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There is no debating the significant contributions local banks make to the economy of Ghana. These can be in the form of employment and tax revenue to the state.

The Financial and Insurance sub-sector of Ghana falls under the services sector of the economy. The services sector, as per the 2019 budget statement, saw a decline in its share of the Gross Domestic Product from 56.2% to 45.6% after the rebasing exercise.

The Government of Ghana in an effort to support local banks in good standing to fall in-line with the Central Banks new minimum capital requirements has set up the Ghana Amalgamated Trust (GAT); is a Special Purpose Vehicle composed mainly of pension funds.

Research conducted by the World Bank reveals that there have been some significant gains made in the area of financial inclusion (FI) in Ghana.

Since the introduction of Mobile Money (MoMo) into the Ghanaian market over a decade ago by telecom giant MTN, the industry has seen a study growth from its humble beginnings with a current number of 316,919 registered and 173,229 active mobile money agents nationwide and 29 million accounts (Ministry of Finance, Ghana).

For Ghanaians tired of the daily bumpy, rugged commute to and fro; massive road construction and rehabilitation is expected in the coming year with provision made for notable trunk and feeder roads in addition to seeing the revamping of the rail network.

Gone are the days when Ghanaians would tune in once a year at 6pm to listen (watch) attentively to the budget statement being read by the then Finance Minister Dr. Kwesi Botchwey on national television;

With the recent launch of the GCX, Ghana joins the league of 12 other African Countries running a commodity exchange. Notable among these is the Ethiopian Commodities Exchange (ECX) which begun in 2008 and has quickly grown to be a model for other African countries.

Ghana’s housing deficit is currently hovering above 1.7 million units. This means the country will require about 700,000 units of houses annually to meet this demand and thus requiring an investment of about $52 billion over a 10 year period.

The Capital Market in Ghana currently consists of about 133 participants; these consist of Investment Advisors, Fund Managers, Broker Dealers, Registrars, Custodians, a Stock Exchange, and a Depository. Statistics from the Ghana Securities Industry Association (GSIA) shows that as at the third quarter of 2018, total industry Assets under Management (AUM) was over GHC 40 billion which translates to about 20% of the nation’s total Gross Domestic Product (GDP).

Exactly eleven years ago, Ghana made her landmark discovery of Oil and Gas deposits in commercial quantities.Subsequently for the first time the country will be conducting an open competitive bidding round for the allocation of new oil blocks.

Exactly eleven years ago, Ghana made her landmark discovery of Oil and Gas deposits in commercial quantities.Subsequently for the first time the country will be conducting an open competitive bidding round for the allocation of new oil blocks.

The Energy Commercial Bank Limited (ECBL) on the 2nd of October 2018 launched its Initial Public Offering (IPO) to raise GHC 340 million by offering 261,538,462 ordinary shares at an offer price of GHC 1.30. The 30 day offer (ending 02/11/18) is open to the general public with a minimum subscription of 100 ECBL shares valued at GHC 130.00

Upon joining the league of oil producing nations, the average Ghanaian expected to see some reasonable reduction in prices of petroleum products, coupled with massive economic growth.
It is rather sad to say that this has remained at best, wishful thinking

Sino – Ghana relationship; Impact on the Ghanaian Financial Sector

 

With an infrastructure deficit hovering around $30 billion according to the Hon. Minister of Finance, Ghana is currently seeking China’s collaboration to address this deficit. The Government hopes to achieve the said infrastructuraltransformation by leveraging on its untapped natural resources, notably bauxite.

Upon joining the league of oil producing nations, the average Ghanaian expected to see some reasonable reduction in prices of petroleum products, coupled with massive economic growth. It is rather sad to say that this has remained at best, wishful thinking.

MTN GHANA LISTS ON THE GHANA STOCK EXCHANGE

On 5th September 2018, MTN Ghana finally got listed on the
Ghana Stock Exchange (GSE) after a successful sale of a little over GHC 1 billion worth of shares during its Initial Public offering (IPO). MTN has thus now become the fortieth (40th) company and the very first telecommunication company to list on the GSE.

