monthly economic news and views at lagos business school

Monthly Economic News and Views

At Lagos Business School

Executive Breakfast Meeting

January 28, 2015

The Falling Naira - Are You Prepared ??

Presented by B.J. Rewane

Financial Derivatives Company Limited


2

Outline - Catching a Falling Knife

December/January Highlights

External Markets

Domestic Economy

Capital Markets

Political Update

Outlook for February

Global Economy - A Mixed Bag


4


External- A Mixed Bag

Oil price declined to $46.59pb

A 5 ½ year low

Cumulative 8 week drop of 35%

December fall of 20.89% and January 14%

The price plunge is accentuated by slowing demand and

over supply

OPEC reluctance to cut production is keeping prices

close to the floor


5


Global GDP growth revised downwards to 3.5% from

3.8%

Every $10 drop in oil price increases global GDP by 0.2%

($1.4trn)

Shifting income from oil producers to consumers

The consensus is that the floor price is $40pb

Worldwide rig count is 3570 of which 100 are idle

Idle rigs have increased from 70 to 100 since December


6


Active rigs in Nigeria down by 1 to 18 in December

Global commodities index (BCOM) down by 19.7%

Oil is responsible for 48% of the weight

Apple reports record profit of $18bn in Q4

Equal to GDP of Yemen

Equivalent of $200m per day


7


Domestic

Broad money supply increased 7.29%, as against target of

15%

Power output from the grid is 3700MW

Retailers inventory levels down to 5 weeks

Naira dropped past the psychological resistance of

N200/$, testing the N210 level

Dollars on offer at the auction down 42.47% to $1.49bn

in January


8

December January Highlights

Spread between the parallel & official markets increased to

N42 or 25%

Stock market when adjusted for devaluation is down

15.48% in 2015

MPC maintained status quo at January meeting

Assures the markets that no need to panic

J.P. Morgan puts Nigeria on negative watch on bond index

Nigeria is 1.12% weight of the index


9

December January Highlights

Russia debt instruments downgraded to junk status by

S&P

Petrol price cut by 10.3% to N87 per litre

Market reaction was that- too little too late

Electricity MYTO increase in tariff on Christmas day

Common external tariff in West Africa adopted January 1

Member countries are allowed flexibility

To impose additional import adjustment tax on 177 tariff

lines


IMF Cuts Global Growth

Old Projections (%) Latest IMF Projections (%)

