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Tag: outlook

  • Oil dips to $84.75, as IMF cuts down outlook

    Brent crude prices, yesterday, slipped to $84.75 per barrel, following the decision by the International Monetary Fund (IMF) to lower its growth forecasts.

    Benchmark Brent crude was down 25 cents at $84.75 a barrel by 0735 GMT after a 1.3 per cent gain on Tuesday. US light crude was 25 cents lower at $74.71

    The International Monetary Fund downgraded its global economic growth forecasts for 2018 and 2019(two days ago) Tuesday, raising concerns that demand for oil products may slump as well.

    However, markets were supported as Hurricane Michael moved towards Florida causing the shutdown o of nearly 40 per cent of US Gulf of Mexico crude production.

    Trade tensions and rising import tariffs are taking a toll on international commerce, while emerging markets struggle with tighter financial conditions a ..

    “Prices are peaking at the most opportunistic time given the waning global growth narrative,” said Stephen Innes, head of trading APAC at OANDA in Singapore.

     

    In the United States, nearly 40 per cent of daily crude oil production was lost from offshore US Gulf of Mexico wells on Tuesday because of platform evacuations and shut-ins ahead of Hurricane Michael.

    Michael has strengthened into an “extremely dangerous” Category 4 hurricane, according to the latest advisory from the US National Hurricane Center.

    Oil producers evacuated personnel from 75 platforms as the storm made its way through the central Gulf on the way to landfall on Wednesday on the Florida Panhandle.

     

    The country’s largest privately owned crude terminal, the Louisiana Offshore Oil Port, said late on Tuesday it halted operations at its marine terminal.

     

    The facility is the only US port able to fully load and unload tankers with a capacity of 2 million barrels of oil.

     

    Companies turned off daily production of about 670,800 barrels of oil and 726 million cubic feet of natural gas by midday on Tuesday, according to offshore regulator the Bureau of Safety and Environmental Enforcement.

     

     

  • FirstBank’s outlook now stable, says S&P

    FirstBank’s outlook now stable, says S&P

    S&P Global Ratings has revised its outlook on First Bank of Limited to stable from negative. The agency affirmed the lender’s ‘B-/B’ long- and short-term counterparty credit ratings.

    “We have raised our long-term national scale rating on FirstBank to ngBB+’ from ‘ngBB’, while we have affirmed our short-term national scale rating at ‘ngB’. Furthermore, we took the same rating actions on FirstBank’s non-operating holding company (NOHC), FBN Holdings PLC (FBNH). The rating actions reflect our view that FirstBank’s regulatory capital has and the risk of breaching regulatory requirements has thus diminished. In addition, the bank’s funding and liquidity remain credit strength,” the agency said.

    Continuing, it said though asset quality remains a weakness, in its view, it is stabilising, thanks to the steadying of the oil price and new management’s efforts. “We expect FirstBank will continue to display weaker asset quality metrics and lower profitability than other rated top-tier banks in Nigeria in 2017 due to continuing high credit costs. That said, we believe that the bank’s new leadership team will address the legacy asset quality issues and institute more prudent risk management measures,” the agency said.

    It said the lender’s cost of risk jumped to 10.4 per cent at year-end 2016 from 5.7 per cent at year-end 2015, and  nonperforming loans (NPLs) increased to 24.4 per cent for the same period compared with 18.1 per cent the prior year.

    The performance of the bank’s portfolio stemmed from high concentration and foreign currency loans (51 per cent of total loans in 2016), particularly the oil and gas-related exposures. This performance and the huge impairments have prompted the bank to recruit a new Chief Risk Officer and launch a review of its risk management process to improve loans approvals, risk monitoring, and collection.

  • NDIC’s summit on economic outlook

    One strong message that came out of the recently concluded workshop of the Financial Correspondents Association of Nigeria (FICAN) is that the worst is over as far as the current recession is concerned. This, in the views of financial system analysts, is against the background of the measures being undertaken by the federal government to get the country out of the recession. Nothing demonstrates this more than the N753 billion capital spending released between June and October 2016 – considering also that nothing near this figure had ever been spent in a full year during the last decade!

