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Opinion: Will Nigeria Shock the Global Arena in H2?

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The largest economy in Africa has certainly had a presence in the third quarter of 2017. Investors across the globe are becoming increasingly optimistic over Nigeria’s economic outlook, as the nation mitigates internal risks, while breaking away from oil reliance.

Signs of recovery and momentum can already be viewed across Gross Domestic Growth and falling inflation, while foreign exchange has experienced an evolution.

With the ingredients for Nigeria to rattle the global arena in H2 already bubbling in the cauldron, an economic rebound by the end of the year is becoming a firm possibility.

As we head into the final trading month of Q3, market players will closely scrutinise core data such as inflation and GDP, which have the ability to boost sentiment further, if both exceed market expectations.

Nigeria’s foreign exchange crisis remains an obstacle on the road to recovery. While the timely implementation of the Investors and Exporters (FX) Window is likely to boost confidence over Nigeria’s outlook, this is only the first step.

With the NAFEX increasing the supply of foreign exchange into the largest economy in Africa, investors are likely to be magnetized, consequently adding another layer of stability to the FX markets.

The Central Bank of Nigeria may be commended on its ability to unify some of their multiple exchanges, by letting dealers quote the Naira levels used in trades, but more transparency is still needed.

For Nigeria to abolish its multiple exchanges and truly have an official exchange rate, it will require an official devaluation, which President Muhammadu Buhari has repeatedly rejected.

While a devaluation of the Naira is likely to accelerate inflation and punish Nigerians at home, it will increase transparency and ultimately boost foreign direct investment, which could in turn fuel economic growth.

Speaking of the Naira, the local currency currently trades around 370 to the Dollar on the parallel exchange.

Although the implementation of NAFEX has weakened prices noticeably, the currency still continues to hold ground against a broadly weaker Dollar. Further intervention by the Central Bank of Nigeria, coupled with confidence over Nigeria’s economic recovery, is likely to support the local currency further this year.

Market players will continue to evaluate the Federal Reserve’s ability to raise US interest rates, which have the power to strengthen the Dollar – consequently punishing emerging market currencies.

While Nigeria has taken steps to shield itself from internal shocks, the threat of capital outflows from a resurgent Dollar is still an issue that cannot be overlooked. Focusing on the technical outlook, repeated Dollar weakness could send the USDNGN towards 350 on the parallel markets.

With inflation in Nigeria following a negative trajectory, economic fundamentals stabilizing and foreign exchange displaying early signs of transparency, the Central bank of Nigeria is likely to remain in sharp focus.

While the intricate combination of falling oil prices, decelerating economic growth and a currency crisis initially encouraged the CBN to remain on standby, the current economic landscape has morphed for the better.

The clock is ticking for the central bank to make a move with an interest rate cut, as cooling inflation and improving core fundamentals indicate signs of stability.

The outlook for oil remains a significant economic factor for Nigeria, especially when considering how the commodity impacts the nation’s government revenues and stability of foreign exchange markets.

WTI Crude has struggled to maintain gains in August, with prices pressured below $50, as the oversupply concerns weighed on sentiment. This has been an interesting and volatile period for oil markets, with the commodity trapped in a tough tug of war, as conflicting data attracts both the bulls and bears.

Despite OPEC’s optimism over the production cut deal continues to spark speculative boosts in prices, reports of compliance slumping in July and output jumping to a 2017 high in the same month, excited bears.

This battle of attrition may be coming to a finale, with oil’s bearish action suggesting that investors are becoming increasingly skeptical of the cartel’s ability to rebalance the markets.

Nigeria has the ability to bounce back from an economic deceleration and break away from oil reliance but the right steps must be taken.

The developments in August are already highly encouraging with the implementation of NAFEX increasing foreign exchange transparency and putting investors at ease. As we head into the final month of Q3, market players are likely to become more dependent on data to gauge the nation’s economic health.

Sentiment towards the Nigerian economy continues to improve amid the stabilizing fundamentals, with the Central Bank of Nigeria cutting interest rates to support growth further if all the boxes are ticked.

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E-Financial

Vodacom Director Urges Accountants to Leverage Sage/ACCA Partnership

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By peter oluka

Mr Oluseyi Olanrewaju, the finance director at Vodacom Business Africa (Nigeria) Limited, has re-emphasised the need for accounting professionals to embrace digital culture.

