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Economy

Sustaining Positive Growth Trajectories of African Exchanges

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Africa

This conference, themed “Africa Evermore”, is an opportune time for us to engage with one another in open and constructive dialogue about our current operating environment, and how to go about closing the gaps in our journey to attain the full promise of Africa’s economic potential.

Compared to this year’s performance, growth in sub-Saharan Africa is projected to pick up in 2016 by 0.5 percentage points to 4.3 per cent according to the IMF’s World Economic Outlook.  This growth is expected to be supported by moderate global recovery, and growth in low-income developing countries which compared to this year are projected to grow by one more percentage point to 5.8 per cent in 2016.  Africa’s positive outlook is just one of the many opportunities that if well harnessed could seriously position the continent for greater heights.

Our markets currently cover multiple asset classes from equities and bonds to ETFs and derivatives.  In 2015 year to date, African exchanges collectively have traded over $325.0 billion in equities, $1.2 trillion in bonds, and $438.0 billion in ETFs & Others, representing a market capitalization of over $1.3 trillion.  In terms of governance and ownership structure, several of our exchanges are demutualized, while others are in the process of demutualizing.  Today, our exchanges are becoming active players in the global exchange business, and the conference theme “Evermore” is about sustaining that growth position, and becoming a real platform for growth in the African economy.

The role of the capital market remains a critical one and I believe that it is time to ask the tough question of how we can sustain the positive growth trajectories of our performances as African exchanges, given the globalization of the securities business.  It is my strong belief that one of the things that Africa needs to sustain its growth, is a solid capital markets ecosystem that will attract investment and unlock the potential that exists on the continent.

How do we, as capital market businesses, operate and grow in a sustainable and socially responsible way?  What I would like this conference to deliver is a better understanding of: 1) how best to pursue social values, without losing sight of the traditional financial objectives of our businesses; and 2) the correlation between the health of our economies, and the value of our capital markets, bearing in mind peculiar strengths, that individually and collectively we could leverage as we press forward.

One of Africa’s greatest strengths is its population of 1.1 billion people, 200 million of whom are aged between 15 and 24, making Africa the continent with the youngest population in the world.  The current trend indicates that this figure will double by 2045.  Similarly, Africa’s middle class has tripled in size to 313 million people or roughly 30% of the population over the last 30 years, and it is projected that this figure will reach 1.1 billion by 2060.

We anticipate a positive shift in demand as a result of this statistic, and African exchanges are already positioning themselves to do a lot more to service the increasingly sophisticated needs of our growing middle class.  Our customers will be looking to sustain and grow their wealth, and will be looking to work with us in preparation for the transfer of that wealth.  Therefore I encourage all of us as capital market players to ramp up on our efforts, as we prepare ourselves to meet our clients at their points of need.

Furthermore, among the 23 nations that make up ASEA, we have a combined total of just-over 1,600 listed companies, this number is negligible compared to the actual number of successful companies operating on the continent, or the over 1.5 million businesses registered in Africa.  I propose we find new ways to engage with business leaders in order to communicate more clearly the vital role we play in facilitating long-term financing, mobilizing resources, and directing the flow of savings and investments efficiently within our economies.

An even more incredible potential, one which I am particularly passionate about is the exponential benefits that accrue from risk-sharing initiatives.  Internationally, integrated stock markets improve resource allocation and accelerate growth by facilitating liquidity.  Although profitable investments sometimes require long-run commitments to capital, savers prefer not to relinquish control of their savings, and preferably not for long periods of time.

This is where liquidity comes in to ease the investor’s tension.  It does this by providing investors with assets that are easily liquidated at any time, while simultaneously allowing firms permanent access to capital that is raised through equity issues.  In this regard, I believe that there is no better time than now to intensify our efforts in ongoing initiatives that foster the advancement of regional integration and cooperation.

