BNET Nigeria News Update August 2017 whole—and would remain negative for about a third of HIGHLIGHTS the countries in the region. “The slight upward revision to 2017 growth relative to the Nigeria’s economic growth to April 2017 WEO forecast reflects a modest upgrading of growth prospects for South Africa, which is experiencing a overtake South Africa next bumper crop due to better rainfall and an increase in mining output prompted by a moderate rebound in year commodity prices. “However, the outlook for South Africa remains difficult, with elevated political uncertainty and weak consumer and business confidence, and the country’s growth forecast was consequently marked down for 2018,” it added. July 2017 It urged Nigeria and other commodity exporters to continue to adjust to lower revenues, while diversifying The International Monetary Fund (IMF) on their sources of growth over time. Monday predicted that the Nigerian economy would expand by 1.9 per cent in 2018, higher than the 1.2 per “Oil prices have receded, reflecting strong inventory levels cent it estimated for South Africa. in the United States and a pickup in supply. Headline inflation also generally softened as the impact of the In addition, the multilateral institution projected that commodity price rebound of the second half of 2016 Nigeria would exit the biting economic recession this year faded, and remains at levels well below central bank with a slim economic growth of 0.8 per cent, just as it targets in most advanced economies. predicted that South Africa, would also record one per cent growth in its Gross Domestic Product (GDP) this year. “Core inflation has remained broadly stable. It has largely been stable in emerging economies as well, with a few, The fund made the predictions in its World Economic such as Brazil and Russia, witnessing strong declines.” Outlook (WEO) for July 2017, titled: ‘A Firming Recovery,’ that was obtained on its website. According to the report, capital flows to emerging economies have been resilient in the first few months of The Nigerian economy sank into its worst economic 2017, with a notable pickup in non-resident portfolio recession in 29 years last year and has seen government inflows. pursuing expansionary fiscal policies to reflate the economy. It noted that while risks around the global growth forecast appeared broadly balanced in the near term, they Similarly, South Africa entered recession for the first time remained skewed to the downside over the medium term. in eight years in 2017; data from Statistics South Africa had shown last month. “Projected global growth rates for 2017–18, though higher than the 3.2 per cent estimated for 2016, are below pre- But the latest WEO stated that in sub-saharan Africa, the crisis averages, especially for most advanced economies outlook remains challenging. and for commodity-exporting emerging and developing The report anticipated growth in the continent would rise economies.” in 2017 and 2018, but would barely return to positive The report stated: “Among the former, many face excess territory in per capita terms this year for the region as a capacity as well as headwinds to potential growth from 1 aging populations, weak investment, and slowly advancing The Nigerian Stock Exchange (NSE) All-Share Index slid 2.6 productivity. per cent to close at 33,477.89, ending a five-day winning streak. Similarly, market capitalisation fell by the same “Reforms to boost potential output are of the essence, margin from N11.89 trillion to close at N11.58 trillion. and slow aggregate output growth makes it even more important that gains are shared widely across the income On the banking index, Skye Bank Plc shed 5.0 per cent, distribution,” it stated. while EcoBank Transnational Incorporated and FBN Holdings Plc fell by 4.9 per cent apiece. According to the report, financial stability risks needs close monitoring in many emerging economies. Diamond Bank depreciated by 4.6 per cent, just as Zenith Bank Plc and Access Bank Plc went down by 3.9 per cent “Short-term risks are broadly balanced, but medium-term each. Guaranty Trust Bank Plc and Fidelity Bank Plc also risks are still skewed to the downside. fell by 2.5 per cent and 1.5 per cent, respectively. “Lower commodity prices would further exacerbate However, the volume and value of trading rose by 29.7 per macroeconomic strains and complicate adjustment needs cent and 52.1 per cent, respectively, to 508.7 million in many commodity exporters.” shares worth N6.4 billion, from 392.268 million shares valued at N4.217 billion traded on Tuesday. Stocks end five-day rally as MSCI on Tuesday said it was undertaking an index review of Nigeria, China, Saudi Arabia and Argentina, and was MSCI defers decision on slated to announce its decision that night. Nigeria Nigeria was under review for possible demotion from the MSCI’s frontier