    This, at least was the consensus at the annual workshop organized and sponsored by Nigeria Deposit Insurance Corporation (NDIC) aimed at dissecting the recession ravaging the country. Aside serving the the purpose of highlighting the unique role of the financial press in managing and dissemination information to help the country navigate its way out of recession, the workshop also serves to bring the financial media and various financial regulators together with a view to understanding what measures the government is taking to see the country through the difficult, albeit winding economic recession.

    For NDIC, it is a unique platform for its corporate social responsibility, in addition to ensuring that that the Nigerian public and the relevant financial stakeholders are kept well informed and to build a rapport and synergy with the financial press.

    Indeed, NDIC has established this beautiful tradition, for many years now, of taking the annual event round the country to give it deserved national outlook. This time around Kaduna played host of the two-day event held from December 17-19, 2016. Scintillating presentations were made and digested through syndicated groups and far-reaching suggestions and recommendations proffered.

    Reflecting on the theme of this year’s workshop which is “Economic Recession and Nigerian Banking Sector: Opportunities, Challenges and Way Forward”, the Managing Director of the NDIC, Malam Umaru Ibrahim described the role of the media as very significant and great one towards the development of the nation. He challenged the media to do more in this time of recession, which he described as tough and most difficult for the country. “The media”, he said, “can achieve this through most fair, objective, well-articulated news report and analysis of the government activities on continued basis”.

    Dr. Abiodun Adedipe, one of the resource persons traced the current recession to the mid 1970s particularly the oil boom period. According to Adedipe, three significant economic issues confronted Nigeria by the turn of the 2000s: huge external debt, reaching about $36 billion; poor infrastructure and weak crude oil price, below $10/barrel at some point. The economy, then as well as now needed urgent fixing, but the purse was lean! According to Adedipe, the growth of Nigeria’s economy was robust until end-2014, averaging an annual 6.4% during 2001 to 2014. But in 2015, it grew by 2.79%, dragging the 15-year average down to 6.16%. Unfortunately, the positive growth was however, not accompanied by jobs – it was non-inclusive and exacerbated inequality, resulting in dismal development indices.

    And while the signs began to show in early 2013, Adedipe listed some of these symptoms as;  a lack of  diversification of the economy, overdependence on hydrocarbons for foreign earnings and government revenue; bloated government recurrent expenditure; a high unemployment rate (13.3% unemployment and 19.3% underemployment in Q2), dominated by youth (49.5%, up from 42.4% in Q1); a low, but stable external reserves ($24.10 bn) and high cost of doing business and high cost of living (inflation at 18.3% in October 2016).

    Another presentation by M.Y. Umar of the NDIC looked at the impact of the recession on the financial institutions.  According to Umar, the impact of recession on particularly deposit insurance system (DIS) include the following: lower saving resulting in lower premium payment which represents a threat to the survival of financial institutions; mass  loss of jobs; low investments; and rising sharp practices among banks among others.

    On the regulatory measures taken to manage the current crisis, the director, Bank Examination Department of the NDIC A.A. Adeleke listed some of them as including the unbundling of universal banking; raising of the capital adequacy; whereas the global standard is 8%, it was raised to between 10 – 16% to create default capital buffer in times of recession; stress testing – banks were subjected to liquidity test such as computation of Basel II. Both the NDIC and CBN, he said, further undertook some special proactive measures such as early intervention against warning signals; consumer education and enlightenment and preventing speculations and de-marketing of banks.

    On the role of the media, the chairman of the FICAN, Babajide Komolafe, opined that the financial media can offer its contribution to getting the nation out of the recession through reporting of opportunities available in the economy. This will help grow the economy. He held that investigative journalism can also help curb corruption, while the media can help encourage the populace to buy locally produced goods; by so doing, they will be growing the economy.  He noted that this can be done through positive reportage on the good side of made-in-Nigeria goods.

    The delicate issue of forex management under recession was discussed by CBN’s W.D. Gotring, who itemized some of the apex bank’s responses to the challenges of forex management to include closure of Retail Dutch Auction (RDA) window; adoption of interbank intervention; introduction of exclusion list (for 41 banned items); introduction of new flexible exchange policy; review of BDC operations; and introduction of forward and future’s market.