World Output 3.8 3.5

United States 3.1 3.6

Euro area 1.3 1.2

Japan 0.8 0.6

UK 2.7 2.7

Canada 2.4 2.3

Russia 0.5 -3

China 7.1 6.8

India 6.4 6.3

Saudi Arabia 4.5 2.8

Nigeria 7.3 4.8


IMF Cuts Global Growth

US only major economy with an upward review in its

growth forecast

Lower oil prices have prompted cuts in the outlook for

big oil exporters

Lower oil price presents opportunity to reform energy

subsidies in both importers and exporters


13

OECD Mixed Performance

Deflation now a reality in the Eurozone

Inflation fell to -0.2% in December from 0.3% in November

ECB begins large-scale QE

In response to sluggish growth and deflationary pressures

Euro trading at an 11-year low of 1.10/$

Down 16.16% since May 2014

Russia is in a recession, expected to contract by 3% in 2015

Oil prices and sanctions taking their toll

China will face the dilemma of tighter monetary policies

and slower growth

SSA - Good Policies, Commodity Price Vulnerable


15

Sub-Saharan Africa - Good Policies,

Commodity Price Vulnerable

The IMF revised downwards 2015 GDP forecast to 4.9%

from an earlier projection of 5.8%

Major challenges facing SSA in 2015 include

Slower global growth

The impact of Ebola

Lower commodity prices

Increased risk of a further decline in commodity prices

amid weaker global economic conditions

Benefits of lower oil-import costs offset by falling

commodity prices

Commodity Exports as % of

GDP

Angola 53.8

Libya 46.1

Chad 34.7

Nigeria 34.5

Zambia 25

Congo 21.6


16

Impact on Nigeria

CFA Franc is used by 9 African countries

$1.12= 1 euro, down from a high of 1.42

656.53 CFA = 1 euro

Cheaper euro means cheaper exports from CFA Franc

African countries competing with Nigerian exports

This will have a negative impact on Nigeria’s terms of trade

Hot money reverse flows

To put further pressure on Nigeria’s external reserve and the

naira


17

Outlook

Global growth outlook for 2016 cut to 3.7% from 4%

Monetary policy divergence to continue between the

US Fed and other major central banks

Interest rates increase expected in the US later this year

Bank of Japan (BoJ) and ECB to employ stimulus measures

Capital reverse flows in search of safety

Risks more elevated among oil exporters

Slowing demand from China and Europe to stifle increase

in exports of emerging markets

Com

mod

itie

s

Prices Trend Downwards


Economics of Oil - OPEC Losing Control

Market Structure: Oligopoly

OPEC: Cartel controls 32% of daily supply (30.25mpbd)

Many buyers: 196 countries

Few suppliers: 35 countries

Control price and output

Advantage: excessive profit

Disadvantage: exploitative

Global demand: 91.15mbpd

Global supply: 92.08mbpd


Oil Market Dynamics

Top 5 oil producers (mbpd)

USA (12.67)

Russia (10.67)

Saudi Arabia (9.59)

China (4.22)

Canada (4.17)

Only one member of OPEC

Production costs

Saudi Arabia - $5pb

Nigeria - $28pb


22

Volatile Oil Market


23

Weakest Link in the Chain

Russia

Venezuela

Nigeria

Iran

Low reserves

Huge population

Leakages and corruption


24

Oil Rich vs. Oil Poor

Oil Rich

External Reserves

($’bn) Budget position(%) Income per capita ($)

Kuwait 34.35 28.93 29, 729

Saudi Arabia 740.4 6.4 18, 034

Oman 17.7 (-0.4) 13,306

Oil Producing

External Reserves

($’bn) Budget Position (%) Income per capita ($)

Angola 37.94 6.7 2, 738

Russia 386.2 (-2.7) 6, 923

Iran N/A (-0.78) 3, 132

Nigeria 34.47 (-1.8) 2,688

Venezuela 22.06 (-11.5) 6,402


25

Commodity Prices Trending Downwards

Bloomberg Commodity Index (BCOM) is down by 19.7% YTD

Plunge in oil prices is the main driver of the decline

Oil market dynamics are driven by oversupply and weak demand

OPEC is unwilling to cut output

U.S., Russia and Iraq increasing production

Weak demand in Europe and Asia

Agric. products affected by strong recovery in global production

Strengthening dollar also becoming a significant factor affecting commodity prices

Most commodities are priced in dollars; inverse relationship


26

Inverse Relationship between U.S. Dollars and Commodity Prices

The Bloomberg Dollar Spot Index (DXY) up 18.3% YTD

while the commodity index is down 19.7%

Source: Bloomberg


27

Commodity Monthly Change

(Dec/Jan)

Y-T-D Change

Energy

Brent -21.49% -55.38%

WTI -19.58% -50.25%

Natural Gas -15.37% -32.99%

Grains

Corn -2.68% -11.03%

Wheat -9.82% -8.52%

Rough Rice -6.87% -22.60%

Soft

Sugar 0.67% -1.48%

Cocoa -0.07% 1.30%

Oil Seeds

Palm Oil 7.72% -14.68%

Source: Bloomberg, Reuters, FDC Research

Commodity Prices Trending Downwards


28

Nigerian Companies Vulnerable to Commodities Prices

Commodities Companies Comments

Wheat Honeywell, Flourmills

(Importers of wheat)

•Decline in price brings down

cost

•But may be negated by

exchange rate risk

(devaluation)

Sugar Manufacturers: Bua, Dangote, Flour

Mills(Golden sugar)

