E-Financial
Heavy Hitters Give Nigeria The Thumbs Up
By Lukman Otunuga, Research Analyst
October was certainly another positive month for the largest economy in Africa, which has yet again showcased its brawn and resilience on the global stage.
Annual inflation eased for the eighth straight month, while encouraging core economic metrics pointed to further signs of economic stability. Rising global oil prices and recovering domestic oil production has positively impacted government revenues and supported foreign exchange markets.
The overall outlook for Nigeria remains quite encouraging, especially when considering how heavyweights such as the World Bank and IMF have both recently expressed their optimism. As we head into the final trading months of 2017, there may be an increasing focus on the intentions of the Central Bank of Nigeria.
With inflation pressures easing and economic fundamentals stabilizing, speculation is likely to mount over the Central Bank of Nigeria taking action.
Investor confidence towards the Nigerian economy was stimulated in October, after the World Bank projected economic growth to reach 1% this year.
The IMF has also expressed optimism towards the nation by re-affirming its 0.8% growth forecast for the economy this year. According to the fund, growth in 2017 has been fueled by recovering oil production.
In addition to the improving oil outlook, Nigeria’s agricultural sector has also been performing; this is especially significant in view of the fact that the nation is currently on a quest for diversification. While the IMF stated that growth in 2018 may be subdued by population growth, the 1.9% prediction still remains encouraging and continues to highlight the resilience of the Nigerian economy.
Speaking of recovering oil production, Nigeria’s oil output hit 1.8 million barrels a day in August. While this is good news for the nation as oil prices are currently trading above $52 per barrel, production is likely to remain below this level. Although the nation could have the ability to pump more oil, the silent pressure radiating from OPEC’s production cut deal is likely to keep production capped.
While Nigeria is currently exempt from the cartels deal to cut production, there is a possibility that OPEC will request them to join in an effort to rebalance markets.
This poses an external risk to Nigeria, as the Federal government’s 2017 budget is based on a production of 2.2 million barrels per day, at $44.50 per barrel.
A scenario where Nigeria limits production and oil prices start to depreciate, could pose a threat to the nation’s current economic recovery.
While oil markets have found support from geopolitical tensions between the US – Iran and Iraq conflicts, the oversupply concerns are still lingering in the background. Technical traders will continue to observe how WTI Crude reacts above $50.
Although Nigeria’s macroeconomic environment continues to stabilize, there is still a strong need for a robust fiscal policy to complement growth.
It has been said on repeated occasions that the nation’s infrastructure needs a serious makeover. With major roads in poor condition, healthcare and education in need of a revamp, Nigeria has a lot of work on its hands.
It must be kept in mind that solid infrastructure creates a strong and healthy economy. President Muhammad Buhari has recently asked the National Assembly to approve a request to borrow $5.5 billion. With Buhari stating that the loan will be used to provide funding for capital projects, this is likely to improve investor sentiment as the money borrowed, is used for infrastructure developments.
On the monetary side, Godwin Emefiele, the Governor of the Central Bank of Nigeria, is expecting inflation rates to ease rapidly and hit high single-digit rates in the middle of 2018. This sounds like a realistic and achievable prediction, especially when considering how inflation has cooled for the eighth straight month in September, to 15.98%.
The steady increase in foreign exchange supply from the usage of the flexible rate policy, has also played a role in the fall of consumer prices, with inflationary pressures slowing and becoming a theme of the past.
If the nation’s rate of inflation continues to decline and the economic environment improves further, the Central Bank of Nigeria may cut interest rates in an effort to support growth.
Focusing on the foreign exchange outlook, the Naira traded at N363 per Dollar on the parallel market on Friday, 27 October. With the Dollar roaring back on the back of optimism over Donald Trump moving forward with tax reforms, the Naira, like many other Emerging Market currencies, could feel the heat.
Overall, there is growing confidence over Nigeria’s economic outlook, with markets paying very close attention to domestic economic data and the CBN as the 2017 finish line draws near.
Lukman Otunuga is a Research Analyst at FXTM
Titan Trust Bank has selected Oracle FSS for its core and digital banking technology, it is understood.
