Business and Economic Review

Transcription

1 October/November 2015 Business and Economic Review RTC Advisory Services Ltd Introduction Policy and Politics Nigerian Macroeconomic Review Global Economy Nigeria Outlook and Projections: Implications for Business Conclusions Outline RTC Business and Economic Review October/November

2 President Muhammadu Buhari s full cabinet nominees having now been approved by the Senate, the presidency organised a two-day inaugural retreat for the team on November 5-6, There is every expectation that the cabinet will finally be sworn-in the week of November 9, probably on November 11, It has been almost six months since Buhari took office and eight months since his election and the delay in giving direction to the economy has been very costly for Nigeria in terms of investment losses and capital flows, declining economic growth rates, capital market sell-offs and other indices. Yet the biggest losses are in terms of opportunity squandered-huge global goodwill and domestic euphoria wasted as markets and citizens were bewildered at lack of policy direction. Yet the sentiment now has to be better late than never!!! Introduction Policy and Politics RTC Advisory Services Ltd October/November

3 While the allocation of cabinet responsibilities by President Buhari yet remains unclear, the economic core of the cabinet is obvious:- Dr Emmanuel Ibe Kachikwu Dr Okechukwu Enalamah Senator Udoma Udo Udoma Mrs Kemi Adeosun Mrs Amina Muhammed Mr Babatunde Raji Fashola SAN Other influential cabinet nominees include General A Dambazau, who may man the defense portfolio; Dr Kayode Fayemi who is speculated for foreign affairs; ex-governor Rotimi Amaechi; Professor Isaac Adewole (education?); Brigadier-General M. Dan-Ali and Chief Audu Ogbeh, speculated to be bound for the agriculture ministry. A Cabinet at last Names State Age Educational Background Experience/Previous Position Abubakar Malami Kebbi 48 LLB, LLM, BL National Legal Adviser of Congress for Progressive Change (CPC) Chairman Legal Team of the CPC Presidential Campaign Organization, 2011 Member of the PDP Legal Team for Election Petition, 2003 Member Kano State Local Government Election Tribunal, 2004 Resource Person to the Manifesto Drafting Sub-Committee of Inter Joint Party Merger Committees between the CPC, ACN & ANPP towards the formation of the All Progressives Congress (APC). Retired Lt. General; Former Chief of Army Staff ( ); Head, Security Lt.-Gen. Abdurahman Dambazzau Kano 61 BSc, MSc, Ph.D Committee APC. Adebayo Shittu Oyo 62 LLB, BL Lawyer; Former CPC Governorship Candidate, Oyo State Sen. Aisha Jumai Alhassan Taraba 56 BSc Mrs. Amina Mohammed Gombe 54 BSc, MSc Chief Audu Ogbeh Benue 68 BSc, MSc Mr. Babatunde Raji Fashola SAN Lagos 52 LL.B, BL Chibuike Rotimi Amaechi Rivers 50 BA, MA APC Gubernatorial Candidate for Taraba, 2015; Senator, Federal Republic of Nigeria ; Former Commissioner for Justice & Attorney General, Taraba State; Chief Registrar, High Court of the FCT 30 years experience in public & private sector; Special Adviser, UN post-2015 Development Planning; Founder &CEO, think tank Center for Development Policy; Co-founder, Afri-Projects Consortium. Deputy Speaker, Benue State House of Assembly; Federal Minister of Communications; Minister of Steel Development; and National Chairman, PDP Executive Governor, Lagos State ( ); Chief of Staff, LASG; Member, Lagos State Executive Council. Speaker, Rivers State House of Assembly; Executive Governor, Rivers State; Chairman, NGF; and DG, Buhari Campaign Organisation The Buhari Cabinet 3