    On declining asset qualities, Owo Godwin, a financial analyst, identified some of the measures taken to improve the quality as general economic improvement through diversification; fiscal and monetary policy harmonization; boost in domestic production and value added among many others. Needless to say the effects of falling oil price on the banking sector is visible to all to see. These effects include rising non-performing loans (NPLs); dwindling liquidity; declining solvency and declining profitability among many others.

    Overall, the workshop challenged Nigerians to be ready for an inevitable recovery within the life span of the current Buhari administration. This is in view of federal government’s continuous efforts to diversify the economy; investment in agriculture, mining and infrastructure; enhancement of local manufacturing capacity; import substitution; fiscal discipline; patronage of made-in Nigeria products and services; and forex policy consistency among others.

     

    • Hassan is financial system analyst based in Abuja.

  • Fitch revises Nigeria’s outlook to negative

    Fitch Ratings yesterday revised the Outlook on Nigeria’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to negative from stable and affirmed the IDRs at ‘B+’.

    The issue ratings on Nigeria’s senior unsecured foreign currency bonds have also been affirmed at ‘B+’.

    The country ceiling has been affirmed at ‘B+’ and the short-term foreign and local currency IDRs have been affirmed at ‘B’.

    The revision of the outlook reflects tight forex liquidity and low oil production that contributed to the country’s first recession since 1994. The economy contracted through the first three quarters of last year and Fitch estimates gross domestic product (GDP) growth of -1.5 per cent last year as a whole.

    Fitch said: “We expect a limited economic recovery in 2017, with growth of 1.5 per cent, well below the 2011-15 annual growth average of 4.8 per cent. The non-oil economy will continue to be constrained by tight foreign exchange liquidity. Inflationary pressures are high with year on year CPI inflation increased to 18.5 per cent in December. Access to foreign exchange will remain severely restricted until the Central Bank of Nigeria (CBN) can establish the credibility of the Interbank Foreign Exchange Market (IFEM) and bring down the spread between the official rate and the parallel market rates.

    “The spot rate for the naira has settled at a range of N305-N315 per USD in the official market, while the Bureau de Change (BDC) rate depreciated to as low as N490 per USD in November 2016. In an effort to work with the CBN to help the parallel market rates converge with the official, BDC operators subsequently adopted a reference rate of N400 per USD. However, dollars continue to sell on the black market at rates of well above N400. The authorities have communicated a commitment to the current official exchange rate range, but the availability of hard currency at those rates is severely constrained.

    “Trading volumes in both the spot and derivative markets increased following the June changes to the official foreign exchange market, but remain low, at of $8.4billion in December, compared to $24billion in December 2014. Gross general government debt increased to an estimated 17per cent of GDP at end-2016, from 13 per cent at end-2015, although it remains well below the ‘B’ median of 56 per cent and is a support to the rating. However, the country’s low revenues pose a risk to debt sustainability. Gross general government debt stands at 281per cent of revenues in 2016, above the ‘B’ median of 230per cent.

    “Nigeria’s government debt is 77per cent denominated in local currency, which makes it less susceptible to exchange rate risk, but the share of foreign currency debt is increasing. Additionally, the government faces contingent liabilities from approximately $5.1billion in debt owed by the Nigeria National Petroleum Corporation (NNPC) to its joint venture partners.”

    Fitch forecasts that Nigeria’s general government fiscal deficit will remain broadly stable this year at 3.9per cent of GDP, just below the ‘B’ category median of 4.2per cent.

    It said the country is likely to experience a recovery in oil revenues, but will continue to struggle with raising non-oil revenues. Total revenues will rise to just 7.4 per cent of GDP, up from 6.2 per cent in 2016, but still below the 12.4per cent of GDP experienced in 2011-15.

    Import and excise duties have experienced a boost from the depreciation of the naira, but corporate taxes and  value added tax (VAT) will continue to underperform, owing to issues with implementation and compliance. On the expenditure side, growing interest costs will increase current spending.

    Fitch forecasts the cost of debt servicing in 2017 will reach 1.4per cent of GDP, up from an average of 1.1per cent over the previous five years.

    The banking sector has experienced worsening asset quality as a result of the weakening economy, problems in the oil industry, and exchange rate pressures on borrowers to service their loans.

    The CBN reported that industry non-performing loans (NPLs) grew to 11.7per cent of gross loans at end-June 2016, up from 5.3per cent at end-December 2015.

