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Sustained Investment Critical to Nigeria’s Growth—PwC

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By Dipo Olowookere

Latest report by PwC has revealed that sustained investment and reform are critical to realising growth potential in Nigeria and other emerging market economies.

It also said the long-term global economic power shift away from the established advanced economies is set to continue over the period to 2050, as emerging market countries continue to boost their share of world GDP in the long run despite recent mixed performance in some of these economies.

This is one of the key findings from the latest report from PwC economists on the theme of the World in 2050: The long view: how will the global economic order change by 2050? This presents projections of potential GDP growth up to 2050 for 32 of the largest economies in the world, which together account for around 85% of global GDP. These projections are based on the latest update of a detailed long-term global growth model first developed by PwC in 2006.

The report projects that the world economy could double in size by 2042, growing at an annual average real rate of around 2.5% between 2016 and 2050. This growth will be driven largely by emerging market and developing countries, with the E7 economies of Brazil, China, India, Indonesia, Mexico, Russia and Turkey growing at an annual average rate of around 3.5% over the next 34 years, compared to only around 1.6% for the advanced G7 nations of Canada, France, Germany, Italy, Japan, the UK and the US.

Dr Andrew S. Nevin Ph.D., PwC Nigeria’s Chief Economist and co-author of the report, commented that, “We will continue to see the shift in global economic power away from established advanced economies towards emerging economies in Asia and elsewhere. The E7 could comprise almost 50% of world GDP by 2050, while the G7’s share declines to only just over 20%.”

When looking at GDP measured at market exchange rates (MER), there is not quite such a radical shift in global economic power. But China still emerges as the largest economy in the world before 2030 and India is still clearly the third largest in the world by 2050.

But the spotlight will certainly be on the newer emerging markets as they take centre stage. By 2050, Indonesia and Mexico are projected to be larger than Japan, Germany, the UK or France, while Turkey could overtake Italy. In terms of growth, Vietnam, India and Bangladesh could be the fastest growing economies over the period to 2050, averaging growth of around 5% per year, which also shows how growth breaks down between population and GDP per capita.

Nigeria has the potential to move eight places up the GDP rankings to 14th by 2050, but it will only realise this potential if it can diversify its economy away from oil and strengthen its institutions and infrastructure.

Dr Andrew S. Nevin observed that, “Growth in many emerging economies will be supported by relatively fast-growing populations, boosting domestic demand and the size of the workforce. This will need, however, to be complemented with investments in education and improvement in macroeconomic fundamentals to ensure there are sufficient jobs for the growing number of young people in these countries.”

“In contrast to our previous 2015 edition, in which we projected Nigeria to be the fastest growing economy of the countries we modelled, Nigeria is now expected to be only the sixth fastest. This reflects the slowdown of the Nigerian economy over the last two years as a result of a fall in oil prices.

“In 2016, the economy officially slid into recession for the first time in recent years as key sectors contracted sharply across three quarters. Foreign exchange shortages and high inflation have hampered the growth of manufacturing and services, with administrative controls put in place by the Central Bank resulting in a reduction in foreign direct investment and foreign portfolio flows.”

The report said Nigeria will average around 2% annual growth to 2020, with growth then picking up speed in the decades following to average almost 4.5% p.a. between 2041 and 2050. Along with South Africa, Nigeria is one of the few to see a marked acceleration of annual average growth over the next few decades, as opposed to a moderation.

However, to support long-term sustainable growth, Nigeria needs to develop a broader-based economy, diversifying its exports to ensure its growth is not dampened by global price or demand shocks. Alongside this, Nigeria should develop its institutions and infrastructure, supporting long-term productivity growth.”

It identified five ways in which Nigeria can support inclusive growth which include:

Improving tax collection: Nigeria is a low-taxed economy compared to its peers with the tax-to-GDP ratio estimated at just 8%, the second lowest in Africa and the fourth lowest in the world. If these could be increased to the Sub-Saharan African economies’ average of 18% of GDP, Nigeria could potentially raise its tax revenues to around $104 billion. Higher tax revenues would reduce government borrowing and encourage financial institutions to offer funds at lower interest rates, thereby boosting the real economy.

Economic diversification: Nigeria’s potential advantages for future growth include a large consumer market, a strategic geographic location as a hub for Africa, and a young and entrepreneurial population. The first step in harnessing this opportunity requires deliberate efforts to improve value-adding activity in the non-oil economy, particularly in agriculture and the services sectors.

