Monthly Economic Review - February 2015

Transcription

Monthly Economic News and Views
at Lagos Business School
Executive Breakfast Meeting
February 4, 2015
Nigeria at Crossroads
Stability or Change – Which do you Prefer??
Presented by B.J. Rewane
Financial Derivatives Company Limited
Outline - Election Fever, Oil Price Recovery, Naira Flat
2
What We Said on January 28
The World in 2 Weeks
Commodities
Domestic Economy
Capital Markets
Policy Direction
Political Update
Outlook
On January 28 We Said…
3

Oil price declined to $46.59pb

A 5½ year low

Cumulative 8 week drop of 35%

Worldwide rig count is 3570 of which 100 are idle

Idle rigs have increased from 70 to 100 since December

Active rigs in Nigeria down by 1 to 18 in December

Global commodities index (BCOM) down by 19.7% YTD

Oil is 48% of the weight
4

Nigeria’s broad money supply increased 7.29%, as against
annual target of 15%

Power output from the grid is up marginally at 3700MW

Retailers’ inventory levels down to 5 weeks from 12-week
levels

Destocking after consumer resistance to price increase
5

Naira depreciated below the psychological resistance of
N200/$, testing the N210 level

Spread between the parallel & official markets increased
to N42 or 20%

Stock market after adjusting for devaluation is down
15.48% in 2015
Update on Oil Shocks
6

Exports down 12.3% to $78.2bn

Imports sticky at $50.7bn
120
100
80

Revenue down 45%
60

Reserves down 20.85% Y-o-Y

FDI down 17.9%
40
20
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Imports ($'bn)
Exports ($'bn)
Trade balance ($'bn)
What We Forecast…
7

J.P Morgan forecast for oil
 Q1: $42pb
 Q2: $43pb
 Average
 Long
2015: $49pb
term recovery in 2019

Naira to trade at N195/$ at the interbank

N205/$ – N210/$ at the parallel market

NOPs will be increased to 1%

Stock market will remain flat to down through February

Commodity prices will slip
What We Forecast…
8

Inflation will inch up to 9% in February

Banks will announce capital raising plans

Fiscal deficit will widen

There will be a complete change of guards at Abuja

External reserves will deplete to $33bn

The policy direction, pace and enforcement will be more
defensive
US - Q4 GDP Growth Misses Mark
10
6
5
4
3
4.6
4.5
5.0

3.5
2.7
2.6

1.8
2
1

0
1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014
-1
-2
Lower oil prices boosted consumer
spending
Govt spending slowed by 7.5%
Stronger dollar estimated to have
lowered growth by a whole
percentage point
-2.1
-3
Source: Commerce Department




Export growth slowed to 2.8%
from 4.5% in Q3’14

Import growth surged to 8.9% from
-0.9% in Q3’14
US GDP grew by 2.6% in Q4’14
Lower than the 3.2% growth
expected
Lower than 5.0% recorded in
Q3’14
US - Inflation is Down-Fed is Watching
11

Consumer Price Inflation (CPI) down to 0.8% in December

Biggest 1-month decline in 6 years

Pulled down by plunging energy costs

Makes the timing of an interest rate increase tricky

Evidence of firmer inflation needed before change of stance

CPI has been below the Fed’s 2% target since April 2012
Europe
12

Euro down 6.6% to 1.13/$ so far in 2015

Swiss Central Bank’s decision to end currency ceiling
continues to send shockwaves

European banks have issued profit warnings

Major forex trading firms have been adversely hit


Alpari has declared bankruptcy
Swiss franc-denominated mortgage payments have soared
China
13

China grew by 7.4% in 2014 - Slowest pace since 1990

China willing to accept slower growth in a bid to:

Shift to a growth path that makes investment less reliant on
credit that has fuelled a property boom