  • Fitch Ratings affirms Wema Bank’s BB-, stable outlook

    Fitch Ratings affirms Wema Bank’s BB-, stable outlook

    Fitch Ratings, a global leader in credit ratings and research, has affirmed Wema Bank’s Viability Rating (VR), saying it has a stable outlook.

    The agency also affirmed the Long-term National Rating (Wema) at (BBB-) to reflect the improvement in creditworthiness over time relative to the best credits in Nigeria.

    In Fitch’s opinion, the banking industry will remain challenging considering volatile and low oil prices, continued disruptions in oil production and constraints regarding the forex liquidity.

    As such, the industry could witness a rise in non-performing loan ratios, though strong capital ratios helped absorb the one-off negative fore shock. It said, the forex devaluation could impact consumer demand.

    It said the Long-term Issuer Default Ratings (IDR) of Wema remains on stable outlook as the rating is driven by its Viability Ratings (VR) and there is no expectation of any material change in the bank’s intrinsic creditworthiness.

    Wema Bank’s strengths, which underpin its long- and short-term ratings, include its strong risk management culture, low NPL exposure and good liquidity levels. The bank’s affirmed rating further reinforces its resolve to remain a smarter and efficient bank.

    Wema Bank Plc’s Managing Director, Segun Oloketuyi, said the rating is an affirmation of the bank’s transformation and its positioning as one of the major players within the  retail banking landscape.

    Fitch also affirmed the Viability Ratings (VR) of all the Nigerians banks, Fitch has revised the SRFs to ‘B’ from ‘B+’ for the systemically important banks; FirstBank, UBA, Zenith and GTBank, following the downgrade of Nigeria’s sovereign ratings.

    The challenging and volatile operating environment in Nigeria and other key rating factors, particularly the banks’ financial profiles, constrain the VRs in the highly speculative ‘b’ range. Despite slower asset growth and higher loan impairment charges, Fitch expects banks to remain profitable in the year due to still strong earnings generation and as such all banks’ national ratings have been affirmed given their unchanged respective creditworthiness relative to each other.

  • Citi presents markets outlook to Fed Govt

    Citi presents markets outlook to Fed Govt

    Citi International Bank has presented energy markets outlook to Federal Government’s Economic Management Team (EMT) led by the Vice President, Prof. Yemi Osinbajo.

    The presentation focused on the outlook for Energy markets including oil, gas, power and renewables, in the short, medium and long-term. The Citi delegation was led by Citi Nigeria CEO, Akin Dawodu. Other members of the delegation included Citi’s Global Head of Energy Strategy, Seth Kleinman, who was the lead presenter, Citi’s Chief Economist for Africa, David Cowan and Citi’s Regional Public Sector Head, Mrs. Funmi Ogunlesi.

    The presentation was designed to provide the government top economic managers with the forecast international market prices for oil and other energy sources such as gas.

    Following the presentation, Dawodu said: “It has been a great privilege to provide this key data and information to the top-tiers of government through the EMT as Chaired by His Excellency, the Vice President. We were honoured to have the opportunity and greatly impressed by the levels of engagement and focus of the members of the EMT.

    Kleinman also expressed the bank’s appreciation for the opportunity and stated that it represented a great honour for Citi, to have been have been invited to give this presentation.

    Nigeria remains a key focus country for Citi within Africa and the emerging markets. Osinbajo expressed his appreciation to Citi for the very timely presentation, which he said, would assist in future planning for the economy.

  • A buoyant Nigerian economic outlook

    A buoyant Nigerian economic outlook

    The downturn of oil prices has created immediate but temporary fiscal and monetary challenges in Nigeria. Dollar oil revenue to the government has shrunk considerably, reflecting over 70 per cent decline in oil prices from the heights they attained in June 2014. Therefore, expansion of the federal fiscal deficit has become necessary in order for the government to continue to meet its obligations and deliver service to the populace. In the states, where the fiscal space is more constricted, paying public sector wages has become more challenging.

    On the monetary side, there has been downward pressure on the foreign reserves. This has limited the wherewithal of the Central Bank of Nigeria (CBN) to continue to defend the naira value across the foreign exchange markets. The official market is sheltered from exchange rate volatility. But we have seen the naira reach all-time lows against the dollar in the parallel market, causing public anxiety and threatening the way working class Nigerians love to live.

