nigeria at crossroads economic...flight frequency into nigeria politics south africa 5.75 5.3 zenith...
TRANSCRIPT
Monthly Economic News and Views
at Lagos Business School
Executive Breakfast Meeting
February 4, 2015
Nigeria at Crossroads Stability or Change – Which do you Prefer??
Presented by B.J. Rewane
Financial Derivatives Company Limited
Financial Derivatives Company Limited
2
Outline - Election Fever, Oil Price Recovery, Naira Flat
What We Said on January 28
The World in 2 Weeks
Commodities
Domestic Economy
Capital Markets
Policy Direction
Political Update
Outlook
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On January 28 We Said…
Oil price declined to $46.59pb
A 5½ year low
Cumulative 8 week drop of 35%
Worldwide rig count is 3570 of which 100 are idle
Idle rigs have increased from 70 to 100 since December
Active rigs in Nigeria down by 1 to 18 in December
Global commodities index (BCOM) down by 19.7% YTD
Oil is 48% of the weight
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On January 28 We Said…
Nigeria’s broad money supply increased 7.29%, as against
annual target of 15%
Power output from the grid is up marginally at 3700MW
Retailers’ inventory levels down to 5 weeks from 12-week
levels
Destocking after consumer resistance to price increase
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On January 28 We Said…
Naira depreciated below the psychological resistance of
N200/$, testing the N210 level
Spread between the parallel & official markets increased
to N42 or 20%
Stock market after adjusting for devaluation is down
15.48% in 2015
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Update on Oil Shocks
Exports down 12.3% to $78.2bn
Imports sticky at $50.7bn
Revenue down 45%
Reserves down 20.85% Y-o-Y
FDI down 17.9%
0
20
40
60
80
100
120
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Imports ($'bn) Exports ($'bn) Trade balance ($'bn)
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What We Forecast…
J.P Morgan forecast for oil
Q1: $42pb
Q2: $43pb
Average 2015: $49pb
Long term recovery in 2019
Naira to trade at N195/$ at the interbank
N205/$ – N210/$ at the parallel market
NOPs will be increased to 1%
Stock market will remain flat to down through February
Commodity prices will slip
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What We Forecast…
Inflation will inch up to 9% in February
Banks will announce capital raising plans
Fiscal deficit will widen
There will be a complete change of guards at Abuja
External reserves will deplete to $33bn
The policy direction, pace and enforcement will be more
defensive
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US - Q4 GDP Growth Misses Mark
Lower oil prices boosted consumer
spending
Govt spending slowed by 7.5%
Stronger dollar estimated to have
lowered growth by a whole
percentage point
Export growth slowed to 2.8%
from 4.5% in Q3’14
Import growth surged to 8.9% from
-0.9% in Q3’14
US GDP grew by 2.6% in Q4’14
Lower than the 3.2% growth
expected
Lower than 5.0% recorded in
Q3’14
2.7
1.8
4.5
3.5
-2.1
4.6 5.0
2.6
-3
-2
-1
0
1
2
3
4
5
6
1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014
Source: Commerce Department
10
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US - Inflation is Down-Fed is Watching
Consumer Price Inflation (CPI) down to 0.8% in December
Biggest 1-month decline in 6 years
Pulled down by plunging energy costs
Makes the timing of an interest rate increase tricky
Evidence of firmer inflation needed before change of stance
CPI has been below the Fed’s 2% target since April 2012
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Europe
Euro down 6.6% to 1.13/$ so far in 2015
Swiss Central Bank’s decision to end currency ceiling
continues to send shockwaves
European banks have issued profit warnings
Major forex trading firms have been adversely hit
Alpari has declared bankruptcy
Swiss franc-denominated mortgage payments have soared
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China
China grew by 7.4% in 2014 - Slowest pace since 1990
China willing to accept slower growth in a bid to:
Shift to a growth path that makes investment less reliant on
credit that has fuelled a property boom
Lift the living standards of the burgeoning middle-class
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Sub-Saharan Africa – Peer Comparison
Source: FDC Research, Bloomberg, Trading Economics
Country
Policy
Direction
(% p.a.)
