The sustained increase in the consumer price index (CPI), which is used to gauge inflation in the country has worsened misery index in Nigeria, a report by the Financial Derivatives Company Limited has stated.
Using the third quarter 2016 unemployment and underemployment rate of 13.9 per cent and 19.7 per cent (the most recent published figures), and December’s inflation of 18.55 per cent, Nigeria’s misery index is 52.15.
Due to nationwide job cuts (in the banking and oil sector especially) unemployment is estimated to have risen to 14.5 per cent in the fourth quarter of 2016. This is expected to bring the misery index of the fourth quarter, 2016, to a record high of 53.35. This would be 21.05 points higher than the fourth quarter 2014 figures.
Misery index is a measure of economic well-being for a specified economy, computed by taking the sum of the unemployment rate and the inflation rate for a given period. An increasing index means a worsening economic climate for the economy, and vice versa.
To this end, the research and investment company in its latest bi-monthly economic report for January 2017, pointed out that Nigeria’s misery index had risen for the last six quarters, stating that if the movement persists, consumers would be hit hard. In addition, it noted that consumer may be faced with deeper dwindling purchasing power, as their incomes would only be able to buy less of their usual consumption basket. Similarly, the poor will become poorer in real terms, and the middle class will thin out.
These factors are important because they pose economic and social costs to the average income earner. An increase in the misery index is triggered by an increase in either variable, and signifies economic discomfort and negative consumer sentiment.
“Additionally, climbing misery index implies declining economic activity and reduced consumption. This is because unemployed people are underutilised and rising prices will discourage rational consumers from spending. This can cause or complicate an economic slowdown or contraction. There will also be increased debt, as the federal government borrows money to increase social support schemes. In the end, the citizens will be left with high uncertainty and low morale.
“Furthermore, it is believed that consecutive rises in the misery index usually lead to a decline in the favourability ratings of the serving administration, and could result in a re-election loss for the incumbent. This was the case for U.S. President Ford and Jimmy carter, whose terms saw the misery index reach all-time highs. Likewise, Nigeria’s 2015 elections reflected this hypothesis,” the FDC report stated.
Leading the pack of high misery indexes in Africa is South Sudan, whose inflation rate of 457.20 per cent in November 2016 had sent its misery index through the roof. Other countries with high misery index include Angola (67.92), Congo (57.3), Libya (46.9), Kenya (46.3). On the other hand, some countries such as Cameroon (4.55), Ivory Coast (5.1) and Uganda (9.5), still maintain low misery indexes. At 52.15, Nigeria’s misery index is among the top in the continent.
Furthermore, the report noted that oil booms in the past engineered the significant increase in the revenues of net oil exporting countries, with dramatic changes felt in countries like Nigeria, where oil revenues per capita in the country increased from $33 in 1965 to $325 in 2000. With this oil windfall however came dramatic appreciations in the currencies of net oil exporters leading to the famous Dutch disease studies on the effects of oil bonanzas on currencies of countries especially but not exclusive to countries with under developed institutions.
“Natural resource curse hypothesis and empirical studies often characterise countries that fall prey to this state of inefficiency with deindustrialisation, bad growth prospects and currency disequilibrium. Our focus will rest mainly on the latter as forex market challenges and currency woes have contributed significantly to the astronomical hike in the price levels of net oil importers, Venezuela and Angola.
“Venezuela and Angola are oil producing countries that pull their weights in their respective continents. Venezuela currently produces 2.02 million barrels per day, 14.85 per cent higher than 1.72 million barrels per day that Angola produces. Oil revenue contributes about 45 per cent to the GDP of Angola and about 95 per cent to its total ex- ports. The same trend is observed in Venezuela where oil production and activities contribute 50 per cent and 95 per cent to its GDP and exports respectively,” it added.
The Nigerian equities market monday resumed the week on a positive note as the Nigerian Stock Exchange (NSE) All-Share Index (NSE ASI appreciated by 0.03 per cent to close at 26,231.37. The market had shed 0.39 per cent last week as highly capitalised stocks fell under the high sell pressure. However, as trading resumed yesterday, the market went up marginally to close higher. Market analysts at Meristem Securities Limited, attributed the positive trading to gains by large capitalised stocks.