Lift the living standards of the burgeoning middle-class
Sub-Saharan Africa – Peer Comparison
14
Country
South
Africa
Angola
Kenya
Policy
Direction
(% p.a.)
5.75
9
8.5
Inflation
Rate (%)
5.3
7.48
5.53
Source: FDC Research, Bloomberg, Trading Economics
Ghana
21
17
Nigerian
Banks
Zenith
Skye
Ecobank, GTB,
UBA
Access,
Ecobank, FBN,
GTB, UBA,
Zenith
Flight
Frequency
into Nigeria
15
Politics
Recent presidential
election in May.’14 ,
Election held every 5
years
3
Last Presidential election
was in August 2012.
Elections are held every
4 years
10
Last presidential election
was in December 2013.
elections are held every
5 years
39
Recent presidential
election in Dec.’12
Elections held every 4
years
Commodities
Oil prices gain momentum
Oil Prices Gain Momentum
17

The Bloomberg Commodity Index (BCOM) is up by 0.57%
week-on-week


But still down by19.8% YTD
Oil price rebounded on signs of output cut by US
producers

US demand for leasing oil rigs is slowing

90 rigs idled in the US in the past week

US rig count now down to 1,543

Brent oil price up by 20.25% to $57.91pb from $48.16pb

Grain prices still on a decline due to global glut
Non-Oil Commodity Prices trend Downwards
18
Weekly Change
(Jan. 26 – Feb. 3)
Y-o-Y Change
Brent
20.25%
-46.35%
WTI
17.5%
-41.54%
Natural Gas
-4.51%
-36.02%
Corn
0.46%
-10.63%
Wheat
-1.30%
-9.71%
Rough Rice
-4.59%
-26.15%
Sugar
-5.73%
-7.12%
Cocoa
-1.68%
-0.41%
-1.58%
-23.06%
Commodity
Energy
Grains
Soft
Oil Seeds
Palm Oil
Source: Bloomberg, Reuters, FDC Research
Oil Surge - Bloomberg’s View
19

Recent oil price surge: an industry in despair

Oil rigs idled now 352 in past 8 weeks

BP to reduce spending to $20bn this year compared to
$26bn previously planned

How low can prices go and still sustain the US oil boom?

History of oil prices follow a golden rule:

What goes down must come up

Eventually supply will shrink and prices will rise again
Domestic Economic Performance
Leading Economic Indicators (LEI’s)
21
Indicators
December
January
% Change
February
Oil Price ($’pb)
45.13
57.91
28.32
55
Exchange Rate (N/$ - Interbank)
186.10
192
2.79
195
8.0
*8.3
0.30
9.14
13
13
-
13
External Reserves ($’bn)
34.47
34.46
0.03
32
NSE ASI (% change)
0.33
14.07
-14.4
-10
Market Cap (N’trn)
11.48
9.85
14.2
9.00
31%: 13%
32%:17%
-
-
9%:2%
11%: 3%
-
-
Inflation Rate (% - ave)
MPR(% p.a.)
Vacancy Factor VI (Residential
vs. Commercial)
Vacancy Factor Ikoyi
(Residential vs Commercial)
Source: EIU, EIA , OPEC, CBN, FDC Research , (* FDC’s forecasts)
Declining Growth Trajectory
22

Q4’14 to come in slightly lower
than in Q3’14




Due to macro headwinds
Finance minister estimated negative
impact from north east insecurity at
0.05% annually
Further decline expected in Q1’14 due
to planting
Sharp drop in PMI to 56.4 in January






Down from 60.4 in December 2014
Reduced confirmation lines of credit
After a Nov-Dec pile up
Inventories are being drawn down
New inventories as replacement cost
more expensive
Devaluation plus carrying cost
Oil Prices up, External Reserves down
23

Global oil prices rebound on signs of output cuts in the
US






$1.74bn was sold at the RDAS in January compared to
$1.21bn in December


Due to fewer auction days in December
External reserves is down by 0.61% to $34.28bn


