macroafricaintel | The experience of businesses in Nigeria during the 2015-16 FX scarcity (1)  

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Adapt or leave
Even as most firms found it difficult to adapt to the hitherto foreign exchange (FX) scarcity in Nigeria – eased in June 2016 after the Nigerian central bank floated the naira – others embraced it by adopting innovative strategies to remain in business. Shoprite, a South African grocer, advertised in April 2016, asking Nigerian manufacturers to supply specific consumer goods – it used to import these items. As the sale of FX for the importation of some of its fast moving consumer goods had been banned in the official FX market, the retailer needed to seek local alternatives. There were concerns about quality. Even so, it was the grocer’s brand that assured customers, not where the goods came from. Some South African firms – Truworths and Clover for example – chose to leave the country instead. Their business models, it turned out, were not really adaptable to the new economic realities. As they imported goods cheaply from their home country, Nigeria’s then fixed and overvalued exchange rate almost always guaranteed them a positive FX return and sometimes made up for the occasional negative or meagre margins on goods sold. In spite of the tough economic environment – which remains challenging even after the naira was allowed to trade freely in June 2016 – Pick ‘n’ Pay, another major South African retailer, announced plans in April 2016 to set up shop in Nigeria, evidence it considered the long-term prospects of the country to be still attractive. A view echoed no less by Rich Lesser, global chief executive at Boston Consulting Group, a consultancy, at a July 2016 CEO conference by BusinessDay – the leading business daily in Nigeria.

Take short-term losses for long-term gain
Some firms needed to import certain inputs. So, local alternatives could not be sought in their case. Regardless, almost all the major firms were forced to source foreign exchange from the parallel (unofficial or ‘black’) market at a premium of at least 50 percent on the then official US dollar rate of about 200 naira. The views of key executives in Nigeria’s manufacturing sector during that testing period are instructive. They sourced foreign exchange from wherever they could get it, at twice the official rate sometimes. Unfunded clean letters of credit, asking for favourable payment terms from suppliers, and adopting an export focus to generate FX were some of the strategies adopted by Seven-Up Bottling Company Plc, manufacturers of PepsiCo’s products in Nigeria, chief executive Sunil Sawhney says. He was not alone. In a trading update reported by Bloomberg in April 2016, PZ Cussons Plc – makers of the Imperial Leather soap brand in Nigeria – availed investors of its own experience: it did not get as much hard currency as it needed for its operations. And even when it did, it had to pay a premium of 50-70 percent. Inevitably, the much higher blended costs of foreign exchange from these alternative sources were passed on to consumers – not in all cases, according to Mr Sawhney; never mind that his company’s suppliers were able to pass on the increased costs. PZ Cussons was able to transfer some of the costs, however: it made changes to the prices of those products that were elastic – typically the high-end ones – while maintaining the prices of its mass market segment products, the sales of which tend to be extremely sensitive to price changes. Even so, an executive at a competing manufacturer, Unilever Plc, did not hide his frustration. Unilever’s Africa president, Bruno Witvoet, was blunt in an interview reported by Bloomberg in March 2016: “It would be very insane to continue like this for months and months.” Regardless, some firms managed to cope. Nestle, a global foods and beverage manufacturer, for instance. What Nestle did was to widen the number of banks it sourced foreign exchange from – a practice that became widespread amongst other multinational firms thereafter, limiting effectiveness. Additional investments by Nestle – it opened a US$28 million (5.6 billion naira) water factory in mid-April 2016 – amid the myriad of uncertainties at the time, is proof it still saw tremendous potential in the country. Despite the challenges, Unilever continued to make additional investments as well, investing over US$150 million in recent years on its brands and facilities. On why Unilever remained bullish on the country’s prospects despite the obvious constraints, Mr Witvoet put it this way: “Nigeria has a lot of opportunity.” This was the dominant sentiment of managers at multinational companies that endured those challenging times. Since they were in Nigeria for the long-run, they chose to brave the challenges, albeit their pain thresholds were severely tested. Positive measures by the central bank from June 2016 onwards – in addition to floating the naira, the Central Bank of Nigeria (CBN) also cleared pending FX purchase orders of about US$4 billion via spot and forward settlements – were a vindication of their resilience.