Inflation
Rate (%) Nigerian
Banks
Flight
Frequency
into Nigeria Politics
South
Africa 5.75 5.3 Zenith 15
Recent presidential
election in May.’14 ,
Election held every 5
years
Angola 9 7.48 Skye 3
Last Presidential election
was in August 2012.
Elections are held every
4 years
Kenya 8.5 5.53 Ecobank, GTB,
UBA 10
Last presidential election
was in December 2013.
elections are held every
5 years
Ghana 21 17
Access,
Ecobank, FBN,
GTB, UBA,
Zenith
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Recent presidential
election in Dec.’12
Elections held every 4
years
Com
mod
itie
s
Oil prices gain momentum
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Oil Prices Gain Momentum
The Bloomberg Commodity Index (BCOM) is up by 0.57%
week-on-week
But still down by19.8% YTD
Oil price rebounded on signs of output cut by US
producers
US demand for leasing oil rigs is slowing
90 rigs idled in the US in the past week
US rig count now down to 1,543
Brent oil price up by 20.25% to $57.91pb from $48.16pb
Grain prices still on a decline due to global glut
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Commodity
Weekly Change
(Jan. 26 – Feb. 3) Y-o-Y Change
Energy
Brent 20.25% -46.35%
WTI 17.5% -41.54%
Natural Gas -4.51% -36.02%
Grains
Corn 0.46% -10.63%
Wheat -1.30% -9.71%
Rough Rice -4.59% -26.15%
Soft
Sugar -5.73% -7.12%
Cocoa -1.68% -0.41%
Oil Seeds
Palm Oil -1.58% -23.06%
Source: Bloomberg, Reuters, FDC Research
Non-Oil Commodity Prices trend Downwards
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Oil Surge - Bloomberg’s View
Recent oil price surge: an industry in despair
Oil rigs idled now 352 in past 8 weeks
BP to reduce spending to $20bn this year compared to
$26bn previously planned
How low can prices go and still sustain the US oil boom?
History of oil prices follow a golden rule:
What goes down must come up
Eventually supply will shrink and prices will rise again
Domestic Economic Performance
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Source: EIU, EIA , OPEC, CBN, FDC Research , (* FDC’s forecasts)
Leading Economic Indicators (LEI’s)
Indicators December January % Change February
Oil Price ($’pb) 45.13 57.91 28.32 55
Exchange Rate (N/$ - Inter-
bank)
186.10 192 2.79 195
Inflation Rate (% - ave) 8.0 *8.3 0.30 9.14
MPR(% p.a.) 13 13 - 13
External Reserves ($’bn) 34.47 34.46 0.03 32
NSE ASI (% change) 0.33 14.07 -14.4 -10
Market Cap (N’trn) 11.48 9.85 14.2 9.00
Vacancy Factor VI (Residential
vs. Commercial)
31%: 13% 32%:17% - -
Vacancy Factor Ikoyi
(Residential vs Commercial)
9%:2% 11%: 3% - -
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Declining Growth Trajectory
Q4’14 to come in slightly lower than in Q3’14
Due to macro headwinds
Finance minister estimated negative impact from north east insecurity at 0.05% annually
Further decline expected in Q1’14 due to planting
Sharp drop in PMI to 56.4 in January
Down from 60.4 in December 2014
Reduced confirmation lines of credit
After a Nov-Dec pile up
Inventories are being drawn down
New inventories as replacement cost more expensive
Devaluation plus carrying cost
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Oil Prices up, External Reserves down
Global oil prices rebound on signs of output cuts in the US
Brent crude currently up 28.32% YTD at $57.91pb
From a low of $45.13pb in January
Have oil prices bottomed out?
Or is there a new floor?