Corruption: If Nigeria reduces corruption, there is a significant opportunity to boost GDP levels. For example, if corruption in Nigeria could be reduced in the long-run to estimated levels in Malaysia, we estimate that annual GDP could rise by over $500 billion by 2030. Deliberate efforts to reduce corruption will complement the Nigerian government’s diversification drive.

Easing the constraints to business: A weak business environment is holding back Nigeria’s economic growth potential and slowing down the pace of development. Nigeria ranked 169th out of 190 countries in the World Bank’s 2017 Ease of Doing Business Index, lower than Niger, Madagascar and Sierra Leone. Other than protecting minority investors and getting credit, Nigeria ranks low on all other indicators and will need to particularly focus on improving electricity supply, simplifying the tax collection process and improving trading across borders so as to leverage its position as the hub of West Africa.

Increasing labour productivity: Nigeria has the advantage of a large workforce of over 70 million, but the majority are under-skilled. It is imperative to equip workers with the skills needed to keep pace with an economy in transition like Nigeria. Average productivity of a worker in Nigeria is very low at US$3.24/hr relative to US$19.68/hr in South Africa and US$29.34/hr in Turkey 14. Improvements in productivity will require investments to ensure a broad availability of good quality education as well as relevant vocational training to improve value-added activity across key sectors such as manufacturing and services.

Average incomes and Working-age populations

The report further noted that today’s advanced economies will continue to have higher average incomes – with the possible exception of Italy, all of the G7 continue to sit above the E7 in the rankings of GDP per capita in 2050. Emerging markets are projected to close the income gap gradually over time, but full convergence of income levels across the world is likely to take until well beyond 2050.

In addition, PwC economists project global economic growth to average around 3.5% per annum over the years to 2020, slowing down to around 2.7% in the 2020s, 2.5% in the 2030s, and 2.4% in the 2040s. This will occur as many advanced economies (and eventually also some emerging markets like China) experience a marked decline in their working-age populations. At the same time, emerging market growth rates will moderate as these economies mature and the scope for rapid catch-up growth declines. These effects are projected to outweigh the impact of emerging economies having a progressively higher weight in world GDP, which would otherwise tend to boost average global growth.

All of these portend challenges for policy makers. In order to realise their great potential, emerging economies must undertake sustained and effective investment in education, infrastructure and technology. The fall in oil prices from mid-2014 to early 2016 highlighted the importance of more diversified emerging economies for long-term sustainable growth. Underlying all of this is the need to develop the political, economic, legal and social institutions within emerging economies to generate incentives for innovation and entrepreneurship, creating secure and stable economies in which to do business.

According to Dr Andrew S. Nevin, “Policymakers across the world face a number of challenges if they are to achieve sustainable long-term economic growth of the kind we project in this report. Structural developments, such as ageing populations and climate change, require forward-thinking policy which equips the workforce to continue to make societal contributions later on in life and promotes low carbon technologies.

“Falling global trade growth, rising income inequality within many countries and increasing global geopolitical uncertainties are intensifying the need to create diversified economies which create opportunities for everyone in a broad variety of industries.”

Great opportunities for business with the right strategic mix of flexibility and patience

Emerging market development will create many opportunities for business. These will arise as these economies progress into new industries, engage with world markets and as their relatively youthful populations get richer. They will become more attractive places to do business and live, attracting investment and talent.

Emerging economies are rapidly evolving and often relatively volatile, however, so companies will need operating strategies that have the right mix of flexibility and patience to succeed in these markets. Case studies in the PwC report illustrate how businesses should be prepared to adjust their brand and market positions to suit differing and often more nuanced local preferences. An in-depth understanding of the local market and consumers will be crucial, which will often involve working with local partners.

Concluding, Dr Andrew S. Nevin said, “Businesses need to be patient enough to ride out the short-term economic and political storms that will inevitably occur from time to time in these emerging markets as they move towards maturity. But the numbers in our report make clear that failure to engage with these emerging markets means missing out on the bulk of the economic growth we expect to see in the world economy between now and 2050.

“For Nigeria, although we face some tough choices, the current episode represents a potential tipping point for positive change as the government becomes forced to address the sources of vulnerability in order to achieve inclusive growth and sustainable development.”

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

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Economy

Naira Loses 0.05% to Trade N408.80/$1 at I&E FX  Window

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Naira BDC Segment

By Adedapo Adesanya

The Naira gave up some gains made on the US Dollar at the previous session on Wednesday, February 24 at the Investors and Exporters (I&E) window of the foreign exchange market.