4 Names State Age Educational Background Experience/Previous Position Dr. Chris Ngige Anambra 63 MB.BS Former Governor, Anambra State; Senator of the Federal Republic of Nigeria ; Deputy Director, Federal Ministry of Health. Sen. Hadi Sirika Katsina 51 Pilot Senator, Federal Republic of Nigeria; Pilot and Member, CPC Group Managing Director, NNPC; Executive Vice Chairman & General Counsel, Exxon Mobil (Africa); General Counsel/Legal Adviser, Texaco Nigeria & Texaco Overseas Petroleum Co.; General Counsel/Secretary, Mobil Producing Nigeria Unlimited; ED, ExxonMobil Group of Dr. Emmanuel I. Kachikwu Delta 58 LLB, LLM,Ph.D/SJD Companies. Ibrahim Usman Jibril Nasarawa 57 BEd, MSc Deputy Director, Development Control Department; Land Officer, FCT; Teacher/Lecturer Dr. Kayode Fayemi Ekiti 50 BSc, MSc, PHD Former Governor, Ekiti State; Director, Centre for Democracy & Development; Secretary General, Media Empowerment for Africa; Strategy Development Adviser, Deptford City Challenge, London; Research Officer, African Research and Information Bureau; Tutorial Fellow, War Studies Dept., Kings College, London; Lecturer, Nigeria Police Training College, Sokoto. Mrs. Kemi Adeosun Ogun 48 BSc, ICAN Ogun State Commissioner for Finance, CEO, Quo Vadis Partnership; MD, Chapel Hill Denham Management; Senior Manager, Price Waterhouse Coopers. Alhaji Lai Mohammed Kwara 63 LLB Chairman, Optmedia Limited; Director, Afromedia Plc; Public Relations Officer, Nigerian Airport Authority (now FAAN); and National Publicity Secretary, All Progressives Congress Dr. Ogbonnaya Onu Ebonyi 64 BSc, MSc, PHD Executive Governor, Abia State; Chairman, Conference of Nigerian elected Governors; Presidential Candidate, APP (now ANPP); National Chairman, ANPP Dr. Osagie Ehaneri Edo MD, PGD Edo State Coordinator, Buhari Campaign Organisation; Senior Registrar & Clinic Instructor, University of Benin Teaching Hospital; Member, Old Bendel&Edo States Hospital Management Board; Consultant Surgeon, SPDC Nigeria. The Buhari Cabinet (contd.) Names State Age Educational Background Experience/Previous Position Solomon Dalong Plateau 51 LLB,LLM Lawyer; Lecturer, University of Jos; PA to Solomon Lar; Former Chairman of Langtang South Local Government Area. Mr. Suleiman Adamu Jigawa 50s BSc, MSc Senator Udoma Udo-Udoma Akwa Ibom 60 BA&MA (Law) Civil Engineer; Vice President, Association of Consulting Engineers in Nigeria (ACEN). Former Chairman, Corporate Affairs Commission; Senator of the Federal Republic, Chairman,Governing Board of the Security and Exchange Commission; Chairman, UACN; Director, Unilever and Vice Chairman of the Board of Linkage Assurance; Chairman, Union Bank Plc; and Senior Partner&Head, Udo Udoma and Bello Osagie The Buhari Cabinet (contd.) 4

5 Names State Age Educational Background Abubakar Bwari Bawa Niger 52 BSc Accountant and Adamu Adamu Bauchi Journalist Experience/Previous Position Chief Whip, Federal House of Representative ( ); Planning Officer, Niger State Ministry of Lands, Survey and Town Planning; Consummate and successful businessman, Gamji-Tee Aluminium Company, Mercury Nigeria Ltd, Interstate Property Development Company and Unipetrol Nigeria dealership. Journalist; Columnist, Daily Trust newspapers and Public Affairs Analyst Aisha Abubakar Sokoto BSc Int. Relations Senior Manager, PENCOM Anthony Anwuka Imo Former VC, IMSU; Agriculture Expert Heineken Lokpobri Bayelsa 48 LLB Hon. Member, Bayelsa House of Assembly ( ); Speaker, Bayelsa State House of Assembly; Senator, Federal Republic of Nigeria ( ); DG, Timipre Sylva. Campaign Organisation for Bayelsa State governorship election. Prof. Isaac Adewole Osun 60 MB BS, FMCOG, FWACS Vice Chancellor, University of Ibadan; Council Member & Head, Department of Obsterics and Gynaecology at the College of Medicine; Consultant Obsterician and Gynaecologist, University College Hospital (UCH); Director, Prevention of Mother to Child Transmission (PMTCT) of HIV Project; Chairman, PMTCT National Task Team Subcommittee on anti-retrovirals for the PMTCT of HIV; and Country's Principal Investigator for 'Operation Stop Cervical Cancer' in Nigeria; Secretary-General, Confederation of African Medical Associations and Societies (CAMAS) Barr. James E. Ocholi (SAN) Kogi 55 LLB, LLM APC Governorship Aspirant, Kogi State; National Secretary, The Full Gospel Businessmen s Fellowship International in Nigeria; Pro-chancellor and Chairman of Council, Salem University, Lokoja; Chairman, Disciplinary Committee of Nigeria Bar Association, FCT Abuja; and Principal Partner, Ocholi James & Associates. Buhari s Ministerial Nominees (contd.) Names State Age Educational Background Experience/Previous Position Research Officer, Nigerian Law Reform Commission; Law Practitioner; Assistant DG, BA (Pol. Sci.), BA (Law), Cordination Sector for External Relations; and World Intellectual Property Jeffery Onyema Enugu 59 LLM, MA Organisation Khadijah Bukar Abba-Ibrahim Yobe 48 BSc (Business Studies & Sociology) Politician; Hon. Member, Federal House of Representative ( ) Brig. Gen. Mansur M. Dan Ali (rtd.) Zamfara 56 HND, MPA Deputy Director, Procurement at Dept. of Logistics NDA; Acting Director Military Training; and Chief Instructor, NDA. Muhammadu Musa Bello Adamawa Immediate Former Chairman, National Hajj Commission; Mustapha Baba Sheshuri Borno 54 Former Member, Federal House of Representative Dr. Okechukwu Enelamah Abia MBBS, MBA, ICAN Chief Executive Officer, Partner, and Founder of African Capital Alliance; Director, Dorman Long Engineering Limited; Non-Executive Director, UAC of Nigeria Plc since Director, etranzact, Cornerstone Insurance Plc, Technoserve, Inc., Africa Leadership Initiative West Africa (ALIWA), and Business Day; Director, African Venture Capital Association; Board Member, Africa Venture Capital Association and the Emerging Markets Private Equity Association; Director, Emerging Markets Private Equity Association; and Director of Associated Bus Company Plc. Prof. Omoleye C. Daramola Ondo BSc. Ed., M.Ed., Ph.D HOD, Dept. of Arts and Social Sciences Education, University of Ilorin Pastor Usani Usani Ughuru Cross River State Chairman, APC; State Secretary, CPC; ACN &APC Governorship Candidate; Zainab S. Ahmed Kaduna BSc, MBA Former MD, Kaduna Industrial and Finance Company; Exec. Sec., NEITI Buhari s Ministerial Nominees (contd.) 5