The start-up bank recently obtained its license by the Central Bank of Nigeria (CBN).
It’s understood that Temenos and Infosys also competed for the deal.
The shortlist came down to the two most widely installed international core systems in Nigeria, Infosys’ Finacle and Oracle FSS’s Flexcube.
The Nigerian banking sector has seen a great deal of upheaval over the years, with many mergers, start-ups and closures. Flexcube is a well respected name since the late 1990s (the pioneer was Access Bank, now one of the country’s top five banks) and has been a commonly selected platform since then.
The new bank is believed to be one of five to have gained regulatory approval of late (Globus Bank is another).
Local media sources say the new licences stem from the Central Bank’s desire to attract new investments into the sector and better serve the country’s 50 million+ unbanked and under-banked citizens.
Titan Bank is said to be headed by a former executive director of Heritage Bank (which is a Finacle user).
Oracle FSS did not respond to request for comment.
International Monetary Fund (IMF), has appointed Tony Elumelu, Nigerian billionaire and group chairman of Heirs Holdings, owners of United Bank of Africa, to its advisory council on entrepreneurship and growth, convened by Kristalina Georgieva, the fund managing director.
The announcement was disclosed in a statement on Friday.
According to the statement, the IMF advisory council comprises global business leaders, policymakers, and academics dedicated to identifying and addressing regulatory barriers to entrepreneurship.
The IMF said Elumelu will be instrumental in ensuring that Africa’s entrepreneurship is central in policy making.
“Elumelu, Africa’s leading advocate of entrepreneurship and whose Foundation has funded, mentored, and trained over 25,000 African entrepreneurs since 2015, champions entrepreneurship as the engine for the economic transformation of Africa,” the statement reads.
“A self-made entrepreneur, Elumelu’s embracing of entrepreneurship is fundamental to his concept of Africapitalism, his belief that Africa’s private sector can and must play a leading role in the continent’s development, making long-term investments that deliver social and economic value.
“Elumelu will be instrumental in ensuring that Africa’s entrepreneurial potential is central to global economic policy making.”
Speaking at the inaugural meeting of the advisory council on March 26, Georgieva said the appointees would share their experiences on how macroeconomic and financial policies “can provide a supportive environment for innovation, entrepreneurship, and productivity — key ingredients for a thriving private sector and strong economic growth”.
Africa’s Micro, Small, and Medium Enterprises, fintech industry, scaling remittances, and cross-border payments will be the driving forces behind the continent’s digital ballooning payments system, which is estimated to reach $1.5 trillion by 2030.
This is according to a MasterCard-commissioned study by Genesis Analytics, which states that the digital payments economy is growing faster on the continent.
This comes as the World Bank says Sub-Saharan Africa has shown significant growth in financial inclusion over the past decade, much of it driven by mobile money account adoption.
Dimitrios Dosis, president, Eastern Europe, Middle East and Africa at MasterCard, comments: “Africa is filled with immense possibilities, and its people have the potential to shape the global economy in the decades ahead.
“MasterCard remains deeply committed to driving digital transformation across the continent, working closely with entrepreneurs, merchants, banks, start-ups, telcos, and governments. By increasing our investments, expanding innovation, and fostering inclusion, we are helping build a more connected and accessible digital future.”
The payment technology company went on to say as a longstanding technology partner to Africa, its continues to strengthen its commitment to the continent’s digital growth through strategic investments, public-private partnerships, and innovation initiatives that drive financial health and economic growth.
In addition, it says trends in Africa signal a strong shift towards digital transactions, with businesses and consumers increasingly embracing contactless solutions, further accelerating economic participation and financial accessibility across the region.
“For over five decades, MasterCard has worked alongside African governments, businesses, and communities to advance financial inclusion and economic development.
“With Africa projected to host nine of the world’s 20 fastest-growing economies, we are focused on leveraging our expertise and a technology to support the continent’s continued digital transformation.
“Our investments today will help build a more resilient economy for the future,” says Mark Elliott, division president, Africa, MasterCard
By fostering collaboration with key stakeholders, MasterCard says it aims to enhance digital connectivity, expand economic opportunities, and enable millions of people and businesses to thrive in the digital economy.
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