By this listing, MTN’s shares are now available for trading on the GSE. The stock will trade under the ticker symbol “MTNGH” and will be available from all licensed brokerage firms.

The first day of trading in MTN shares saw a significant increasing in market capitalization. Market Capitalization increased by over GH¢ 9.22 billion from GH¢ 55.97 billion to GH¢ 65.19 billion. This represents an increase of over 16.4%. The first trading day also witnessed a total of about 5 million shares valued at GH¢ 3.76 million being traded.

It is envisaged that, these additional shares on the market will increase the trading appetite of investors and thus improve liquidity on market.

Investors will now eagerly wait in anticipation for the listing of Energy Commercial Bank which is seeking to raise over GHC 340 million by floating fifty percent (50%) of it shares to Ghanaian institutional and retail investors. The IPO is currently pending final approval from the Securities and Exchange Commission.

THOUGHT OF THE WEEK:

Outlook for the Asset Management Industry

The asset management industry is growing with new business lines evolving on a continuous basis. The industry’s Funds under Management has increased by CAGR of 50% on an annual basis. Emerging trends indicate that Asset Management firms with Collective Investment Scheme Products, such as Mutual Funds, Unit Trust and Real Investment funds are competitively advantaged to scale-up the AUM and improve their bottom line significantly in the years ahead.

The emerging developments below make collective investment schemes or products the new business line to pursue.

  • Increase in Pension Allocations to Mutual Funds: The increase in pension funds allocation target- into collective investment schemes- from a maximum of 5% to 15% will increase growth of such products astronomically. Due to this all the big players in the asset management industry have set-up mutual funds to absorb pension funds. EDC and Stanlib have CIS products that currently contributes to about GHS 500 Million and GHC 300 Millions to their assets under management.

 

  • New Solvency Framework Guideline for Insurance Companies: The new available capital resources (ACR) calculation for insurance companies opens room for them to invest heavily in money market mutual funds to allow for a low discount rate 5% on the allocated asset. This is the lowest in the entire permissible asset class for insurer’s, except Government Bonds, which attracts no discount. This development opens doors for millions of funds to flow into Money Market Funds.

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THOUGHT OF THE WEEK

Cleaning Up the Banking Sector

Banks are an essential source of income for most businesses, and provide other important financial services which contribute towards the development of any economy. However, weak banks can lead to a number of negative externalities in society if they collapse.

A distressed bank can be defined simply as a bank whose liquidity or solvency is impaired unless there is a major improvement in its financial resources, risk profile, management systems and in a timely manner. Issues of inadequate financial resources and weak asset quality can be predicted through various calculations, the easiest being their liquidity and risk positions.

Liquidity refers to a bank’s ability to convert assets to cash or the amount of cash on the balance sheet. Banks must meet funding needs for their operations, they must be able to repay their own debts. They must have enough cash on hand to meet withdrawals requests and be able to fund new loans for customers. A high working capital, as well as a high current ratio represents a stronger position of liquidity, which would determine how solvent and profitable the bank is.

Expectations

When dealing with distressed banks, early intervention is by regulatory bodies is critical to prevent an escalation of the problem. To prevent a liquidity crisis like the financial crisis from happening again, BoG regulations should require banks to meet certain stringent liquidity requirements for operations. This is an important protection for the financial system, and it also makes calculating a bank’s liquidity position much easier for investors.

Bank of Ghana (BoG) has indicated that there are seven other banks classified as being in varying stages of distress, the cases of UT Bank and Capital Bank were most severe. In respect of the other banks that are distressed to varying extent, we expect BoG to monitor them closely and step in as soon as it appears that the interest of depositors and other participants are threatened.

Re-capitalization has become necessary because of weak economic growth and weak credit management systems are affecting performance in the financial sector. The new requirement is expected to clean up the banking industry. We expect more mergers and acquisitions in the banking sector as not all the over 30 banks would be able to meet the new capital levels.

THOUGHT OF THE WEEK

Ghana Launches Treasury Single Account

Government has begun the implementation of several key policy initiatives aimed at promoting long-term economic growth and national development.