FMCGs:P & G

Beverage Manufacturers: 7up

Guinness, NB

•Reduces profitability for

manufacturers

•Decline in price brings down

cost for importers but face

exchange rate risk

Palm Oil Okomu, Presco

(Manufacturers of Palm Oil)

•If international prices are

cheaper, might lead to

increased imports

•Reduces profitability for

manufacturers

Cocoa Nestle, Cadbury

Decline in price brings down

cost


29

Outlook – Food, Feedstuff & Beverages

Outlook remains bearish

Increased supply and weak global demand, especially in

China, will keep oil prices low

China is one of the largest consumer of grain, energy and

metals

Speculation that oil price may bottom out at $40pb

For agric. products, expectation of large global supplies

in 2015 to keep prices down

EIU forecasts that grains and oilseeds will show the

largest declines in 2015, of around 8% and 12%

respectively


30

Outlook – Food, Feedstuff & Beverages

Plans for higher export subsidies in India may boost

supply of sugar and dampen its price

India is the second largest producer of sugar in the world

Export controls by Russia limiting the supply of wheat

Russia is the third largest producer of wheat in the world

A global shortage of cocoa might lead to an increase in

prices


31

Outlook- Industrial Raw Materials

Prices for industrial raw materials are expected to rise

by 4.5% in 2015

Below their highs of 2011 but will reflect market

fundamentals more closely

Prices for base metals will show the strongest gains

Due to a strong recovery in aluminium prices

Domestic Economic Performance


33

Indicators December January % Change February

Oil Price ($’pb) 52.39 49.18 6.13 45

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

Source: EIU, EIA , OPEC, CBN, FDC Research , (* FDC’s forecasts)

Leading Economic Indicators (LEI’s)


34

Inflation Projected to Increase in January

Headline inflation forecast to

increase to 8.3% in January

Up from 8% in December 2014

Seasonality effect, planting period

Higher electricity tariff

Depreciating value of the naira and

pass through effect on consumer

goods

Inflationary pressures from political

spending

Lower global commodity prices

10% drop in petrol price having no

impact

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


35

Money Supply & Interest Rates

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 74.13%p.a. in December 2014

Declined below the floor of

10.25% p.a. to 6.29%

Due to excess liquidity and

limited outlets after FAAC

MPR still at 13% p.a.

0

10

20

30

40

50

60

70

80

OBB ON 30 90 180

Year to

date high

4 year

low


37

Interest Rates Flat

No major change expected until after the elections

MPR will remain at 13% p.a. in February

Lobby groups will pressure CBN for downward review

To boost lending and spur economic growth


38

Falling Naira, Declining External Reserves

Recent policy measures have heightened pressure on the

naira

Leading to a record low of N210/$ at the parallel market

Naira has lost 17.9% (y-o-y) at interbank market

Remained flat at N168/$ post November devaluation

CBN’s ability to defend the naira is limited


39

Falling Naira, Declining External Reserves

$1.49bn was sold at the RDAS compared to $2.59bn in

corresponding period in 2014

External reserves is down to $34.46bn

5.13months of imports and payments

32.00

33.00

34.00

35.00

36.00

37.00

38.00

39.00

40.00

Oct'14 Nov'14 Dec'14 Jan'15

External Reserves ($'bn)

Source: CBN, FDC Research


40

How to Use a Hamburger to Determine the Value of a Currency


Burgernomics: True Value of the Currency

Source: CBN, FMDQ, FDC Research

153

163

173

183

193

203

213

N/$

Forex N/$

official parallel interbank

Dec’14 Jan’15 %

Change

Euro 0.83 0.88 6.02

Pound 0.64 0.66 3.13

Chinese

Yuan

6.20 6.24 0.65



Nigeria



Big mac index is a one item basket

No Macdonalds in Nigeria

Johnny Rocket is a proxy at N1200

Using exchange rate in January 2015: $7.14

The Big Mac substitute suggests the naira is overvalued

by 32.91%

The true value of the naira based on burgernomics today

is N223.48/$ (N214.5/$ in July 2014)


45

Implications of MPC Decisions

CBN will engage J.P Morgan on GBI-EM index

Market fears will continue

Anxiety as election approaches

Spread of N35 between parallel and official rate is a major

factor

The selling pressure may resume if oil prices fall below

$45

If external reserves decline below $33bn


46

Decision Consistent with African Peers

Source: FDC Research, Bloomberg, Trading Economics

Country

Interbank Exch

Rate Y-o-Y %

depreciation

Inflation Rate

(%)

Policy Direction

(% p.a.)