6 The incoming cabinet has its work cut out. As we reiterate later in this report, several key sectors-manufacturing, oil and gas and public administration (government) are already in recession, while most others are experiencing sharp slow downs in growth rates. Public expectations are high, and fueled by promises of a big welfare state by the now-governing APC, probably unrealistic in the context of current economic realities. And there are many outstanding tough and potentially painful decisionson currency values, fuel subsidies, privatisation, electricity tariffs, macroeconomic and structural reforms, and public sector rationalisation and wages etc. A Cabinet at last (contd.) The other major policy concern has been the series of actions by various Nigerian regulatory agencies which suggest that regulators are adopting a tough and probably unreasonably punitive attitude towards regulated entities. There is also a suggestion of regulators resorting to large fines as a revenue generating mechanism! In a space of a few days:- Telecommunications regulator National Communications Commission (NCC) imposed a fine of $5.2billion on MTN on 26/10/15 for not removing about 5million unregistered subscribers from its network. MTN immediately lost $5.4bn in market capitalisation between October 23 and 29. The fine exceeds the company s Nigeria revenue of $3.09bn in 2014 (and also exceeds Nigeria s revenue from oil in Q The Financial Reporting Council of Nigeria (FRC) imposed a fine of N1bn on Stanbic IBTC while suspending the holding company s Chairman, MD and two other directors, as well as KPMG s auditor who signed off the accounts. The matter is now before the courts and CBN has supported Stanbic s position. The CBN has itself imposed fines of N1.87bn, N2.942bn and N4bn on First Bank, UBA and Skye Bank respectively for amounts unremitted under the Treasury Single Account. Markets are rattled particularly by the sanctions on MTN and Stanbic IBTC. Season of Regulatory Anomie!!! 6

7 Nigerian Macroeconomic Review RTC Advisory Services Ltd October/November 2015 Inflation continues its rise, reaching 9.4% in September Inflation Rate 9.3% 9.4% 9 8.3% 8 7 Source: NBS, RTC Research Inflation Rate (%) 7

8 Inter-Bank Call Rate Monetary Policy Rate Treasury Bill Rate Savings Deposit Rate Prime Lending Rate Maximum Lending Rate Jan'15 Feb'15 Mar'15 Apr'15 May'15 Jun'15 Jul'15 Aug'15 Sep'15 Source: CBN & RTC Research Money Market Indicators (%) 20,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, Jan'15 Feb'15 Mar'15 Apr'15 May'15 Jun'15 Jul'15 Aug'15 Sep'15 Broad Money (M2) Currency Outside Banks (COB) Private Sector Credit Currency in Circulation (CIC) Source: CBN & RTC Research Money and Credit Data (N Mn) 8

