Category Archives: GLOBAL FINANCE

Policy reset urgently needed in Nigeria, others to secure growth – IMF

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In order for Nigeria and other economies in Africa to harness their strong potential, the International Monetary Fund (IMF) has stressed the “critical need” for a substantial policy reset by policy makers in the countries, adding that their response to date has generally been insufficient.
The IMF stated this in its latest Regional Economic Outlook for sub-Saharan Africa released on Tuesday.
The report showed that growth fell to three and a half per cent in 2015 in sub-Saharan Africa, the lowest level in 15 years, and growth this year was expected to slow further to three per cent, well below the six per cent average over the last decade, and barely above population growth.

Continue reading Policy reset urgently needed in Nigeria, others to secure growth – IMF

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Moody’s downgrades Nigeria’s Sovereign Issuer Rating to ‘B1’

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Moody’s Investors Service has downgraded Nigeria’s long-term issuer ratings to B1 from Ba3 and has assigned a stable outlook, concluding the review for the downgrade that was initiated on March 4th 2016.

The key drivers of the rating action were increased external vulnerability brought about by the prospect of lower-for-longer oil prices; execution risk in the transition to a less oil-dependent federal budget, and the implications for the government’s balance sheet should it not achieve its aims; and an elevated interest burden over the next two years while the government grows its non-oil tax receipts.

Continue reading Moody’s downgrades Nigeria’s Sovereign Issuer Rating to ‘B1’

NSE, ASEA Host 5th BAFMarkets Seminar

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The Nigerian Stock Exchange (NSE) and
African Securities Exchanges Association
(ASEA) would co-host the 5th Building African
Financial Markets (BAFM) seminar.
The seminar holding for the firs time outside
South Africa, is tagged – ‘Addressing
Liquidity Concerns in African Capital Market’
and would be held between April 28 and 29
while the ASEA Executive Board meeting holds
on the 30th of next month.

Continue reading NSE, ASEA Host 5th
BAFMarkets Seminar

Africa Currency Crises Spark Diverging Central Bank Action

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Nigeria to stick with looser policy, South Africa tightens
Inflation risks rising, while economic growth outlooks worsen

Africa’s biggest economies are taking opposite approaches on monetary policy as they struggle to cope with collapsing commodity prices and a slump in investor confidence.

South Africa, Nigeria, Angola and Ghana are set to announce their first interest-rate decisions of the year this week in an environment complicated by plummeting currencies, rising inflation risks and deteriorating growth. While a record-low rand may force South African policy makers to take more aggressive action, Nigeria is set to stick to its looser policy, according to analysts surveyed by Bloomberg.

The contrasting approaches underscore the difficult policy choices African central banks are being forced to take as their currencies suffer the worst of the rout in global financial markets. In Nigeria, the continent’s biggest economy, growth concerns and naira stability have trumped inflation risks, while fiscal pressures in Ghana and an oil-triggered crisis in Angola have fueled weaker currencies and prompted higher interest rates.

“A further decline in commodity prices, tightening of monetary policy by the U.S. Federal Reserve, and unfavorable weather conditions mean that the short-term outlook for African currencies is weak,” Jacques Verreynne, an economist at NKC African Economics, based in Paarl, near Cape Town, said in an e-mailed response to questions.

“Although the outlook for economic growth is fairly weak in many parts of the continent, there is pressure on central banks to raise interest rates in order to anchor inflation expectations,” he said.
Naira Risks

The Bank of Ghana kicked off the week’s policy decisions by keeping its benchmark interest rate unchanged at 26 percent on Monday, in line with the forecasts of seven of the 10 economists surveyed by Bloomberg. Kenya’s central bank also opted last week to extend the pause in its interest-rate cycle by leaving the policy rate at 11.5 percent.

In Nigeria, pressure is mounting on Governor Godwin Emefiele to devalue the naira and ease foreign-currency controls that are hurting businesses and worsening the outlook for growth in Africa’s biggest oil producer.

He surprised market analysts at the last Monetary Policy Committee meeting in November by cutting the benchmark rate by 2 percentage points to 11 percent and snubbing calls to weaken the currency.

All but one of the 22 economists surveyed by Bloomberg predict Emefiele will leave the key rate unchanged on Tuesday, with some predicting an adjustment to the naira rate.
Inflation Pressure

“The concerns are that the currency is under pressure, that the currency is misaligned,” Bismarck Rewane, chief executive officer at Financial Derivatives Co. Ltd., said by phone from Lagos, Nigeria’s commercial capital. “Ghana and South Africa have already moved closer to an equilibrium. Nigeria has not really accepted that the currency price is in disequilibrium.”

While the Central Bank of Nigeria has virtually fixed the naira at 197-199 per dollar since March, South Africa’s rand has plunged about 29 percent and Ghana’s cedi is down almost 8 percent in the same period. The National Bank of Angola, which is set to hold an MPC meeting on Jan. 29, has gradually devalued the kwanza since last year as revenue plunged in sub-Saharan Africa’s biggest oil producer after Nigeria.