Average of $50-55pb expected in February
$1.74bn was sold at the RDAS in January compared to $1.21bn in December
Due to fewer auction days in December
External reserves is down by 0.61% to $34.28bn
$32bn expected in March
5.10 months of imports and payments Source: CBN, FDC Research
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Oil Prices up, External Reserves down
Source: CBN, FDC Research
30.00
32.00
34.00
36.00
38.00
40.00
42.00
44.00
46.00
48.00
50.00
Apr May Jun Jul Aug Sep Oct Nov Dec Jan
External Reserves ($'bn)
2013 2014
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Naira Remains Under Pressure
Naira trading at record low of N210/$ at the parallel market
Depreciated by 16.17% (y-o-y) at interbank market
Flat at N168/$ in RDAS market
Special intervention for Bureau de Change (BDCs) to increase supply
Market is inelastic
Buy! Buy!! Buy!!!
CBN introduces new policy measures
NOP increased to 0.5% from 0.1%
Submission of details on all domiciliary accounts with Banks
Independent of election outcome, the naira is expected to depreciate slightly in March
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Foreign Inflows Down in Nigeria
FDI flows into Nigeria down for the 3rd consecutive year to $4.9bn
Contrary to $704bn (4% growth) in developing economies
FPI inflows in Q2’14 slowed to $3.9bn compared to $6.5bn in Q2’13
FPI inflows in H1’14 were less than Q2’13
Foreign inflows on the NSE between January and November 2014 increased to $3.9bn from $3.14bn
Total foreign outflows in the first 11 months totalled $4.99bn, up from $2.98bn in the corresponding period of 2013
Reflecting a sell off
4.4
3.9
3.2
3.8
4.7
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2013 2014 2015 2016 2017
FDI ($'bn)
Source: EIU
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January Inflation to Spike to 8.3%
FDC forecasts an increase in
inflation to 8.3% in January
From 8% in December 2014
Impact of weaker currency,
seasonality
8.0%
7.7%
7.8%
7.9%
8.0%
8.2%
8.3%
8.5%
8.3%
8.1%
7.9%
8.0%
*8.3%
7.5%
7.7%
7.9%
8.1%
8.3%
8.5%
8.7%
Headline Inflation Rate
Source: NBS, FDC Research
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Liquidity Drives Interest Rates Down
Annualized money supply (M2)
increased to 7.29% in December
2014
Interest rates continue to move
in tandem with liquidity level
Average OBB & ON rates
peaked at 14.94% p.a. in the last
two weeks
No major change expected until
after elections
0
5
10
15
20
5-J
an
7-J
an
9-J
an
11-J
an
13-J
an
15-J
an
17-J
an
19-J
an
21-J
an
23-J
an
25-J
an
27-J
an
29-J
an
31-J
an
2-F
eb
OBB ON 30 90 180
Source: FMDQ, FDC Research
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Global - Policy Divergence to Continue
US Fed expected to raise interest rates later this year
MPC of Bank of England decided to keep interest rates at
record lows in a unanimous vote
Growing concerns about a long bout of low inflation
ECB announces large-scale QE
To purchase €60bn/month in assets for the next 20 months
In response to anaemic recovery and “lowflation”
Bank of Canada announces rate cut from 1% to 0.75%
Sharp drop in oil prices a threat to growth and underlying
inflation
Bank of Japan (BoJ) to employ further stimulus measures
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Domestic - New CBN Directive
The CBN issued a new directive to all deposit money
banks on the submission of domiciliary accounts details as
follows:
List of all Dom acc holders stating name, account number and
balances at 29th January 2015
Total balance of all Dom accounts as at 29th of January, 2015
List of corporate domiciliary account holders and their balances
List of individual domiciliary account holders and their balances
List of public sector institutions domiciliary account holders and
their balances
The mode of lodgement to the account for each of the above
transactions (either cash or by wire transfer)
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Implications
Apex bank concerned about high level of domiciliary
balances at average of 1% p.a.
