Monthly Economic News and Views At Lagos Business School

Transcription

Monthly Economic News and Views
At Lagos Business School
Executive Breakfast Meeting
January 28, 2015
The Falling Naira - Are You Prepared ??
Presented by B.J. Rewane
Financial Derivatives Company Limited
Outline - Catching a Falling Knife
2
December/January Highlights
External Markets
Domestic Economy
Capital Markets
Political Update
Outlook for February
Global Economy - A Mixed Bag
4
External- A Mixed Bag

Oil price declined to $46.59pb

A 5 ½ year low

Cumulative 8 week drop of 35%

December fall of 20.89% and January 14%

The price plunge is accentuated by slowing demand and
over supply

OPEC reluctance to cut production is keeping prices
close to the floor
5

Global GDP growth revised downwards to 3.5% from
3.8%

Every $10 drop in oil price increases global GDP by 0.2%
($1.4trn)

Shifting income from oil producers to consumers

The consensus is that the floor price is $40pb

Worldwide rig count is 3570 of which 100 are idle

Idle rigs have increased from 70 to 100 since December
6

Active rigs in Nigeria down by 1 to 18 in December

Global commodities index (BCOM) down by 19.7%

Oil is responsible for 48% of the weight

Apple reports record profit of $18bn in Q4

Equal to GDP of Yemen

Equivalent of $200m per day
7
Domestic

Broad money supply increased 7.29%, as against target of
15%

Power output from the grid is 3700MW

Retailers inventory levels down to 5 weeks

Naira dropped past the psychological resistance of
N200/$, testing the N210 level

Dollars on offer at the auction down 42.47% to $1.49bn
in January
December January Highlights
8

Spread between the parallel & official markets increased to
N42 or 25%

Stock market when adjusted for devaluation is down
15.48% in 2015

MPC maintained status quo at January meeting

Assures the markets that no need to panic

J.P. Morgan puts Nigeria on negative watch on bond index

Nigeria is 1.12% weight of the index
December January Highlights
9

Russia debt instruments downgraded to junk status by
S&P

Petrol price cut by 10.3% to N87 per litre

Market reaction was that- too little too late

Electricity MYTO increase in tariff on Christmas day

Common external tariff in West Africa adopted January 1

Member countries are allowed flexibility

To impose additional import adjustment tax on 177 tariff
lines
IMF Cuts Global Growth
World Output
United States
Euro area
Japan
UK
Canada
Russia
China
India
Saudi Arabia
Nigeria
Old Projections (%)
3.8
3.1
1.3
0.8
2.7
2.4
0.5
7.1
6.4
4.5
7.3
Latest IMF Projections (%)
3.5
3.6
1.2
0.6
2.7
2.3
-3
6.8
6.3
2.8
4.8
IMF Cuts Global Growth

US only major economy with an upward review in its
growth forecast

Lower oil prices have prompted cuts in the outlook for
big oil exporters

Lower oil price presents opportunity to reform energy
subsidies in both importers and exporters
OECD Mixed Performance
13

Deflation now a reality in the Eurozone


ECB begins large-scale QE


Down 16.16% since May 2014
Russia is in a recession, expected to contract by 3% in 2015


In response to sluggish growth and deflationary pressures
Euro trading at an 11-year low of 1.10/$


Inflation fell to -0.2% in December from 0.3% in November
Oil prices and sanctions taking their toll
China will face the dilemma of tighter monetary policies
and slower growth
SSA - Good Policies, Commodity Price Vulnerable
Sub-Saharan Africa - Good Policies,
Commodity Price Vulnerable
15


The IMF revised downwards 2015 GDP forecast to 4.9%
from an earlier projection of 5.8%
Major challenges facing SSA in 2015 include





Slower global growth
The impact of Ebola
Lower commodity prices
Commodity Exports as % of
GDP
Angola
53.8
Libya
46.1
Chad
34.7
Nigeria
34.5
Zambia
25
Congo
21.6
Increased risk of a further decline in commodity prices
amid weaker global economic conditions
Benefits of lower oil-import costs offset by falling
commodity prices
Impact on Nigeria
16


