Options, Choices & Actions Presented by Bismarck Rewane CEO, - - PowerPoint PPT Presentation

Presented by Bismarck Rewane CEO, Financial Derivatives Company Ltd. May 28th , 2019

Options, Choices & Actions

Buhari 3.0

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GDP growth rate (%)

2014 14

2019 19

6.22 1.91

Ma Macro croeco economic nomic Sco Scorec recard ard

Exchange Rate N/$ 191 361

Economic Indicators

On Grid Power (MW/h)

3,790 4,016

34.47 45.09 External Reserves($’bn)

2021 21

Oil Price($’pb) Oil Production(mbpd) External Debt($’bn) 99.26 400 66.51 1.91 1.75 9.71 25.27

65 3.4 1.77

54 31.2 4,200 External buffers ($’bn) 24.76 19.08 22.8 GDP ($’bn) 568.5 482.3

576.5

2014/ / 2019

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2014 14

2019 19

Inflation rate (%) 9.60

Ma Macro croeco economic nomic Sco Scorec recard ard

Economic Indicators

Trade balance ($’bn)

• 6.4

23.5

Unemployment + Underemployment (%) 29.1 43.2 11.37

2021 21

38.70 54.57 Misery index unemployment+underemployment+inflation Income per capita ($)

2,726 2,400

Minimum wage (N) 18,000 30,000

2,726 30,000 44.2 35 9.2 29.6

2014/ / 2019

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2014 14

2019 19

Ma Macro croeco economic nomic Sco Scorec recard ard

Ease of doing business (out of 190) 146 170 Transparency Index (out of 180) 144 136

Social Indicators

Source: NBS, CBN, DMO, EIU, FDC Think Tank

Life Expectancy (years) 53.43 52.55

19 indicators measured: 11 negative 8 positive

201 014/201 4/2019

Ease of doing business score 52.89 47.33

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Citizens Scorecard – Suffering but Smiling

Commodities 2014 May’19 % Change (2015/2019) Garri 13,500 6,500 52 Rice (50kg) 9,500 15,000 59 Beans (50kg) 14,000 19,000 36 Gala 100 100

• Palm Oil (25L)

9,000 9,000

• Tomatoes (50kg)

4,300 18,000 319 PMS (N/ltr) 97 145 49

Source: NBS, FDC Think Tank

8.06 15.63 12.15 11.31 5 10 15 20 2014 2016 2018 2019

Average inflation (%)

 Headline inflation now at 11.37% (April)  Expected to increase in the coming months

Source: FDC Think Tank

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Oil Price Drives Economy

6.21 6.54 6.23 5.94 3.96 2.35 2.84 2.11

• 0.67
• 1.49
• 2.34
• 1.73
• 0.91

0.55 1.2 2.11 1.95 1.5 1.81 2.38 2.01 2.2 2.5 2.5

• 3
• 2
• 1

1 2 3 4 5 6 7 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19

% The Boom Period

Slowdown Recession Slow Recovery

GDP Growth (%)

Relapse or Takeoff?? Source: NBS, FDC Think Tank

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What the World Says - IMF

Assess ssme ment nt  Economy is recovering  Persisting structural and policy challenges  Huge infrastructure gap  Governance and institutional weakness Recom

• mmen

endat datio ions s  Stop multiple exchange rates  Improve tax collection  Stop waivers exemptions  Tighten money supply Outlook

• k

 Growth to hover around 2%-2.5%

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What the World Says - EIU

Assess ssme ment nt  Business environment unlikely to improve  Weak government institutions to persist  Oil revenue likely to underperform  Current account will record thinner surpluses Recom

• mmen

endat datio ions s  Increased government spending on priority areas  Boost tax compliance and widen tax net  Market-oriented reforms Outlook

• k

 Economic performance will pick up moderately  Business reforms unlikely to be sufficient

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Bu Buha hari ri 2.0: 0: Polic

• licy

y Tren rends ds & Inc & Incon

• nsiste

sistencie ncies

Commencement of Anchor Borrowers Programme

• 9 banks banned from forex

trading

• 9% Communication tax on end

users

2015 2016 2017

Launched the Economic Recovery and Growth Plan (ERGP) IEFX window was introduced

2018

Increase in Excise duty on alcohol & tobacco Presidential Enabling Business Environment Council (PEBEC) Launched in 2017

2019

New minimum wage was signed (N30,000)

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GDP : Catalyst Needed = Investment Multiplier

(2015)Y = C + I + G + X - M

$493.8bn $388.0bn $73.2bn

• $29.3bn

(2019)Y = C + I + G + X - M

$482.3bn $386.7bn $66.3bn $3.4bn $22.0bn

(2023)Y = C + I + G + X - M

$550bn $423.9bn $88.7bn $10bn $24.7bn

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Buhari 3.0: New Agenda (Old Wine in Old Bottles?)

The leopard must change its spots

 Challenges to address:  Recessionary gap is 1% - Nigeria still at risk of another recession  Sub-optimal investment level ($66.3bn – 2019)  Vulnerability to exogenous shocks  Depleting external buffers

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The Must Do’s

 Sign the African Continental Free Trade Area (AfCFTA)  Forex convertibility  Reduce subsidies gradually  Investment in road and rail transport  Airport concessioning  Block leakages  Simplify tax administration

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The May Do’s

 Unification of exchange rates to facilitate trade flows  Lease/sale of idle assets  Convert power sector loans to equity  Shift subsidies from wasteful consumption to critical social infrastructure (health, education)

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The Will Not Do’s

 Remove subsidies completely  Sell refineries  Restructure the forex market

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Outlook – Muddle through or Take off??

 President’s first official duty would be his cabinet choice  Key appointments to be finalised in June  Portfolio and personality changes but policy continuity  Execution of policy and response to shocks will be the major challenge  Inflationary pressures to persist (liquidity, cost push factors)  Unemployment to increase to 25%-28%  Likely VAT and excise duty adjustments

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