One such key policy initiative is the Ghana Treasury Single Account (TSA), which is a set of linked bank accounts through which the government recognises all its receipts and payments. This has required a transfer of 15,172 bank accounts of government institutions to the central bank for ease of management and monitoring.

The TSA would provide government with a consolidated view of its cash resources and to ensure treasury management as required under the cash management reform initiative. When successfully implemented, the TSA would strengthen government’s fiscal management and spending. TSA ensures that the MoF has full control over budget allocations, and strengthens the authority of the budget appropriation.

Impact

We expect the affected banks to face some liquidity challenges in the short to medium term. In curbing this, rates on deposits may see an increase as a means of inducing customers. This would make them compete with banks that have surplus liquidity. Lending by the affected banks would reduce due to the significant decline in deposits and possibly compel these banks to downsize staff in order to be more efficient.

The value of these banks, if listed on the exchange, would see a decline as a result of thinner margins due to the increased rates on deposits and the possible reduction in lending. Their risk positions may also be affected as cost of equity increases.

However, the implementation of this programme is a critical step towards curbing corruption in public finance. This is a tool to combat corrupt practices, eliminate indiscipline in public finance and ensure adequate fund flow to critical sectors of the economy to catalyse development.

THOUGHT OF THE WEEK

Stock Market Overview

The GSE-CI closed the week at 2,268.45, representing a Year-to-Date (YTD) return of 34.30%. Meaning you would have gained a significant return of 34.30%, if you had bought into the Consumer Index at the start of the year. The Financial Index (GSE-FI) has a higher YTD of 35.38%, meaning that financial stocks are performing better than other stocks of listed companies. The market capitalisation recorded a YTD of 9.10%.

The overall Consumer Index performance is underpinned by the higher returns of financial stocks, performance has been driven by manufacturing stocks such as BOPP with a YTD of 142.31% and FML with a YTD of 44.34%. The performance of the overall Financial Index is driven by three main financial stocks. Namely, SCB with a YTD of 115.52%, ETI with a YTD of 50.00% and GCB with a YTD of 44.66%.

The value increase in the overall volume of shares traded on the exchange and the market capitalisation of the listed equities can be attributed to low interest environment. Which has spurred investors’ influx into the equities market for higher yields.

Investing in the stock market versus other investments has several benefits, asides a higher prospect of capital appreciation. The stock market offers a wide variety of businesses which have stock publicly traded, an investor can have a diversified stock portfolio with selected stocks and can outperform the general market returns.

In addition, many of the more established stocks pay out dividends, which can also provide the investor with an income. Conservative investors can enjoy the benefits of stock ownership without incurring too much risk by investing in stocks in the food production sector.

THOUGHT OF THE WEEK

Monetary Policy Committee Cuts Policy Rate by 150bps

The policy rate has been cut by 150bps to 21.0% on the back of reducing inflation and improving macroeconomic environment. Consumer inflation has been on a downward trend, currently standing at 12.1% in June 2017. The downward trend in inflation came from lower food and petroleum prices as well as relative stability of the Cedi against the US Dollar. The narrowing trade deficits and increased foreign exchange inflows from foreign investors into the fixed income market, equally contributed to the stable environment.

There are signals that economic activity is improving in Ghana as GDP grew by 6.6% in Q1 2017 compared to 4.4% in Q1 2016. BoG’s leading indicator of economic activity, the Composite Index of economic activity recorded a year change of 26.33%. In addition, there have been an increase of credit allocation to the private sector to expand production and create additional jobs. This has resulted in an increased export and the higher tax receipts to government.

Outlook

It is clear that the ongoing policy easing cycle aimed at reducing interest rates to enhance credit to the private sector in a bid to stimulate economic activity is working. However, while lending rates have reduced from a peak of 33.0% in February to 30.8% in June, they are still high for a lot of businesses.

However, moving forward, we expect further declines in the policy rate owning to a stable currency and a decline in inflation. More also, we expect the development in the treasury market to be the key driver of commercial lending rates, as more banks shift funds from low interest government bonds to high yield interest loans.