CFA Franc is used by 9 African countries

$1.12= 1 euro, down from a high of 1.42

656.53 CFA = 1 euro
Cheaper euro means cheaper exports from CFA Franc
African countries competing with Nigerian exports

This will have a negative impact on Nigeria’s terms of trade

Hot money reverse flows

To put further pressure on Nigeria’s external reserve and the
naira
Outlook
17

Global growth outlook for 2016 cut to 3.7% from 4%

Monetary policy divergence to continue between the
US Fed and other major central banks


Interest rates increase expected in the US later this year

Bank of Japan (BoJ) and ECB to employ stimulus measures
Capital reverse flows in search of safety


Risks more elevated among oil exporters
Slowing demand from China and Europe to stifle increase
in exports of emerging markets
Commodities
Prices Trend Downwards
Economics of Oil - OPEC Losing Control
Market Structure: Oligopoly

OPEC: Cartel controls 32% of daily supply (30.25mpbd)

Many buyers: 196 countries

Few suppliers: 35 countries

Control price and output

Advantage: excessive profit

Disadvantage: exploitative

Global demand: 91.15mbpd

Global supply: 92.08mbpd
Oil Market Dynamics

Top 5 oil producers (mbpd)







USA (12.67)
Russia (10.67)
Saudi Arabia (9.59)
China (4.22)
Canada (4.17)
Only one member of OPEC
Production costs


Saudi Arabia - $5pb
Nigeria - $28pb
Volatile Oil Market
22
Weakest Link in the Chain
23







Russia
Venezuela
Nigeria
Iran
Low reserves
Huge population
Leakages and corruption
Oil Rich vs. Oil Poor
24
Oil Rich
External Reserves
($’bn)
Budget position(%) Income per capita ($)
Kuwait
34.35
28.93
29, 729
Saudi Arabia
740.4
6.4
18, 034
Oman
17.7
(-0.4)
13,306
Oil Producing
External Reserves
($’bn)
Budget Position (%) Income per capita ($)
Angola
37.94
6.7
2, 738
Russia
386.2
(-2.7)
6, 923
N/A
(-0.78)
3, 132
Nigeria
34.47
(-1.8)
2,688
Venezuela
22.06
(-11.5)
6,402
Iran
Commodity Prices Trending Downwards
25



Bloomberg Commodity Index (BCOM) is down by 19.7%
YTD
Plunge in oil prices is the main driver of the decline
Oil market dynamics are driven by oversupply and weak
demand





OPEC is unwilling to cut output
U.S., Russia and Iraq increasing production
Weak demand in Europe and Asia
Agric. products affected by strong recovery in global
production
Strengthening dollar also becoming a significant factor
affecting commodity prices

Most commodities are priced in dollars; inverse relationship
26
Inverse Relationship between U.S.
Dollars and Commodity Prices

The Bloomberg Dollar Spot Index (DXY) up 18.3% YTD
while the commodity index is down 19.7%
Source: Bloomberg
Commodity Prices Trending Downwards
27
Monthly Change
(Dec/Jan)
Y-T-D Change
Brent
-21.49%
-55.38%
WTI
-19.58%
-50.25%
Natural Gas
-15.37%
-32.99%
Corn
-2.68%
-11.03%
Wheat
-9.82%
-8.52%
Rough Rice
-6.87%
-22.60%
Sugar
0.67%
-1.48%
Cocoa
-0.07%
1.30%
7.72%
-14.68%
Commodity
Energy
Grains
Soft
Oil Seeds
Palm Oil
Source: Bloomberg, Reuters, FDC Research
Nigerian Companies Vulnerable to
Commodities Prices
28
Commodities
Companies
Comments
Wheat
Honeywell, Flourmills
(Importers of wheat)
•Decline in price brings down
cost
•But may be negated by
exchange rate risk
(devaluation)
Sugar
Manufacturers: Bua, Dangote, Flour
Mills(Golden sugar)
FMCGs:P & G
Beverage Manufacturers: 7up
Guinness, NB
•Reduces profitability for
manufacturers
•Decline in price brings down
cost for importers but face
exchange rate risk
Palm Oil
Okomu, Presco
(Manufacturers of Palm Oil)
•If international prices are
cheaper, might lead to
increased imports
•Reduces profitability for
manufacturers
Cocoa
Nestle, Cadbury
Decline in price brings down
cost
Outlook – Food, Feedstuff & Beverages
29


