26 Jan

Daily Watch – Internet use declines in Nigeria, Fitch goes gloomy on forex and debt load

  • Fitch Ratings revised the outlook on Nigeria to negative from stable over concerns that a lack of foreign exchange will hamper the economy and affirmed the west African nation’s rating at B+, four steps below investment grade. While Nigeria’s economy will probably grow at 1.5 percent this year, after contracting by an estimated 1.5 percent in 2016, the non-oil sector will continue to be constrained by foreign currency shortages, the ratings agency said in an e-mailed statement on Wednesday. “Access to foreign exchange will remain severely restricted until the Central Bank of Nigeria can establish the credibility of the interbank foreign exchange market and bring down the spread between the official rate and the parallel market rates,” Fitch said. While government debt remains low at 17 percent of GDP, the shortage of state revenues “poses a risk to debt sustainability,” according to Fitch. The government’s debt stood at 281 percent of revenue as of end 2016, and while 77 percent of that is domestic, foreign currency borrowings are increasing, the agency said.
  • The CBN has asked banks to bid in a special currency auction to clear a backlog of dollar obligations that businesses owe, Reuters quotes traders as saying on Wednesday. The regulator asked commercial lenders to submit backlog dollar demand from fuel importers, airlines, raw-materials producers, and makers of agricultural chemicals and machinery for manufacturers by 1500 GMT. In a notice to commercial lenders, the central bank said it would hold a retail foreign exchange auction on Wednesday to sell two- to five-month dollar forwards. The amount of dollars to be sold was unspecified, traders said. Last December, the CBN sold around $1 billion on the forward market to clear a similar backlog of dollar obligations, in an effort to support production in Africa’s biggest economy. The CBN on Tuesday said it would continue to provide hard currency, with priority given to manufacturing industries that need to import raw materials and spare parts.
  • The FG announced that it has commenced the importation of fertilisers and other related products from Morocco, with the first consignment set to arrive Lagos on January 27. This was stated by the Minister of Agriculture and Rural Development, According to agriculture and rural development minister, Audu Ogbeh, the first shipment will see the commodity sold at ₦5,000 per bag to farmers and all availability and accessibility concerns had been addressed. He said: “With the dry season farming to commence soon we expect the first shipment of phosphate, a major component of fertiliser shipment fertiliser from Morocco will arrive on Friday in Lagos. The minister said the fertiliser production target will be about 700,000 to 800,000 tonnes per annum. Nigeria and Morocco signed an agreement in December 2016 that will ensure the production of 1 million tonnes of fertiliser locally in 2017. The agreement was anchored by the Fertilizer Producers and Suppliers of Nigeria and a Moroccan company, OCP during the visit by President Muhammadu Buhari to Morocco.
  • The number of internet users in Nigeria’s telecommunications networks dropped to 91,910,341 in Dec. 2016 according to new NCC data. The telecoms regulator made the disclosure in its Monthly Internet Subscribers Data for November published on its website. The data indicated that internet users on both GSM and CDMA networks dropped by 536,346 in December compared with 92,446,687 users recorded in November. It showed that out of the 91,910,341 internet users in December, 91,880,032 were on GSM networks. The data show that MTN had 31,753,369 subscribers using the internet on its network in the month under review, a drop of 264,410 internet subscribers in December after recording 32,017,779 in November, Globacom had 27,010,178 customers surfing the net on its network in December, a decline of 112,714 users from the 27,122,892 that surfed the internet on the network in November while Airtel had 19,363,545 internet users in December, adding 219,845 customers to its November record of 19,143,700. The numbers also showed that Etisalat had 13,752,940 internet customers in December, a decrease of 379,067 users from the 14,132,007 users recorded in November. The NCC data revealed that the CDMA operators, Multi-Links and Visafone, had a joint total of 30,309 internet users on their networks in December, maintaining the same number from November.
  • Shareholders of Guinness Nigeria have approved a plan by the board to raise a total of ₦40 billion by way of a rights issue to existing shareholders. This is the first offer in the market for the year, and already there is scepticism about the ability of shareholders to fully subscribe to the offer, given the prevailing economic conditions. This is particularly so given the very high inflation of about 18.5 percent and weakening purchasing power thereby compounding the illiquidity in the stock market. Guinness reported a pre-tax loss of ₦4.4 billion in 2016 largely driven by increases in net interest expense. The Guinness shareholders also authorised the directors to apply any outstanding loan facilities due to any person from the company towards the payment for any rights or shares subscribed for by such a person under the rights issue. Guinness Nigeria had announced at the end of 2016, its intention to offer a Rights Issue as part of plans to optimise its balance sheet and improve its financial flexibility. Company chairman Babatunde Savage disclosed that a soft loan by Diageo, Guinness’ parent company to procure raw materials stood at ₦9.8 billion as at September 2016.