Adapted from a paper by the author in July 2016 for the NTU-SBF Centre for African Studies at Nanyang Business School, Singapore

#Africa #Markets | 19 Oct

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Global Markets

  • Asia shares losses as China’s steps help Shanghai recover
  • MSCI Asia ex-Japan up 0.05 pct
  • China shares see-saw on growth worry, regulator support pledges
  • Japan’s Nikkei off 0.7 pct
  • Trade disputes, rising US rates, Italy budget weigh

Oil Markets

  • Oil prices edge up, but set for weekly loss on stock build, trade row
  • Brent crude futures up 0.4 pct at $79.63 a barrel (0124GMT)
  • US WTI crude futures up 0.4 pct at $68.92 a barrel

Precious metals

  • Gold edges higher as Asian shares slip
  • Spot gold up 0.2 pct at $1,227.31 an ounce (0107GMT)
  • US gold futures little changed at $1,230.60 an ounce

Grains

  • Soybeans edge higher, set for biggest weekly loss in 5 weeks
  • Most active CBOT wheat futures unchanged at $5.13 per bushel (0058GMT)
  • Most active corn futures down 0.3 pct at $3.69-3/4 per bushel
  • Most active soy futures up 0.1 pct at $8.64-1/4 per bushel
  • Most active rice futures unchanged at $10.96 per hundredweight

Key African events or data releases today
[Posts & comments at my Twitter handle @DrRafiqRaji]

  • Namibia’s Geingob in Kenya today for state visit
  • South Africa presidential health summit today; Ramaphosa ill, Mabuza attending instead

Key African events or data releases yesterday & early a.m today
[Posted & commented on some headlines below at my Twitter handle @DrRafiqRaji]

  • Bank of Kigali prices its cash call at 270 francs per share
  • Feature – Can a hungry Mali turn rice technology into “white gold”?
  • Morocco sees govt budget deficit narrowing to 3.3pct in 2019
  • Benin businessman sentenced in absentia to 20 years for drug trafficking
  • Tribe of slain Libya rebel commander protests at eastern oil port
  • Algeria bans wearing of full-face veils at work
  • Rwanda president appoints new foreign, defense ministers in reshuffle
  • Nigeria plans to cut 2019 budget and lower debt to boost revenues – budget minister
  • Ghana sells 988.7 mln cedis ($203.6 mln) domestic bonds at 19.5 pct yield
  • African Crude – Nigerian December crude loading programmes emerge
  • Tanzania charges Acacia subsidiaries with tax evasion, corruption
  • South Africa’s rand softer after US Fed’s minutes; stocks fall
  • Egypt accuses 3 oil executives of embezzling nearly $1 bln – agency
  • Water, power supplies cut off on strife-torn Comoros island – residents
  • Investec asset management buys stake in South African school firm
  • Ethiopia’s PM says soldiers who marched on palace sought to ‘abort reforms’
  • Egypt prosecutor refers 3 oil industry execs for trial for alleged corruption – judicial source
  • Mauritius bourse looks to entice African issuers with new index
  • Creditor seeks to wind up Kenya’s Uchumi Supermarkets over debt
  • Afreximbank loans Zimbabwe $500 million as dollar crisis worsens
  • Russia may use National Wealth Fund to finance Egypt nuclear plant: Siluanov
  • Former Sudan president Suwar al-Dahab dies in Riyadh – SUNA
  • Ethiopia soldiers who marched on palace wanted to abort reforms – PM
  • Uganda shilling firms amid sell-off in interbank
  • South Africa poised to adopt plan to boost local car industry suppliers
  • Nigeria extends crude-for-product swaps until June 2019 – sources
  • Ethiopia’s FX reserves rise 30 pct after falling to ‘alarming’ levels – PM
  • New Age appraisal well in Cameroon’s Etinde field strikes gas, oil
  • Hoegh Gallant LNG carrier leaves Egypt, sets US destination
  • South Africa’s Old Mutual sells all 5.5 mln shares in Nedbank
  • Tax byte: Africans fear trend towards levies on data, services
  • South African retailer Mr Price says CEO to retire by year-end

N.B. Full stories of above headlines are available on Reuters

#Global #Markets | 19 Oct

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

(GMT+1)