The rand’s slide to a record-low of 17.9169 per dollar on Jan. 11 is adding to pressure on inflation in South Africa at the same time that the worst drought in more than a century boosts food costs. Inflation accelerated to 5.2 percent in December and is set to exceed the central bank’s 3 percent to 6 percent target band this year. The rand fell 0.1 percent to 16.4859 by 5:23 p.m. in Johannesburg.

Speculation is growing the Reserve Bank will raise the magnitude of its rate increases from 25 basis points. While most of the 23 economists surveyed by Bloomberg predict higher rates this week, 16 forecast the repurchase rate of 6.25 percent will be lifted by at least 50 basis points.
Economic Stability

The MPC decision is the first since the U.S. Federal Reserve raised interest rates in December and President Jacob Zuma shocked financial markets by changing his finance minister three times in the space of five days, triggering a weaker rand.

Governor Lesetja Kganyago said in an interview on Jan. 20 that it’s impossible to avoid the trade-off between growth and inflation and the central bank will “act with resolve” if price pressures stemming from a weaker rand spread more broadly in the economy.

“There’s still room for African central banks to tighten monetary policy,” Courage Kingsley Martey, an economist at Databank Group Ltd., said by phone from the Ghanaian capital, Accra. “It is possible to sacrifice growth for some time and then allow macroeconomic stability to return, else inflation will return to haunt growth.”

(BLOOMBERG)

 

Public finances of 11 EU countries are at high risk in medium-term: EU

European Union (EU) flags fly in front of the European Central Bank (ECB) headquarters in Frankfurt, Germany, December 3, 2015. REUTERS/Ralph Orlowski

Eleven European Union countries including France, Italy and Britain face high risks to the sustainability of their public finances because even 10 years from now their public debt will still be high, the European Commission said on Monday.

In a fiscal sustainability report, the European Union’s executive arm said Belgium, Ireland, Spain, France, Croatia, Italy, Portugal, Romania, Slovenia, Finland and United Kingdom were all at high risk.

The estimates are based on the Commission’s macroeconomic forecasts for all 28 EU countries from last November that projected key economic indicators two years ahead.

The report did not contain any recommendations, but the commission is due to issue country-specific recommendations at a later date.

The sustainability analysis assumes no policy changes after the two years included in the forecast. It does not include Greece or Cyprus, which are still under bailout programs.

The Commission said there were no short-term fiscal sustainability risks to any EU countries. But it said that for instance in the case of Italy some factors such as gross and net debt, gross financing needs and the amount of non-performing loans, pointed to short-term “challenges”.

It made similar comments about challenges from non-performing loans and other issues facing 15 other countries.

The best performers in terms of fiscal sustainability, with low risks in the short-, medium- and even long-term, were Denmark, Germany, Estonia, Latvia.

(REUTERS)

 

Oil currencies dip, euro and yen gain

The dollar sign (R) is seen alongside the signs for other currencies above a currency exchange shop in Mongkok shopping district in Hong Kong in this file photo dated October 30, 2014.  REUTERS/Damir Sagolj

The dollar edged down on Monday as renewed selling on oil markets drove investors into their safe havens of choice, the euro and yen, and weakened the currencies of major crude exporters.

After an upbeat session in Asia, stock markets quickly turned negative in Europe and oil fell almost 3 percent, driving roughly half-percent falls in the Canadian dollar and Norwegian crown. CAD=D4 EURNOK=D4

The oil price fall turned investors’ focus back onto the broadly negative view of the outlook for the world economy that has dominated since the start of 2016.

That has tended to benefit the euro, yen and Swiss franc at the expense of the dollar.

“We cannot sound the all clear, there is clearly a lot of uncertainty out there,” Commerzbank strategist, Thu Lan Nguyen, said.

“The main theme this morning is of commodity currencies being under pressure. A lot depends on the oil price. If we see a sharp drop back to the levels we saw last week, we can see another round of the market nerves we have been seeing.”

The dollar fell about a third of a percent against the yen to 118.40 JPY=, well off last week’s one-year low of 115.97. The euro was also up about 0.25 percent at $1.0816 EUR=EBS.

Norway’s prime minister and central bank governor were set to meet at short notice on Monday and expectations for the outcome of the meeting helped the crown steady at 9.47 crowns per euro by 1221 GMT (7:21 a.m. EST), down 0.3 percent.

“Extra spending would be temporarily supportive for the crown but would not change the longer-term bearish currency story against the dollar unless there is a quick pick-up in non-oil sectors,” Morgan Stanley analysts said in a morning note.

Bullish bets on the dollar fell for a fourth straight week through Jan. 19, according to Reuters calculations and the latest data from the Commodity Futures Trading Commission, released on Friday.

Focus is on the pace of Federal Reserve tightening as risk aversion and volatile markets push investors to pare bets on any U.S. near-term hikes, with rates widely expected to be held on Wednesday.