THOUGHT OF THE WEEK

Investing In the Agricultural Sector

The agricultural sector is an integral part of the economy as it accounts for approximately 60 percent of the labour force. It is recognized as the mainstay of the economy with a greater impact on poverty reduction than other sectors. It is also critical for rural development and associated cultural values, social stabilization, environmental sustainability and a buffer during economic shocks.
Per thorough research, the agricultural sector contributed 7790.18 million Ghana Cedis to the overall GDP in 2016. Agriculture clearly is one of the sectors that makes a country competitive on the global stage, as such finance and investment firms as well as investors thinking of growth and sustainability of their businesses and portfolios should consider going into agric investments.
The increase in domestic consumption has resulted in the increased importation of agricultural commodities, the consumption of rice in particular has doubled in the last 5 years and will continue to increase as the population expands. Funding from investors will go a long way in boosting production locally, which will in turn increase exports and generate revenues.

Outlook

Nimed research outlook for the sector remains positive. Our outlook is premised on the current value added expansion in the agric sector. Such as the current Ghana, Switzerland $80 million arrangement at increasing cocoa production. The rise in global demand of agric commodities certainly suggest a bright future for the agricultural market.

THOUGHT OF THE WEEK

Investing In the Agricultural Sector

The agricultural sector is an integral part of the economy as it accounts for approximately 60 percent of the labour force. It is recognized as the mainstay of the economy with a greater impact on poverty reduction than other sectors. It is also critical for rural development and associated cultural values, social stabilization, environmental sustainability and a buffer during economic shocks.
Per thorough research, the agricultural sector contributed 7790.18 million Ghana Cedis to the overall GDP in 2016. Agriculture clearly is one of the sectors that makes a country competitive on the global stage, as such finance and investment firms as well as investors thinking of growth and sustainability of their businesses and portfolios should consider going into agric investments.
The increase in domestic consumption has resulted in the increased importation of agricultural commodities, the consumption of rice in particular has doubled in the last 5 years and will continue to increase as the population expands. Funding from investors will go a long way in boosting production locally, which will in turn increase exports and generate revenues.

Outlook

Nimed research outlook for the sector remains positive. Our outlook is premised on the current value added expansion in the agric sector. Such as the current Ghana, Switzerland $80 million arrangement at increasing cocoa production. The rise in global demand of agric commodities certainly suggest a bright future for the agricultural market.

THOUGHT OF THE WEEK

Moody’s Economic Growth Outlook for Ghana

Moody’s Investors Service in a published report stated that Ghana’s B3 credit rating and stable outlook reflects its strong economic growth outlook and reduction in external imbalances, set against challenges which include a significant fiscal overrun in 2016, high government debt and very low debt affordability.
Moody’s envisaged a strong growth outlook for the country’s diversified economy compared to the regional average over the next few years, which would be supported by new oil and gas field developments coming on stream.
However, it highlighted some apparent current challenges such as our sovereign debt position, fiscal overruns and stability in the commercial banking industry, that need to be keenly checked to maintain our positive outlook and sustain current rating.

Outlook

Nimed research outlook for the country’s credit rating remains positive. Our outlook is premised on the current on-going reforms in the general economy. Such as witnessed declines in fiscal overruns, expected increase in oil output, decomposition of government debts portfolio into more long-term debt and Government’s commitment to pay the legacy energy sector debt. These on-going reforms will restore stability in our financial industry and further boost our credit rating profile.

THOUGHT OF THE WEEK

The Government Request IMF Aid Deal Extension

The Government has requested that the IMF push back the end date of its 3-year aid program, from April 2018 to December 2018. The Extended Credit Facility (ECF) for Ghana in an amount of US$918 million in support of medium-term economic reform program set by the previous government.

The program’s Key Performance Indicators (KPI) aim at restoring debt sustainability and macroeconomic stability to foster a return to high growth and job creation, while protecting social spending. Achieving these key fiscal objectives requires a strict containment of expenditure and structural reforms to strengthen public finances, as well as the improvement of budget transparency.

There has been some success in meeting these indicators set by the IMF, notably restoring the effectiveness of the inflation targeting framework to help bring inflation back into single digit territory before the completion of the program. This well help preserve the stability of the financial sector.