These sub-regional integration efforts such as WACMI in West Africa, CoSSE in Southern Africa, and EAC in East Africa must be encouraged.  We must also begin to study how to effectively link the entire region.  Hence, the African Exchanges Linkage Project (AELP) which is a jointly owned mandate between ASEA and the Africa Development Bank (AfDB), is a step in the right direction.  It is aimed at addressing the lack of liquidity in African capital markets by creating linkages across key regional markets to reduce fragmentation and information asymmetry.

All of these efforts to deepen the continent’s markets will aid in pushing Africa’s economic transformation, and enhancing national competitiveness.  But we must be careful to never lose sight of the real objective of these initiatives, which is to stimulate opportunities for the investment community, and expose issuers to deeper pools of capital, and a wider community of analysts and investors pools.

Weak corporate governance is often found responsible for many of the corporate failures in Africa.  However, as securities exchanges, we operate powerful platforms through which we can influence and promote sustainable business practices.  Accordingly, we must increase our contribution and participation in developing our national codes of corporate governance, by setting strong listing and maintenance requirements, and ensuring adequate disclosure of listed companies’ corporate governance arrangements.

Africa is becoming known as the continent that leapfrogs traditional stages of growth or development.  We have seen this in the telecommunications industry where despite insurmountable challenges with communications infrastructure, the impact of mobile phone technology in Africa has been phenomenal, and is now revolutionizing many other sectors of our economy.  When it comes to mobile phone technology, Africans are doing great things and leapfrogging the West, ironically driven by a lack of infrastructure.

Mobile payment systems experienced phenomenal growth in Kenya because many Kenyans did not have bank accounts, but they had mobile phones.  Here in South Africa, the innovation of mobile commerce where you can order something on your phone and pick up from a locker is growing in popularity, and the driver for this is the limited number of physical malls.  As a result of poor infrastructure in the health space, Africans are yet again turning to mobile technology for health information on platforms such as Mobile Alliance for Maternal Action (MAMA).

This trend is no different in how quickly the continent has embraced innovations in renewable sources of energy.  Between 2010-2012, Nigeria’s renewable power production posted the world’s fastest growth, at more than 15% a year, according the World Bank.  I therefore call on my colleagues in the capital market space to do no less in the capital market.  Let us be aware of our opportunities and tremendous capabilities and get involved in understanding what emerging technology can do for our sector, from blockchain technology to advancements in cyber security.

I have no doubt that the programme at this year’s conference will surely drive the level of engagement and idea generation that will solidify and strengthen our association’s strategic resolve.  But more importantly, I believe that the learnings from our interactions will elevate our business strategies to ride out the headwinds that our markets have experienced this year.  In the end, I sincerely hope that we are better positioned to unlock our continent’s growth potential, and empowered to advance the development of our capital markets.

Thank you for your attention and for your anticipated contributions to the dialog during this conference.  Once more, I welcome you all to the ASEA Conference 2015, and I wish us all fruitful deliberations.

•Oscar, President, African Securities Exchanges Association (ASEA) presented the speech at the associaton’s 19th annual conference in South Africa, last week.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

Nigeria On Path To Food Sufficiency As Buhari Unveils Mega Rice Pyramids

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Rice

With the unveiling of 13 rice pyramids (one million bags of rice) President Mohammadu Buhari today, the country is no doubt on a path is to self-sufficiency in food production.

Investors King gathered that the president, today, unveiled the FCT Mega Rice Pyramids in Abuja.

The rice pyramid, considered to be the biggest of its type in Africa, is located on the grounds of the Abuja Chamber of Commerce and Industries (ACCI) on Airport Road.

The one million rice paddy which was stacked in 15 separate pyramids at the ACCI is in collaboration of the Central Bank of Nigeria (CBN) with the Rice Farmers Association of Nigeria (RIFAN), planted and harvested from states across the country under the Anchor Borrowers’ Programme (ABP). Farmers were asked to return the bags of rice paddy that made up the pyramids in exchange for cash in order to repay the loans they received under the ABP.