Nigeria 17.9 8 13

South Africa 10.47 5.3 5.75

Angola 4.9 7.48 9

Kenya 6.03 6.02 8.5

Ghana 28.12 17 21


47

Outlook

Possible scrapping of RDAS and adoption of a pure

interbank market

Interest rate will remain at 13%p.a.

Increasing NOP to 1%

Allow BDCs back into the market


NSE ASI

26,000.00

27,000.00

28,000.00

29,000.00

30,000.00

31,000.00

32,000.00

33,000.00

34,000.00

35,000.00

36,000.00

ASI (

poin

ts)

Dec 2014

ASI

Extreme volatility in December

2014

Index recorded its worst and best

post-2009 crash

Index rose by 0.33%

26,000.00

27,000.00

28,000.00

29,000.00

30,000.00

31,000.00

32,000.00

33,000.00

34,000.00

35,000.00

04

-Ja

n

05

-Ja

n

06

-Ja

n

07

-Ja

n

08

-Ja

n

09

-Ja

n

10

-Ja

n

11

-Ja

n

12

-Ja

n

13

-Ja

n

14

-Ja

n

15

-Ja

n

16

-Ja

n

17

-Ja

n

18

-Ja

n

19

-Ja

n

ASI (p

oin

ts)

Jan2015

ASI

Slippery slope or bottom

fishing?

Investors losing N1.5trn of value

Index down by 14.07%


50

January Highlights - New Year, Old Fears

Investors resume trading with negative sentiment

Took profit from the Santa Claus rally

And Foreign Portfolio Investors exit further

Leading to 5 consecutive losses for the NSE ASI

Index lost 13.02% before recording its first gain

More fears as crude oil prices hit $45pb

CBN NOP rule worsened investor sentiment


Sectors in January

Banking and Consumer stocks significantly hit

The darlings of FPIs feel the heat; NESTLE, NB, GUARANTY, ZENITH

Banking sector P.E of 6.49x and P/BV of 0.61x

Any buying opportunities, post-election rebound?

Teaser; FBNH at N7.50 and P/BV of 0.53x offers 10% dividend yield potential

-16.00% -14.00% -12.00% -10.00% -8.00% -6.00% -4.00% -2.00% 0.00%

Banking

Insurance

Consumer

Oil & Gas

Industrial

Sectors Performance

Return (%)


Winners and Losers…..Nov - Jan

Stock/Company Jan'2015 Nov'2014

Change

%

E-Tranzact International Plc 3.39 2.21 53.39%

Omoluabi Savings and Loans 0.92 0.67 37.31%

Beta Glass Co. Plc 30.00 22.05 36.05%

Academy Press Plc 1.18 0.95 24.21%

Evans Medical Plc 2.27 1.99 14.07%

Stock/Company Jan'2015 Nov'2014

Change

%

Dangote Flour Mills Plc 3.19 6.23 -48.80%

Champion Brew. Plc 6.08 9.8 -37.96%

FCMB Group Plc 2.09 3.3 -36.67%

Costain (W A) Plc 0.65 1.01 -35.64%

Diamond Bank Plc 4.00 6.2 -35.48%

Sudden preference for small

caps and ASEM listed stocks

Heavy cap stocks depressed

significantly

An all round rout of banking

stocks

But Sterling Bank performed;