However, it has become clear that the some of the objectives of the program may not be achieved to satisfactory standard by the completion date of April 2018, thus an extension is required for the government to meet the fiscal targets. The request also aims at getting the deal to be revised to include more funding and new targets for fiscal consolidation in restoring macro-economic stability.

A prudent debt management strategy and monitoring of these indicators would be necessary to achieve the goal of reducing poverty and restoring macro-economic stability.

THOUGHT OF THE WEEK

Ghana Missed Revenue Target for Q1 2017

In the Quarterly Brief on the 2017 Budget Performance issued by IMANI Ghana, revealed the shortfalls in the government’s projected targets on revenue and expenditure for the First Quarter. Showing a signal that calls for closer monitoring and alternative economic strategies are needed. The revenue shortfall indicates that the impact on the removal of certain corporate taxes dubbed “nuisance taxes” by the Ministry of Finance is yet to stimulate in corporate profitability.

Revenue targets have been missed for Q1 by 14%, of which domestic revenue fell short of the target by 12%. Company taxes, a component of the domestic tax revenue slipped off the target by 27% for the quarter. On the external economy, taxes on International Trade, specifically import duties missed the projection by 23% for the quarter. Non-tax revenue and grants amounted for the largest target miss by 21% and 53% respectively. On a positive note, expenditure targets for the quarter were short by 14%.

Outlook

The performance on revenue particularly domestic tax revenue for Q1 raises concerns within the short term. Without significant recovery of real sector productivity to drive the tax revenue over the upcoming quarters beyond the projections of government, efficiency and effectiveness of the 2017 economic plan could be undermined.

Moving forward, we expect more to be done, for the economy to get back on track and stimulate job creation. The stability in the country’s power supply and low exchange rate volatility is expected to sustain the current low inflationary environment and associated low interest rate regime. This we believe will spur economic growth, corporate profitability and attainment of the projected taxes receipt.

THOUGHT OF THE WEEK

Energy Sector Bond Issued: Tenor Reviewed From 15-Year To 10-Year

Government of Ghana finally advances on the issuance of the energy sector bond to clear the $2.4 billion debt owed, that has put pressure on State Owned Enterprises (SoEs), private companies who owe banks and energy suppliers. The bond seeks to raise $2.5 billion dollars (GHC 10 billion) using an exchange rate of 4 Cedis to 1 USD

The initial tenor of the bond was 15 years, but currently has been reviewed downwards to 10 years to retire the legacy debt in the energy sector. The 10-year energy bond will be led by joint managers Fidelity Bank and Standard Chartered Bank. The Lead Managers on behalf of Government shall set up a Special Purpose Vehicle (ESLA-SPV) to issue the long-term bond or 10-year Energy Bond on the back of ESLA receivables assigned to the SPV, which shall be listed on the Ghana Stock Exchange (GSE).

The ESLA SPV is expected to issue the bond to the tune of about GHC10 billion, with fractions of the bond proceeds being used to refinance previously restructured debt due Banks that are currently being repaid, with an initial payment of 250 million Cedis made to banks.

Impact on Private Sector

Debts owed by government is cited as a major threat to the energy sector growth. The provision of the bond will strengthen the balance sheets of the affected companies and position them as an eligible company for investments. In general, it would improve liquidity positions of Bulk Distribution Companies (BDCs) and banks.

THOUGHT OF THE WEEK

Treasury Yields Continue To Fall To 5-Year Record Low

Ghanaian yields have continued to march towards a low-interest regime following a 100bps policy rate cut to 22.5% in the last MPC meeting.

The yield on the 91-day bill softened by 48bps to a 5-year low of 11.91% this week versus 12.39% last week while that of the 182-day also dropped by 48bps to a 5-year low of 13.29% this week versus 13.77% last week.

A 3-year bond was also auctioned by the government and its yield fell by 300bps to a 4-year low of 18.50%. However, there was strong demand for treasury securities especially the 91-day T-bill.

Treasury yields doesn’t just influence how much government pays to borrow from the money market, it also impacts the confidence and returns earned to investors who buy into this debt.

The lower treasury yields for the short-term fixed income securities signifies the government need for longer term debt in line with the policies set for economic growth.