markets index to “standalone” status. Market analysts had indicated that the newly introduced Investors’ and Exporters’ (I&E) foreign exchange window targeted at foreign portfolio investors could earn Nigeria reprieve from being demoted from the MSCI’s frontier June 2017 markets index. This, according to the index provider, stemmed from “continuous deterioration of the market accessibility” after the introduction of restrictions on foreign currency trading in 2015. Eleven Lagos-listed stocks on the Nigerian Stock Exchange (NSE) are currently on the MSCI Frontier Markets 100 index with a weighting of around seven per cent. That is the fourth largest after Kuwait, Argentina and Vietnam. MSCI eventually announced its decision to delay a potential reclassification of its Nigeria frontier market index to “standalone” market status till November. Nigerian stocks fell 2.6 per cent Wednesday after global The delay would temporarily save Nigeria from the index provider, MSCI, said it would leave the country in its ignominy of another removal, having been delisted by U.S. frontier index until at least November, when it will again investment bank, JP Morgan & Chase, from its assess investor access to the market. Government Bond Index for Emerging Markets (GBI-EM) in MSCI said Nigeria would remain a frontier market, with the September 2015, and Barclays from its emerging markets possibility of being downgraded to “standalone” status, local currency government bond benchmark in February leading shares to retreat. 2016. According to Reuters, the index of Nigeria’s top 10 banks, In a statement on the results of the MSCI 2017 “Market its relatively liquid sector, shed 2.6 per cent partly on the Classification Review”, obtained Wednesday, the index MSCI news, and after Etisalat Nigeria failed to agree a debt provider said: “To date, investors seem to be cautiously renegotiation deal with lenders. 2 optimistic on the effectiveness of this new window but still Consequently, MSCI plans to add 222 China A Large Cap require more time to test it further.” stocks, representing on a pro-forma basis approximately 0.73 per cent of the weight of the MSCI Emerging Markets It added: “As a reminder, the Central Bank of Nigeria (CBN) Index at a 5 per cent partial Inclusion Factor. pegged the local currency to the U.S. dollar in the first half of 2015, resulting in a sharp decline in liquidity on the Atlas Mara to Increase UBN Stake foreign exchange market, particularly at the beginning Meanwhile, global financial services holding firm, Atlas 2016. Mara Ltd., which has dropped almost 80 per cent on the “Hence, the ability of international institutional investors London Stock Exchange (LSE) since an initial public offering to repatriate capital has been significantly impaired to a led by co-founder Bob Diamond, plans to raise more than point where the investability of the Nigerian equity market its market value by selling a 35 per cent stake to Fairfax is being questioned. Africa Holdings Corp. “Additionally, the decision on the potential removal of the The firm, which specialises in bank acquisitions in Africa, MSCI Nigeria Index from the MSCI Frontier Markets Index expects to get $200 million from selling new stock to has been delayed to November 2017 to allow more time existing shareholders and Fairfax Africa and will also issue for international institutional investors to better assess the a fresh convertible bond to the Toronto-based investment effectiveness of the new FX trading window introduced by company, Atlas Mara said in a statement Wednesday. the Central Bank of Nigeria.” Atlas Mara will use the proceeds to boost its holdings in Last April, the CBN had introduced a new FX trading Union Bank of Nigeria Plc to 44.5 per cent from about 31 window for investors and exporters aimed at facilitating per cent, reported Bloomberg Wednesday. the repatriation of capital. Atlas Mara, which owns banks in seven African countries, The CBN further recently revealed that cumulative has plunged in value since its December 2013 IPO after transactions on the new I&E window had risen to $2.2 growth across the continent slumped and currencies billion, from about $1 billion last month. weakened amid a commodities rout. CBN interventions in the I&E window have dwindled to Diamond, 65, in February ousted Chief Executive Officer below 30 per cent, enabling participants to freely trade John Vitalo and pledged to cut annual operating costs by currencies at a market determined rate. $20 million after rising expenses threatened the company’s ability to expand through acquisitions. Alongside Nigeria, MSCI also announced that the MSCI Argentina Index will not be reclassified to emerging Union Bank, Atlas Mara’s single biggest investment in markets status, as investors expressed concern that the Africa, is Nigeria’s worst-performing bank stock this year.