CALENDAR
07:35 Japan BoJ Gov Kuroda Speech 
09:00 Euro Area Euro-South Korea Summit 
13:30 Canada Core Inflation Rate YoY 
13:30 Canada Inflation Rate MoM 
13:30 Canada Retail Sales MoM 
13:30 Canada Inflation Rate YoY 
14:00 US Fed Kaplan Speech 
15:00 US Existing Home Sales MoM 
15:00 US Existing Home Sales 
15:00 Brazil Business Confidence 
16:30 UK BoE Gov Carney Speech 
17:00 US Fed Bostic Speech 
02:30 China House Price Index YoY 
16:30 US Fed Bostic Speech
NEWS
Dutch Personal Spending Rises the Least in 3 Months 
Dutch Consumer Morale Weakest in Over 2 Years 
China Economy Expands 1.6% QoQ in Q3 
China Retail Sales Rise the Most in 5 Months 
China Industrial Output Rises the Least in 31 Months 
China Fixed Asset Investment Growth Beats Estimates 
Japan Inflation Rate Edges Down to 1.2% YoY 
Moody’s Places Costa Rica Rating on Review for Downgrade 
Jamaica Inflation Rate Jumps to 7-Month High 
New Zealand Tourist Arrivals Climb 2.1% YoY 
Chile Raises Interest Rate to 2.75% 
US Stocks Plunge on Thursday 
Colombia Trade Deficit Narrows 3% YoY in August 
Colombia Imports Rise 9.3% YoY in August

Source: Trading Economics, Macroafricaintel Research

#Africa #Markets | 18 Oct

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Global Markets

  • Asia stocks falter as China knocked by renewed trade war fears
  • Asian shares down; Chinese mainland stocks tumble
  • Treasury yields, dollar up after Fed minutes; Wall St stocks drop
  • Sept FOMC minutes show Fed united on rate hikes
  • US report doesn’t label China as currency manipulator
  • WTI crude dips below $70/bbl after large stock build

Oil Markets

  • Oil steadies amid Saudi tensions after plunge on jump in US stockpiles
  • US crude stocks up 6.5 mln bbls in fourth weekly build – EIA
  • US crude production dips to below 11 mln bpd
  • Fall in Iran oil exports helps support prices
  • Brent crude futures down 0.1 pct at $80.00 a barrel (0650GMT)
  • US WTI intermediate crude futures up 1 cent at $69.76 a barrel

Precious metals

  • Gold holds tight range as dollar firms, stocks ease
  • Spot gold up 0.1 pct at $1,223.78 an ounce (0403GMT)
  • US gold futures flat at $1,226.90 an ounce

Grains

  • Soybean prices edge down as US harvest pace picks up
  • Most active CBOT wheat futures down 0.4 pct at $5.15-1/4 per bushel (0009GMT)
  • Most active corn futures down 0.4 pct at $3.72-3/4 per bushel
  • Most active soy futures down 0.3 pct at $8.83 per bushel
  • Most active rice futures unchanged at $10.96 per hundredweight

Key African events or data releases today
[Posts & comments at my Twitter handle @DrRafiqRaji]

  • South Africa mining production data for Aug-18 expected [fcst. -10.2% yy, prev. -5.2%]
  • Final day for Nigerian political parties to submit list of candidates to electoral agency

Key African events or data releases yesterday & early a.m today
[Posted & commented on some headlines below at my Twitter handle @DrRafiqRaji]

  • Hoegh Gallant LNG carrier leaves Egypt, sets US destination
  • South Africa’s rand retreats due to hawkish Fed, mining data ahead
  • South Africa’s Old Mutual sells all 5.5 mln shares in Nedbank
  • Tax byte: Africans fear trend towards levies on data, services
  • South African retailer Mr Price says CEO to retire by year-end
  • Wooing investors, Rwanda hosts first tantalum-tracking blockchain
  • Germany’s Voith to supply more turbines for Ethiopia’s Renaissance Dam
  • Congo’s ebola outbreak to worsen without stepped-up response – WHO committee
  • South Africa’s Ramaphosa orders inquiry at $142 bln state pension fund
  • Zambia’s finance minister says new mining taxes will not hit operations
  • Tanzania charges Acacia subsidiaries with tax evasion, corruption
  • Steinhoff’s investors to suspend legal battle as firm recovers
  • Morocco trade deficit expands by 8.2 pct Jan-Sept
  • Africa Crude – Offers for Nigerian edge up, buyers await Dec programmes
  • South African riots over poor services, poverty hit record in 2018
  • Nigeria central bank, MTN getting closer to settlement – minister
  • Congo accuses Angola of violent expulsions, Luanda denies
  • Troops kill two amid unrest in Comoros over constitutional change
  • Nigerian politician Ibori loses appeal against UK graft conviction
  • Congo summons Angola ambassador following expulsion of migrants
  • Egypt resumes restoration of historic al-Zahir Baybars mosque
  • Nigerian Senate backs $2.79 bln eurobond issue, warns of debt overhang
  • Buy a blender online in Mogadishu? E-commerce comes to Somalia
  • About a thousand workers protest over pay at South African arms maker Denel
  • Acacia Mining says another employee arrested by Tanzania anti-corruption body
  • South Africa’s retail sales jump 2.5 pct y/y as spending on consumer goods rises
  • Zika in Africa: Rare birth defect on the rise in Angola
  • Nigeria state oil company denies existence of $3.5 bln fuel subsidy fund
  • Ugandan shilling unchanged, commodity flows offer support
  • Workers strike over pay at South African arms dealer Denel
  • Egypt plans to issue international sovereign sukuk in 2019-2020
  • Danone quarterly sales growth slows on weak China, Morocco boycott
  • Insight – How Russia moved into Central Africa
  • South African pharmacy group Dis-Chem HY profit uip as market share increases