Brent crude currently up 28.32% YTD at $57.91pb
From a low of $45.13pb in January
Have oil prices bottomed out?
Or is there a new floor?
Average of $50-55pb expected in February
$32bn expected in March
5.10 months of imports and payments
Source: CBN, FDC Research
Oil Prices up, External Reserves down
24
External Reserves ($'bn)
50.00
48.00
46.00
44.00
42.00
40.00
38.00
36.00
34.00
32.00
30.00
Apr
May
Jun
Jul
Aug
2013
Sep
Oct
Nov
2014
Source: CBN, FDC Research
Dec
Jan
Naira Remains Under Pressure
25

Naira trading at record low of N210/$ at the parallel
market



Special intervention for Bureau de Change (BDCs) to
increase supply



Market is inelastic
Buy! Buy!! Buy!!!
CBN introduces new policy measures



Depreciated by 16.17% (y-o-y) at interbank market
Flat at N168/$ in RDAS market
NOP increased to 0.5% from 0.1%
Submission of details on all domiciliary accounts with Banks
Independent of election outcome, the naira is expected to
depreciate slightly in March
Foreign Inflows Down in Nigeria
26



FDI flows into Nigeria down for the 3rd
consecutive year to $4.9bn
Contrary to $704bn (4% growth) in
developing economies
FPI inflows in Q2’14 slowed to $3.9bn
compared to $6.5bn in Q2’13




FPI inflows in H1’14 were less than
Q2’13
Foreign inflows on the NSE between
January and November 2014 increased
to $3.9bn from $3.14bn
Total foreign outflows in the first 11
months totalled $4.99bn, up from
$2.98bn in the corresponding period of
2013
Reflecting a sell off
FDI ($'bn)
5
4.5
4.7
4.4
3.9
4
3.5
3.8
3.2
3
2.5
2
1.5
1
0.5
0
2013
Source: EIU
2014
2015
2016
2017
January Inflation to Spike to 8.3%
27
Headline Inflation Rate

8.7%
inflation to 8.3% in January
8.5%
8.5%
8.3%
8.3%
FDC forecasts an increase in
8.3%
*8.3%

From 8% in December 2014

Impact of weaker currency,
8.2%
8.1%
8.1%
8.0%
8.0%
7.9%
7.9%
7.8%
7.7%
7.7%
7.5%
Source: NBS, FDC Research
8.0%
7.9%
seasonality
Liquidity Drives Interest Rates Down
28
5
OBB
ON
Source: FMDQ, FDC Research
30
90
180
2-Feb
31-Jan
29-Jan
27-Jan
25-Jan
23-Jan
21-Jan
19-Jan
17-Jan
15-Jan
0
13-Jan
No major change expected until
after elections
10
11-Jan

Average OBB & ON rates
peaked at 14.94% p.a. in the last
two weeks
15
9-Jan

Interest rates continue to move
in tandem with liquidity level
20
7-Jan

Annualized money supply (M2)
increased to 7.29% in December
2014
5-Jan

Global - Policy Divergence to Continue
31


US Fed expected to raise interest rates later this year
MPC of Bank of England decided to keep interest rates at
record lows in a unanimous vote



ECB announces large-scale QE

To purchase €60bn/month in assets for the next 20 months

In response to anaemic recovery and “lowflation”
Bank of Canada announces rate cut from 1% to 0.75%


Growing concerns about a long bout of low inflation
Sharp drop in oil prices a threat to growth and underlying
inflation
Bank of Japan (BoJ) to employ further stimulus measures
Domestic - New CBN Directive
32

The CBN issued a new directive to all deposit money
banks on the submission of domiciliary accounts details as
follows:

List of all Dom acc holders stating name, account number and
balances at 29th January 2015

Total balance of all Dom accounts as at 29th of January, 2015

List of corporate domiciliary account holders and their balances

List of individual domiciliary account holders and their balances

List of public sector institutions domiciliary account holders and
their balances

The mode of lodgement to the account for each of the above
transactions (either cash or by wire transfer)
Implications
33

Apex bank concerned about high level of domiciliary
balances at average of 1% p.a.