9 Naira 11/9/ A 1990s era of four different exchange rates-ifem, BDC, Cash and Transfers now exists and FX is rationed administratively by the CBN!!! Sep' 14 Oct' 14 Monthly Average Exchange Rates of the Naira Nov' 14 Dec' 14 Jan' 15 Feb' 15 Mar' 15 Apr' 15 May' 15 Jun' 15 Jul' 15 Aug' 15 Sep' 15 BDC (USD) IFEM (USD) Jan Feb Mar Apr May 2015 Jun Jul Aug Sept IFEM (USD) BDC (USD) Parallel Cash Exchange Rate Movement: Sept 14-Sept 15 Source: CBN, 2015 Transfer Source: CBN & RTC Research Connected Lines Operator Sep 15 Aug 15 Jul 15 Jun 15 May 15 Apr Mobile (GSM) ,769, ,782, ,758,538 Mobile (CDMA) ,799,949 3,743,811 7,684,026 Fixed Wired/Wireless , ,871 2,233,981 Total ,941, ,892, ,676,545 Active Lines Mobile (GSM) 148,427, ,703, ,495, ,486, ,386, ,057, ,772, ,841,315 Installed Capacity Telecommunications sector tele-density is over 100% Mobile (CDMA) 2,042,015 2,125,941 2,057,519 2,105,981 1,993,278 2,234,302 2,187,845 2,404,777 Fixed Wired/Wireless 191, , , , , , , ,537 Total 150,660, ,018, ,741, ,775, ,561, ,476, ,143, ,606,629 Mobile (GSM) N/A N/A N/A N/A N/A N/A N/A 218,522,048 Mobile (CDMA) N/A N/A N/A N/A N/A N/A N/A 18,400,000 Fixed Wired/Wireless N/A N/A N/A N/A N/A N/A N/A 11,342,677 Total N/A N/A N/A N/A N/A N/A N/A 248,353,725 Teledensity Telecommunications Sector Data Source: NCC,

10 IN BILLIONS 11/9/2015 The post-election gains in capital markets have been completely dissipated. 13,500 13,000 12,500 12,000 11,500 11,000 10,500 10,000 9,500 9,000 Market Capitalisation Market Capitalisation Source: NSE 45,000 All Share Index 40,000 35,000 30,000 25,000 20,000 All Share Index Source: NSE 10

11 Key Macroeconomic Indicators Key Indices July 2015 Sept Gross External Reserves $31.20 July 31, 2015 $30.63 Sept. 17, 2015 Inter-bank Exchange Rate June 29, 2015 Sept. 18, 2015 BDC Exchange Rate June 29, 2015 Sept. 18, 2015 Key Decisions were:- Reduce the CRR from 31 to 25 per cent; Retain the MPR at 13 per cent; Retain the symmetric corridor of 200 basis points around the MPR; and Retain the Liquidity Ratio at 30 per cent. Monetary Policy Committee (MPC) Meeting of Sept , 2015 Sectoral Utilisation of Foreign Exchange: Q Food Products 9.3% Transport Sector 2.1% Agricultural Products 1.2% Manufactured Products 10.1% Invisible Sector 41.2% Minerals & Oil Sector 17.7% Industrial Sector 18.4% FX Sectoral Utilisation Q

12 Value of imports in 2015 is on course to decline to around N6Trillion in 2015, from about N7.4bn in ,000, ,892, Value of Total Import (N'Million) 9,000, ,000, ,000, ,000, ,624, ,015, ,374, ,000, ,000, ,000, ,220, ,000, ,000, Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 YTD Value of Total Import (N Million) Source: NNPC Crude Oil Lifting: Jan. 15-Aug

13 Source: NNPC Crude Oil Lifting Values: Jan. 15-Aug. 15 NNPC reveals that Warri and Kaduna refineries recorded Zero% capacity utilisation in September 2015! Port Harcourt refinery was 4.15%!!! Cumulative YTD capacity utilisation for all? 5.77%!!!!!!! Crude Oil Refining Capacity Utilisation: Aug. & Sep Source: NNPC 13

14 NNPC has lost N437bn so far in 2015, with revenues of N1.3trillion and expenses of N1.7trillion!!! Source: NNPC NNPC: Monthly Budget Vs Actual, July and Aug Nigeria Recession Watch! Is Nigeria heading into an economic recession??? RTC Advisory Services Ltd October/November