“We attribute the day’s performance to the positive sentiments in the market, specifically on some large cap stocks. We expect this trend to continue into the week, as we anticipate more bargain hunting activities on counters trading below their intrinsic values,” they said.
A total of 19 stocks appreciated compared with 15 that declined in value. UACN Property Development Company (UPDC) Plc led the price gainers’ chart, advancing by 4.86 per cent to close at N3.02 per share.
UPDC is planning to raise about N5 billion from the capital market through a rights issue of 1.719 billion ordinary shares of 50 kobo each at N3.00 per share on the basis of one new share for every one share already held. The Chairman of UPDC, Mr. Larry Ettah had last year given indication for the raising of the funds to boost its operations.
Ettah had said the capital injection would be in form of rights issue, disposal of low performing assets and sell down of surplus stake in the real estate investment trust (REIT) among others.
“Our strategy for 2016 and beyond includes deleveraging the business through equity capital injection by way of rights issue, sell down of surplus stake in the REIT and disposal of low-performing assets, as well as leveraging on partnerships and alliances that are in sync with the company’s long term goals,” he said.
Cutix Plc closed as the second highest price gainer with 4.4 per cent, while Oando Plc appreciated by 3.9 per cent. Wema Bank Plc and Diamond Bank Plc garnered 3.8 per cent.
Wema Bank last week announced the appointment of Mr. Ademola Adebise as the deputy managing director of the bank in a move seen as establishing a stable succession plan.
A stockbroker, Mr. Ayo Oguntayo had hailed development, saying it will bring to the bank a stable succession plan that is capable of boosting investors’ confidence in the financial institution.”
The CEO Fidelity Bank, Nnamdi Okonkwo, was at the weekend presented with the eight awards won by the Bank’s ‘Tough Job’ campaign at the recently concluded 2016 Lagos Advertising and Ideas Festival (LAIF).
Tough Job won Silver for Radio, another Silver for Film, a Bronze for Best Use of Production Design & Art Illustration whilst the Bank’s logo unveil took home a Bronze in the Radio category.
Fidelity Bank’s (Our Word) campaign won Bronze in Radio under the Investment & Other Financials products category whilst ‘Tough Job’ picked bronze each for “Best Use of Film Editing” and Film prize, under the Bank & Investment category.
Speaking in Lagos, when the awards were presented to him at the Bank’s corporate Head Office, Mr. Nnamdi Okonkwo who dedicated the feat to the Bank’s esteemed customers said “to be recognized at LAIF validates the hard work that we have put into the development and execution of our new corporate identity”. According to Okonkwo, the new identity reinforces its overall transformation and also strengthens its focus on the youth segment and overall service excellence. He pointed out that the lender has not only raised the bar in the area of customer service delivery but also remains focused on attaining its renewed vision of becoming a vibrant and millennial brand.
Vitafoam Nigeria Plc, manufacturer of foam and an array of home product, posted an after tax profit of N412. 39m in 2016 as against N196.64m in the preceding year, representing an increase of 110 per cent year-on-year.
The firm’s total asset also grew by eight percent from N12.09bn to N13.098bn in the period under review.
A statement by the company indicated that a sum of N125m would be proposed as dividend of 12kobo per share to the company’s shareholders at the Annual General Meeting scheduled for March this year. The statement attributed the performance to the company’s board and management as well as internal efficiency.
The statement added, “No doubt the last financial year was indeed very challenging for the Nigerian Economy. The significant improvement in operating profit was majorly due to cost control measures which were preemptively taken during the year.
“In spite of the tough operating environment the company achieved a 110 per cent increase in the PAT from N196.64m in 2015 to N412.39m in 2016. The company’s total assets grew by eight per cent from N 12.09bn in 2015 to N13.09bn last year. This was supported by growth in our long-term investment and total current asset.
“The board has proposed a dividend payment of N125m representing 12 kobo per ordinary share at the next AGM.”
