- Analysts Predict Monetary Policy Easing
Analysts at WSTC Financial Services Limited in its 2018 forecast has predicted a 200 basis point (bps) reduction in the Monetary Policy Rate(MPR). The firm stated this in its 2018 projection titled: “Nigeria in 2018, A tale of two halves”.
The Lead Analyst, WSTC, Mr. Olutola Oni noted that “monetary easing is now a matter of when, not if.”
The report added: “We expect the CBN to adopt a dovish stance in 2018, although this should bear some implications on inflation and capital flows.
“The CBN will witness renewed pressure to complement the economic growth agenda of fiscal policies ahead of February 2019.
“The ongoing sovereign debt portfolio restructuring will enable the CBN mop up excess liquidity at lower cost .We expect a 200bps reduction in MPR in 2018, with the first rate cut in March or May.
“However, considerations about ensuring positive real-returns and stability in the FX market should ultimately place a floor on monetary easing and yield compression.”
The firm also anticipated stability in the foreign exchange market, stating that there were few incentives for the harmonisation of rates across various forex market segments in 2018.
It noted that increased exchange rate exposure, resulting from the FGN’s debt substitution strategy, would be an additional reason to avoid convergence of rates in the year.
“Inflows from oil earnings and proceeds of external borrowings will further prop-up external reserves in first half 2018. We expect a slowdown of inflows in the second half of 2018 as election-related uncertainty kicks in.
“However, both the MPC and the Presidency will favour forex stability ahead of the February 2019 general elections, hence, we reckon that FX rates will be managed across the different market segments,” it added.
Commenting on its outlook for the stock market, the report stated: “The equities market is expected to be driven by liquidity in the forex market, improving economic activities, impressive corporate performance and softer yields on fixed income securities in first half 2018. FMCG, Industrial Goods, Banking, Construction, and Upstream Oil & Gas are poised to benefit most.”
Continuing, it stated that regulation constitutes a key risk to the downstream oil and gas industry.
“We expect a modest contraction in net interest margin in the banking industry in the first half of 2018. Also, high oil prices, easier access to forex and improving economic activities should strengthen asset quality and enhance modest credit growth. Healthier consumer spending will be supported by declining inflation & election- induced public spending.
“The performance of the Consumer Goods & the Industrial Goods sectors will be driven by stable product prices, healthier sales volume, lower debt burden, lower borrowing cost & improved forex liquidity.
“Stability in forex and declining inflation are expected to support lower input and operating costs. Thus, we expect healthier margins from companies in these sectors.
“However, we reckon that a resurgence of tighter liquidity in the forex market and heightened election-related uncertainties in the year may dampen overall market performance in H2 2018.”
Furthermore on oil outputs, it added: “Crude oil started off in 2018 with a multi-year high of $67 per barrel, boosted by supply disruptions, record level of compliance among OPEC members (and some other major non-OPEC producers) to the ongoing production cut agreement and strong global demand.”
“With the ongoing alignment between OPEC and non-OPEC members, the odds are stacked in support of favourable oil prices in 2018. Heightened geo-political risks in the Middle East may further unsettle market disequilibrium for longer in 2018.”
“On the domestic scene, we believe that the FGN will be more inclined to managing the demands of militants in the creeks. Hence, we expect a more stable production and evacuation of crude oil from the Niger Delta,” it added.
Gov Emmanuel Attracts $1.4b Fertilizer Plant to Akwa Ibom
The Governor of Akwa Ibom State, Mr. Udom Emmanuel has signed an agreement for the citing of a multi billion fertilizer plant in his State.
Governor Emmanuel was part of a Nigerian delegation led by the Minister of State for Petroleum Resources, Chief Timipre Sylva, that visited Morocco to set out the next steps of the $1.4 Bln fertilizer production plant project launched in June 2018.
The agreement between the OCP Africa, the Nigerian Sovereign Investment Authority and the Akwa Ibom State Government will birth one of the biggest investments in the fertilizer production industry worldwide.
The signing ceremony took place at the Mohammed VI Polytechnic University (UMP6).
Mr. Emmanuel signed one of the agreements of the partnership, which covers a memorandum of understanding between OCP Africa, the Akwa Ibom State in Nigeria and the NSIA on land acquisition, administrative facilitation, and common agricultural development projects in the Akwa Ibom State.
Speaking while signing the agreement, Governor Emmanuel said, “Our state is receptive to investments and we are prepared to offer the necessary support to make the project a reality.
“With a site that is suitably located to enable operational logistics and an abundance of gas resources, all that is left is for the parties to accelerate the project development process”, Mr. Udom said.
The agreement reached between the Nigerian Government and the OCP further links OCP, Mobil Producing Nigeria (MPN), the NNPC, the Gas Aggregation Company Nigeria (GACN), and the NSIA.
The two partners agreed to strengthen further their solid partnership leveraging Nigerian gas and the Moroccan phosphate.
This project will lead to a multipurpose industrial platform in Nigeria, which will use Nigerian gas and Moroccan phosphate to produce 750,000 tons of ammonia and 1 million tons of phosphate fertilizers annually by 2025.
The visit of the Nigerian delegation to Morocco takes place within the frame of the partnership sealed between OCP Group and the Nigerian Government to support and develop Nigeria’s agriculture industry.
Following the success of the first phase of Nigeria‘s Presidential Fertilizer Initiative (PFI) and the progress of the fertilizer production plant project launched in 2018 by OCP and NSIA, the Moroccan phosphates group and the Nigerian government delegation have agreed on the next steps of their joint project which is rapidly taking shape.