Believes domiciliary transactions are used for round
tripping
A breach of confidentiality
Will fuel a rush of transfers to overseas banks
A fear that CBN will now seek for information on naira
accounts
Could become a tool for taxation or witch-hunting
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Global Markets……A Changing Shape
Apple vs. Samsung vs. Microsoft (Nokia)
Apple release Q4 earnings with record profit of $18bn
The I-phone company beat its rivals Samsung, Microsoft
and Google
Quarterly revenue of $74.6bn higher than combined
revenue of Google, Microsoft and Amazon - $73.9bn
Google full year revenues at $66bn
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Global Markets……A Changing Shape
Revenue Growth
Apple 30%, Google 15%, Amazon 15% and Microsoft 8%
Apple also beat its stiffest rival Samsung
Revenues down 11% to $48bn
Net income down 27% to $4.89bn
Also sold $6.5bn bonds
The future: I-watch, Apple-pay coming but Google glass
out
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Global Markets
-20% -15% -10% -5% 0% 5% 10% 15% 20%
MICEX
JALSH
FTSE 100
KNSMIDX
S & P 500
DOW
GGSECI
IBOVESPA
NSEASI
Global Indices Performance
European Central Bank (ECB) to oil markets with €60bn monthly
Appetite for risk boosted by the ECB’s action
Nigerian and Russian markets miles apart despite facing similar
challenges as oil producing nations
Vodka and Kalashnikov Vs ____________?
Russia bracing for the worst,
Reserves depleted to $388bn from $511bn in 2014
Nigeria’s reserves at $34.2bn
37
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NSE ASI – Directionless and Drifting
Free fall of equities prices flattening out
Market highly apprehensive
2 days of positive gains this week
Investors lost N1.6trn of value
Index down by 14.70% in January 2015
Pendulum movements – swinging between red and black
The struggle for direction - Fear vs. Value
26,000.00
27,500.00
29,000.00
30,500.00
32,000.00
33,500.00
35,000.00
NSE A
SI (P
oin
ts)
Jan 2015
ASI
38
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January 2015 Highlights
NSE ASI down by 14.70% to 29,562.07 points
Market capitalization down to N9.85trn from N11.48trn
Total turnover of N94.86bn against N100bn in December
Average daily turnover of N4.75bn
Rights Issue
Oando re-priced rights issue to N16.50 from N22
Access Bank launches rights offer at N6.90 against N8.90
7UP, PZ and Guinness report earnings
Revealed challenges of consumer sector
But shows resilience of leading brands
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Sectors in January
Banking and consumer stocks significantly hit
The darlings of FPIs feel the heat: NESTLE, NB, GUARANTY, ZENITH
Selling is not because of weak stocks but for liquidity reasons
Banking sector P.E of 6.49x and P/BV of 0.61x
Buying opportunities abound for the discerning
Resilience, Brand, Strategy, Performance and Market Share (Size)
-20% -15% -10% -5% 0%
Insurance
Oil & Gas
Industrial
Consumer
Banking
Sectors in January
Change %
0
10
20
30
40
50
FinancialServices
Oil & Gas Consumer Industrial
NG
N (
Billions)
Turnover
Value
40
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NSE in 2015…Bank of America (BofAML)
Bank of America sees 11% drop in corporate earnings
Due to the 30% drop in crude oil prices
Consumption and export earnings will shrink
Not okay with Flour Mills of Nigeria and Guinness
Shrinking revenues and margins
Rising cost burdens
Like NESTLE, NB and DANGCEM
Market leaders in their various industries
Reliant on local sourcing of raw materials
Consistent growth in revenues
Scale economies and high margins
BofAML sees short term risks of naira depreciation and political tensions as opportunity
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ZENITH and GUARANTY in 2015….Rencap
Zenith and Guaranty racing at the top