    While this is on, it is so easy to become downbeat in one’s outlook for the Nigerian market. Extreme opinions have called into question any sense of progress the country has made with economic management, especially since the return of democratic governance in 1999. They see the threats of higher public debt, inflation, unemployment and slower economic growth. But these issues are most likely to be short-term.

    The current sharp decline in oil prices constitutes a speed bump. Yes, it slowed the pace of economic growth to 3.3 per cent last year, from 7 per cent average GDP growth rate of the last ten years. But, some positive developments are already identifiable with this foreign exchange crunch. To summarise the totality of the auspicious developments, Nigeria has entered a phase of economic transition. This transition has been imperative for long. To some extent, signs that it is already afoot are undeniable. But the economic conditions of today ensures that this transition must gather pace. This transition would invariably lead the country to a period of sustained, endogenous high economic growth.

    There are three factors that underpin my buoyant outlook on Nigeria. One involves cumulative improvement in governance. The second is Nigeria’s commitment to macroeconomic stability. And the third is the irrepressible determination of Nigerians to do well for themselves. This third factor ensures the resilience of the citizens and that of the country. It is the critical element that has continued to drive the progress the country has been making.

     

    Cumulative governance improvement

    The Administration of President Muhammadu Buhari will deliver further improvement in public governance and fiscal management in Nigeria. The President will continue to build on the progress that has been made since the country returned to democracy in 1999. It is not the better judgment to focus on the challenges of governance and overlook the evidence of the progress that has been made.

    Nigeria is committed to democratic governance. In 2007, we appeared surprised when the country made the first-ever democratic transition of government. The late Umaru Musa Yar’Adua succeeded President Olusegun Obasanjo as elected president. Then in 2009, without much pomp and pageantry, we marked the first straight ten years of democratic governance in Nigeria. The 2015 presidential election just proved to be another landmark for the country: for the first time in our history, an opposition party candidate won against the incumbent, and the transition of power was smooth.

    Ahead of the election, Moody’s affirmed a stable outlook for Nigeria. In an interview with one of the country’s top economic journals, Financial Nigeria, later in 2015, the head of sovereign analysis for the rating agency, Aurelien Mali, said the track-record of conclusive elections in Nigeria was factored in the positive outlook.

    Institutions of democratic governance are enjoying longevity. It is a rarity for the legislature, whose existence was usually terminated by the incessant military interregna of the 1980s and the 1990s. Even the tenure certainty for the President nowadays is remarkable in view of our history. While each administration since 1999 has grappled with putting in place more transparent and accountable frameworks for public and market governance, the fact that the institutional drivers of the process are intact is a mark of progress on its own.

    To crown it all, Nigerians are clamouring for further progress. We want the pace of progress to increase. We want responsible and responsive governance. We are even more assured than we were 17 years ago that it is the role of the electorate that is pivotal in constituting government. This awareness is healthy for the Nigerian populace and those who constitute government or aspire to political leadership.

     

    Stable macroeconomic environment

    There is a positive relationship between an environment of political stability underpinned by constitutionality and positive market performance. The Nigerian democracy has even prioritised the development of the Nigerian market. One of the ways successive governments have demonstrated this is by pursuing macroeconomic stability. Unprecedented levels of domestic and foreign investments have followed, beginning with the mobile telephone industry in 2001.

    The CBN has pursued single digit inflation and maintained it in the better part of the last five years. Price stability has been predicated on market reforms and financial market stability. When the 2008 – 2009 Global Financial Crisis arrived on our shores, the reinvigoration of the banking system through the recapitalisation and consolidation of the banks three years earlier, helped us to weather the storm. A strong response to the crisis through CBN liquidity intervention, introduction of macroprudential regulation and purchases of impaired assets helped to strengthen the banks. As the country faces the headwind of low oil prices now, Nigerian banks are expected to remain resilient, even if they have to make operational adjustments.

    Even as the exchange rate policy of the CBN continues to generate a healthy debate, the anti-devaluation argument is consistent with maintaining financial and price stability. President Muhammadu Buhari has shown good leadership with his position which indicates that macroeconomic stability is not a political party agenda in Nigeria; it is a country agenda that has been upheld by successive administrations since 1999.