Outlook remains bearish
Increased supply and weak global demand, especially in
China, will keep oil prices low




China is one of the largest consumer of grain, energy and
metals
Speculation that oil price may bottom out at $40pb
For agric. products, expectation of large global supplies
in 2015 to keep prices down
EIU forecasts that grains and oilseeds will show the
largest declines in 2015, of around 8% and 12%
respectively
Outlook – Food, Feedstuff & Beverages
30

Plans for higher export subsidies in India may boost
supply of sugar and dampen its price


Export controls by Russia limiting the supply of wheat


India is the second largest producer of sugar in the world
Russia is the third largest producer of wheat in the world
A global shortage of cocoa might lead to an increase in
prices
Outlook- Industrial Raw Materials
31

Prices for industrial raw materials are expected to rise
by 4.5% in 2015

Below their highs of 2011 but will reflect market
fundamentals more closely

Prices for base metals will show the strongest gains

Due to a strong recovery in aluminium prices
Domestic Economic Performance
Leading Economic Indicators (LEI’s)
33
Indicators
December
January
% Change
February
Oil Price ($’pb)
52.39
49.18
6.13
45
Exchange Rate (N/$ Inter-bank)
186.10
192
2.79
195
8.0
*8.3
0.30
9.14
13
13
-
13
External Reserves ($’bn)
34.47
34.46
0.03
32
NSE ASI (% change)
0.33
14.07
-14.4
-10
Inflation Rate (% - ave)
MPR(% p.a.)
Source: EIU, EIA , OPEC, CBN, FDC Research , (* FDC’s forecasts)
Inflation Projected to Increase in January
34

Headline inflation forecast to
increase to 8.3% in January

Up from 8% in December 2014

Seasonality effect, planting period

Higher electricity tariff




Depreciating value of the naira and
pass through effect on consumer
goods
Inflationary pressures from political
spending
Lower global commodity prices
10% drop in petrol price having no
impact
Headline Inflation Rate
8.7%
8.5%
8.5%
8.3%
8.3%
8.3%
*8.3%
8.2%
8.1%
8.1%
8.0%
8.0%
7.9%
7.9%
7.8%
7.7%
7.7%
7.5%
Source: NBS, FDC Research
8.0%
7.9%
Money Supply & Interest Rates
35






Annualized money supply (M2)
increased to 7.29% in December
2014
Year to
date high
80
70
Interest rates continue to move in 60
tandem with liquidity level
50
Average OBB & ON rates peaked
at 74.13%p.a. in December 2014
Declined below the floor of
10.25% p.a. to 6.29%
Due to excess liquidity and
limited outlets after FAAC
MPR still at 13% p.a.
40
30
20
10
0
OBB
ON
30
90
180
4 year
low
Interest Rates Flat
37

No major change expected until after the elections

MPR will remain at 13% p.a. in February

Lobby groups will pressure CBN for downward review

To boost lending and spur economic growth
Falling Naira, Declining External Reserves
38

Recent policy measures have heightened pressure on the
naira

Leading to a record low of N210/$ at the parallel market

Naira has lost 17.9% (y-o-y) at interbank market

Remained flat at N168/$ post November devaluation

CBN’s ability to defend the naira is limited
Falling Naira, Declining External Reserves
39

$1.49bn was sold at the RDAS compared to $2.59bn in
corresponding period in 2014

External reserves is down to $34.46bn

5.13months of imports and payments
External Reserves ($'bn)
40.00
39.00
38.00
37.00
36.00
35.00
34.00
33.00
32.00
Oct'14
Nov'14
Source: CBN, FDC Research
Dec'14
Jan'15
How to Use a Hamburger to Determine the
Value of a Currency
40
Burgernomics: True Value of the Currency
Forex N/$
213
Dec’14 Jan’15
203
Euro
0.83
0.88
6.02
Pound
0.64
0.66
3.13
Chinese
Yuan
6.20
6.24
0.65
N/$
193
%
Change
183
173
163
153
official
parallel
interbank
Source: CBN, FMDQ, FDC Research
Nigeria