Zenith quite aggressive while Guaranty thrives on
efficiency
Regard each other as key competitor
Capital adequacy ratio of Zenith at 21% and GTB at 18%
Both banks expected to record good profits for 2014
Trading under their break-even Cost of Risk (COR) of
7.5% and 9%
Peak COR since 2004 of 5.2% and 7%
Rencap’s price target is N22 and N25 respectively
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Winners and Losers…..Jan 2015
OKOMU AND DANGSUGAR
gained 8.28% and 7.40%
Commodity traders
benefitting from low prices
And speculation that CBN
Forex policy would offer
advantage
No dollar at RDAS to import
locally produced goods
The Big 5 were not spared
Creating good entry
opportunities
Company Jan-15 Dec-14 Change %
Presco Plc 32.66 24.50 33.31%
P Z Cussons Nigeria Plc. 29.64 23.80 24.54%
Cutix Plc. 1.55 1.30 19.23%
Union Bank Nig.Plc. 9.50 8.50 11.76%
U A C N PLC. 37.20 34.00 9.41%
Company Jan-15 Dec-14 Change %
Diamond Bank Plc 3.58 5.58 -35.84%
Dangote Flour Mills Plc 3.00 4.55 -34.07%
Julius Berger Nig. Plc. 44.89 60.66 -26.00%
Skye Bank Plc 1.99 2.66 -25.19%
Fidelity Bank Plc 1.25 1.62 -22.84%
Company Jan-15 Dec-14 Change %
Dangote Cement Plc 156.00 200.00 -22.00%
Nigerian Brew. Plc. 142.02 165.30 -14.08%
Nestle Nigeria Plc. 800.25 1011.75 -20.90%
Guaranty Trust Bank Plc. 20.03 25.18 -20.45%
Zenith Bank Plc 16.01 18.41 -13.04%
The Most Capitalized Stocks
43
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Corporate Earnings
Company Revenue
Growth PBT Growth P.E Ratio Share Price
Growth
7UP 8.87% 14.07% 14.16x -5.68%
GUINNESS 4.76% -27.38% 21.00x -22.69%
PZ -2.47% -36.95% 27.96x 24.54%
Consumer firms facing high cost burdens and lower revenues
But leading brands seem to be maneuvering well
Guinness profits pared by exceptional item of N852mn
PBT was set to be N5.5bn
Stock prices of firms have corrected
Average sector P.E down to 32.70x from 40.82x in Dec’2014
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Outlook
The downturn in the equities market will continue
As negative sentiment would dominate
Because FY’2014 corporate earnings will be weak
Also due to political tensions as general elections
approach
Expect increased volatility at current levels
Market P.E ratio of 19.71x is a gift
February will witness a downward, choppy trend
The tussle between bargain hunters and profit takers
would intensify
NSE ASI would remain below 30,000 points
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NSE ASI in 2015
Q1
Q2
Q3
Q4
NSE ASI: Over the 4 Quarters
NSE ASI
The Rush to buy
Q1: “Weary investors”
Election fears
Crude oil prices
Weak corporate earnings
Q2: “Mixed Feeling”
Post election
Naira devaluation
Some stability
Q3: “The storm is over”
All the bad news would be out
Low and attractive price
The strong rebound is imminent
Q4: “Calm returns”
Positions taken in Q3
Profit taking
Last fools would still enter
46
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Ships Awaiting Berth Decline
Ships awaiting berth at Apapa
down to 61 in January
14.1% lower than 71 in
December
Devaluation of the currency is
affecting imports
In tandem with a lower PMI
reading
Expect an increase in March
Source: NPA, FDC Research
49
68 64
70
81 79
71
61
0
10
20
30
40
50
60
70
80
90
Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15
No of Ships Awaiting Berth
49
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Rig Count trend Downwards
US rig count down by 90 to
1,543 in January
Canada rig count down by 38
to 394
Number of active rigs in
Nigeria down to 18
From 19 in December
January figures not yet
available
1785
1543
15
18
0
2
4
6
8
10
12
14
16
18
20
0
500
1000
1500
2000
2500
US Nigeria
50
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Retail Industry Update
Beer market has grown 9.5% in 2014
Malt market grew 15%