He made the remark while delivering keynote address at Sage-ACCA Continuing Professional Development (CPA), event held in Lagos Tuesday, which was the launch of partnership between the two entities to provide platform for accountants to embrace digital transformations.

Olanrewaju emphasized that rapid growth and development in information technology has brought about digital revolution in economic, social and cultural fields, and bequeaths today’s accountant with the responsibility to improve on the skills to remain relevant.

With the recognition of the accounting discipline as an information system, he said, the accountants can’t undermine the influence that the changes in processes of carrying out transactions with the usage of IT in business operations.

In a bid to keep up with changing conditions and the enabling inclusion of information era the need to embrace the digital culture in accountancy can’t be overlooked especially in medium to large scale business.

“Technology should not be viewed as a threat rather tools to boost accounting profession. Digitization is the future; as accountants we can’t run from it. Yes, manual processes are ridden with high risks on accounting and costly. Thus, changes is the environment necessitates changes in applicable accounting tools and skills required to carry out accounting roles”, Olanrewaju said.

Determinants of business that qualify as medium to large include: IT staff & skills including several specialists, multiple locations, large capex in relation to other businesses in operation in the same industry and business with main considerations for technology purchases being advanced features and security.

Using the acronym: VUCA- Volatile, Uncertain, Complex and Ambiguous situations, he reminded the participants that, roles of accountants have changed overtime, demanding for real-time ‘results’. “The environment demands you react quickly to ongoing changes that are unpredictable; it requires you to take action. Therefore, there is little you can achieve today in the ‘VUCA’ world without digitization”.

The keynote speaker also applauded Sage X3 offering, such as robust accounting processes; consistency; time saving; delivers visible metrics; helps to improve operational efficiency and assists users to be in line with government regulations and international accounting rules.

Participants at the interactive session with other C-level ACCA members also learnt how Sage X3 offers the bedrock of the adjustments required in today’s accounting field.

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E-Financial

CBN 14% Interest Rate: Investors Still Expecting Cut

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Lukman Otunuga, a research analyst at FXTM.

By peter oluka

Nigeria’s central bank has yet again left benchmark interest rates unchanged at 14% in November amid a ‘fragile’ economic recovery.

But, Lukman Otunuta research analyst ForexTimes, in his comment, believes investors are still keen on interest rate cut.

The apex bank also left the cash reserve ratio (CRR) at 22.5 percent.

CBN governor, Godwin Emefiele made this known on Tuesday while announcing the decision of the committee in Abuja.

Emefiele said only one of the nine members of the committee voted against the decision.

“Inflation in particular requires very close monitoring to gain clarity on the medium-term optimum path of monetary policy,” Emefiele told a news conference.

The monetary Policy Committee had begun its last meeting for the year on Monday.

According to the committee, the interest rate was held to prevent exchange rate pressure.

Commenting on the decision by the apex bank, Otunuga said, “With GDP growth in the third quarter rising by 1.40%, it seems that the central bank is hesitant to take action anytime soon.

“I believe that Nigeria’s improving economic landscape, and signs of inflationary pressures easing, are likely to support investor expectations of a rate cut.

“With inflation in Nigeria at 15.91%, there is a suspicion that the CBN may be waiting for a more sustained decline before moving ahead with rate cuts to support economic growth.

“As the year slowly comes to an end, investors will continue to observe Nigeria’s hard economic data and inflation figures for hints as to when the CBN might act in 2018”.

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E-Financial

Bitcoin Smashes Through $8,000 for the First time

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Bitcoin hit a new record high on Monday after smashing through the $8,000 level for the first time over the weekend, marking an almost 50 percent climb in just eight days.

The new high came after leading U.S. payments company Square Inc said late last week that it had started allowing select customers to buy and sell bitcoins on its Cash app.

Bitcoin traded as high as $8,197.81 on the Luxembourg-based Bitstamp exchange, up over 2 percent on the day and around 48 percent up since dipping to $5,555 on Nov. 12.

An eye-watering eightfold increase in the value of the volatile cryptocurrency since the start of the year has led to muliple warnings that the market is in a bubble, and institutional investors are broadly staying away.

Retail investors, however, as well as some hedge funds and family offices, are piling into the market. The “market cap” of all cryptocurrencies hit an all-time high of over $242 billion on Monday, according to trade website Coinmarketcap.

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