Big mac index is a one item basket

No Macdonalds in Nigeria

Johnny Rocket is a proxy at N1200

Using exchange rate in January 2015: $7.14


The Big Mac substitute suggests the naira is overvalued
by 32.91%
The true value of the naira based on burgernomics today
is N223.48/$ (N214.5/$ in July 2014)
Implications of MPC Decisions
45

CBN will engage J.P Morgan on GBI-EM index

Market fears will continue

Anxiety as election approaches



Spread of N35 between parallel and official rate is a major
factor
The selling pressure may resume if oil prices fall below
$45
If external reserves decline below $33bn
Decision Consistent with African Peers
46
Country
Interbank Exch
Rate Y-o-Y %
depreciation
Inflation Rate
(%)
Policy Direction
(% p.a.)
Nigeria
17.9
8
13
South Africa
10.47
5.3
5.75
Angola
4.9
7.48
9
Kenya
6.03
6.02
8.5
Ghana
28.12
17
21
Source: FDC Research, Bloomberg, Trading Economics
Outlook
47

Possible scrapping of RDAS and adoption of a pure
interbank market

Interest rate will remain at 13%p.a.

Increasing NOP to 1%

Allow BDCs back into the market
NSE ASI
Dec 2014
Jan2015
36,000.00
35,000.00
35,000.00
34,000.00
33,000.00
ASI

Extreme volatility in December



post-2009 crash

19-Jan
18-Jan
17-Jan
Slippery slope or bottom
fishing?
Index recorded its worst and best
Index rose by 0.33%
16-Jan
ASI
2014

15-Jan
26,000.00
14-Jan
26,000.00
13-Jan
27,000.00
12-Jan
27,000.00
11-Jan
28,000.00
04-Jan
28,000.00
10-Jan
29,000.00
09-Jan
29,000.00
30,000.00
08-Jan
30,000.00
31,000.00
07-Jan
31,000.00
32,000.00
06-Jan
32,000.00
05-Jan
33,000.00
ASI (points)
ASI ( points)
34,000.00
Investors losing N1.5trn of value
Index down by 14.07%
January Highlights - New Year, Old Fears
50

Investors resume trading with negative sentiment

Took profit from the Santa Claus rally

And Foreign Portfolio Investors exit further

Leading to 5 consecutive losses for the NSE ASI

Index lost 13.02% before recording its first gain

More fears as crude oil prices hit $45pb

CBN NOP rule worsened investor sentiment
Sectors in January
Sectors Performance
Industrial
Oil & Gas
Consumer
Return (%)
Insurance
Banking
-16.00%
-14.00%
-12.00%
-10.00%
-8.00%
-6.00%
-4.00%
-2.00%
0.00%

Banking and Consumer stocks significantly hit

The darlings of FPIs feel the heat; NESTLE, NB, GUARANTY, ZENITH

Banking sector P.E of 6.49x and P/BV of 0.61x

Any buying opportunities, post-election rebound?

Teaser; FBNH at N7.50 and P/BV of 0.53x offers 10% dividend yield potential
Winners and Losers…..Nov - Jan
Stock/Company
Jan'2015
E-Tranzact International Plc
Omoluabi Savings and Loans
Beta Glass Co. Plc
Academy Press Plc
Evans Medical Plc
Stock/Company
Change
Nov'2014
%
3.39
0.92
30.00
1.18
2.27
Jan'2015
Dangote Flour Mills Plc
Champion Brew. Plc
FCMB Group Plc
Costain (W A) Plc
Diamond Bank Plc
2.21
0.67
22.05
0.95
1.99
53.39%
37.31%
36.05%
24.21%
14.07%
Change
Nov'2014
%
3.19
6.08
2.09
0.65
4.00
6.23
9.8
3.3
1.01
6.2
-48.80%
-37.96%
-36.67%
-35.64%
-35.48%




Sudden preference for small
caps and ASEM listed stocks
Heavy cap stocks depressed
significantly
An all round rout of banking
stocks
But Sterling Bank performed;
returned 4.66%