Investors King recalls that the CBN’s ABP which started in November 2015 had the goal of providing aid to farmers and influencing the value chain of various commodities in Nigeria. The CBN, in 2019, revealed that it disbursed the sum of N791 billion to more than 3 million farmers across the 36 states of the Federation, under the ABP as part of its efforts towards diversifying the economy and assisting farmers with the provision of farm inputs and cash to smallholder farmers.

The president, who commissioned the pyramid, disclosed that the ABP is expected to catalyse the agricultural productive base of the nation, which is a major part of the government’s economic plan to uplift the economy, create jobs, reduce reliance on imported food and industrial raw materials, and conserve foreign exchange.

According to the CBN governor, Godwin Emefiele, the CBN, in collaboration with the rice farmers have significantly improved the productivity per hectare of the smallholder farmer from about 2.4 metric tonnes per hectares in 2015 to between about 5 metric tonnes per hectares in 2021.

The RIFAN has over 12.2 million members across the 36 states of the country who are involved in rice farming, milling, storage and management, trading and marketing, export, research and training and allied businesses.

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Economy

Nigeria’s Inflation Rate Rose in December After 8-month Decline– NBS

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Nigerian economy

The National Bureau of Statistics, on Monday announced that Nigeria’s annual inflation rate has risen to 15.63 percent in December 2021. This was higher than the 15.40 percent recorded in November 2021 when the headline inflation moderated for eight consecutive months. The increase is likely due to the usual surge in the prices of goods and services around Christmas time.

The report stated, “This is showing a slowing down in the rate when compared to the corresponding period of 2020.

“Comparing the rate to the year-on-year performance in the previous months shows that the rate has increased.

“Also, comparing the rate of price change between December and November (month-on-month) shows that the headline index rose by 1.82 per cent in December 2021. The November figure was 1.08 per cent. The rise was in part driven by a continued surge in food inflation.”

According to NBS, the composite food index increased by 17.37 per cent in December 2021 down by 2.19 per cent points compared to the 19.56 per cent obtained in December 2020.

“The average annual rate of change of the Food sub-index for the twelve months ending December 2021 over the previous twelve-month average was 20.40 per cent, 0.22 per cent points lower from the average annual rate of change recorded in November 2021 (20.62) per cent,” it said.

It further mentioned that the rise in the food index was as a result of increases in prices of bread and cereals, food products, meat, fish, potatoes, yam and other tubers, soft drinks and fruits.

The statistics showed that on a month-on-month basis, the food sub-index increased by 2.19 per cent in December 2021, up by 1.12 per cent points from 1.07 per cent obtained in November 2021.

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Economy

Manufacturing Activities, Macroeconomy Witness Gradual Growth in Q4 2021: MAN

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The Manufacturers Association of Nigeria (MAN) has said that Nigeria’s macroeconomy and manufacturing operating environment were buttressed by the marginal recovery of some key manufacturing indicators allowed a gradual improvement in the fourth quarter (Q4) of 2021.

In its Manufacturers CEOs Confidence Index (MCCI) Q4 report, the President of the association, Mr. Mansur Ahmed clarified that although changes in almost all manufacturing indicators as measured in the report are still not as desired, the fourth quarter performance is better than what was obtained in the 2021 Q3.

The MCCI is an index set up by MAN to measure changes in the quarterly pulsation of manufacturing activities in relation to movement in the macroeconomy and government policies. The Index is considered as MAN’s barometer used to aggregate the views of CEOs of manufacturing companies on changes in the economy.

In the report, Ahmed stated that manufacturers’ resilience, seasonal transactions, and passive policy support sustained manufacturing in the quarter despite the prevalence of familiar and emerging excessive tax-related challenges faced by manufacturers.