Highest growth is in the lowest price segment
The cheaper brands are growing 10 times faster than
premium
Customers are spending less for a higher alcohol
content
Possibly due to economic blues and mood swings
Supermarket and trade outlets have grown in excess of
30%
Bar consumption is up 10%
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Retail Industry Update
Supermarkets, groceries and formal outlets account for
approximately 8% of sales of beer, malt and ready to
drink brands
Jos is fastest growing market followed by Lagos
Slowest market growth is Ibadan, growing by 3.5%
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Uncertainty surrounding upcoming UK elections gradually
began to weigh on real estate activities
UK general election is scheduled for May 7, 2015
House prices down by 1.6% and 0.9% in the North West
and South West respectively
House prices still up in London by 1.8%
Expect a rebound in general real estate activities after the
elections
Political Uncertainty affect UK Real Estate
55
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Boomerang buyers now set to re-enter the housing
market after the US real estate bubble in 2007
7-year window given to repair credit and qualify to buy a
home has passed since the foreclosure crisis
7.3 million buyers now eligible to re-enter
Recovery in the US economy is also positive for the real
estate market
US Real Estate – A Rebound Underway
56
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Supply expected to exceed demand for properties in
Dubai for the next 3 years
Projections of a 5-10% drop in property prices in 2015
Buyers seeking for more affordable options rather than
oversupplied luxury segment
Volatile energy prices and stronger dollar also causing
foreign investors to hold back on real estate investments
in Dubai
Property prices have become more expensive for foreigners as
the dollar strengthens
UAE currency, dirham, is pegged to the dollar
Slowdown Expected in Dubai Real Estate
57
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Watch Out for New Developments in Ikoyi
Purpose Dimension (Sq.
Metre)
Floors
Kingsway Towers,
Glover Road
Commercial 15, 000 15
BAT Rising Sun,
Opposite Ikoyi Club
Mixed-Use 19, 500 13 (4 floors for
office space)
Heritage Place,
Between Lugard and
Kingsway Avenue
Commercial 15,600 15 (8 floors for
office space)
Sogenal Towers,
Beside Mercedes Benz
Place
Mixed-Use 7,500 15
Office space of this standard usually cost $1,000 per sq. metre
per annum
Aviation Update
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World’s Busiest International Airport
Jo’burg, Dubai, Nairobi and Cairo are amongst the top 100 most visited cities in the world
Dubai overtakes Heathrow airport as the busiest international hub
The goal is to make Dubai a global centre of aviation
Aviation is expected to account for over a third of Emirates’ GDP by 2020
Controls a significant portion of travel between the West, Asia and Australasia
Airport traffic increased by 6.1% in 2014 to 70.47m passengers
Heathrow handled 68.1m international passengers in 2014
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World’s Busiest International Airport
Dubai's surge in traffic is due to
the massive A380 fleet at
Emirates
The airline has proven the A380
can be used anywhere in a
profitable way
A further increase is expected in
passenger traffic in 2015
Projected to reach 78.4m
Dubai's other airport, Al-
Maktoum International, opened
for passengers in 2013, and will
be handling 120m travellers
when completed in 2022
Country
(Total
Passenger
Volume)
2014
(M)
2013
(M)
2012
(M)
Heathrow 68.1 72.3 70.3
Dubai 70.5 66.4 57.6
62
0
20
40
60
80
2012 2013 2014
Heathrow Dubai
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St. Valentine’s Super Deals!!!