returned 4.66%

Bottom fishing the way to go

The rout seems to be over despite the negative sentiment

NSE ASI at 28,000 points with P.E of 19.71x

A recovery is imminent


53

Crude Oil Prices

No direct correlation between oil price and the Nigerian

market

As crude oil tests $45pb floor

Depression of Oil stocks: SEPLAT & OANDO

Fear

Due to rising insecurity and political tensions

Citing possible pre and post-election violence

Stock Market Drivers in January 2015


55

Policy Makers and the naira

MPC maintains status quo

CBN battles to defend the naira as JPMorgan bites

NOP 0.1% to 0.5% right after post-MPC press briefing

Naira tests new levels at interbank and parallel market amidst

high illiquidity

Stock Market Drivers in January 2015


56

Banking Sector…….A Stress test

CBN broaching the idea of stress testing banks

The banks need it like a bullet in the head

Increased NPL and provisioning

Oil and Gas risk assets in focus

Banks with Oil and Gas exposure will be the focus

Higher NPLs, lower earnings and dividends

Capital increases to build buffers

CBN will most likely allow the banks ride out the storm

A bail out too expensive

Nigeria cannot afford a bankingshock


57

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

As current prices present buy opportunities

Market P.E ratio of 19.71x is a gift


58

Outlook

Next three weeks would see a downward, choppy trend of

the index

Battle between bargain hunters and profit takers would

intensify

NSE ASI would remain below 30,000 points


FAAC Allocation will Decline Further

The naira value of dollar assets will

be sharply higher

FAAC allocation is down by 23.2% to

N580.38bn

From 2014’s high of N755.95bn when

oil prices was at $115pb

A persistent decline in oil will cause

FAAC to reach a low of N350bn

Payment of salaries will be a

challenge

Source: FMF, FDC Research

60

755.95

654.6

611.7 603.5 593.3 628.8

580.38

300

360

420

480

540

600

660

720

780

840

900

FAAC (N'bn)


Value of Cheques Expected to Increase

Value of cheques in 2014 was at an

average of N2.13trn

13.2% of money supply

The lowest value of N1.18trn coincides

with the drop in government revenues

as oil prices began to plummet

We expect an increase in the value of

cheques due to political spending

during the elections

Source: CBN, FDC Research 61


0.000.501.001.502.002.503.003.50

2013 2014

2013 vs. 2014

2.10

1.76 2.07 1.94

2.67 2.94

1.84

2.66

1.18

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

Value of Cheques (N'trn)


Ships Awaiting Berth Declined Further

Ships awaiting berth at Apapa

declined to 71in December

10.13% lower than 79 in

November

Devaluation of the currency is

expected to affect imports

Which implies less ships awaiting

berth at the ports

Source: NPA, FDC Research

105

52

79

71

0

20

40

60

80

100

120

Jan-

14

Feb

-14

Mar-

14

Ap

r-14

May-1

4

Jun-

14

Jul-1

4

Aug-1

4

Sep-1

4

Oct

-14

Nov-

14

Dec-

14

No of Ships Awaiting Berth


Rig Count Down Marginally

Number of active rigs declined

from 19 to 18 in December

Worldwide rig count down by

100 to 3570

Oil contractors are idling rigs

and laying off workers

Expect a further decline in rigs

as oil prices fall further

Source: Baker Hughes, FDC Research

0

5

10

15

20

25

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2013 2014

15

9

19 18

02468

101214161820

Jan-

14

Feb

-14

Mar-

14

Ap

r-14

May-1

4

Jun-

14

Jul-1

4

Aug-1

4

Sep-1

4

Oct

-14

Nov-

14

Dec-

14

Rig Count

Retail Industry


65

Retail

Total sales for year end celebrations increased by

approximately 6%

Increase in shopping traffic during the holidays

Driven by increased demand for groceries, FMCGs and

white products

Online retailing received a major boost

Partly due to attractive promos advertised

Inventory levels down to 5weeks

Cash to card ratio unchanged at 75:25 in Lagos


66

Retail Outlook for Nigeria

Retail activities are election neutral

Customers are buying ahead of the devaluation repricing

FMCGs highly vulnerable to exchange rate risks in 2015

due to high import content


67

Global retailers will focus on penetrating emerging markets

Shifting demographics and expectation of rising demand in the region

And increased disposable income due to reduced petrol prcie

High population and growing middle class

Key growth countries are:

India

Indonesia

China

Nigeria

Retailers have their eyes on Emerging Markets

Source: PWC, FDC Research


68

Retailers have their eyes on Emerging Markets

The MINTs and SSA will be targeted

Due to higher margins and per capita spend

Decreasing margins in new store openings will give rise

to increased productivity within existing stores

Barriers to global trade will continue to decline

Developing markets will liberalize trade barriers

Source: PWC, FDC Research


70

Slow construction activities for highly capital-intensive

projects

Funds are channelled into elections instead of new contracts

But pending commercial developments still on schedule

for completion in 2015

Heritage Place, Ikoyi

Civic Centre Towers

Jabi Lake Mall, Abuja

Real Estate

70


71

Real Estate

Less capital-intensive projects continue to gain traction

Devaluation of the currency began to take its toll on

activities

Landlords unwilling to accept naira because of the

exchange rate difference

Especially in the high-end market

Vacancy factor increasing but rents are sticky


73

Vacancy Factor

Residential vacancy factor in Victoria Island increased to

32% in January

Commercial vacancy factor up to 17%

Residential vacancy factor in Lekki and Ikoyi increased to

35% and 11% respectively

Commercial vacancy factor at 41% and 3% in Lekki and Ikoyi

respectively

Ikoyi still predominantly residential though new commercial

developments are springing up


74

Fluctuations in Vacancy Factor

Source: FDC Research

32%

17%

0%

5%

10%

15%

20%

25%

30%

35%

March'14 May'14 Jul'14 Sept'14 Jan'15

Victoria Island

11%

3% 0%

5%

10%

15%

20%

25%

30%

35%

40%


Ikoyi

35%

47%

0%5%

10%15%20%25%30%35%40%45%50%


Residential Vacancy Factor

Commercial Vacancy Factor

Lekki


75

New Commercial Developments

Osapa Convenience Centre, Lekki

Shopping mall to be situated at Jakande roundabout along

Lekki-Epe expressway

Shoprite is the anchor tenant

Will also have a Grade A office complex inside the premises

Designed to take advantage of the high traffic volume along the

Expressway to meet the needs of commuters to and from

work

On the contrary, it is expected to generate more traffic on the

expressway


76

New Commercial Developments

Kingsway Tower, Glover Road, Ikoyi

Commercial high-rise building

15 floors; 1000 sq. Metres

Metro Mall, Admiralty

15 rooms available

N100,000 – N120,000 per sq. Metre

39 rooms purpose built hotel on Ajose Adeogun

2600 sq. metres


77

Construction activities expected to pick up after elections

Risk of political violence may delay investment into the

real estate sector

Further decline in oil revenues will also curtail government

spending on capital projects

The usual lease/rent will continue but at a slow pace

Elections not expected to affect pending property

developments due for completion in 2015

Eko Atlantic project to pick up in 2015

Abuja centenary city in the pipeline

Outlook

77

Aviation Update


79

Falling Naira, Increased Fares

79 ROE depreciated by 2.95%

From N186.5 in Dec’14 to N192 in Jan 27

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%


80

Falling Naira, Increased Fares

80

Airlines profitability up due to lower oil prices

Ethiopian Airline made a profit of Br3.15bn ($155.47m)

in their 2014 financial year

Highest profit made in 69years of existence

More acquisitions and consolidations

Etihad acquired 49% stake in Alitalia

Stricter regulations and policies to be imposed on

operators

NCAA suspended the Air Operator’s Certificate (AOC) of

Discovery Airline


81

Dipping Oil Prices, Increased Airlines’ Profitability

81 IATA announced a positive outlook for airline’s

profitability in report

Global net profit forecast for 2014 of $19.9bn set to rise

to $25bn in 2015

Lower oil prices and stronger worldwide GDP growth

are the main drivers

Average return airfares (excluding taxes and surcharges)

expected to fall by 5.1% and cargo rates are expected to

fall by 5.8%

IATA


82

Dipping Oil Prices, Increased Airlines Profitability

82 On a per passenger basis, airlines will make a net profit

of $7.08 in 2015

Up on the $6.02 earned in 2014

Total passenger numbers expected to grow to 3.5bn,

revenues expected to grow to $623bn

Passenger traffic expected to grow by 7.0% in 2015

Above the 5.5% growth trend of the last two decades

Cost of transporting goods expected to fall by 5.8% in

2015.