15 GDP growth has declined from 6.54% in Q to 2.35% in Q2 2015, an almost three-fold decline!!! Real GDP Growth: Q Q % 6.54% 6.23% 5.94% 3.96% 2.35% 2014 Q Q Q Q Q Q2 Real GDP Growth Real GDP Growth: Q Q Left to the oil and gas sector, Nigeria would already be in recession!!! The oil sector has declined for two consecutive sectors, by -8.15% in Q1 and -6.79% in Q GDP Growth Rate, Q Q (Per cent) % 6.21% 7.51% 6.54% 6.71% 6.23% 6.44% 5.94% 5.14% 5.59% 3.96% 3.46% 2.35% 1.18% 2014 Q Q Q Q Q Q2-3.60% -6.60% -6.79% -8.15% GDP Growth Rate Oil Non-Oil Real GDP Growth: Q Q

16 GDP Structure: Q % 0.02% 4.14% 0.75% 1.79% 3.18% 17.89% Agriculture Mining and Quarrying Manufacturing 0.24% 3.67% 8.69% 7.75% Electricity, Gas, Steam and Air Conditioning Supply Water Supply, Sewage, Waste Management and Remediation Construction Trade Accommodation and Food Services 13.89% 9.29% Transportation and Storage Information and Communication Arts, Entertainment and Recreation 4.18% Financial and Insurance Real Estate 1.53% 0.68% 18.87% 0.51% 0.13% Professional, Scientific and Technical Services Administrative & Support Services Public Administration Education Human Health and Social Services Other Services GDP Structure Q S/N Activity Sector 2015 Q2 % Contribution 1 Agriculture 4,088, Mining and Quarrying 1,771, Manufacturing 2,124, Electricity, Gas, Steam and Air Conditioning Supply 116, Water Supply, Sewage, Waste Management and Remediation 30, Construction 956, Trade 4,312, Accommodation and Food Services 156, Transportation and Storage 348, Information and Communication 3,175, Arts, Entertainment and Recreation 54, Financial and Insurance 837, Real Estate 1,986, Professional, Scientific and Technical Services 946, Administrative & Support Services 5, Public Administration 639, Education 408, Human Health and Social Services 170, Other Services 727, GDP at Basic Prices 22,859, GDP Structure, Q

17 5,000, ,500, ,000, ,500, ,000, ,500, ,000, ,500, ,000, , Output by Key Sectors (N'Million) 4,312, ,088, ,175, ,124, ,746, , , , , , , ,986, ,898, Q Key Sectors S/N Activity Sector 2014 Q Q Q Q Q Q2 1 Agriculture Mining and Quarrying Manufacturing Electricity, Gas, Steam and Air Conditioning Supply Water Supply, Sewage, Waste Management and 5 Remediation Construction Trade Accommodation and Food Services Transportation and Storage Information and Communication Arts, Entertainment and Recreation Financial and Insurance Real Estate Professional, Scientific and Technical Services Administrative & Support Services Public Administration Education Human Health and Social Services Other Services GDP at Basic Prices Real GDP Growth Rate by Sectors (%) 17

18 Manufacturing Q Q Q Q Q Q Oil Refining Cement Food, Beverage and Tobacco Textile, Apparel and Footwear Wood and Wood Products Pulp, Paper and Paper Products Chemical and Pharmaceutical Products Non-Metallic Products Plastic and Rubber Products Electrical and Electronics Basic Metal, Iron and Steel Motor Vehicles and Assembly Other Manufacturing Manufacturing Output Growth by Sectors: Q Q Manufacturing Sector by Output (N'Million) 1,200, ,000, ,010, , , , , , , , , , , , , , , , , Manufacturing Sector 18

19 Banking sector assets declined from N28.6Trillion in Q to N28.4Trillion. The last time sector assets contracted was between 2009 and 2010, during the global crisis and Nigeria s bank shake-out. 30,000.0 DMBs Total Assets (N' Billion) 28, , , , , , , , , Q Q Commercial Banks Total Assets: 2004-Q Information and Communication Information & Communication Output by Sectors 3,000, ,504, ,500, ,000, ,500, ,000, , , , , Telecomunications and Information Services Publishing Motion Pictures, Sound Recording and Music Production Broadcasting 19

20 s/n Sector Q Q Comments 1. Oil and Gas -8.15% -6.79% Already in Recession. Q3 expected to be worse. 2. Manufacturing -0.7% -3.82% Already in Recession. Q3 likely to see higher decline. 3. Public Admin. (Govt.) % % Already in Recession. Q3 projected static or worse 4. Accommodation & Food Services (Hotels & Rest.) 26.6% -8.97% Drastic Descent into negative from bullish growth! 5. Electricity, Gas etc % % Already in Recession. Large sectoral declines. 6. Agriculture 4.7% 3.49% Slowing Growth Rate 7. Construction 11.17% 6.42% Slowing Growth Rate. Q3 projected worse. 8. Info. & Comm. (Telcos.) 9.49% 6.26% Slowing Growth Rate 9. Finance & Insurance 9.01% 6.41% Slowing Growth Rate. 10. Real Estate 3.08% 2.97% Slowing Growth Rate 11. TOTAL GDP 3.96% 2.35% Slowing overall GDP growth. Q3 expected below 2% Nigeria Recession Watch October/November 2015 Global Economy RTC Advisory Services Ltd 20