Lufthansa offers special deals to celebrate the season
Return fare inclusive of all taxes and fees
Lagos – London From $709
Abuja – London From $761
Port Harcourt – London From $1024
Departure period Feb 06 2015 – Mar 20 2015
Return period Feb 07 2015 – Apr 20 2015
Offer last till Mar 10, 2015
Purchase Period 3 days
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Falling Naira, Increased Fares
Preferred
Destination
Eco Class
(Dec’14) N
Eco Class
(Jan’15) N
%
Change
Biz Class
(Dec’14 N)
Biz Class
(Jan’15) N
%
Change
London 447,720 524,160 17.07% 690,440 803,320 16.35%
New York 561,044 656,832 17.07% 705,036 825,408 17.07%
Atlanta 441,160 516,480 17.07% 941,524 1,102,272 17.07%
Dubai 213,120 182,040 -14.58% 528,080 618,240 17.07%
Johannesburg 301,760 353,280 17.07% 499,200 426,400 -14.58%
Economy class down for Dubai due to price war between
Emirates and Arik
Political Risk Analysis
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Political Update
Jonathan
“I will do better in my second term”
Believes continuity will allow for stability in the economy
PDP using all sorts to fight back
Election postponement
Interim government
Presidential debate
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Political Update
Buhari
“$20bn missing money equivalent to Nigeria’s budget”
Could provide 840,000 patrol vehicles and 13,000MW of
power
Believes in continuity unless you are already at the edge
of a cliff
Suspicious of the elite and compromise of principles
Altercations between Ngozi and Soludo throws up questions
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Political Update
Post-Election
Policies to remain the same
Economic damage is significant
Even the best of minds will have a hard time
The crisis of false expectations will become real
Could be a case of a pyrrhic victory
Post election violence is imminent
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The Race Narrows – So Near Yet So Far
The APC momentum and surge is growing at a slower pace
The PDP is fighting back big time
Both parties are consolidating and energising their base
The PDP can forget the North West & North East
North Central is a battleground
The APC can forget the South East but will get the 25% in
South/South
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Political Update
South West has the population, demography and
sophistication to be a swing zone
Osinbajo on the ticket makes it attractive to ethnocentric
Yorubas
Buhari has avoided a debate
Message is becoming clearer and is connecting
Focusing on rallies and town hall meetings
Jonathan is working tirelessly to showcase his track record
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Deciding Factors
Exchange rate depreciation to N210 is a kiss of death
Boko Haram insurgency has become a nuisance to the PDP
Missing Chibok girls is another black eye
Oil price recovery to $57pb is great news for the PDP
The CBN defence of the naira is helping the President
Power supply unreliability is a PDP liability
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Deciding Factors
Buhari’s ambiguity on economic reform is unsettling to the
international market
Embracing reform which is guided by economic patriotism
may douse fears
Both candidates appears numerophobic
Crisp numbers and charts are appealing to the under 30s
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Likely Outcomes
An announced PDP landslide victory
A narrow victory for the APC with a run off
A dual result, Ivory Coast model
Election postponement
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External Views - Eurasia Group
Short term trajectory : Negative
Long term : Neutral
Economic management would improve under Buhari
But oil production would be more at risk
A second Jonathan term would bring broad policy
continuity
But in an environment that will sharply limit the scope
for economic reform
Amidst a deteriorating security environment
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External Views - Eurasia Group
A Buhari win offers more upside potential
On austerity and anti corruption
Security risks in the Delta region
A potential to impact oil production would be higher under
his administration
Independent of who wins the February 14 election, the
aftermath will be marked by considerable uncertainty
and unrest through March
Outlook
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Outlook for February
J.P Morgan forecast for oil
Q1: $42pb
Q2: $43pb
Average 2015: $49pb
Long term recovery in 2019
Naira to trade at N195/$ at the interbank
N205/$ – N210/$ at the parallel market
NOPs will be increased to 1%
Stock market will remain flat to down through February
Commodity prices will slip
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Outlook for February
Inflation will inch up to 9%
Banks will announce capital raising plans
No matter the election outcome
There will be a complete change of guards at Abuja
The policy direction, pace and enforcement will be more
defensive
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Corporate Humour
80
Charles Wadsworth -
Women are like the police. They could have
all the evidence in the world, but still want
the confession.
- Chris Rock
By the time a man realizes that maybe his
father was right, he usually has a son who
thinks he is wrong.
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Corporate Humour
81
Only your real friends will tell you when your
face is dirty.
Spend the afternoon. You can’t take it with
you.
- Sicilan Proverb
Annie Dillard -
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Corporate Humour
82
It is called Rap music because the C fell off the
printer.
A homeless musician is one without a
girlfriend.
- Allan Bease
Anonymous -
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Bismarck J. Rewane, MD/CEO Financial Derivatives Company Ltd.
Lagos, Nigeria 01-7739889