Bottom fishing the way to go

The rout seems to be over despite the negative sentiment

NSE ASI at 28,000 points with P.E of 19.71x

A recovery is imminent
Stock Market Drivers in January 2015
53

Crude Oil Prices

No direct correlation between oil price and the Nigerian
market


As crude oil tests $45pb floor

Depression of Oil stocks: SEPLAT & OANDO
Fear

Due to rising insecurity and political tensions

Citing possible pre and post-election violence
Stock Market Drivers in January 2015
55

Policy Makers and the naira

MPC maintains status quo

CBN battles to defend the naira as JPMorgan bites


NOP 0.1% to 0.5% right after post-MPC press briefing
Naira tests new levels at interbank and parallel market amidst
high illiquidity
Banking Sector…….A Stress test
56










CBN broaching the idea of stress testing banks
The banks need it like a bullet in the head
Increased NPL and provisioning
Oil and Gas risk assets in focus
Banks with Oil and Gas exposure will be the focus
Higher NPLs, lower earnings and dividends
Capital increases to build buffers
CBN will most likely allow the banks ride out the storm
A bail out too expensive
Nigeria cannot afford a bankingshock
Outlook
57

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

As current prices present buy opportunities

Market P.E ratio of 19.71x is a gift
Outlook
58

Next three weeks would see a downward, choppy trend of
the index

Battle between bargain hunters and profit takers would
intensify

NSE ASI would remain below 30,000 points
FAAC Allocation will Decline Further

The naira value of dollar assets will
be sharply higher

FAAC allocation is down by 23.2% to
N580.38bn

From 2014’s high of N755.95bn when
oil prices was at $115pb

A persistent decline in oil will cause
FAAC to reach a low of N350bn

Payment of salaries will be a
FAAC (N'bn)
900
840
780 755.95
720
660
654.6
600
611.7 603.5
628.8
593.3
580.38
540
480
420
360
300
challenge
Source: FMF, FDC Research
60
Value of Cheques Expected to Increase

Value of Cheques (N'trn)
Value of cheques in 2014 was at an
3.50
average of N2.13trn


3.00
2.50
13.2% of money supply
2.00
1.76
2.07 1.94
We expect an increase in the value of
cheques due to political spending
1.18
0.50
0.00
as oil prices began to plummet
2013 vs. 2014
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
2013
2014
Source: CBN, FDC Research
2.66
1.84
1.00
The lowest value of N1.18trn coincides
during the elections
2.10
2.94
1.50
with the drop in government revenues

2.67
61
Ships Awaiting Berth Declined Further
Ships awaiting berth at Apapa
Devaluation of the currency is
40
expected to affect imports
20
Source: NPA, FDC Research
Dec-14
Nov-14
Oct-14
Sep-14
berth at the ports
0
Aug-14
Which implies less ships awaiting
52
Jul-14

60
Jun-14

71
May-14
November
79
80
Apr-14
10.13% lower than 79 in
105
100
Mar-14

120
Feb-14
declined to 71in December
Jan-14

No of Ships Awaiting Berth
Rig Count Down Marginally
and laying off workers

25
Dec-14
Nov-14
Oct-14
Sep-14
Aug-14
Oil contractors are idling rigs
Jul-14

9
Jun-14
100 to 3570
15
May-14
Worldwide rig count down by
19 18
Apr-14

20
18
16
14
12
10
8
6
4
2
0
Mar-14
from 19 to 18 in December
Rig Count
Feb-14
Number of active rigs declined
Jan-14

20
Expect a further decline in rigs
15
as oil prices fall further
10
5
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013
Source: Baker Hughes, FDC Research
2014
Retail Industry
Retail
65

Total sales for year end celebrations increased by
approximately 6%



Increase in shopping traffic during the holidays
Driven by increased demand for groceries, FMCGs and
white products
Online retailing received a major boost

Partly due to attractive promos advertised

Inventory levels down to 5weeks

Cash to card ratio unchanged at 75:25 in Lagos
Retail Outlook for Nigeria
66

Retail activities are election neutral

Customers are buying ahead of the devaluation repricing

FMCGs highly vulnerable to exchange rate risks in 2015
due to high import content
Retailers have their eyes on Emerging Markets
67



Global retailers will focus on penetrating emerging
markets
Shifting demographics and expectation of rising demand
in the region
And increased disposable income due to reduced petrol
prcie