The Bank of Japan (BoJ) will conclude a two-day policy meeting on Friday, at which sources familiar with its thinking say it is likely to cut its core consumer inflation forecast for the coming fiscal year to possibly below 1 percent.

Downbeat data has raised speculation of more BoJ easing by April.

(REUTERS)

 

Oil falls 4 percent after Iraq supply adds to glut

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Oil prices resumed their slide on Monday, falling about 4 percent to wipe out some of the surge at the end of last week, on news that Iraq flooded a massively oversupplied oil market with record output last month.

Brent crude LCOc1, the global benchmark, was down $1.18 at $31.00 a barrel by 11:29 a.m. EST, down 3.7 percent from its closing price on Friday, when Brent surged 10 percent. The contract had traded to a 12-year low of $27.10 on Jan. 20, before the two-day rally.

U.S. crude CLc1 traded $1.40 lower at $30.79 a barrel. The contact had traded to a 13-year low of $26.19 on Jan. 20.

The losses came despite news that oil producer group OPEC was evaluating holding an extraordinary meeting. Qatar’s energy minister said a request for such a gathering was being discussed.

Iraq’s oil ministry told Reuters on Monday that the country had record output in December, with its fields in the central and southern regions producing as much as 4.13 million barrels a day. A senior Iraqi oil official said separately the country may raise output even further this year.

“The news that Iraq has probably hit another record builds on the oversupply sentiment,” said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.

“The oversupply will keep markets depressed and prices low, and on the other hand short positions are in excessive territory,” he said.

Traders who had put on record short positions raced to close them out on Friday, causing a near-historic rally that was partially erased on Monday, adding to oil market volatility.

The advance of a blizzard toward the U.S. East Coast over the weekend sent crude futures up 15 percent over two days last week.

“The shorts have been very nervous in the past week and have looked for excuses to accept some profits. They found it in the ECB comments and the weather,” said Jim Ritterbusch of Chicago-based oil consultancy Ritterbusch & Associates, also referring to remarks by European Central Bank President Mario Draghi that fanned hopes for ECB monetary stimulus.

Analysts at Energy Aspects said Monday that global oil inventories would continue to fill in the next months, but should start to ease by mid-year.

However, OPEC’s Secretary-General Abdullah al-Badri said at an event in London that signs were already emerging that the market was rebalancing.

(REUTERS)

 

OPEC officials see oil market begin to start rebalancing

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OPEC officials said on Monday the oil market was poised to start rebalancing itself after prices sank to their lowest since 2003, a sign the exporter group will stick to its policy of not cutting supplies without help from rival producers.

Oil prices have collapsed to below $28 a barrel this month from $100 in mid-2014 on a supply glut. The drop gained impetus after the Organization of the Petroleum Exporting Countries in late 2014 shifted strategy to defend market share, not prices.

The price drop has started to slow the development of relatively expensive supply sources such as U.S. shale oil and forced companies to delay or cancel billions of dollars worth of projects, putting some future supplies at risk.

“We expect that we will go through one more downturn cycle of oil price. But we will recover. The market is definitely going to balance itself because today’s oil price is not sustainable whatsoever,” Qatar’s Energy Minister Mohammed al-Sada told a conference in London.

Speaking at the same conference, OPEC Secretary-General Abdullah al-Badri said he also saw reason for optimism, citing forecasts for further growth in global oil demand in 2016 and a contraction in non-OPEC supply.

“We already see some signs that supply and demand fundamentals will start to correct themselves in 2016,” Badri said at the conference at Chatham House.

Earlier, Badri said OPEC and non-OPEC producers needed to work together to tackle an excess of oil inventories so prices can recover and investments in new fields begin.

So far, major non-OPEC producers such as Russia have refused to work with OPEC by cutting supplies, although Oman and Azerbaijan have expressed willingness to do so.

“It is vital the market addresses the issue of the stock overhang,” Badri said. “This is now central to the return of a balanced market.”

EMERGENCY MEETING?

The price slide has squeezed income in producing nations and is particularly painful for OPEC members such as Venezuela, who depend heavily on oil income and lack the capacity to pump more.

Venezuela has requested OPEC hold an emergency meeting to discuss steps to prop up oil prices. But OPEC’s Gulf members including Saudi Arabia, who led the 2014 policy shift, have opposed earlier calls for emergency meetings.

The Qatari minister, whose country holds OPEC’s rotating presidency this year, said the request was being considered although he declined to say if he was in favor.

“We received a request and oil ministers are discussing that,” he said. “It is being evaluated.”

While non-OPEC supply is expected to fall this year, output from OPEC could rise following the lifting of sanctions on Iran, Iraq’s plan to further expand supplies and no sign of Saudi Arabia cutting back from near-record levels.

Iraq may further raise oil output in 2016, reaching levels as high as 4 million barrels per day (bpd) from the country’s south, a senior Iraqi oil official, who asked not to be named, said on Monday.

Iraq has been producing from its southern fields around 3.7-3.8 million bpd in recent months.

(REUTERS)