This could force growth oriented investors to look into alternative investment instruments such as stocks and bonds, where they can earn higher returns.

THOUGHT OF THE WEEK

Revised Investment Guidelines from NPRA Provides Long Term Funding Opportunities to Private Sector Companies

The National Pensions Act, 2008 Act766 mandates the National Pensions Regulatory Authority (NPRA) to have an oversight responsibility of the Tier 2 and Tier 3 funds of both public and private pension scheme in Ghana which commenced in 2010. The NPRA however, in their bid to diversify the investment portfolio of pension fund managers which was dominated by investments in government securities, has proposed new investment guidelines for a more diverse allocation of the schemes managed by various pension fund managers.

The proposed change allows fund managers to invest up to 60% of assets in government securities, 35% of assets in corporate debt securities and 35% of assets in bank deposits as well as other money market securities. This comes against the previous asset allocation of 75% in government securities, 30% in corporate debt securities and 35% in bank deposits and other money market securities.

The change also captures the introduction of a new asset class of alternative investments with a 15% allocation. This allows pension fund managers to invest funds in real estate, trust funds, private equity funds, hedge funds and external investment in securities.

The new proposed change will offer private sector companies in search of alternative sources of financing an avenue to utilize the various long term funding opportunities under the new pension scheme by liaising with fund managers and trustees. The change will also improve the liquidity on the capital market in Ghana and further create room for more listing on the Ghana Stock Exchange and the alternative exchange

THOUGHT OF THE WEEK

Stock Market Overview

The GSE-CI closed the week at 1,923.53, representing a Year-to-Date (YTD) return of 13.88%. Meaning you would gain a return of 13.88%, if you had bought into the Consumer Index at the start of the year. The Financial Index (GSE-FI) has a higher YTD of 16.66%, meaning that financial stocks are performing better than other stocks of listed companies. The market capitalisation recorded a YTD of 11.97%.

The overall Consumer Index performance is underpinned by the higher returns of consumer stocks, namely BOPP with a YTD of 70.61 and GOIL with a YTD of 48.18%. The performance of the overall Financial Index is driven by three main financial stocks. Namely, GCB with a YTD of 47.19%, SCB with a YTD of 31.36% and SOGEGH with a YTD of 22.58%.

The volume of stocks traded over the week amounted to 570,758. Presenting a negative week-on-week (w-o-w) change of -91.45%, meaning there was a significant decrease in the number of shares traded within the week. With UTB having bulk of 558,000 shares.

The value of stocks traded over the week amounted to 59,275. Presenting a negative w-o-w change of -99.45%, showing that there was a significant decrease in the trading activity of high worth stocks on offer.

Although, there was a decrease in the overall volume of shares traded on the exchange, it did not have a direct impact on the market capitalisation, which increased marginally. Signalling the overall confidence of the Ghanaian Bourse.

THOUGHT OF THE WEEK


Ghana’s Fiscal Balance

The new government’s debt and financial sector management strategies set in the 2017 budget, was seemingly validated in early April after the country tapped the bond markets to the tune of USD 2.2 billion with foreign investors snapping up most of the debt. In a further sign of investor confidence, the cedi has made significant gains in recent weeks, which should help dampen inflationary pressures.

The government aims to broaden the tax net and strengthen the fiscal policy framework in order to pare back a budget deficit which ballooned last year, coming in far above the target agreed with the IMF.

Finding between the right mix of fiscal and monetary policies is key to achieving fiscal convergence, which will boost the economy. This can be achieved by pursuing effective debt management strategy to ensure debt sustainability and reduce government borrowing, usually resulting in crowding out of the private sector.

Adopting global standards of risk and treasury management would ensure accountability in the use of state resources, beating down our fiscal deficit.

THOUGHT OF THE WEEK


Currency Market Overview

The Ghanaian Cedi has remained relatively stable in recent weeks following a strong recovery that resulted in the average interbank exchange rate (USD:GHS) dropping from a 2017 high of 4.6042 on March 08, 2017 to 4.2091 at the close of trading on Friday May 12, 2017. As well as dropping marginally against the Euro and Pound Sterling.

