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RMB Raises Hope on Nigeria’s Economic Recovery in 2017

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  • RMB Raises Hope on Nigeria’s Economic Recovery in 2017

With 2016 ending as one of the challenging years for the country, there are better expectations in 2017, going by the budget plans and the recent production cut agreed by international oil producers, RMB Nigeria has said.

Besides, the bank expressed optimism that there will be more transparent and open foreign exchange activities in the new year, which would help to attract foreign inflows and reduce the pressure on the apex bank as the major supplier to the interbank market.

The Managing Director of RMB Nigeria, Michael Larbie, who made the observation at its Client Appreciation Evening, in Lagos, noted that the challenge of recession, rising inflation foreign exchange shortage brought every economic activity to near standstill.

“These impacted our manufacturing clients as they shut in production because of shortage of raw materials. There is a negative real interest rate. In fact it has affected the broader economy.

“Clients have cut back long term investments due uncertainty and correspondingly, these slow down also speaks more of our individual and industry performance- slowing growth. We will surely put 2016 behind and look ahead with optimism in 2017.

“But in 2017, there is hope, because there are some areas in the market that we can build on like the working capital and trading. Clients at a time are taking Naira loans, rather than the usual demand for dollar loans.

“We did take advantage and benefitted from that. We did get involved with trade and working capital transactions in 2016. We financed port jetty in Port-Harcourt and petrochemical plants’ projects.

“The production cut deal by oil producers is a positive for the economy and business transactions and we do hope that the budget will be given accelerated attention to complement our projections,” he said.

According to him, the speedy attention to budget process would ensure that funding goes to projects that would boost economic activities.

“Government is a big player in the economy and where it is failing, definitely it is going to affect overall performance. So, we do hope that budget implementation effectively rolls through to 2017, until the new one begins. The expansionary budget is the right thing to do to stimulate the economy and put it back on track,” he said.

Larbie pointed out that the import substitution strategy through diversification is the right thing to do now, saying that we must question the rationale to depend on oil for years.

“Granted, liberating from oil is going to take time, but we must start somewhere to stir the course, especially from the quick wins- rice production and agric mechanisation.

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 long experience in the global financial market. Contact Samed on Twitter: @sameolukoya

Investment

Barclays Tell High Net Worth Investors to Shun Africa and Other Emerging Economies

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Barclays to High Net Worth Clients, Stay Off Africa and Other Emerging Economies

Barclays, one of the world’s largest investment banks, has started advising high net worth clients to stay off Africa and other emerging economies.

According to Barclays, despite the recent recovery noticed in emerging-market stocks, investors are better off avoiding the risks that still abound in emerging nations. Barclays Plc, however, advised high net worth clients to focus on U.S equities despite the S&P’s breakneck rally.

The investment bank said emerging economies do not have enough fiscal buffers to spend their way out of the COVID-19 pandemic and will likely continue to struggle in the near-time compared to the US with 12 percent of gross domestic product fiscal-support.

It said the huge US stimulus may halt rebound in emerging-markets stocks as more money is expected to flow into the world’s largest economy and its European counterparts.

“Compared to the U.S., emerging-market economies appear more vulnerable,” said Haider, the London-based managing director and head of global growth markets. “Their central banks have less room to maneuver, their governments may not be able to provide unlimited support and equity markets, given their sector mix, can be more challenged by an economic slowdown.”

Barclays added that even after 33 percent rebound in stocks of emerging markets since the panic selloff subsided in March, stocks are still down by 9 percent from year-to-date while the US S&P 500 stocks are up by 45 percent. Presently, their stocks trading at a 36 percent discount to US stocks, up from 25 percent three months ago.

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Economy

Crude Oil Rises to $43.1 Per Barrel on Production Cuts Extension

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  • Crude Oil Hits $43.1 Per Barrel Following OPEC’s Production Cuts Extension

Brent crude oil, against which Nigerian oil price is measured, rose by 1.25 percent on Monday during the Asian trading session following OPEC and allies’ agreement to extend crude oil cuts to the end of July.

OPEC and allies, known as OPEC plus, agreed to extend production cuts of 9.7 million barrels per day reached in April to July on Saturday.

In the virtual conference, delegates agreed that members, including Nigeria and Iraq presently struggling to attain a 100 percent compliance level must keep to the agreement or be forced to do so in subsequent months.

Nigeria, Iraq and others failed to keep to the cartel’s agreement in May after reports show that Nigeria only managed to attain a 19 percent compliance level during the month while Iraq struggled to attain just 38 percent in the same month.

Russia and Saudi Arabia, the two largest producers of the group, warned members to stick to the agreed quota if they want to rebalance the global oil market.

While the errant producers such as Iraq and Nigeria have vowed to reach 100% conformity and compensate for prior underperformance, we still think they will likely continue to have some commitment issues over the course of the summer,” said Helima Croft, head of global commodity strategy at RBC Capital Markets.

The potential return of Libyan output could also cause considerable challenges for the OPEC leadership.

Earlier on Monday, Brent crude oil hits $43.1 per barrel, more than a month record-high, before pulling back slightly to $42.83 per barrel.

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Economy

Gold Dips by 2 Percent on Better Than Expected Job Report

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  • Gold Dips by 2 Percent on Better Than Expected Job Report

Gold prices declined by 2 percent on Friday following a better than expected US non-farm payroll report.

The report showed an increase of 2.5 million payroll numbers against a decline of 7.5 million predicted by many experts.

The surprise number boosted investors’ confidence in US recovery as many dumped their haven investment (gold) for the stock market.

“We had significantly stronger-than-expected U.S. payroll numbers – an increase of 2.5 million versus an expectation of a decline of 7.5 million – that 10-million swing has brought forward expectations of the economic recovery in the United States,” said Bart Melek, head of commodity strategies at TD Securities.

Spot gold immediately declined by 1.9 percent per ounce to $1,678.81 while the U.S. gold futures slid 2.6 percent to settle at $1,683.

Gold was also being pressured by stronger yields and a slightly firmer dollar, “meaning the opportunity cost to hold gold in the portfolio has gone up,” Melek added.

The surprise didn’t stop there, US Dow Jones was up 614 points despite the protest going on the US and US-China tension.

Also, NASDAQ rose by 29 points while the S&P index added 50 points increase.

Note: Investors generally increase their investments in gold and other haven assets during a crisis to avert risk exposure and do the opposite once they sense a better economy.

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