N.B. Full stories of above headlines are available on Reuters

#Global #Markets | 18 Oct

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

(GMT+1)

CALENDAR
05:30 Netherlands Unemployment Rate 
07:00 Switzerland Balance of Trade 
09:30 UK Retail Sales ex Fuel MoM 
09:30 UK Retail Sales ex Fuel YoY 
09:30 UK Retail Sales YoY 
09:30 UK Retail Sales MoM 
13:30 US Philadelphia Fed Manufacturing Index 
14:00 US Fed Bullard Speech 
17:15 US Fed Quarles Speech 
00:30 Japan Core Inflation Rate YoY 
00:30 Japan Inflation Rate YoY 
03:00 China Fixed Asset Investment (YTD) YoY 
03:00 China Industrial Production YoY 
03:00 China Retail Sales YoY
NEWS
South Korea Leaves Monetary Policy Unchanged 
Australia Jobless Rate Falls to 6-1/2-Year Low of 5% 
Japan Import Growth Slows 
Japan Trade Surplus Narrows in September 
Argentina Inflation Rate Jumps to 6.5% MoM 
Further and Gradual Rate Hikes Likely to Continue 
European Shares Fall on Wednesday 
Colombia Retail Sales Rise 5.5% YoY in August 
Panama Economic Growth at 4-Month High of 3.37% 
Colombia Manufacturing Output Growth at 4-Month High 
Ghana Economy Grows 5.4% YoY in Q2 
US Crude Oil Stocks Above Forecasts 
US Stocks Trade Lower 
Russia Retail Sales Rise the Least in 6 Months

Source: Trading Economics, Macroafricaintel Research

#Africa #Markets | 17 Oct

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Global Markets

  • Asia shares ride Wall St bounce, China muted
  • Nikkei up more than 1 pct, but China stocks lag
  • Netflix surges on strong results, lifts FANG sector
  • Dollar mixed as risk sentiment favours emerging markets

Oil Markets

  • Oil prices edge up on surprise drawdown in US crude stockpiles
  • Brent crude futures up 0.4 pct at $81.77 a barrel (0007GMT)
  • US WTI crude futures up 0.5 pct at $72.27 a barrel

Precious metals

  • Gold prices hold steady as investors wait for Fed minutes
  • Spot gold up 0.1 pct at $1,224.70 an ounce (0100GMT)
  • US gold futures down 0.2 pct at $1,228.30 an ounce

Grains

  • Soybean prices extend losses as US harvest pace expected to pick up
  • Most active CBOT wheat futures down 0.1 pct at $5.23 per bushel (0042GMT)
  • Most active corn futures down 0.1 pct at $3.75 per bushel
  • Most active soy futures down 0.1 pct at $8.83-3/4 per bushel
  • Most active rice futures down 0.1 pct at $10.87 per hundredweight

Key African events or data releases today
[Posts & comments at my Twitter handle @DrRafiqRaji]

  • South Africa retail sales data for Aug-18 due [fcst. -0.7% yy, prev. 1.3%]
  • Zimbabwe electoral violence inquiry to continue public hearings; after launch yesterday

Key African events or data releases yesterday & early a.m today
[Posted & commented on some headlines below at my Twitter handle @DrRafiqRaji]