At the previous session, after a constant plunge, the domestic currency rose to N408.60/$1 but gave up 0.05 per cent or 20 kobo of this yesterday to quote at N408.80/$1.

This happened as the demand for FX overpowered the local currency as transactions worth $212.43 million were recorded, $89.06 million or 72.2 per cent higher than the $123.37 million recorded at the preceding session.

However, at the parallel market, the domestic currency maintained its stability against the greenback on Wednesday to trade at N480/$1.

But at the same unregulated segment of the market, the Nigerian currency depreciated by N5 against the Pound Sterling to close at N670/£1 in contrast to N665/£1 it was sold on Tuesday and gained N2 against the Euro to close at N580/€1 compared to the previous trading rate of N582/€1.

At the interbank segment of the market, the value of the Naira against the Dollar still remained unchanged on Wednesday at N379/$1. It also traded flat against the American currency at the Bureaux De Change (BDC) window at N395/$.

Meanwhile, in the cryptocurrency market, which had some recorded losses recently, things are beginning to look again as all the seven digital coins tracked by Business Post closed positive.

The largest surge was recorded by Dash (DASH), which gained 30.6 per cent to sell at N169,800. It was followed by Ethereum (ETH), which made a 16.4 per cent jump to sell at N1,088,988.00, while Tron (TRX) recorded a 13.7 per cent strengthening to sell at N31.90.

Bitcoin (BTC) saw its value rise by 9.8 per cent to trade at N31,900,699, Litecoin (LTC) appreciated by 5.5 per cent to trade at N116,000, the US Dollar Tether (USDT) rose by 7.9 per cent to trade at N650.55, while Ripple (XRP) recorded a 3.4 per cent growth to trade at N301.02.

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Economy

CSCS Buoys Bulls’ Return to NASD by 0.94%

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CSCS Stocks

By Adedapo Adesanya

After closing in the negative territory for four consecutive trading days, the NASD Over-the-Counter (OTC) Securities Exchange finished bullish on Wednesday.

Business Post reports that the unlisted securities market closed higher by 0.94 per cent at the midweek session on the back of the gains recorded by Central Securities Clearing Systems (CSCS).

The share price of the company appreciated by N1 or 6.5 per cent to settle at N16.50 per unit compared to N15.50 per unit it finished at the previous session.

This positive price movement boosted the market capitalisation of the exchange by N4.79 billion to N512.24 billion from the previous N507.45 billion.

Also, it increased the NASD Unlisted Security Index (NSI) by 6.67 points to 713.91 points from 707.24 points it finished on Tuesday.

It was not all rosy at the market yesterday as the share price of FrieslandCampina WAMCO Nigeria Plc depreciated by 22 kobo or 0.2 per cent to trade at N119.43 per share in contrast to N119.65 per share of the preceding session.

Yesterday, the volume of trades dipped by 82.5 per cent as 41,100 units of securities were transacted by investors as against 234,152 units of securities traded on Tuesday.

Equally, the value of transactions went down by 46.9 per cent to N4.29 million from N8.1 million, while the total number of deals went up by 33.3 per cent to four deals from three deals.

These deals were performed on FrieslandCampina WAMCO Nigeria Plc, which accounted for three, and CSCS, which accounted for one.

Again, UBN Property Plc remained as the most active stock by volume (year to date) for trading 15.5 million units valued at N16.8 billion. CSCS Plc has exchanged 4.7 million units worth N73.2 million, while FrieslandCampina has transacted 2.3 million units worth N284.2 million.

Also, FrieslandCampina was the most traded stock by value (year-to-date) for transacting 2.3 million units valued at N284.2 million. Niger Delta Exploration and Production (NDEP) Plc has traded 603,911 units worth N195.9 million, while CSCS has traded 4.7 million units worth N73.2 million.

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Economy

Brent Trades $67/Barrel Despite High Crude Inventories

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brent crude oil

By Adedapo Adesanya

The Brent crude jumped to $67 per barrel on Wednesday despite a surprising report that showed a build in crude inventories in the United States, the largest oil-producing country in the world.

During the trading session, the global benchmark, which many country use to price their crude, appreciated by 2.8 per cent or $1.85 to trade at $67.22 per barrel, while the US benchmark, West Texas Intermediate (WTI) crude, gained $1.78 or 2.9 per cent to sell at $63.45 per barrel.

Crude oil prices went on steroids after the Energy Information Administration (EIA) reported a crude oil inventory build of 1.3 million barrels for the week to February 19. The build was much lower than the one the American Petroleum Institute (API) had estimated a day earlier.