Believes domiciliary transactions are used for round
tripping

A breach of confidentiality

Will fuel a rush of transfers to overseas banks

A fear that CBN will now seek for information on naira
accounts

Could become a tool for taxation or witch-hunting
Global Markets……A Changing Shape
35

Apple vs. Samsung vs. Microsoft (Nokia)

Apple release Q4 earnings with record profit of $18bn

The I-phone company beat its rivals Samsung, Microsoft
and Google

Quarterly revenue of $74.6bn higher than combined
revenue of Google, Microsoft and Amazon - $73.9bn

Google full year revenues at $66bn
Global Markets……A Changing Shape
36

Revenue Growth


Apple 30%, Google 15%, Amazon 15% and Microsoft 8%
Apple also beat its stiffest rival Samsung

Revenues down 11% to $48bn

Net income down 27% to $4.89bn

Also sold $6.5bn bonds

The future: I-watch, Apple-pay coming but Google glass
out
Global Markets
37
Global Indices Performance
NSEASI
IBOVESPA
GGSECI
DOW
S & P 500
KNSMIDX
FTSE 100
JALSH
MICEX
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%

European Central Bank (ECB) to oil markets with €60bn monthly

Appetite for risk boosted by the ECB’s action



Nigerian and Russian markets miles apart despite facing similar
challenges as oil producing nations
 Vodka and Kalashnikov Vs ____________?
Russia bracing for the worst,
 Reserves depleted to $388bn from $511bn in 2014
Nigeria’s reserves at $34.2bn
NSE ASI – Directionless and Drifting
38
Jan 2015
NSE ASI (Points)
35,000.00
33,500.00
32,000.00
30,500.00
29,000.00
27,500.00
26,000.00
ASI

Free fall of equities prices flattening out

Market highly apprehensive

2 days of positive gains this week

Investors lost N1.6trn of value

Index down by 14.70% in January 2015

Pendulum movements – swinging between red and black

The struggle for direction - Fear vs. Value
January 2015 Highlights
39

NSE ASI down by 14.70% to 29,562.07 points

Market capitalization down to N9.85trn from N11.48trn

Total turnover of N94.86bn against N100bn in December



Average daily turnover of N4.75bn
Rights Issue

Oando re-priced rights issue to N16.50 from N22

Access Bank launches rights offer at N6.90 against N8.90
7UP, PZ and Guinness report earnings

Revealed challenges of consumer sector

But shows resilience of leading brands
Sectors in January
40
Sectors in January
Turnover
50
Banking
40
NGN (Billions)
Consumer
Industrial
Oil & Gas
Insurance
-20%
-15%
-10%
-5%
30
Value
20
10
0%
0
Change %
Financial
Services
Oil & Gas Consumer
Industrial

Banking and consumer stocks significantly hit

The darlings of FPIs feel the heat: NESTLE, NB, GUARANTY, ZENITH

Selling is not because of weak stocks but for liquidity reasons

Banking sector P.E of 6.49x and P/BV of 0.61x

Buying opportunities abound for the discerning

Resilience, Brand, Strategy, Performance and Market Share (Size)
NSE in 2015…Bank of America (BofAML)
41




Bank of America sees 11% drop in corporate earnings
Due to the 30% drop in crude oil prices
Consumption and export earnings will shrink
Not okay with Flour Mills of Nigeria and Guinness



Like NESTLE, NB and DANGCEM





Shrinking revenues and margins
Rising cost burdens
Market leaders in their various industries
Reliant on local sourcing of raw materials
Consistent growth in revenues
Scale economies and high margins
BofAML sees short term risks of naira depreciation and
political tensions as opportunity
ZENITH and GUARANTY in 2015….Rencap
42








Zenith and Guaranty racing at the top
Zenith quite aggressive while Guaranty thrives on
efficiency
Regard each other as key competitor
Capital adequacy ratio of Zenith at 21% and GTB at 18%
Both banks expected to record good profits for 2014
Trading under their break-even Cost of Risk (COR) of
7.5% and 9%
Peak COR since 2004 of 5.2% and 7%
Rencap’s price target is N22 and N25 respectively
Winners and Losers…..Jan 2015
43
Company
Jan-15
Dec-14
Change %
Presco Plc
32.66
24.50
33.31%
P Z Cussons Nigeria Plc.
29.64
23.80
24.54%
Cutix Plc.
1.55
1.30
19.23%
Union Bank Nig.Plc.
9.50
8.50
11.76%
37.20
34.00
9.41%
U A C N PLC.