The company’s Group Managing Director and Chief Executive Officer, Mr. Taiwo Adeniyi, had earlier this month explained that Vitafoam would continue to operate optimally despite the high production cost and low purchasing power of customers. According to him the management had learnt how to operate within the confines of economic recession.
He explained that corporate organisations ought to be able to make realistic plan by now as some variables of production are becoming predictable.
Speaking on the dividend policy of Vitafoam, Adeniyi explained that no matter the challenges in the economy the firm would continue to place premium on the shareholder value
“Our shareholders are our pride. We have an obligation to work very hard to ensure that they consistently paid dividend. We shall pay dividend for 2016 despite recession. We have always sustained our culture of shareholder value. We shall continue to appreciate our shares’ advice on how to move the company forward,” Adeniyi said.
As crude oil producers seek to reduce oversupply and support prices, the energy ministers of the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC countries yesterday stated that the two groups had made a strong start to reducing their oil output under the first such pact in more than a decade.
Eleven of OPEC’s 13 members along with 11 non-OPEC countries have agreed to make cuts for the first half of the year.
However, OPEC members – Nigeria and Libya, both suffering setbacks in production, were given exemptions.
Reuters reported that the ministers said 1.5 million of almost 1.8 million barrels per day had been taken out of the global oil market already.
“The deal is a success …All the countries are sticking to the deal …(the) results are above expectations,” Russian Energy Minister, Alexander Novak, reportedly said after yesterday’s first meeting of a committee set up to monitor the deal.
Countries involved in the deal could reduce their output by 1.7 million bpd by the end of the month, Interfax news agency quoted Novak as saying.
‘The Kingdom of Saudi Arabia has taken the initiative and other countries took part in very significant actions,” Saudi Energy Minister Khalid al-Falih told reporters following the meeting.
“Despite demand usually being lower in the first quarter in winter, the actions taken by the Kingdom and many other countries have impacted the market in a tangible way and we have seen the impact in spot prices,” al-Falih added.
Brent oil prices that fell to $27.10 a barrel a year ago have held above $50 per barrel since OPEC producers agreed on December 10, 2017 to lower output in the first half of 2017.
The cuts are aimed at reducing a global glut in oil that has weighed on oil prices for more than two years.
Falih said implementation of agreed cuts had been “fantastic” and he hoped for 100 percent compliance in February.
“We will not accept anything less than 100 percent compliance,” Kuwaiti Oil Minister, Essam Al-Marzouq, who chairs the five-member ministerial compliance committee, told a news conference.
The other members of the committee represent Algeria, Venezuela, Russia and Oman.
Venezuela has achieved more than half of its planned 95,000 bpd cut, Oil Minister Nelson Martinez told Journalists.
Full compliance could take global oil inventories back close to their five-year average by mid-2017, lowering oil in storage by around 300 million barrels, Falih said.
“[There are] no surprises so far in terms of demand or supply from other sources so there is no reason for us to suddenly come in January and say we need a bigger reduction or a longer period,” he said.
Saudi Arabia is producing slightly below 10 million bpd and has informed buyers of substantial cuts scheduled for next month, he said.
Russia has cut its oil output by around 100,000 bpd, Novak said, double what was originally planned. He said Russian oil production had averaged around 11.15 million bpd this month.
He told Journalists it was too early to talk about extending the current deal beyond the planned six months but that remained an option.
“Everyone sees that the agreements on oil production cuts have already have a positive effect on oil markets. The market has become more stable and predictable,” Novak said.
It was agreed yesterday that a technical joint committee (JTC) would be created comprising a representative for each of the five members of the monitoring committee and as well as the OPEC presidency, which is currently held by Saudi Arabia.
The JTC will cooperate with the OPEC Secretariat in compiling production data which will be presented to the ministerial monitoring committee by the 17th of every month, OPEC said in a news release.
The monitoring committee will communicate after the 17th of every month and plans two meetings ahead of the next ordinary OPEC meeting in Vienna on May 25.
The Central Bank of Nigeria’s Monetary Policy Committee will hold its first meeting for the year today (Monday) and Tuesday to review developments in the economy and probably set a new direction for growth this year.