21 Global growth projections are more muted than in both the July and April projections from the IMF WEO. Global growth for 2015 is now reduced to 3.4%. IMF projects Nigerian growth at an unattainable 4% WEO Projections: October 2015 Global Competitiveness Index Framework 21

22 Country/ Economy Switzerland United States Germany Netherlands Japan Hong Kong SAR Finland Sweden United Kingdom Norway OVERALL INDEX OVERALL INDEX SUB INDEXES Basic Requirements Efficiency Enhancers Innovation and Sophistication Factors Rank Score Rank Score Rank Score Rank Score Rank Score Global Competitiveness Index: Top 10 countries Country/ Economy Global Rank OVERALL INDEX Africa Rank Score Global Rank OVERALL INDEX Africa Rank Global Competitiveness Index: Africa Top 10 countries SUB INDEXES Basic Requirements Efficiency Enhancers Innovation and Sophistication Factors Score Rank Score Rank Score Rank Score Mauritius South Africa Rwanda Botswana Morocco Namibia Algeria Cote d Ivoire Tunisia Zambia Nigeria

23 Global Competitiveness Index: Nigeria s Summary Global Competitiveness Index: Nigeria s Summary (contd.) 23

24 Global Competitiveness Index: Nigeria s Summary (contd.) The rankings at the top of the GCI remained stable, highly advanced Western economies and Asian tigers continue to dominate the rankings. Switzerland maintained the top spot, followed by United States and Germany. Japan is ranked fifth while United Kingdom remains the 9 th most competitive economy globally. Mauritius remains Africa s most competitive economy, falling to 46 th in the global ranking. South Africa ranks as the second most competitive economy in Africa and 49 th in the world. The lowest ranked African country is Guinea, placed at 140 th in the world. Generally, Sub-Saharan Africa as a whole continues to trail the rest of the world in competitiveness. Nigeria is ranked 124 th globally and 25 th in Africa, improves 3 places this year in the global ranking. The improvement reflects increase in market size, accountability of the private sector, improvements in property rights and lower government deficit. The country s downward trend is attributed to infrastructure gap, corruption, access to finance, inefficient use of talents, inefficient higher education, and undue influence. In addition, the security situation remains dire. Global Competitiveness Index Summary 24

25 Daily Basket Price Trend Weekly Basket Price Trend Monthly Basket Price Trend Yearly Basket Price Trend OPEC Basket Prices Source: OPEC, RTC Research Brent Crude Oil: Daily Price Trend Brent Crude Oil: Monthly Price Trend Source: World Bank, EIA, RTC Research Brent Crude Oil Prices 25

26 Crude oil price volatility remained high in the month of October. OPEC and Brent Crude oil prices increased by 0.42% and 1.86% respectively to averaged $45.02 and $48.12 for the month of October. The increase in prices in the month of October reflects decline in global supply, production disruptions particularly in the US (oil rig crash), and positive Q3 growth in major economies. EIA forecasts that Brent crude oil prices will average $54/b in 2015 and $59/b in 2016, unchanged from last month s STEO. Forecast West Texas Intermediate (WTI) crude oil prices average $4/b lower than the Brent price in 2015 and $5/b lower in Oil Market Summary The FAO Food Price Index* averaged nearly 162 points in October 2015, as much as 6 points (3.9 percent) more than in September and the sharpest increase since July The October surge was mainly the result of rises in the sugar, vegetable oils and dairy quotations, while cereal prices were subject to a more modest increase and those of meat remained stable. According to the index, food on international markets in October was still 16 percent cheaper than one year ago. World Food Situation Report Source: FAO 26