Company
Diamond Bank Plc
Jan-15
Dec-14
Change %
3.58
5.58
-35.84%
Dangote Flour Mills Plc
3.00
4.55
-34.07%
Julius Berger Nig. Plc.
44.89
60.66
-26.00%
Skye Bank Plc
1.99
2.66
-25.19%
Fidelity Bank Plc
1.25
1.62
-22.84%
Jan-15
Dec-14
Change %
156.00
200.00
-22.00%
142.02
165.30
-14.08%
800.25
1011.75
-20.90%
20.03
25.18
-20.45%
16.01
18.41
-13.04%

OKOMU AND DANGSUGAR
gained 8.28% and 7.40%
Commodity traders
benefitting from low prices
And speculation that CBN
Forex policy would offer
advantage
No dollar at RDAS to import
locally produced goods
The Most Capitalized Stocks
Company
Dangote Cement Plc
Nigerian Brew. Plc.
Nestle Nigeria Plc.
Guaranty Trust Bank Plc.
Zenith Bank Plc


The Big 5 were not spared
Creating good entry
opportunities
Corporate Earnings
44
Company
Revenue
Growth
PBT Growth
P.E Ratio
Share Price
Growth
7UP
8.87%
14.07%
14.16x
-5.68%
GUINNESS
4.76%
-27.38%
21.00x
-22.69%
PZ
-2.47%
-36.95%
27.96x
24.54%

Consumer firms facing high cost burdens and lower revenues

But leading brands seem to be maneuvering well

Guinness profits pared by exceptional item of N852mn

PBT was set to be N5.5bn

Stock prices of firms have corrected

Average sector P.E down to 32.70x from 40.82x in Dec’2014
Outlook
45









The downturn in the equities market will continue
As negative sentiment would dominate
Because FY’2014 corporate earnings will be weak
Also due to political tensions as general elections
approach
Expect increased volatility at current levels
Market P.E ratio of 19.71x is a gift
February will witness a downward, choppy trend
The tussle between bargain hunters and profit takers
would intensify
NSE ASI would remain below 30,000 points
NSE ASI in 2015
46
NSE ASI: Over the 4 Quarters
The Rush to buy
Q1
Q4
Q3
NSE ASI
Q2
Q1: “Weary investors”
Q2: “Mixed Feeling”

Election fears

Post election

Crude oil prices

Naira devaluation

Weak corporate earnings

Some stability
Q3: “The storm is over”
Q4: “Calm returns”

All the bad news would be out

Positions taken in Q3

Low and attractive price

Profit taking

The strong rebound is imminent

Last fools would still enter
Ships Awaiting Berth Decline
49

Ships awaiting berth at Apapa
No of Ships Awaiting Berth
down to 61 in January

14.1% lower than 71 in
December

Devaluation of the currency is
affecting imports
90
81
80
70
60
68
79
71
70
64
61
50
40
30

In tandem with a lower PMI
reading

Expect an increase in March
20
10
0
Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15
Source: NPA, FDC Research
49
Rig Count trend Downwards
50

US rig count down by 90 to
1,543 in January

Canada rig count down by 38
to 394

Number of active rigs in
Nigeria down to 18

From 19 in December

January figures not yet
2500
20
18
2000
1500
15
16
14
1785
1543
12
10
1000
8
6
500
4
2
0
0
available
US
18
Nigeria
Retail Industry Update
52








Beer market has grown 9.5% in 2014
Malt market grew 15%
Highest growth is in the lowest price segment
The cheaper brands are growing 10 times faster than
premium
Customers are spending less for a higher alcohol
content
Possibly due to economic blues and mood swings
Supermarket and trade outlets have grown in excess of
30%
Bar consumption is up 10%
Retail Industry Update
53

Supermarkets, groceries and formal outlets account for
approximately 8% of sales of beer, malt and ready to
drink brands