The 11 members of the MPC meet once in two months to evaluate the economy and make adjustments in key variables to set direction for economic growth.
The meeting is coming at a time the country is passing through a biting recession, which has seen inflation rate as high as 18.55 per cent, massive job losses, low consumer confidence, high volatility in exchange rate and other acute economic challenges.
Experts, who spoke to our correspondent on Sunday, forecast that the committee would leave key economic variables, including the Monetary Policy Rate (benchmark interest rate) and the Cash Reserve Ratio unchanged in view of the critical state of the economy.
According to them, there is a need for the MPC to lower the benchmark interest rate and adjust the CRR in order to enhance the capability of the Deposit Money Banks to create credit in the economy.
There was, however, a consensus among the experts that these policy adjustments might not happen.
They argued that the MPC had not historically shown that it was in favour of such policy adjustments in a recession.
“I think that because it is the beginning of the year, the MPC may not adjust any of the monetary policy rates; they will likely want to wait to see the direction the economy will go for the year,” the Director-General, West Africa Institute of Financial and Economic Management Studies, Prof. Akpan Ekpo, said.
It is believed that none of the tools of monetary policy can be adjusted to enhance the process of taking a country out of a recession.
Contrary to this view, Ekpo said recent studies had shown that an aggressive adjustment in a monetary policy tool could reverse recession.
However, he said, “I am not sure the MPC will want to carry out an aggressive adjustment in any of the tools of monetary policy.
“Take for instance, can the committee vote to bring the benchmark interest rate from the current 14 per cent to say 10 or eight per cent? No. This is why I am predicting that the committee may leave the policy rates unchanged for now; again, it is the beginning of the year.”
He advised the CBN on the need to work with the Ministry of Finance to achieve policy coordination between the fiscal and monetary authorities.
According to him, this is necessary to bring the country out of recession in the next few months.
A professor of Economics at the Olabisi Onabanjo University, Sherriffdeen Tella, said the MPC had increased or left unchanged the monetary policy tools in previous meetings.
He added that it was high time the committee brought down the rates.
Tella explained, “By now, it should be obvious to the MPC that the type of inflation we are experiencing in the country is cost push and not demand pull. It is not a demand pull inflation means it is not coming as a result of excess money supply, which the MPC is trying to mop up from the economy.
“The inflation is caused by increase in the prices of goods and services, which have been occasioned by significant increases in the cost of production caused by naira depreciation and high cost of credit. As a result, what the MPC needs to do now is to lower the MPR and increase the banks’ capability to increase credit.”
The MPR was retained at 14 per cent by the MPC at its 253rd meeting in November last year. It predicated its decision on the need to mitigate the fragile macroeconomic conditions and the strong headwinds confronting the economy, particularly the implications of the twin deficits of current account and budget deficits.
UACN Property Development Company (UPDC) Plc will soon shop for N5 billion from the capital market through existing shareholders. The funds would be raised via a rights issue of 1.719 billion ordinary shares of 50 kobo each at N3.00 per share on the basis of one new share for every one share already held.
The Nigerian Stock Exchange (NSE) disclosed at the weekend that UPDC has already applied for the approval and listing of the right issue through its stockbroker, Stanbic IBTC Stockbrokers Limited.
The Chairman of UPDC, Mr. Larry Ettah had last May disclosed plans by the company to raise fresh capital to boost its operations.
Speaking to shareholders during the company’s annual general meeting (AGM) in Lagos, Ettah said the capital injection would be in form of rights issue, disposal of low performing assets and sell down of surplus stake in the real estate investment trust (REIT) among others.
“Our strategy for 2016 and beyond includes deleveraging the business through equity capital injection by way of rights issue, sell down of surplus stake in the REIT and disposal of low-performing assets, as well as leveraging on partnerships and alliances that are in sync with the company’s long term goals,” he had said.
As part of capital injection, UPDC raised N16.799 billion commercial paper (CP) under its N24 billion CP Issuance Programme.
Speaking on the debt capital, Managing Director of UPDC, Mr. Hakeem Ogunniran, said the CP issuance had afforded the company a better opportunity to successfully diversify its short-term funding sources at a 25 per cent reduced cost, thereby enhancing their value-creating capability for the company’s various stakeholders.
