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 Adedapo Adesanya
Four securities weakened the NASD Over-the-Counter (OTC) Securities Exchange by 1.95 per cent on Friday, erasing N41.17 billion from the bourse, which had its market capitalisation at N2.567 trillion compared with the previous session’s N2.618 trillion.
In the same vein, the NASD Unlisted Security Index (NSI) decreased at the close of business by 85.28 points to 4,277.07 points from 4,362.32 points.
The price decliners were led by 11 Plc, which gave up N20.50 to sell at N200.50 per share compared with the preceding day’s N221.00 per share, FrieslandCampina Wamco Nigeria Plc dropped N16.94 to close at N155.20 per unit versus Thursday’s closing price of N172.14 per unit, Central Securities Clearing System (CSCS) Plc went down by N2.11 to N84.68 per share from N86.79 per share, and Afriland Properties Plc lost 11 Kobo to end at N16.74 per unit, in contrast to the N16.85 per unit it closed a day earlier.
During the trading day, the value of transactions jumped by 172.1 per cent to N29.9 million from the preceding session’s N10.9 million, and the volume of trades soared by 136.5 per cent to 955,096 units from the previous 403,901 units, while the number of deals went down by 11.4 per cent to 31 deals from 35 deals.
Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units worth N6.5 billion, and CSCS Plc with 68.6 million units sold for N4.7 billion.
GNI Plc also ended the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units exchanged for N8.4 billion, trailed by Infracredit Plc with 2.3 billion units traded for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
By Dipo Olowookere
The last trading session of this week on the floor of the Nigerian Exchange (NGX) Limited ended on a negative note, with a 0.66 per cent loss on Friday.
This was influenced by sustained selling pressure and cautious trading, which forced investors into profit-taking.
Data obtained by Business Post showed that the energy sector fell by 4.66 per cent, the insurance counter dipped by 2.23 per cent, the consumer goods index depreciated by 0.96 per cent, and the banking segment shed 0.28 per cent, while the industrial goods space remained unchanged.
At the close of business, the All-Share Index (ASI) of Nigeria’s stock exchange went down by 1,531.81 points to 232,049.02 points from 233,580.83 points, and the market capitalisation dropped N983 billion to settle at N148.905 trillion compared with Thursday’s N149.888 trillion.
Aradel was the worst-performing equity after it lost 10.00 per cent to close at N1,417.50. International Energy Insurance slipped by 9.95 per cent to N5.79, Trans-Nationwide Express depreciated by 9.89 per cent to N3.28, eTranzact crashed by 9.79 per cent to N14.75, and UPDC slumped by 9.72 per cent to N28.12.
The best-performing equity for the day was Universal Insurance, which gained 6.32 per cent to close at N1.01, McNichols grew by 5.52 per cent to N8.60, Linkage Assurance expanded by 4.67 per cent to N1.57, NGX Group appreciated by 4.35 per cent to N120.00, and Transcorp increased by 3.62 per cent to N41.50.
As look at the activity level indicated that investors traded 388.7 million stocks worth N18.4 billion in 44,631 deals compared with the 393.7 million stocks valued at N19.2 billion executed in 45,813 deals a day earlier, representing a decline in the trading volume, value, and number of deals by 1.27 per cent, 4.17 per cent, and 2.58 per cent, respectively.
By Adedapo Adesanya
The Naira recorded a loss of 82 Kobo or 0.06 per cent against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, June 26, exchanging at N1,380.93/$1, in contrast to the previous day’s rate of N1,380.11/$1.
Equally, the domestic currency further weakened against the Pound Sterling in the official FX market yesterday by N6.06 to settle at N1,824.90/£1 versus the preceding session’s N1,818.84/£1, and lost N10.74 on the Euro to sell at N1,577 .58/€1 versus N1,566.84/€1.
At the GTBank forex counter, the Naira depreciated against the greenback during the session by N4 to close at N1,387/$1, in contrast to Thursday’s value of N1,383/$1, and at the parallel market, it was unchanged at N1,395/$1.
Interbank FX activity among financial institutions has fluctuated amid a sharp slowdown in forex market interventions by the Central Bank of Nigeria (CBN), as it allows demand and supply to move the market.
Also, a stronger greenback has generally put significant pressure on emerging-market currencies.
Nigeria has accessed the first tranche of a proposed $5 billion derivatives financing arrangement with First Abu Dhabi Bank PJSC, the largest lender in the United Arab Emirates (UAE).
The $5 billion facility, approved by the National Assembly earlier this year, is part of the federal government’s plan to diversify external financing sources and reduce borrowing costs. Structured as a Total Return Swap with First Abu Dhabi Bank, proceeds are earmarked for refinancing debt and supporting infrastructure financing.
If the proceeds are brought into the country through the official FX market, the transaction will increase the currency reserves or Dollar liquidity.
At the cryptocurrency market, Solana (SOL) grew by 2.2 per cent to $71.92, Cardano (ADA) gained 1.1 per cent to trade at $0.1474, Ripple (XRP) also appreciated by 1.1 per cent to $1.05, Dogecoin (DOGE) expanded by 0.9 per cent to $0.0755, and Ethereum (ETH) improved by 0.4 per cent to $1,578.84.
On the flip side, TRON (TRX) slid 0.6 per cent to $0.3203, Binance Coin (BNB) slumped by 0.3 per cent to $564.33, and Bitcoin fell by 0.2 per cent to $60,219.37, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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