Jos is fastest growing market followed by Lagos

Slowest market growth is Ibadan, growing by 3.5%
Political Uncertainty affect UK Real Estate
55

Uncertainty surrounding upcoming UK elections gradually
began to weigh on real estate activities


UK general election is scheduled for May 7, 2015
House prices down by 1.6% and 0.9% in the North West
and South West respectively

House prices still up in London by 1.8%

Expect a rebound in general real estate activities after the
elections
55
US Real Estate – A Rebound Underway
56

Boomerang buyers now set to re-enter the housing
market after the US real estate bubble in 2007

7-year window given to repair credit and qualify to buy a
home has passed since the foreclosure crisis

7.3 million buyers now eligible to re-enter

Recovery in the US economy is also positive for the real
estate market
56
Slowdown Expected in Dubai Real Estate
57

Supply expected to exceed demand for properties in
Dubai for the next 3 years



Projections of a 5-10% drop in property prices in 2015
Buyers seeking for more affordable options rather than
oversupplied luxury segment
Volatile energy prices and stronger dollar also causing
foreign investors to hold back on real estate investments
in Dubai

Property prices have become more expensive for foreigners as
the dollar strengthens

UAE currency, dirham, is pegged to the dollar
57
Watch Out for New Developments in Ikoyi
58
Purpose
Dimension (Sq.
Metre)
Floors
Kingsway Towers,
Glover Road
Commercial
15, 000
15
BAT Rising Sun,
Opposite Ikoyi Club
Mixed-Use
19, 500
13 (4 floors for
office space)
Heritage Place,
Between Lugard and
Kingsway Avenue
Commercial
15,600
15 (8 floors for
office space)
7,500
15
Sogenal Towers,
Mixed-Use
Beside Mercedes Benz
Place

Office space of this standard usually cost $1,000 per sq. metre
per annum
Aviation Update
World’s Busiest International Airport
61






Jo’burg, Dubai, Nairobi and Cairo are amongst the top
100 most visited cities in the world
Dubai overtakes Heathrow airport as the busiest
international hub
The goal is to make Dubai a global centre of aviation
Aviation is expected to account for over a third of
Emirates’ GDP by 2020
Controls a significant portion of travel between the
West, Asia and Australasia
Airport traffic increased by 6.1% in 2014 to 70.47m
passengers

Heathrow handled 68.1m international passengers in 2014
World’s Busiest International Airport
62

Dubai's surge in traffic is due to
the massive A380 fleet at
Emirates


A further increase is expected in
passenger traffic in 2015


The airline has proven the A380
can be used anywhere in a
profitable way
Projected to reach 78.4m
Dubai's other airport, AlMaktoum International, opened
for passengers in 2013, and will
be handling 120m travellers
when completed in 2022
Country
(Total
Passenger
Volume)
2014
(M)
2013
(M)
2012
(M)
Heathrow
68.1
72.3
70.3
Dubai
70.5
66.4
57.6
80
60
40
20
0
2012
2013
Heathrow
2014
Dubai
St. Valentine’s Super Deals!!!
63


Lufthansa offers special deals to celebrate the season
Return fare inclusive of all taxes and fees



Lagos – London
Abuja – London
Port Harcourt – London
From $709
From $761
From $1024
Departure period
Feb 06 2015 – Mar 20 2015
Return period
Feb 07 2015 – Apr 20 2015
Offer last till
Mar 10, 2015
Purchase Period
3 days
Falling Naira, Increased Fares
64
Preferred
Destination
Eco Class Eco Class %
(Dec’14) N (Jan’15) N Change
Biz Class
Biz Class
%
(Dec’14 N) (Jan’15) N Change
London
447,720
524,160
17.07%
690,440
803,320
16.35%
New York
561,044
656,832
17.07%
705,036
825,408
17.07%
Atlanta
441,160
516,480
17.07%
941,524
1,102,272 17.07%
Dubai
213,120
182,040
-14.58%
528,080
618,240
17.07%
Johannesburg
301,760
353,280
17.07%
499,200
426,400
-14.58%