Ettah had disclosed that the company was recalibrating development towards the retail segment and has put in place strategies to enable it take advantage of emerging opportunities in the segment.
According to him, despite the slow-down in the luxury segment, the Nigerian real estate market remained attractive as there were significant untapped potential in the residential category, and numerous opportunities in the retail, commercial and industrial segments of the market in the near term.
He explained that growth in the commercial segment has been driven by new investments in high growth sectors like retail, hospitality/tourism and telecommunications, while the spike in demand for residential housing is linked to population growth & rising income levels (emergence of middle class).
He disclosed that although real estate development activity was increasing in several states of the federation, demand and supply for commercial and residential properties remain more predominant in Lagos, Abuja and Port Harcourt.
The Nigerian stock market (equities category) has sustained its losing streak for three straight days, posting a N15bn drop in the Nigerian Stock Exchange market capitalisation.
A total of 196.469 million shares valued at N2.611bn were traded in 3,317 deals.
The NSE market capitalisation, at the close of trading on Thursday, dropped to N9.015tn from N9.030tn, while the NSE All-Share Index closed at 26,201.60 basis points from 26,245.34 basis points.
Amid persistent mixed trading across key sectors, the equity market traded lower as the NSE ASI shed 0.17 per cent. Meanwhile, global markets traded mixed ahead of European Central Bank’s decision on monetary policy rate (base interest rate held at zero per cent).
The banking sector and the oil/gas sectors swung into positive territory following gains in Ecobank Transnational Incorporated Plc, United Bank for Africa Plc, Total Nigeria Plc and Mobil Oil Plc, which shares appreciated by 4.23 per cent, 1.57 per cent, 3.34 per cent and 1.34 per cent, respectively.
The industrial goods sector closed 0.29 per cent lower, after closing relatively flat for three consecutive sessions, as five per cent loss in Berger Paints Nigeria Plc and 0.6 per cent loss in Dangote Cement Plc stocks outweighed 4.83 per cent gain in Cutix Plc and 0.6 per cent gain in Cement Company of Northern Nigeria Plc.
The consumer goods sector extended its year-to-date barren run as Champion Breweries Plc and Nigerian Breweries Plc lost 0. 42 per cent each and Nestle Nigeria Plc shed 0.40 per cent.
Market breadth turned positive with 20 advances and 19 declines.
“We expect the overall mixed sentiment (with a bearish bias) to remain the theme of the trading week. Hence, we foresee another tepid session on Friday (today),” analysts at Vetiva Capital Management said.
At Wednesday’s bond auction, the Debt Management Office sold N34.95bn, N74.90bn and N105.10bn, respectively on the five-year, 10-year and 20-year bond at respective yields of 16.8990 per cent, 16.9945 per cent and 16.9920 per cent.
Amid the liquidity mop up, the interbank call rate advanced by 250 basis points to 10 per cent. Meanwhile, at the foreign exchange interbank market, the naira spot rate depreciated by N0.25 while the one-year forward rate appreciated by N29 to close at N305.50 and N349, respectively.
At Wednesday’s Primary Market Auction, the CBN auctioned a total of N269bn across the 91 day-to-maturity, 182DTM and 364DTM bills at respective stop rates of 13.8999 per cent, 17.25 per cent and 18.6499 per cent (effective yields: 14.40 per cent, 18.87 per cent, 22.91 per cent).
Despite the mop-up, the Treasury bills market turned bullish as yields declined by 13 basis points on the average buoyed by healthy demand across board. Particularly, yields on the 133DTM, 196DTM and the 329DTM bills moderated to 16.95 per cent, 19.21 per cent and 20.94 per cent, respectively.
The bonds market, however, traded bearish as yields adjusted to auction levels. Notably, yields on the auction bonds – 14.50 per cent FGN July 2021, 12.50 per cent FGN January 2026 and 12.40 per cent FGN March 2036 rose by 30 basis points, 24 basis points and 23 basis points, respectively to settle at 16.79 per cent, 16.89 per cent and 16.87 per cent.