High population and growing middle class
Key growth countries are:




India
Indonesia
China
Nigeria
Source: PWC, FDC Research
Retailers have their eyes on Emerging Markets
68

The MINTs and SSA will be targeted


Due to higher margins and per capita spend
Decreasing margins in new store openings will give rise
to increased productivity within existing stores

Barriers to global trade will continue to decline

Developing markets will liberalize trade barriers
Source: PWC, FDC Research
Real Estate
70

Slow construction activities for highly capital-intensive
projects


Funds are channelled into elections instead of new contracts
But pending commercial developments still on schedule
for completion in 2015

Heritage Place, Ikoyi

Civic Centre Towers

Jabi Lake Mall, Abuja
70
Real Estate
71

Less capital-intensive projects continue to gain traction

Devaluation of the currency began to take its toll on
activities

Landlords unwilling to accept naira because of the
exchange rate difference


Especially in the high-end market
Vacancy factor increasing but rents are sticky
Vacancy Factor
73

Residential vacancy factor in Victoria Island increased to
32% in January


Commercial vacancy factor up to 17%
Residential vacancy factor in Lekki and Ikoyi increased to
35% and 11% respectively

Commercial vacancy factor at 41% and 3% in Lekki and Ikoyi
respectively

Ikoyi still predominantly residential though new commercial
developments are springing up
Fluctuations in Vacancy Factor
74
Ikoyi
Victoria Island
35%
32%
30%
25%
20%
17%
15%
10%
5%
0%
March'14
May'14
Jul'14
Sept'14
40%
35%
30%
25%
20%
15%
10%
5%
0%
11%
3%
March'14
Jan'15
May'14
Jul'14
Sept'14
Jan'15
Lekki
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
47%
35%
Residential Vacancy Factor
Commercial Vacancy Factor
March'14
May'14
Jul'14
Sept'14
Jan'15
Source: FDC Research
New Commercial Developments
75

Osapa Convenience Centre, Lekki

Shopping mall to be situated at Jakande roundabout along
Lekki-Epe expressway

Shoprite is the anchor tenant

Will also have a Grade A office complex inside the premises

Designed to take advantage of the high traffic volume along the
Expressway to meet the needs of commuters to and from
work

On the contrary, it is expected to generate more traffic on the
expressway
New Commercial Developments
76



Kingsway Tower, Glover Road, Ikoyi

Commercial high-rise building

15 floors; 1000 sq. Metres
Metro Mall, Admiralty

15 rooms available

N100,000 – N120,000 per sq. Metre
39 rooms purpose built hotel on Ajose Adeogun

2600 sq. metres
Outlook
77






Construction activities expected to pick up after elections
Risk of political violence may delay investment into the
real estate sector
Further decline in oil revenues will also curtail government
spending on capital projects
The usual lease/rent will continue but at a slow pace
Elections not expected to affect pending property
developments due for completion in 2015
Eko Atlantic project to pick up in 2015

Abuja centenary city in the pipeline
77
Aviation Update
Falling Naira, Increased Fares
79
79

ROE depreciated by 2.95%

From N186.5 in Dec’14 to N192 in Jan 27
Preferred
Destination
Eco Class Eco Class
(Dec’14) N (Jan’15) N
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
Dubai
213,120
182,040
Johannesburg 301,760
353,280
-14.58% 528,080
17.07% 499,200
1,102,272 17.07%
618,240 17.07%
%
Biz Class
Change (Dec’14 N)
Biz Class
(Jan’15) N
426,400
%
Change
-14.58%
Falling Naira, Increased Fares
80
80


Airlines profitability up due to lower oil prices
Ethiopian Airline made a profit of Br3.15bn ($155.47m)
in their 2014 financial year


More acquisitions and consolidations


Highest profit made in 69years of existence
Etihad acquired 49% stake in Alitalia
Stricter regulations and policies to be imposed on
operators

NCAA suspended the Air Operator’s Certificate (AOC) of
Discovery Airline
Dipping Oil Prices, Increased Airlines’
Profitability
81
81