  • Soccer-Madagascar seals first ever Nations Cup berth along with Egypt, Tunisia
  • Congo signs deal for $14 bln Inga hydroelectric project
  • Congo condemns Angola for violent crackdown on migrants
  • Moroccos’s BCP bank seals acquisition of Mauritius unit of France’s BPCE
  • Nigerian midwife killed by militants is mourned, Red Cross says it refused to pay ransom
  • Nigeria’s Senate to probe alleged $3.5 bln NNPC fuel subsidy fund
  • ICRC names abducted midwife killed in Nigeria
  • South Africa’s Solidarity union to strike at state-owned defence firm over pay
  • Ethiopia creates ‘Peace Ministry’ to tackle violence in sweeping reshuffle
  • Inquiry report urges South Africa’s Ramaphosa to fire suspended tax head
  • Plate of beans too costly for some as conflict sends food costs rocketing
  • South Africa’s Treasury says recession, falling revenue hurt public finances
  • Cameroon court hears calls for “irregular” election to be anulled
  • South Africa’s rand firms as investors chase riskier assets, stocks up
  • African Crude – Angolan exports to dip; Nigerian weaker
  • At least seven killed in train derailment in Morocco
  • Inquiry into Libyan rebel’s killing threatens to open old wounds
  • Botswana’s bourse threatens to delist Choppies over results delay
  • US military says 60 al Shabaab militants killed in Somalia air strike
  • Zambian power firm CEC divests from telecoms business
  • Parts of troubled Libya get 4G telecoms service
  • New South African finance minister to keep policy direction intact – Moody’s
  • Algeria hopes to have energy law ready by first half of 2019 – Sonatrach CEO
  • Case of slain Libyan rebel commander threatens to open old wounds
  • Zambian mining group says tax changes will hit mineral exploration
  • Kremlin to discuss resumption of flights from Russia to Egypt’s Red Sea resorts
  • Wooing investors, Rwanda hosts first tantalum-tracking blockchain
  • Ethiopian Airlines to resume flights to Mogadishu next month
  • Uganda says landslide death toll rises to 43, begins relocations
  • Moody’s ratings review of South Africa to come after next week’s budget – Treasury
  • Kenyan shilling firm on investor inflows
  • Egypt’s petroleum minister says LNG vessel to leave before weekend
  • Recession, falling revenue dent South Africa’s public finances – Treasury
  • Egypt’s foreign reserves sufficient to cover imports for 9 mths – statement
  • Ethiopia’s PM names Ahmed Shide as new finance minister
  • Egypt says agrees $3 bln financing deal with World Bank
  • South Africa’s Pick n Pay H1 profit jumps 19 pct as price cuts lure buyers

N.B. Full stories of above headlines are available on Reuters

#Global #Markets | 17 Oct

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

(GMT+1)

CALENDAR
08:30 Euro Area ECB Praet Speech 
09:30 UK Inflation Rate MoM 
09:30 UK Core Inflation Rate YoY 
09:30 UK Inflation Rate YoY 
09:30 UK BoE FPC Minutes 
10:00 Euro Area Core Inflation Rate YoY Final 
10:00 Euro Area Inflation Rate MoM 
10:00 Euro Area Inflation Rate YoY Final 
10:00 Euro Area Construction Output YoY 
13:30 US Housing Starts 
13:30 US Building Permits 
13:30 US Building Permits MoM 
13:30 US Housing Starts MoM 
14:00 Russia Unemployment Rate
NEWS
Singapore NODX Rises More than Expected in September 
Australia Leading Index Falls 0.1% MoM in September 
Moody’s Changes Tunisia’s Rating Outlook to Negative 
US Stocks Surge on Tuesday 
US International Treasury Purchases Surpass Expectations 
European Shares Close Higher on Tuesday 
Colombia Consumer Confidence Weakens to 6-Month Low 
Panama Inflation Rate Slows to 4-Month Low of 0.8% 
US NAHB Housing Market Index Edges Up in October 
US Job Openings Hit Record High in August 
Canada Foreign Stock Investment at 8-Month Low 
Hungary Leaves Monetary Policy Unchanged 
Ivory Coast Industrial Output Rises the Least in 3 Months 
Burundi September Inflation Rate Lowest Since 1999

Source: Trading Economics, Macroafricaintel Research