    The institutional architecture for supporting market stability has continued to strengthen, and that is without overlooking the higher standards that are yet to be attained. Public debt management in Nigeria has been modernised. A legal framework through the Fiscal Responsibility Act is in place. It places a 3% limit on fiscal deficit as a ratio of the GDP. Since the last two fiscal years of the last administration, a policy to channel public borrowing to infrastructure projects came into place. This policy is affirmed in the fiscal borrowing plan of the present administration, as seen in the 2016 budget.

    While the borrowing plan in the budget has inflamed passions, it appears that the provision of a N360 billion Sinking Fund to liquidate matured debt has eluded the debate. Nevertheless, Nigeria has a solid reputation of servicing its debt obligation to both domestic and international financiers. The deals by which Nigeria exited the Paris Club and London Club debts in 2005 and 2006, respectively, will remain a point of reference in the country’s debt repayment behaviour. Since those important deals, the  fiscal authorities have never taken eyes off the sustainability gauge of Nigeria’s public debt.

     

    Primed for success

    Nigerians are generally determined to be successful. If it takes education, we would go for it. If it takes industry, we would become entrepreneurs and start businesses even under the most challenging environment. We are irrepressible in adverse conditions. As the current foreign exchange crisis begins to affect business as usual, we will reinvent ourselves.

    Nobody, including the average Nigerian, wants a hard life in place of easy life. Countries that have developed have had to do so in response to challenges that posed a threat to their easy life. It might be geopolitical threat, demographic challenges or economic stress. In Nigeria today, the formidable threat is the intertwined high dependency on oil for foreign exchange, import dependency and inadequate domestic production.

    What we have to do is diversify the economy, promote non-oil exports and boost domestic production. In the meantime, we need to use policy instruments to curb unnecessary imports. The policy leaning is there, and Nigerians will respond; not only for survival but to achieve and maintain the good life. This is what defines us as a people of achievement. This is why the outlook of the country is especially buoyant, medium- to long-term.

  • ‘Africa’s growth outlook good but……’

    Growth in Africa is expected to average over four per cent over the next five years, but is still heavily commodity-dependent, according to a report by the Institute of Chartered Accountants in England and Wales (ICAEW).

    The Institute in its report, ‘Economic insight: Africa Q1 2016’, pointed to good news for African economies, but warned that manufacturing still accounts for a small share of output.

    The accountancy and finance body in the report made available to The Nation, however, said the old model of exporting raw materials is becoming unsustainable.

    The report noted that Africa’s Gross Domestic Product (GDP) growth is projected to average 4.3 per cent between 2015 and 2020. Nigeria, the largest economy on the continent, is expected to contribute significantly to Africa’s economic expansion – at an average real rate of 4.8 per cent per year between 2015 and 2020, contributing over 25 per cent to the continent’s forecast growth in this timeframe.The report said in the East Africa region, Kenya’s economy would expand by around six per cent during the 2017 to 2020 period.

    It attributed this to Kenya’s relatively diversified economy and comparatively low commodity dependence, which bonds well with the country’s economic growth outlook. Regional Director, ICAEW Middle East, Africa and South Asia, Michael Armstrong said: “Africa is the most commodity-dependent continent on earth. Africa’s economies increasingly need to create a hospitable environment for companies in the manufacturing and services sectors to drive growth, as the old model of growth driven by exports of raw materials is out-dated.”

    Armstrong added that the East African region is embracing the use of renewable energy to leapfrog older power generation technologies, while also reducing the need to extend the national energy grid to remote villages.

    The report noted, for instance, that Kenya is ranked the seventh highest producer of geothermal power globally after it recently unveiled the second phase of the Olkaria geothermal plant.

    Olkaria is the biggest single- turbine geothermal plant in the world. However, Kenya continues to face its own unique challenges. The report said the country’s unwarrantable fiscal situation is the primary reason why both Standard & Poor’s and Fitch Ratings downgraded the country’s outlook from stable to negative last year.

    However, the report also pointed out that the Kenyan Government has taken important steps towards fiscal consolidation by preparing a supplementary budget that plans to reduce both development and recurrent public spending in the current fiscal year.

