Economy
Nigeria’s Growth Prospects Attractive Despite Dollar Scarcity—Moody’s
By Modupe Gbadeyanka
A latest report by global ratings firm, Moody’s, has stressed that while subdued US dollar supply in the context of prolonged lower oil prices remains a key challenge for corporates in Nigeria, especially those companies constrained by foreign exchange restrictions on certain imports, growth prospects over the next three years are attractive.
This was revealed in a report published Wednesday on Moody’s website titled ‘Corporates — Nigeria: US Dollar Scarcity Remains Key Challenge to Improvement in the Corporate Sector’ and it is available on www.moodys.com.
Moody’s subscribers can access this report via the link at the end of this press release. The report is an update to the markets and does not constitute a rating action.
“Nigeria is still undergoing a severe economic realignment to adjust to lower oil prices and the knock-on effect on its US dollar oil exports, which have led to reduced US dollar supply and lower GDP growth,” said Aurélien Mali, a Moody’s Vice President and local market analyst for the Government of Nigeria.
“The naira’s depreciation by nearly 60% in June partially cleared accumulated US dollar demand and stabilised foreign currency reserves. However, access to US dollars through official channels remains challenging for some companies.” said Douglas Rowlings, a Moody’s Assistant Vice President and the report’s co-author.
Foreign capital inflows into Nigeria are unlikely to rebound strongly as the existence of a parallel market acts as a deterrent. Investors are hesitant to invest capital into Nigeria as long as there is uncertainty around the propensity for a further devaluation of the naira versus the US dollar.
Moody’s expects foreign investment inflows to continue to be constrained until the parallel market Naira per US dollar exchange rate moves closer to the official exchange rate.
The supply of US dollars will improve over time as real growth rates pick up, which will be supported by investment by multinational corporates wishing to further strengthen their domestic position in Nigeria or establish a presence in the country. This, in turn, should be underpinned by improving GDP growth.
The foreign exchange limitation continues to pose challenges for corporates’ day-to-day operations, capital expenditure (capex) and financing activities.
Corporates servicing US dollar debt commitments will continue to have priority access to US dollars but will need to issue requests at least three months in advance to be assured of requisite availability, while corporates requiring US dollars for their purposes, such as capex outside Nigeria, will continue to face difficulties in obtaining sufficient US dollars.
Another source of US dollars through a rebound in oil production could support the reserves in the future, but it is hypothetical at this stage. If such a development were to occur at the current exchange rate, it could balance supply and demand for US dollars in Nigeria.
This, in turn, would lead to the eclipsing of the parallel market, which would encourage net portfolio inflows and should ensure that the official US dollar supply meets the total demand from Nigeria’s economy.
Looking ahead, growth prospects remain attractive for corporates over the next three years.
Although Moody’s expects Nigerian consumers’ purchasing power to remain under pressure over the next 18 months, both domestic and foreign investment is expected to take advantage of Nigeria’s compelling economic fundamentals and are likely to rebound once the economy has fully stabilised.
Nigeria remains the largest economy in sub-Saharan Africa on a purchasing power parity basis, offering a sizeable market for corporates. A growing middle class – both in percentage and absolute terms – and increasing consumer wealth levels will continue to support higher levels of discretionary income expenditure.
The report is available to Moody’s subscribers at http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1044666
By Modupe Gbadeyanka
The federal government has been asked by the Nigerian Bar Association (NBA) to suspend the implementation of the controversial tax laws.
In a reaction to the tax reform acts, the president of the group, Mr Afam Osigwe (SAN), the suspension of the laws would allow for a proper investigation into allegations of alterations in the gazetted and harmonised copies.
A member of the House of Representatives, Mr Abdussamad Dasuki, alleged that some parts of the laws passed by the parliament were different from the gazetted copy.
To address the issues raised, the NBA said it is “imperative that a comprehensive, open, and transparent investigation be conducted to clarify the circumstances surrounding the enactment of the laws and to restore public confidence in the legislative process.”
“Until these issues are fully examined and resolved, all plans for the implementation of the Tax Reform Acts should be immediately suspended,” the association declared.
It noted that the controversies “raise grave concerns about the integrity, transparency, and credibility of Nigeria’s legislative process.”
“These developments strike at the very heart of constitutional governance and call into question the procedural sanctity that must attend lawmaking in a democratic society,” it noted.