Economy class down for Dubai due to price war between
Emirates and Arik
Political Risk Analysis
Political Update
66
Jonathan

“I will do better in my second term”

Believes continuity will allow for stability in the economy

PDP using all sorts to fight back

Election postponement

Interim government

Presidential debate
Political Update
67
Buhari

“$20bn missing money equivalent to Nigeria’s budget”

Could provide 840,000 patrol vehicles and 13,000MW of
power

Believes in continuity unless you are already at the edge
of a cliff

Suspicious of the elite and compromise of principles

Altercations between Ngozi and Soludo throws up questions
Political Update
68
Post-Election

Policies to remain the same

Economic damage is significant

Even the best of minds will have a hard time

The crisis of false expectations will become real

Could be a case of a pyrrhic victory

Post election violence is imminent
The Race Narrows – So Near Yet So Far
69

The APC momentum and surge is growing at a slower pace

The PDP is fighting back big time

Both parties are consolidating and energising their base

The PDP can forget the North West & North East

North Central is a battleground

The APC can forget the South East but will get the 25% in
South/South
Political Update
70

South West has the population, demography and
sophistication to be a swing zone

Osinbajo on the ticket makes it attractive to ethnocentric
Yorubas

Buhari has avoided a debate

Message is becoming clearer and is connecting

Focusing on rallies and town hall meetings

Jonathan is working tirelessly to showcase his track record
Deciding Factors
71

Exchange rate depreciation to N210 is a kiss of death

Boko Haram insurgency has become a nuisance to the PDP

Missing Chibok girls is another black eye

Oil price recovery to $57pb is great news for the PDP

The CBN defence of the naira is helping the President

Power supply unreliability is a PDP liability
Deciding Factors
72

Buhari’s ambiguity on economic reform is unsettling to the
international market

Embracing reform which is guided by economic patriotism
may douse fears

Both candidates appears numerophobic

Crisp numbers and charts are appealing to the under 30s
Likely Outcomes
73

An announced PDP landslide victory

A narrow victory for the APC with a run off

A dual result, Ivory Coast model

Election postponement
External Views - Eurasia Group
74
Short term trajectory : Negative
Long term : Neutral





Economic management would improve under Buhari
But oil production would be more at risk
A second Jonathan term would bring broad policy
continuity
But in an environment that will sharply limit the scope
for economic reform
Amidst a deteriorating security environment
External Views -
Eurasia Group
75

A Buhari win offers more upside potential

On austerity and anti corruption

Security risks in the Delta region

A potential to impact oil production would be higher under
his administration

Independent of who wins the February 14 election, the
aftermath will be marked by considerable uncertainty
and unrest through March
Outlook
Outlook for February
78

J.P Morgan forecast for oil
 Q1: $42pb
 Q2: $43pb
 Average
 Long
2015: $49pb
term recovery in 2019

Naira to trade at N195/$ at the interbank

N205/$ – N210/$ at the parallel market

NOPs will be increased to 1%

Stock market will remain flat to down through February

Commodity prices will slip
Outlook for February
79

Inflation will inch up to 9%

Banks will announce capital raising plans

No matter the election outcome

There will be a complete change of guards at Abuja

The policy direction, pace and enforcement will be more
defensive
Corporate Humour
80
Women are like the police. They could have
all the evidence in the world, but still want
the confession.
- Chris Rock
By the time a man realizes that maybe his
father was right, he usually has a son who
thinks he is wrong.
Charles Wadsworth 80
Corporate Humour
81
Only your real friends will tell you when your
face is dirty.
- Sicilan Proverb
Spend the afternoon. You can’t take it with
you.
Annie Dillard 81
Corporate Humour
82
It is called Rap music because the C fell off the
printer.
- Allan Bease
A homeless musician is one without a
girlfriend.
Anonymous 82
83
Bismarck J. Rewane, MD/CEO
Financial Derivatives Company Ltd.
Lagos, Nigeria
01-7739889

Monthly Economic Review - February 2015

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