27 The FAO Cereal Price Index averaged points in October, up 2.6 points (1.7 percent) from September, largely led by an upturn in wheat and maize prices. Wheat quotations were higher, mostly on concerns about dryness affecting winter wheat in some countries and deteriorating production prospects in Australia. Maize prices strengthened, largely reflecting a slowdown in farmers sales in the United States, the world s biggest producer and exporter of maize. By contrast, rice prices fell, as a result of marked declines in the fragrant and Japonica rice segments. The FAO Vegetable Oil Price Index averaged points in October, up 8.4 points (or 6.2 percent) from September. The increase, which follows three months of decline, was primarily driven by higher palm oil prices, as concerns intensified about El Niño compromising next year s production in Southeast Asia in Indonesia in particular. In addition, international soy oil prices strengthened, mainly reflecting slow progress in soybean plantings in parts of Brazil due to unfavourable weather conditions. Limited global availabilities of rape and sunflower seed also lent support to the index. The FAO Dairy Price Index averaged points in October, up 13.4 points (9.4 percent) from September. Concerns that milk output in New Zealand would fall during the current June/May dairy year caused Oceania prices to rise in both September and October, with export prices from the EU following suite although remaining below quotations in Oceania. Prices of whole milk powder surged by almost 21 percent over the month, with all the other dairy products also incurring marked increases. The FAO Meat Price Index* averaged points in October, essentially the same level as in September, prolonging an extended period of overall stability that has been evident since March Of the meats covered, only ovine meat registered a substantial change, rising by 8 percent due to constrained export availability in Oceania; prices of the other categories of meat were little changed. The FAO Sugar Price Index averaged points in October, up 29.0 points (17.2 percent) from September and the highest level since February The sharp month-on-month increase was largely weather-driven: in Brazil, the world s leading sugar producer, delays caused by excessive precipitation in the South-Central producing regions, adversely affected sugarcane harvesting; and reports of crop damages caused by excessive dryness in India, Thailand, the Philippines, South Africa and Vietnam provided further support to international sugar prices. World Food Situation Report (contd.) Source: FAO Commodity Benchmark Measure Aug Price Wheat*WB US No 2 Hard Red Winter fob Gulf Sept Price Oct Price Price Change (%) Sept Oct b/$/mt CBOT (Chicago Board of Trade) Soft Red Winter Sep Futures $/mt Maize US Yellow No 2 fob US$/Ton CBOT Dec Futures US$/Ton Maize *WB b/$/mt Global Commodity Prices Source: World Bank, FAO, RTC Research 27

28 Commodity Benchmark Measure Aug Price Sept Price Oct Price Price Change (%) Sept Oct Oil Seeds & Oils Soybeans b/$/mt Soybean Oil b/$/mt Palm Oil b/$/mt Soybean Meal b/$/mt Groundnut Oil b/$/mt 1,331 1,321 1, Sugar Sugar EU b/$/kg Sugar US b/$/kg Sugar World b/$/kg Global Commodity Prices (contd.) Source: World Bank, RTC Research Commodity Benchmark Measure Aug Price Sept Price Oct Price Price Change (%) Sept Oct Milk & Dairy Butter US$/Ton 2, , , Skim Milk Powder US$/Ton 1, , , Whole Milk Powder US$/Ton 1, , , Cheddar Cheese US$/Ton 2, , , Meat *WB Beef b/$/kg Chicken b/$/kg Sheep $/kg Steel*WB Aluminum b/$/mt 1,548 1,590 1, Global Commodity Prices (contd.) Source: World Bank, FAO, RTC Research 28

29 $/Tonne $/Tonne 11/9/2015 Commodity Benchmark Measure Aug Price Sept Price Oct Price Price Change (%) Sept Oct Beverages Cocoa $/kg Coffee, arabica $/kg Coffee, robusta $/kg Tea, auctions (3) avg. $/kg Tea, Colombo auctions $/kg Tea, Kolkata auctions $/kg Tea, Mombasa auctions $/kg Global Commodity Prices (contd.) Source: World Bank, RTC Research Grains: Jan.- Oct Grain: % Change in Prices, Feb.-Oct Jan Feb Mar Apr May Jun Jul Aug Sept Oct Wheat - US No1 HRW Wheat - US No2 SRW Maize - US Yellow No2 Maize - CBOT Dec Futures Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. Wheat US HRW Wheat CBOT SRW Maize US Yellow No 2 fob Maize CBOT Dec Futures 1550 Oil Seeds & Oils: Jan. - Oct Oil Seeds & Oils: % Change in Prices, Feb.- Oct Soybeans 5.00 Soybean Oil Palm Oil 0.00 Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. Soybean Meal Groundnut Oil Jan Feb Mar Apr May Jun Jul Aug Sept Oct Global Commodity Prices (contd.) Soybeans Soybean Oil Palm Oil Soybean Meal Groundnut Oil 29