“Legal and policy uncertainty of this magnitude has far-reaching consequences. It unsettles the business environment, erodes investor confidence, and creates unpredictability for individuals, businesses, and institutions required to comply with the law. Such uncertainty is inimical to economic stability and should have no place in a system governed by the rule of law.
“Nigeria’s constitutional democracy demands that laws, especially those with profound economic and social implications, emerge from processes that are transparent, accountable, and beyond reproach. Anything short of this undermines public trust and weakens the foundation upon which lawful governance rests.
“We therefore call on all relevant authorities to act swiftly and responsibly in addressing this controversy, in the overriding interest of constitutional order, economic stability, and the preservation of the rule of law,” the organisation stated.
By Adedapo Adesanya
Demand for hot stocks, including MRS Oil Plc, buoyed the NASD Over-the-Counter (OTC) Securities Exchange by 0.52 per cent on Tuesday, December 23.
The energy company was one of the three price gainers for the session as it chalked up N19.69 to sell at N216.59 per share versus the previous day’s value of N196.90 per share.
Further, FrieslandCampina Wamco Nigeria Plc gained N2.95 to close at N56.75 per unit versus N53.80 per unit and Golden Capital Plc appreciated by 84 Kobo to N9.29 per share from Monday’s N8.45 per share.
Consequently, the market capitalisation went up by N10.95 billion to N2.125 trillion from N2.125 trillion and the NASD Unlisted Security Index (NSI) rose by 18.31 points to 3,570.37 points from 3,552.06 points.
Yesterday, the NASD bourse recorded a price loser, the Central Securities Clearing System Plc (CSCS), which gave up 17 Kobo to close at N33.70 per unit against the previous trading value of N33.87 per unit.
The volume of securities traded at the session went down by 97.6 per cent to 297,902 units from the previous day’s 12.6 million units, the value of securities decreased by 98.5 per cent to N10.5 million from N713.6 million, and the number of deals remained flat at 32 deals.
By value, Infrastructure Credit Guarantee Company (InfraCredit) Plc ended as the most actively traded stock on a year-to-date basis with 5.8 billion units exchanged for N16.4 billion. This was followed by Okitipupa Plc, which traded 178.9 million units valued at N9.5 billion, and MRS Oil Plc with 36.1 million units worth N4.9 billion.
In terms of volume, also on a year-to-date basis, InfraCredit Plc led the chart with a turnover of 5.8 billion units traded for N16.4 billion. Industrial and General Insurance (IGI) Plc ranked second with 1.2 billion units sold for N420.7 million, while Impresit Bakolori Plc followed with the sale of 536.9 million units valued at N524.9 million.
By Dipo Olowookere
It was another bullish trading session for the Nigerian Exchange (NGX) Limited as it closed higher by 0.59 per cent on Tuesday.
The market further rallied due to continued interest in large and mid-cap stocks on the exchange by investors rebalancing their portfolios for the year-end.
Yesterday, Aluminium Extrusion sustained its upward trajectory after it further appreciated by 9.96 per cent to N14.90, as Austin Laz gained 9.81 per cent to close at N2.91, Custodian Investment improved by 9.69 per cent to N38.50, and First Holdco soared by 9.35 per cent to N50.30.
Conversely, Royal Exchange declined by 7.22 per cent to N1.80, Champion Breweries shrank by 6.57 per cent to N15.65, NASCON lost 5.36 per cent to trade at N105.05, Sovereign Trust Insurance depreciated by 5.28 per cent to N3.77, and Japaul went down by 4.51 per cent to N2.33.
At the close of business, 29 shares ended on the gainers’ table and 27 shares finished on the losers’ log, representing a positive market breadth index and bullish investor sentiment.
This raised the All-Share Index (ASI) by 895.06 points to 153,354.13 points from 152,459.07 points and lifted the market capitalisation by N579 billion to N97.772 trillion from the previous day’s N97.193 trillion.
VFD Group finished the day as the busiest stock after it recorded a turnover of 192.0 million units worth N2.1 billion, GTCO exchanged 63.5 million units valued at N5.6 billion, Access Holdings traded 49.8 million units for N1.0 billion, First Holdco sold 45.8 million units valued at N2.3 billion, and Secure Electronic Technology transacted 38.3 million units worth N28.4 million.
In all, market participants bought and sold 677.4 million units valued at N20.8 billion in 27,589 deals compared with the 451.5 million units worth N13.0 billion traded in 33,327 deals on Monday, showing an improvement in the trading volume and value by 50.03 per cent and 60.00 per cent apiece, and a shortfall in the number of deals by 17.22 per cent.
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