universe of banks to move up to 18.3 percent in 2016E, thanks to forex-related gains, but subsequently fall sharply to 11.2 percent in 2017E (assuming forex-related gains are not material in 2017E).
“Among the non-financials, we prefer the cement and palm oil names for which we see upside potential of 56 percent and 6 percent respectively on average.
“The other sectors continue to struggle with the headwinds stemming from forex devaluation given their high dependence on imported raw materials and/or FCY loans.”
On the federal government’s bonds, the report said, “FGN bond yields are likely to drift higher before the policy rate cuts due to the fiscal expansion and substantial issuance programme.
“Active investors will prefer the better returns on longer tenor NTBs. After three years of consecutive losses, we expect equities to regain some lost ground this year. We forecast the ASI to return 10 percent, implying an end-year target of 29,560.”
By Modupe Gbadeyanka
The federal government, the 36 states of the federation and the 774 local government areas have received N1.727 trillion from the Federal Accounts Allocation Committee (FAAC) for December 2024.
The funds were disbursed to the three tiers of government from the revenue generated by the nation in November 2024.
At the December meeting of FAAC held in Abuja, it was stated that the amount distributed comprised distributable statutory revenue of N455.354 billion, distributable Value Added Tax (VAT) revenue of N585.700 billion, Electronic Money Transfer Levy (EMTL) revenue of N15.046 billion and Exchange Difference revenue of N671.392 billion.
According to a statement signed on Friday by the Director of Press and Public Relations for FAAC, Mr Bawa Mokwa, the money generated last month was about N3.143 trillion, with N103.307 billion used for cost of collection and N1.312 trillion for transfers, interventions and refunds.
It was disclosed that gross statutory revenue of N1.827 trillion was received compared with the N1.336 trillion recorded a month earlier.
The statement said gross revenue of N628.972 billion was available from VAT versus N668.291 billion in the preceding month.
The organisation stated that last month, oil and gas royalty and CET levies recorded significant increases, while excise duty, VAT, import duty, Petroleum Profit Tax (PPT), Companies Income Tax (CIT) and EMTL decreased considerably.
As for the sharing, FAAC disclosed that from the N1.727 trillion, the central government got N581.856 billion, the states received N549.792 billion, the councils took N402.553 billion, while the benefiting states got N193.291 billion as 13 per cent derivation revenue.
From the N585.700 billion VAT earnings, the national government got N87.855 billion, the states received N292.850 billion and the local councils were given N204.995 billion.
Also, from the N455.354 billion distributable statutory revenue, the federal government was given N175.690 billion, the states got N89.113 billion, the local governments had N68.702 billion, and the benefiting states received N121.849 billion as 13 per cent derivation revenue.
In addition, from the N15.046 billion EMTL revenue, FAAC shared N2.257 billion to the federal government, disbursed N7.523 billion to the states and transferred N5.266 billion to the local councils.
Further, from the N671.392 billion Exchange Difference earnings, it gave central government N316.054 billion, the states N160.306 billion, the local government areas N123.590 billion, and the oil-producing states N71.442 billion as 13 per cent derivation revenue.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange recorded a 0.65 per cent gain on Friday, December 13, boosted by three equities admitted on the trading platform.
On the last trading session of the week, Okitipupa Plc appreciated by N2.70 to settle at N29.74 per share versus Thursday’s closing price of N27.04 per share, FrieslandCampina Wamco Nigeria Plc added N2.49 to end the session at N42.85 per unit compared with the previous day’s N40.36 per unit, and Afriland Properties Plc gained 50 Kobo to close at N16.30 per share, in contrast to the preceding session’s N15.80 per share.
Consequently, the market capitalisation added N6.89 billion to settle at N1.062 trillion compared with the preceding day’s N1.055 trillion and the NASD Unlisted Security Index (NSI) gained 19.66 points to wrap the session at 3,032.16 points compared with 3,012.50 points recorded in the previous session.
Yesterday, the volume of securities traded by investors increased by 171.6 per cent to 1.2 million units from the 447,905 units recorded a day earlier, but the value of shares traded by the market participants declined by 19.3 per cent to N2.4 million from the N3.02 million achieved a day earlier, and the number of deals went down by 14.3 per cent to 18 deals from 21 deals.
At the close of business, Geo-Fluids Plc was the most active stock by volume on a year-to-date basis with a turnover of 1.7 billion units worth N3.9 billion, followed by Okitipupa Plc with the sale of 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.3 million units sold for N5.3 million.
In the same vein, Aradel Holdings Plc remained the most active stock by value on a year-to-date basis with the sale of 108.7 million units for N89.2 billion, trailed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with a turnover of 297.3 million units worth N5.3 billion.
By Adedapo Adesanya
The Naira appreciated further against the United States Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) by N1.50 or 0.09 per cent to close at N1,533.00/$1 on Friday, December 13 versus the N1,534.50/$1 it was transacted on Thursday.
The local currency has continued to benefit from the Electronic Foreign Exchange Matching System (EFEMS) introduced by the Central Bank of Nigeria (CBN) this month.
The implementation of the forex system comes with diverse implications for all segments of the financial markets that deal with FX, including the rebound in the value of the Naira across markets.
The system instantly reflects data on all FX transactions conducted in the interbank market and approved by the CBN.
Market analysts say the publication of real-time prices and buy-sell orders data from this system has lent support to the Naira in the official market and tackled speculation.
In the official market yesterday, the domestic currency improved its value against the Pound Sterling by N12.58 to wrap the session at N1,942.19/£1 compared with the previous day’s N1,954.77/£1 and against the Euro, it gained N2.44 to close at N1,612.85/€1 versus Thursday’s closing price of N1,610.41/€1.
At the black market, the Nigerian Naira appreciated against the greenback on Friday by N30 to sell for N1,650/$1 compared with the preceding session’s value of N1,680/$1.
Meanwhile, the cryptocurrency market was largely positive as investors banked on recent signals, including fresh support from US President-elect, Mr Donald Trump, as well as interest rate cuts by the European Central Bank (ECB).
Ripple (XRP) added 7.3 per cent to sell at $2.49, Binance Coin (BNB) rose by 3.5 per cent to $728.28, Cardano (ADA) expanded by 2.4 per cent to trade at $1.11, Litecoin (LTC) increased by 2.3 per cent to $122.56, Bitcoin (BTC) gained 1.9 per cent to settle at $101,766.17, Dogecoin (DOGE) jumped by 1.2 per cent to $0.4064, Solana (SOL) soared by 0.7 per cent to $226.15 and Ethereum (ETH) advanced by 0.6 per cent to $3,925.35, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
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