    Tom Rogers, Associate Director, Macro Consulting at Oxford Economics, said: “A clear plan for preventing fiscal slippage will be needed to underpin confidence in public finances and economic stability. The government’s recognition of these economic concerns will be needed to address these issues and instil some confidence in the country’s economic outlook.”

  • Experts worried over 2016 gloomy outlook

    Experts worried over 2016 gloomy outlook

    The nation’s economic outlook in 2016 leaves little to cheer about. These were the submissions of experts who spoke at this year’s edition, of the Nigerian Economic Outlook, organised by the Networks Business Club of the City of David, Redeemed Christian Church of God (RCCG) in partnership with Access Bank Plc.

    Lagos State governor, Akinwumi Ambode who delivered the keynote address observed that one of the challenges bedeviling the country was caused in part by the crash in the price of crude oil.

    According to Ambode, who was represented by Mr. Akinyemi Ashade, Commissioner for Economic Planning and Budget, the current economic crisis, is the direct consequence of the fiscal irresponsibility witnessed in the past couple of years and inability to save for the rainy day during the oil price boom.

    While giving a bird’s eye view of the economic outlook for 2016, renowned economist, Bismarck Rewane said 2016 is going to be a tough year.

    Rewane who is the Managing Director, Financial Derivatives Company Limited said: “If anybody had told me this time last year that oil will drop by $50, I will say no way. But here we are in 2016 and it has dropped to $28. We don’t need an economist to forecast that a country dependent on a single commodity, which is oil, will be worse hit.”

    The year 2016, he emphasised, will be flat “but towards the end of the year, things will pick up and the reason it’s going to be that way is because the present administration is doing the right things very slowly. There seems to be no urgency. Everybody is waiting on government for its policy direction; including foreign investors. There is no time to waste because by 2017, politicians will start talking of primaries for 2019 elections.”

    Echoing similar sentiments, Mr. Mutiu Sunmonu, former Country Managing Director, Shell Petroleum Development Corporation (SPDC) who observed that things were gloomy for the economy, however, expressed optimism that there are business opportunities within the oil and gas sub-sector for those who can make the sacrifice.

  • Bol gets Ba3 international issuer rating, stable outlook

    Bol gets Ba3 international issuer rating, stable outlook

    Moody’s Investors Service has assigned first-time ratings of Ba3 to the Bank of Industry (BoI), while affirming the development finance institution’s rating as stable.

    According to Moody’s, the ratings are underpinned by a b2 standalone credit profile and two notches of uplift due to Moody’s government support assumptions.

    The rating agency explained that Bank of Industry’s b2 standalone profile reflects its robust capital buffers, with equity to assets ratio of 30 per cent as of September 2015; a stable liability structure made up of long-term funding at concessional rates; and the tangible improvements to the bank’s governance and risk positioning in recent years.

    In its Global Credit Research report, Moody’s noted that the Bank of Industry’s reported nonperforming loans ratio (NPLs) is relatively low at 4.6 per cent as of November, last year and compares favourably to development bank peers globally.

    “Low NPLs are partly explained by the exposures relating to the CBN intervention fund, which are guaranteed by commercial banks and, as such, have generated close to zero NPLs as Bank of Industry exercises the guarantee immediately after any of these loans become delinquent.

    “That said, the ratings currently assigned to Bank of Industry take into account our expectation of a higher NPL level (between five and 10 per cent of total loans) over the next two years, as we expect asset quality to come under pressure as the bank increases its loan exposure within Nigeria’s challenging operating environment.

    “Bank of Industry plans to double its total loan book size over the next four years and to increase its MSME portfolio by 14 times its currently modest size. This MSME target corresponds to an annual growth rate of 93 per cent, albeit from a very low base (four per cent of total portfolio). Bank of Industry projects that about half of new loans that will be extended in the future will be guaranteed by a commercial bank”, it added.

    Commenting on the bank’s credit profile, Moody’s stated that as of September 2015, tangible common equity as a percentage of total assets stood at 30 per cent, up from 26 per cent in 2014, which is substantially stronger than similarly-rated global peers.

    “Although we expect Bank of Industry’s capitalization to decline going forward due to its planned loan book growth of about 20 per cent annually, we anticipate that tangible common equity as a percentage of total assets will remain above 20 per cent for the next 12 to 18 months, which will still leave the bank with a robust capital cushion that compares favourably to peers internationally.