53.5m tonnes of cargo is expected to be flown in 2015

Total cargo revenues are expected to rise to $63bn

IATA


84

Political Update

A contest of character vs. record

The PDP is trying to redefine the election as a Buhari

referendum

Throwing the kitchen sink at the APC

APC was clever to make the electoral choice one between

Jonathan and Change

The PDP want it to be a Christian vs. Muslim race

Now a dictator vs. liberal or reformer against command

economy

Presidential


85

2015 looks Different

The younger voters want the older man

The older voters are leaning towards the younger

candidate

The youths are not voting for Buhari

But against the PDP

The PDP strategy was based on the fundamental

assumption

That the APC would implode at the convention in December

The PDP is believed to have sponsored dissidents to

splinter the APC

Failure of the APC to implode left the PDP with no plan

B


86

2015 looks different

The momentum of the APC and their rally turnout was a

wake up call

The PDP is now in overdrive

Using kites of fear, religion, postponement, interim

government

Election will hold on February 14 with 3 possible

outcomes

A landslide for the PDP

A narrow win for the APC

A dual result by both parties and an Ivory Coast scenario

The exchange rate devaluation has hurt the PDP amongst

Ibos


87

2015 looks Different

One in three are traders and are very exchange rate

sensitive

The PDP favourable rating in the South East is down from

90% to 65%

Fear of N250/$ is making South East a potential

battleground

A win on February 14 could lead to a bandwagon effect

on February 28

It could scramble or consolidate the political map of

Nigeria for all times


89


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


91


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


92

Corporate Humour

92

Mario Cuomo -

Goals are dreams with deadlines.

- Diana Hunt

92

You campaign in poetry and you govern in

prose.


93

Corporate Humour

93

The past is a source of knowledge and the

future is a source of hope. Love of the past

implies faith in the future.

Hindsight is like foresight without a future.

A leader takes people where they want to go. A

great leader takes people where they don’t

necessarily want to go, but ought to be.

- Anonymous

Anonymous -

- Rosalynn Carter

93


94

Corporate Humour

94

The only time to eat diet food is while you are

waiting for the steak to cook.

We are all mortal until the first kiss and the

second glass of wine.

- Julia Child

Eduardo Galeano -

94


95

Corporate Humour

95

Learn to say no to the good so you can say yes

to the best.

You know you are getting old when candles

cost more than the cake.

Genius is immediate but talent takes time.

- John Maxwell

Bob Hope -

- Janet Flanner

95


96

Corporate Humour

96

Success is a lousy teacher. It seduces people

into thinking they cant lose.

Temper is the one thing you can’t get rid of by

losing it.

- Bill Gates

Anonymous -

96


97

Corporate Humour

97

I like to leave a message before the beep.

To write a love letter you begin without

knowing what we intend to say and end

without knowing what we have said.

The difference between a dream and a goal is a

plan.

- Steve Wright

Anonymous -

- Anonymous

97


98

Corporate Humour

98

A problem well stated is a problem half solved.

What is gone and what is past, should be past

grief.

- Charles Franklin

William Shakespeare -

98


99

Corporate Humour

99

Obstacles are those frightful things you see

when you take your eyes off the goal.

In order to succeed your desire for success

should be greater than your fear of failure.

- Henry Ford

Bill Cosby -

99


100

Bismarck J. Rewane, MD/CEO Financial Derivatives Company Ltd.

Lagos, Nigeria 01-7739889

monthly economic news and views at lagos business school

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