The report came a day after the API estimated an oil stock build of over 1 million barrels. It also compared with analyst expectations of a 5.372-million-barrel draw for the reported week and a 7.3-million-barrel inventory draw the EIA reported for the previous week.

Last week’s frigid weather in the American state of Texas will likely keep oil prices higher for some time as production restarts slowly, and reports suggest that some of it may not return at all as companies have decided to halt production.

The bullish sentiment around the black gold could be attributed to the renewal of hopes from banks and traders, especially after Goldman Sachs said it expected prices to hit $70 and top it by the summer.

Also, confidence that a meaningful demand rebound will accompany widening vaccination availability by soon has supported prices and the production outages in the US only served to strengthen it further.

Key players in the oil market have been talking up the rising prices in the coming months, with some even floating the prospect of $100 crude in the next year or two as the global economy recovers from the COVID-19 pandemic.

Still, market participants continue to observed events leading to next week’s meeting between the Organisation of the Petroleum Exporting and its allies (OPEC+).

This meeting, set for March 4, is likely to set the tone into the second quarter of the year as they decide on whether to bump up production or seek even higher prices before the pick-up in demand has started to fully materialize.

Back in December, the group decided to restore 500,000 barrels a day as part of the gradual process, which was paused in January, to push the remaining 7 million withheld barrels a day back into the market.

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Economy

Confusion Over Fresh Court Order on Suspended Oando AGM

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Oando SEC crisis

By Dipo Olowookere

There seems to be confusion over a fresh court order secured by a shareholder of Oando Plc concerning the suspension of the company’s Annual General Meeting (AGM).

In 2019, the Securities and Exchange Commission (SEC) suspended the yearly shareholders’ meeting of Oando, preventing the energy firm from meeting its obligations of filing financial statements to the Nigerian Stock Exchange (NSE).

But on Tuesday, February 23, 2021, one Mr Patrick Ajudua claimed he obtained an order from Justice O. A Musa of the High Court of the FCT, Abuja, declaring the action of SEC, the apex regulator in the nation’s capital market, as illegal and unconstitutional.

It was reported that the court held that Mr Ajudua, as a member and shareholder of Oando, has a right and freedom of association and assembly with other shareholders and the right to receive information at the AGM.

Also, it was reported that a letter dated May 31, 2019, by SEC to Oando sanctioning its management was declared unconstitutional, null and void by the court because it was in violation of Mr Ajudua’s fundamental right to a fair hearing and his human right to receive information on the affairs of Oando and his interest and shares in Oando.

According to reports, the court set aside the directive of SEC suspending/postponing indefinitely the AGM of Oando because it was in violation, breach, and contravention of Mr Ajudua’s right and freedom of association and assembly with other shareholders and right to information from other shareholders and Oando Plc;

The shareholder was said to have obtained an order from the court restraining SEC and Oando from interfering with, disrupting, and or interfering with his constitutional right of association, assembly and right to receive information from other shareholders and members of Oando Plc at the postponed 2019 AGM.

He further received an order of injunction restraining SEC from acting and/or taking any steps pursuant to its letter of May 31, 2019, or interfering in any manner whatsoever with directors lawfully appointed him.

Also, Mr Ajudua was said to have secured an order directing Oando to convene and hold AGM within 90 days of the order of the court in compliance with the provisions of CAMA.

But SEC, in a statement made available to Business Post on Wednesday said it was not aware of the case or the judgment.

“The attention of the commission has been drawn to several publications in the social media, where it is reported that a shareholder of Oando Plc, purportedly obtained a judgment from the Federal Capital Territory High Court against the commission.

“The commission wishes to inform the general public that it was never at any time served with court processes with respect to the purported matter at the FCT High court.

“The commission will consequently take all necessary steps to verify and set aside the purported decision of the said court,” the statement signed by the management disclosed.

However, Mr Ajedua has described his action as “a win” for him and “all shareholders,” noting that, “The lingering delay in resolution of the conflict has brought untold hardship, financial difficulty and loss of capital appreciation on our investments.”

“Therefore, we receive this judgement with humility and the pray that with all hands on deck, we can move the company forward.

“We plead with the regulators to give peace a chance and allow for a harmonious resolution to the conflict.

“The shareholder community will continue to protect our investments by ensuring high compliance with the code of corporate governance and the integrity of the company’s operations in the capital market,” he added.