The manufacturing sector in Q4 of the year under review, overall recorded a mixed grilled performance occasioned by meagre improvement in the operating environment indices and macroeconomic ambiance evidenced by the high points. This he said, cumulatively triggered the increase in the aggregate MCCI score for the quarter to 55.4 points from 54.0 points recording the preceding quarter.

“Manufacturing performance is still below the mark,” Ahmed explained, saying, “notwithstanding the marginal improvement in the operating environment during the quarter under review, as the sector is still plagued by numerous familiar constraints. Some of these challenges enumerated by manufacturers are clearly presented in this report.”

The president further advised the government to implement mechanisms such as providing incentives to encourage investments in raw materials, pharmaceutical and petrochemical materials, iron and steel, etc. He also beckoned on the government to specifically provide security to lives and investments in industrial areas.

“In order to improve the performance of the sector, the government needs to intentionally put in place a mechanism that will address these challenges permanently by considering and implementing the following recommendation:

“Further incentivize investment in the development of raw materials locally through the Backward Integration and Resource-based industrialization initiates. Government should call for more investors to key into these initiatives with appropriate and definite incentives.

“For instance, there is need for urgent investment and production of Active Pharmaceutical Ingredients (API) in the country; investment and production of machines; iron and steel; petrochemical materials, etc to support manufacturing activities.

“Give specific attention to the security of life and investment in industrial areas; properly delineate and upscale security infrastructure in the various industrial areas in the country, particularly in the northern part of the country for priority attention. Government should also quickly invest in modern security such as drones, cameras, etc. for robust monitoring of the areas,” Ahmed stated.

The MAN president in the MCCI report stressed the need to ensure effective allocation of available foreign exchange to productive sectors, especially to the manufacturing sector for the importation of raw materials and vital machines and equipment that are not available locally.

He also buttressed the need for the government to expressly direct the Central Bank of Nigeria (CBN) to consult with the Ministries of Industry Trade & Investment and effectively engage MAN on measures to improve forex supply to manufacturing concerns.

He said that the Ministry of Science Technology and Innovation should be directed to inaugurate the Secretariat that will implement the strategies for the Executive Order and the Standard Organisation of Nigeria (SON). The Secretariat will designate local manufacturers of LPG (Liquefied Petroleum Gas) Gas Cylinders as priority provider of the 10 million Cooking Gas Cylinders to be procured by the government for 12 States in the federation.

Ahmed added, “Return milk and other dairy products to the National list in the fiscal policy guidelines to maintain consistency with the Backward Integration Programme, which has spurred heavy investments in the dairy production.

“Unify academic curriculum with industrial skill needs and requirements to guarantee the sustainable development of skilled manpower for the industries. Government should as a matter of urgency synchronize the curricular of tertiary institutions, particularly the Polytechnics with the skills requirements of industries. The various government vocational and training centers should also be re-engineered to offer those skills that are needed by the industries.

“Revisit the resuscitation of the existing national refineries to produce fuels locally, embark on the rehabilitation of major highway corridors, improve trade facilitation infrastructure and deepen the ongoing development of rails system to change the narrative on the operating environment from being a high cost to low production cost environment.”

On electricity, Ahmed said there is a need to sustain the eligible customer initiative to ensure that more power is supplied to the manufacturing sector.

The Manufacturing Association of Nigeria in its Index Report, further adviced the government to, “Strengthen the Bank of Industry (BOI) and Bank of Agriculture (BOA) to adequately provide liberal finance for the manufacturing sector;

“Monitor the implementation of Executive Order 003 to ensure compliance by MDAs so as to boost activities in the manufacturing sector, Publish the list of approved harmonized taxes and levies for the manufacturing sector by the Joint Tax Board (JTB) to address the issues of multiples taxes and levies.

“Rationalize Government Ministries, Departments, Agencies, parastatal and Commissions to resolve the issues of over-regulation and duplication; Improve the time taken to clear machines and raw-materials at the national ports while making the link road accessible.”

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