Economy
S&P Affirms Kenya at ‘B+/B’; Outlook Stable
By Modupe Gbadeyanka
Renowned global rating agency, S&P Global Ratings, on April 7, 2017, affirmed its ‘B+/B’ long- and short-term foreign and local currency sovereign credit ratings on Kenya with the outlook stable.
The agency explained that its ratings on Kenya were supported by its monetary flexibility, liquid domestic financial markets, track record of strong headline and per capita GDP growth, and increasingly diversified economic base.
In March 2016, Kenya signed a new stand-by agreement with the International Monetary Fund (IMF), totalling $1.5 billion over the next 18 months, which would support external financing needs if necessary.
S&P stated that it believes the arrangement will likely act as a policy anchor while it is in force, pointing out that it ratings on Kenya were constrained by the country’s history of ethnic tensions, low GDP per capita and wealth levels, high government fiscal deficits and debt stock, and susceptibility to balance-of-payments pressures.
Since 2014, the lion’s share of Kenya’s net external financing needs has been provided by official rather than commercial lenders.
In 2017, the agency expects the Kenyan economy to grow at 5.3%, slower than the estimated 6 percent in 2016.
Higher oil prices, drought conditions in the Rift Valley, and weaker credit growth (reflecting the government’s introduction of interest rate caps) will weigh on the economy this year; as will the approach of elections in August 2017, if tensions between political parties and along ethnic lines escalate.
“In the medium term, Kenya’s economic growth prospects remain strong, averaging 6% per year over 2018-2020 reflecting a diversified economic base, a resilient tourism sector, and productivity gains from large-scale public infrastructure investments, alongside Kenya’s favourable demographics,” S&P said.
It stated further that large infrastructure projects like the Standard Gauge Railway ($4 billion) have boosted economic activity.
The first phase of the Standard Gauge Railway project has been completed and is undergoing tests before commissioning during 2017. The project seeks to connect Kenya, from the port of Mombasa, with the capital Nairobi and the neighbouring Republic of Uganda.
“We estimate Kenya’s fiscal deficit in 2016-2017 will remain elevated, at close to 10% of GDP, owing to increases in one-off expenditure items related to the elections and drought support spending. This is one of the highest budgetary deficits of all rated sovereigns.
“At the same time, there are still shortfalls in personal and corporate income taxes while capital expenditure implementation lags budget targets. Absent one-off factors experienced in 2016-2017, we expect that large infrastructure-related expenditures will start to decline and that the government will undertake consolidation measures, including improving tax collection.
“We expect fiscal imbalances will reduce more gradually and average close to 6% of GDP in 2017 and close to 4% by 2020.
“We also understand that oversight at the Public Debt Management Office (PDMO) has been bolstered and new debt-management systems have been introduced. We view these factors as supportive of the government’s creditworthiness,” the agency said.
S&P disclosed that the stable outlook reflects its expectation that strong growth prospects will facilitate fiscal consolidation and contain increases in external indebtedness over the next year.
“We could lower the ratings if political tensions flared up and undermined stability-oriented economic policy-making, or if fiscal consolidation were markedly slower and increased government debt or the country’s external private sector debt increased more than we currently expect,” it added.
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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