30 $/Tonne $/KG $/Tonne 11/9/2015 Sugar: Jan.- Oct Sugar: % Change in Prices, Feb.-Oct EU Domestic US Domestic World Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. EU Domestic US Domestic World Jan Feb Mar Apr May Jun Jul Aug Sept Oct , , , , , , Milk & Dairy: Jan. - Oct Jan Feb Mar Apr May Jun Jul Aug Sept Oct Global Commodity Prices (contd.) Butter Skim Milk Powder Whole Milk Powder Chedder Cheese Milk & Dairy: % Change in Prices, Feb.-Oct Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. Butter Skim Milk powder Whole milk powder Cheddar Cheese Meat: Jan - Oct Meat: % Change in Prices, Feb.-Oct Jan Feb Mar Apr May Jun Jul Aug Sept Oct Beef Chicken Sheep Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. Beef Chicken Sheep 1,850 1,800 1,750 1,700 1,650 1,600 1,550 1,500 1,450 1,400 1,350 Aluminium: Jan - Oct Aluminum: % Change in Price, Feb. - Oct Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct Jan Feb Mar Apr May Jun Jul Aug Sept Oct Global Commodity Prices (contd.) 30

31 Growth Rate (%) 11/9/ US Real GDP Growth: Q Q % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Q Real GDP Growth: United Kingdom and United States Unemployment: United States & United Kingdom Source: BLS & ONS 31

32 Nigeria Outlook and Projections: RTC Advisory Services Ltd October/November 2015 S/N Indicator Global GDP Growth Rate (%) Nigeria Real GDP Growth Rate (%) Real GDP (N Million) 67,152, ,831, ,896, ,377, ,313, Nominal GDP (N Million) 89,043, ,495, ,507, ,046, ,609, Nominal GDP ($ Million) 561, , , , , Per Capita GDP (N) 497, , , , , Per Capita GDP ($) 3, , , , , Crude Oil Production (mbd) 9. Inflation Rate (%) months Av Year End Selected Macroeconomic and Social Projections:

33 s/n Indicator Exchange Rate (N/$)-Average 11. Exchange Rate (N/$)-Year End Avg. Official/IFEM Avg. BDC Avg. Parallel Mkt. Transfer Selected Macroeconomic and Social Projections: (contd.) Official/IFEM BDC Parallel Mkt. Transfer Population (millions) Population Growth Rate (%) Unemployment Rate (%) Under employment (%) Poverty Incidence (%) Manufacturing Capacity Utilisation (%) PLR (%) MLR (%) Implications for Business RTC Advisory Services Ltd October/November

34 The constitution of the federal cabinet by President Muhammadu Buhari may hopefully lead to emergence of clearer policy direction from Abuja, though the markets now expect the impact in The new government may be quickly realising that campaiging differs from governing; and they will have to take tough decisions in the weeks ahead. The recent payment by government of over N400bn in arrears of subsidy claims, in spite of the president s previous doubts on existence of a real subsidy confirms that economic reality cannot be defied indefinitely! That confrontation with realism may soon extend to the continuation of the subsidy scheme, currency values and other spheres. Implications for Business Markets and investors are worried about emerging signals from regulators, stoking fears of an anti-business posture, as well as deployment of regulatory powers for revenue generation in the face of declining budget allocations. It is hoped that the MTN fine, in particular will be reduced to a more rational figure so that regulatory caprice will not be an additional disincentive to investing in Nigeria! Virtually all macroeconomic and fiscal indices are trending negativeinflation, growth, capital markets, exchange rates, foreign reserves, trade volumes, oil prices and financial sector performance confirming the adverse economic direction. Outlook for growth in 2016 is weak and several key sectors (oil and gas, manufacturing and government) are already in recession while most others have experienced sharp slowdowns. Implications for Business (contd.) 34

35 RTC has established a Nigeria Recession Watch which is incorporated in this report, to track sectoral growth data and overall GDP growth trends to enable markets anticipate economic direction and implications. We expect Q growth to be below 2%. Unfortunately the Nigerian economy may not expect any great relief from external economic conditions-global output growth is muted; oil prices remain below or around $50 per barrel; and foreign investors are backing away from the country due to concerns over Naira value. RTC s selected macro projections for 2016 and beyond are included in this report, and are subject to revision until February Implications for Business (contd.) Conclusions RTC Advisory Services Ltd October/November

36 Nigerians and the international community eagerly await direction from the cabinet expected in two or so days time. The appointees have their work cut out and will have little time to celebrate their preferment! The imperative now is to quickly define the government s priorities and strategies and commence execution to revive the very positive sentiments that heralded the president s inauguration in May. Conclusions MEDIFE House, 5 th Floor 58/60 Broad Street, Lagos, Nigeria opeyemiagbaje@rtcadvisory.com kehindeayanbadejo@rtcadvisory.com , mojibolaakanbi@rtcadvisory.com Contact RTC Advisory Services Ltd 36