“Given the liquidity mop up, we expect mixed trading to persist at week close albeit with a bearish tilt,” the analysts noted.
The naira fell against the United States dollar at the parallel market to 498 on Thursday, from 497 on Wednesday.
This came hours after the Central Bank of Nigeria resumed dollar sales to Bureau De Change operators through Travelex.
Before dropping to 498, the naira had appreciated to 495/dollar early on Thursday.
The currency traded flat at 497/dollar consecutively between Monday and Wednesday.
Economic and financial experts said the resumption of dollar sales to the BDCs by the CBN through Travelex would help boost the naira.
The local currency has been under persistent pressure owing to scarcity of dollar in the economy.
Economic and financial experts are divided over the outlook of the naira and most economists believe the local currency would continue to fall against the greenback unless the CBN reviewed its monetary and foreign exchange policy.
According to an economic expert, Mr. Henry Boyo, the currency monetary policy framework adopted by the CBN is flawed and there is an urgent need for the central bank to jettison it for a framework that can take the country off the current economic challenges.
He stressed that unless this was done, the rising oil prices would not make the economy better.
Boyo said, “The oil revenue is not the problem; the primary cause of the oppressive dilemma is the distortional process the CBN adopts for infusing the dollar revenue into the domestic money market to drive economic growth.
“President Muhammadu Buhari must be disturbed that the naira exchange rate has suffered so poorly under his watch, particularly after he promised parity between the naira and dollar, if he won the election.
He added, “Unfortunately, the worst has yet to come, because, if crude oil price further rises while output remains favourable, the dollar will paradoxically spike well above N500/$1 and may approach N1000/$1 before December 2017!
“Any attempt to bridge the widening gap between official and parallel market exchange rates will devalue the naira and trigger a steep rise in fuel price to shoot inflation well beyond 20 per cent and make Nigerians poorer still.”
“We will continue to see reasonable volatility of the naira during the first half of this year. The fundamental issues underlying the volatility of the naira have not been addressed,” a currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said.
According to Ezun, the naira will continue to depreciate at the parallel market while the CBN will keep managing the official rate around 305/dollar.
“It will depreciate further but there has been some resistance around 500/dollar. The CBN seems to have come to the end of monetary policy because it is the issue of liquidity,” the Ecobank analyst added.
The Nigerian Stock Exchange (NSE) has approved the application of Portland Paints and Products Nigeria (PPPN)Plc to raise additional capital from existing shareholders via a right issue.
The company had last September applied to the NSE that it would issue 600 million ordinary shares of 50 kobo each at N3.30 per share on the basis of three new shares for every two shares already held to shareholders.
However, the NSE has approved the application at an issuing price of N1.70 instead of the N3.30 initially proposed by the company. With the new price, PPPN will be raising about N1.020 billion from the right issue.
The Chairman of PPPN, Mr. Larry Ettah last year gave indication of the right issue when he told the shareholders at the company’s s annual general meeting that it would raise additional capital in pursuit of its plan to improve returns and address the high leverage position of the company and other business expansion plans.
“We will apply the planned rights proceeds to minimise the debt exposure risks of our business as well as carry out targeted expansion in our operations. The business will focus on its growth brands as well as make the necessary investment in marketing to improve its brands’ awareness and visibility,” Ettah said.
According to him, the company commenced a process of restructuring the business focusing on internal efficiencies and reviewing our route to market model in a bid to ensure that we build a sustainable future for the business.”
He had assured that despite the challenges and risks posed by the business environment, the company, whose flagship brand is Sandtex, would continue to consolidate on the restructuring and seek growth opportunities to deliver returns to the shareholders.
He disclosed that the company would focus on innovation and seek opportunities to introduce new products into its array of brands as it pursues increased profitability.
PPPN recorded 159 percent growth profit after tax in 2014 to N148 million, from N57.3 million in 2013. However, the company did not pay dividend because it was conserving funds to finance its expansion and business re-engineering process. Meanwhile, the equity market declined further yesterday with the NSE All-Share Index declining by 0.17 per cent to close at 26,201.60.