Several cooperation agreements were inked on Tuesday at the Mohammed VI Polytechnic University (UM6P) by OCP Africa and the Nigerian delegation. Through these deals, OCP reaffirms its unwavering support of agricultural development initiatives in Nigeria including PFI.
OCP Africa and the NSIA have agreed, inter alia, to set up a joint venture which will oversee the development of the industrial platform that will produce ammonia and fertilizers in Nigeria.
The OCP has also pledged to supply Nigerian famers with quality fertilizers adapted to the needs of their soil at competitive prices and produced locally.
ICPC Says Nigeria Loses $10bn to Illicit Financial Flows
The Independent Corrupt Practices and Other Related Offences Commission (ICPC) says Nigeria accounts for 20 per cent or 10 billion dollars (N3.8 trillion) of the estimated 50 billion dollars that Africa loses to Illicit Financial Flows (IFFs).
Chairman of ICPC, Prof. Bolaji Owasanoye, said this during a virtual meeting to review a report on IFFs in relation to tax, Mrs Azuka Ogugua, spokesperson for ICPC, said in a statement released in Abuja on Friday.
The ICPC Chairman said, “the African Union Illicit Financial Flow Report estimated that Africa is losing nearly 50 billion dollars through profit shifting by multinational corporations and about 20 per cent of this figure is from Nigeria alone.”
The ICPC boss explained that taxes played “very strategic role in the nation’s political economy.”
He said the objective of the meeting was to improve on the awareness on IFFs, especially in the areas of taxation.
The ICPC boss added that the meeting would give participants the opportunity to openly discuss how to effectively use the instrumentality of taxation to curb IFFs through risk-based approach.
“Risk-based approach, that is: monitoring and audit; due process in tax collection; structured tax amnesty framework skewed in public interest; data privacy; timely resolution of audits and payment of tax refunds and intelligence sharing among revenue generating, regulatory and law enforcement agencies,” he said.
Owasanoye also stated that for the contemporary tax man to remain relevant, he must build his capacity in areas of technology management, solution architects and an astute relationship manager.
The Executive Chairman of Federal Inland Revenue Service (FIRS) Mr Muhammad Nani, expressed concerns that IFFs posed a serious threat to the Nigerian economy as the act robbed the nation of resources that were needed for development.
Nani declared that tackling IFFs would expand the country’s tax base and improve revenue generation, which was required for development.
He consequently pushed for policy reforms that would make it difficult for “capital flights” from occurring so that the country would be placed on the path of growth.
Other discussants at the event identified weak regulatory framework, opacity of financial system and lack of capacity amongst others as some of the factors that fuelled IFFs.
The discussants emphasised the need for capacity building of relevant stakeholders as one of the ways to stamp out illicit financial flows.
They commended ICPC for leveraging its corruption prevention mandate to open a new vista in IFFs discourse in Nigeria. (NAN)
African Development Bank, Egypt Signs Agreements Worth €109 Million to Transform Sewage Coverage in Rural Areas
The African Development Bank Group has signed financing agreements of €109 million with the Government of Egypt to improve sanitation infrastructure and services for rural communities in Luxor Governorate in Egypt’s Upper Nile region.
The financing consists of a €108 million loan from the Bank, and a grant of €1 million from the Rural Water Supply and Sanitation Initiative (RWSSI) – an Africa-wide initiative hosted by the African Development Bank.
The funding, provided in a challenging global context, will help meet the Egyptian government’s financing requirements in the light of the COVID-19 pandemic, and support a sound water and sanitation infrastructure base, a key enabler for the country’s inclusive development.
The Integrated Rural Sanitation in Upper Egypt-Luxor (IRSUE-Luxor) project is set to boost sewage coverage in the region from 6% to 55%, improving the quality of life of citizens, including women and children, who are most affected by poor sanitation.
“Promoting efficient, equitable and sustainable economic development through integrated water resources management is a priority for the Government of Egypt. The IRSUE-Luxor initiative unlocks the socio-economic development potential for inclusive and green growth,” said Rania Al-Mashat, Minister of International Cooperation, who signed the agreements on behalf of the Egyptian government.
About 22,000 households (240,000 inhabitants) will benefit from on-site and off-site facilities, through an integrated system of sewerage networks, sludge treatment and wastewater treatment plants.
IRSUE-Luxor contributes to the National Rural Sanitation Program established by the Ministry of Housing, Utilities and Urban Communities, which aims to expand nationwide access to sanitation services from 34% currently to 60% in 2030.
The project also complements the national Haya Karima (Decent Life) initiative that aims to help rural communities across Egypt access essential infrastructure services to improve their living conditions and livelihoods.
Furthermore, the project includes a staff training component to strengthen performance within the Luxor Water and Wastewater Company.
“This intervention is not just about infrastructure development. An essential part of the project is supporting ongoing sector reforms,” said Malinne Blomberg, the Bank’s Deputy Director General for North Africa.
One of several initiatives supported by the African Development Bank in Egypt to optimize the use of the country’s water resources, IRSUE-Luxor will enable about 30,000 cubic meters of treated wastewater per day to be discharged into drainage and irrigation canals and re-used to enhance agricultural output.
The initiative is in line with the Bank’s water sector policy, which promotes efficient, equitable and sustainable development through integrated water resources management. In addition, the operation supports tariff regulation to achieve full cost recovery, which is one of the basic principles of the Bank’s water sector policy.
The partnership between Egypt and the African Development Bank Group dates back more than half a century. More than 100 operations have been deployed, mobilizing more than $6 billion across multiple strategic sectors.
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