Economy
Report Unveils Top Five Business Risks for West Africa
By Modupe Gbadeyanka
As Nigeria exits the recession of 2017, investor sentiment across West Africa is likely to experience uplift in 2018.
Still, political uncertainty ahead of Nigeria’s 2019 presidential elections and on-going security concerns are among the key risks for businesses operating in the region, says specialist global risk consultancy Control Risks in their annual political and security risk forecast ‘RiskMap’.
Control Risks’ Senior Partner for West Africa Tom Griffin stated that, “2017 has been a tough and turbulent year for businesses in the region, however with Nigeria exiting recession, and foreign exchange shortages easing, we see a strong improvement in investor sentiment emerging.
Another major engine of growth will be Cote d’Ivoire, where economic expansion is projected at around 7% next year. There will be only a handful of elections in the region in 2018, meaning continuity will largely prevail with policy decisions having the biggest impact on the business environment.”
“In Nigeria however, although presidential elections are next slated for 2019, campaigning has already started. The uncertainty that generates, as well as the need for cash that an election brings, mean that political instability and regulators whose actions will be difficult to predict remain among our top risks for businesses in the year ahead.”
Control Risks has identified the following as the key risks facing businesses in West Africa in 2018:
Terrorism and militancy: Business assets and personnel in West Africa will remain vulnerable to attacks by transnational or domestic militant groups. In particular, al-Qaeda and its affiliates will continue to pose a threat to operators in the Sahel, while the oil and gas industry in Nigeria’s Niger Delta will remain exposed to attacks by domestic militant groups. Failure to resolve the underlying political and socio-economic grievances at the root of these movements will see the threat persist in 2018.
Irregular regulators: As countries in the region, notably commodity-dependent economies, face growing fiscal pressures, operators are likely to see regulatory bodies increasingly act as revenue-generating bodies, strengthening local content provisions, introducing stricter fiscal terms, reviewing contracts or erratically imposing fines in companies in the hope of boosting state finances. This will periodically give rise to commercial disputes, legal challenges, and the need for businesses to engage with government stakeholders.
Political instability: Protracted political and socio-economic grievances will continue to fuel popular discontent and a desire for regime change in parts of the region. Cameroonian President Paul Biya’s re-election bid amid a continued crisis in the Anglophone regions will exacerbate tensions, while Togolese citizens will continue to protest for the end of the 50-year Gnassingbé dynasty. Protests will pose security threats to businesses, while regime changes would prompt major institutional changes and complicate engagements for operators.
New sectors, new risks: From Senegal’s offshore potential to Nigeria’s embryonic mining sector, some countries in West Africa will be making forays into previously-undeveloped sectors in 2018. Prospective investors need to monitor closely how government’s ability to oversee these sectors evolves and what the associated risks around these projects become.
On-going operational risks: Many of the major risks and challenges businesses face in West Africa are the on-going practical impediments to day-to-day operations. Shortages of or difficulties in sourcing fuel, foreign currency, equipment and skilled labour; the infrastructure deficits that persist in the vast majority of the region, such as in electricity and transport, will continue to mean higher costs, higher demands on management resources a tougher capital-raising environment, and greater uncertainty for businesses than in other regions.
Many countries in Africa, Nigeria and Cameroon among them, face the prospect of what could become a sovereign debt crisis, a decade after they followed Ghana’s lead in entering the international bond market. The problem is driven by high levels of external debt, persistent uncertainty over the recovery of commodity prices to fund repayments, and borrowing to fund recurrent expenditure. Countries dependent on oil revenues are particularly vulnerable to ballooning debt in 2018.
In Nigeria and Ghana, plans to borrow heavily to finance long-term infrastructure projects will not generate sufficient revenues in the coming year to finance debt repayments. Amid rising inflation and muted oil prices, Nigeria’s debt servicing payments – which in 2016 doubled to 66% of total revenues – are likely to rise further, placing extreme strain on an already stretched budget. With the government of President Muhammadu Buhari well over halfway through its term, yet to fulfil many of the promises that brought it to power and already entering campaign mode, businesses in Nigeria will remain acutely sensitive to political and operational instability in 2018.
The RiskMap 2018 website will be live from Monday, December 18, 2017.
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.
By Dipo Olowookere
For the fourth consecutive trading session, the Nigerian Exchange (NGX) Limited closed higher on Friday by 0.63 per cent on sustained renewed buying pressure.
Apart from the energy and industrial goods sectors which closed flat, every other sector ended in the green territory, according to data obtained from the bourse.
Business Post reports that the insurance index appreciated by 1.52 per cent, the banking space improved by 0.63 per cent, and the consumer goods counter expanded by 0.46 per cent.
As a result, the All-Share Index (ASI) gained 617.47 points to settle at 99,378.06 points compared with the preceding day’s 98,760.59 points and the market capitalisation went up by 375 billion to close at N60.242 trillion, in contrast to Thursday’s closing value of N59.867 trillion.
The volume of transactions on Customs Street yesterday grew by 11.13 per cent to 544.2 million shares from the 489.7 million shares transacted a day earlier.
The value of transactions increased during the session by 49.30 per cent to N10.6 billion from N7.1 billion and the number of deals went up by 1.93 per cent to 8,464 deals from the 8,304 deals posted in the previous trading session.
The busiest equity for the trading day was Japaul with the sale of 71.7 million units valued at N158.0 million, eTranzact exchanged 70.7 million units worth N477.5 million, Tantalizers sold 57.3 million units for N101.2 million, FCMB traded 33.0 million units worth N297.3 million, and Universal Insurance transacted 27.1 million units valued at N9.6 million.
A total of 36 stocks ended on the gainers’ chart, while 15 stocks finished on the losers’ table, indicating a positive market breadth index and strong investor sentiment.
The trio of Aradel Holdings, Ikeja Hotel and Caverton gained 10.00 per cent each to trade at N550.00, N8.80, and N1.98, respectively, as Africa Prudential rose by 9.87 per cent to N17.25 and Golden Guinea Breweries soared by 9.64 per cent to N8.64.
On the flip side, Austin Laz lost 10.00 per cent to close at N1.62, ABC Transport crashed by 8.00 per cent to N1.15, Royal Exchange slumped by 7.69 per cent to 60 Kobo, Secure Electronic Technology plunged by 5.26 per cent to 54 Kobo, and The Initiates crumbled by 4.26 per cent to N2.25.
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