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Economy

AIICO, Zenith Bank, 14 Others Lift NSE Index by 0.03%

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AIICO rights issue

By Dipo Olowookere

The Nigerian Stock Exchange (NSE) was saved from the claws of the bears on Tuesday, bringing a sigh of relief to investors, who had been forced to endure a turbulent time lately.

The market appreciated by 0.03 per cent, thanks to AIICO Insurance, Zenith Bank and 14 other equities.

Zenith Bank on its part contributed chiefly to the growth witnessed yesterday as a result of the release of its 2020 full-year earnings and the declaration of N2.70 final dividend.

This announcement triggered buying pressure and lifted the All-Share Index (ASI) by 10.77 points to 40,164.86 points from 40,154.09 points and pushed the market capitalisation higher by N6 billion to N21.015 trillion from N21.009 trillion.

At the close of transactions, the volume of shares rose by 16.80 per cent to 338.0 million units from 289.3 million units, while the value of traded equities increased by 7.59 per cent to N3.9 billion from N3.6 billion, with the number of deals rising by 5.63 per cent to 5,232 deals from 4,953 deals.

For another trading day, FBN Holdings was the most active stock with the sale of 64.6 million units valued at N471.8 million, while Zenith Bank traded 52.7 million units worth N1.3 billion.

Transcorp exchanged 42.0 million equities for N38.1 million, United Capital transacted 21.0 million stocks valued at N128.2 million, while UBA traded 18.2 million shares for N153.2 million.

During the session, AIICO Insurance and Livestock Feeds topped the gainers’ table with a price appreciation of 7.14 per cent each to finish at N1.20 per unit and N2.25 per share respectively.

Flour Mills improved by 6.16 per cent to close at N31 per unit, Zenith Bank gained 4.84 per cent to trade at N26 per share, while Cutix appreciated by 4.65 per cent to sell for N2.25 per unit.

Sitting on top of the losers’ list was Sunu Assurances, which lost 9.88 per cent to settle at 73 kobo per share and was deputised by LASACO Assurances, which declined by 9.87 per cent to trade at N1.37 per unit.

Africa Prudential depreciated by 9.85 per cent to quote at N5.95 per share, ABC Transport lost 8.57 per cent to close at 32 kobo per unit, while University Press depleted by 8.53 per cent to trade at N1.18 per share.

For the sectors, only the banking index closed positive with a 1.68 per cent growth as the consumer goods and insurance sectors lost 1.61 per cent and 0.92 per cent respectively, with the energy and industrial goods counters closing flat.

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Economy

Unlisted Securities Market Posts Fourth Consecutive Loss

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Unlisted Securities Market

By Adedapo Adesanya

The NASD Over-the-Counter (OTC) Securities Exchange recorded a loss on Tuesday and it was the fourth consecutive time this was happening.

During the trading session, the unlisted securities market ended in negative territory as a result of the 0.49 per cent slide it closed with.

This battered the NASD Unlisted Security Index (NSI) by 3.48 points to 707.24 points from the 710.72 points recorded at Monday’s trading session.

It equally depleted the market capitalisation of the bourse by N2.50 billion to N507.45 billion from N509.95 billion achieved the preceding day.

The bearish environment was activated by a loss in the price of Central Securities Clearing Systems (CSCS) Plc stocks by 50 kobo or 3.1 per cent, closing at N15.50 per unit compared to N16 per unit it traded a day earlier.

However, the level of trading activities improved yesterday as the volume of trades rose by 172.9 per cent to 234,152 units from Monday’s 85,800 units.

But the value of the transactions reduced yesterday by 55.7 per cent as securities worth N8.1 million exchanged hands in contrast to the previous N18.3 million.

Also, the total number of deals executed by market participants went down by 72.7 per cent as only three deals were performed at the exchange as against the 11 deals recorded on Monday.

Business Post reports that these deals were carried out on shares of FrieslandCampina WAMCO Nigeria Plc, CSCS Plc, and Nipco Plc.

The market, which closed without a price gainer, had UBN Property Plc emerging as the most active stock by volume (year to date) with the sale pf 15.5 million units valued at N16.8 billion. CSCS Plc trailed with the sale of 4.7 million units worth N73.1 million, while FrieslandCampina WAMCO Nigeria Plc has traded 2.3 million units worth N280.0 million.

In terms of the most traded stock by value (year-to-date), FrieslandCampina occupied the topmost spot with the sale of 2.3 million units valued at N280.0 million. Niger Delta Exploration and Production (NDEP) Plc has exchanged 603,911 units worth N195.9 million, while CSCS has traded 4.7 million units worth N73.1 million.

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