IATA announced a positive outlook for airline’s
profitability in report
Global net profit forecast for 2014 of $19.9bn set to rise
to $25bn in 2015
Lower oil prices and stronger worldwide GDP growth
are the main drivers
Average return airfares (excluding taxes and surcharges)
expected to fall by 5.1% and cargo rates are expected to
fall by 5.8%
IATA
82
82
Dipping Oil Prices, Increased Airlines
Profitability

On a per passenger basis, airlines will make a net profit
of $7.08 in 2015



Total passenger numbers expected to grow to 3.5bn,
revenues expected to grow to $623bn
Passenger traffic expected to grow by 7.0% in 2015


Up on the $6.02 earned in 2014
Above the 5.5% growth trend of the last two decades
Cost of transporting goods expected to fall by 5.8% in
2015.


53.5m tonnes of cargo is expected to be flown in 2015
Total cargo revenues are expected to rise to $63bn
IATA
Political Update
84
Presidential






A contest of character vs. record
The PDP is trying to redefine the election as a Buhari
referendum
Throwing the kitchen sink at the APC
APC was clever to make the electoral choice one between
Jonathan and Change
The PDP want it to be a Christian vs. Muslim race
Now a dictator vs. liberal or reformer against command
economy
2015 looks Different
85



The younger voters want the older man
The older voters are leaning towards the younger
candidate
The youths are not voting for Buhari


The PDP strategy was based on the fundamental
assumption



But against the PDP
That the APC would implode at the convention in December
The PDP is believed to have sponsored dissidents to
splinter the APC
Failure of the APC to implode left the PDP with no plan
B
2015 looks different
86





The momentum of the APC and their rally turnout was a
wake up call
The PDP is now in overdrive
Using kites of fear, religion, postponement, interim
government
Election will hold on February 14 with 3 possible
outcomes

A landslide for the PDP

A narrow win for the APC

A dual result by both parties and an Ivory Coast scenario
The exchange rate devaluation has hurt the PDP amongst
Ibos
2015 looks Different
87





One in three are traders and are very exchange rate
sensitive
The PDP favourable rating in the South East is down from
90% to 65%
Fear of N250/$ is making South East a potential
battleground
A win on February 14 could lead to a bandwagon effect
on February 28
It could scramble or consolidate the political map of
Nigeria for all times
89

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
91

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
92
92
Goals are dreams with deadlines.
- Diana Hunt
You campaign in poetry and you govern in
prose.
Mario Cuomo 92
Corporate Humour
93
93
The past is a source of knowledge and the
future is a source of hope. Love of the past
implies faith in the future.
- Anonymous
Hindsight is like foresight without a future.
Anonymous A leader takes people where they want to go. A
great leader takes people where they don’t
necessarily want to go, but ought to be.
- Rosalynn Carter
93
Corporate Humour
94
94
The only time to eat diet food is while you are
waiting for the steak to cook.
- Julia Child
We are all mortal until the first kiss and the
second glass of wine.
Eduardo Galeano 94
Corporate Humour
95
95
Learn to say no to the good so you can say yes
to the best.
- John Maxwell
You know you are getting old when candles
cost more than the cake.
Bob Hope -
Genius is immediate but talent takes time.
- Janet Flanner
95
Corporate Humour
96
96
Success is a lousy teacher. It seduces people
into thinking they cant lose.
- Bill Gates
Temper is the one thing you can’t get rid of by
losing it.
Anonymous 96
Corporate Humour
97
97
I like to leave a message before the beep.
- Steve Wright
To write a love letter you begin without
knowing what we intend to say and end
without knowing what we have said.
Anonymous The difference between a dream and a goal is a
plan.
- Anonymous
97
Corporate Humour
98
98
A problem well stated is a problem half solved.
- Charles Franklin
What is gone and what is past, should be past
grief.
William Shakespeare 98
Corporate Humour
99
99
Obstacles are those frightful things you see
when you take your eyes off the goal.
- Henry Ford
In order to succeed your desire for success
should be greater than your fear of failure.
Bill Cosby Financial Derivatives Company Limited
99
100
Bismarck J. Rewane, MD/CEO
Financial Derivatives Company Ltd.
Lagos, Nigeria
01-7739889

Monthly Economic News and Views At Lagos Business School

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