The overall performance of the Cedi is underpinned by the higher inflows from bond issues since the beginning of the year, with offshore investors accounting for 90 percent of the funds. As well as the positive response to monetary measures outlined in the 2017 budget.

The development if sustained could impact positively on interest payments, price of petroleum products, the cost of living and the stock market.

Listed companies such as Unilever and Fan Milk are exposed to FX risks via the significant importation of raw materials such as crude palm oil, sugar, milk, tea and packaging materials.

The stability of the Cedi could help to keep a tight lid on the company’s cost of imported raw materials stable, as well as the cost of goods sold. Improved management planning should boost gross profit in 2017.

However, while the company is undoubtedly set to make cost savings from the stability of the local currency, its overall costs could be influenced by other factors especially movement in the prices of raw materials.

THOUGHT OF THE WEEK


Stock Market Overview

The GSE-CI closed the week at 1,884.87, representing a Year-to-Date (YTD) return of 11.59%. Meaning you would gain a return of 11.59%, if you had bought into the Consumer Index at the start of the year. The Financial Index (GSE-FI) has a higher YTD of 15.22%, meaning that financial stocks are performing better than other stocks of listed companies. The market capitalisation recorded a YTD of 11.12%.

The overall Consumer Index performance is underpinned by the higher returns of financial stocks. The performance of the overall Financial Index is driven by three main financial stocks. Namely, GCB with a YTD of 46.07%, SCB with a YTD of 31.36% and SOGEGH with a YTD of 19.35%.

The volume of stocks traded over the week amounted to 817,576. Presenting a week-on-week (w-o-w) change of 7.63%, meaning the number of shares traded this Friday as compared to the previous Friday increased by 57,991 shares.

The value of stocks traded over the week amounted to 1,780,560. Presenting a w-o-w change 1,380.65%, showing that there was a significant trading activity in high worth stocks on offer. Thus the substantial difference of 1,660,305 between the Fridays.

The value increase in the overall volume of shares traded on the exchange and the market capitalisation of the listed equities can be attributed to low interest environment. Which has spurred investors’ influx into the equities market for higher yields.

THOUGHT OF THE WEEK


Energy Sector Debt Relief for Banks

As of August 2016 the Volta River Authority (VRA) owed nineteen commercial banks and energy sector providers to a tune of 300million dollars in legacy debt. After an initial payment of 250million cedis, made to banks, the Ministry of Finance and Bank of Ghana as well as the Ghana Association of Bankers made an agreement on a restructured road map towards clearing this debt. Energy sector utilities are facing financial challenges which are affecting their viability necessitating a restructuring and priority repayments of their debts.

Currently, 2.3 billion Dollars of outstanding debts is owed by government to the energy sector. The government plans to issue a 15-year bond to settle these debts. This will relieve the pressure on State Owned Enterprises (SoEs), private companies who owe banks and energy suppliers. The bond is expected to cover all liabilities and will be serviced with Energy Sector Levy Act (ESLA) revenues. Thus, these companies will become stronger financially, as well as more competitive.

Impact on Private Sector

Debts owed by government is cited as a major threat to the energy sector growth. The provision of the bond will allow space for energy companies to have stronger balance sheets, to grow, invest and attract investment. In general it would improve liquidity positions of BDCs and banks.

THOUGHT OF THE WEEK


Energy Sector Debt Relief for Banks

As of August 2016 the Volta River Authority (VRA) owed nineteen commercial banks and energy sector providers to a tune of 300million dollars in legacy debt. After an initial payment of 250million cedis, made to banks, the Ministry of Finance and Bank of Ghana as well as the Ghana Association of Bankers made an agreement on a restructured road map towards clearing this debt. Energy sector utilities are facing financial challenges which are affecting their viability necessitating a restructuring and priority repayments of their debts.

Currently, 2.3 billion Dollars of outstanding debts is owed by government to the energy sector. The government plans to issue a 15-year bond to settle these debts. This will relieve the pressure on State Owned Enterprises (SoEs), private companies who owe banks and energy suppliers. The bond is expected to cover all liabilities and will be serviced with Energy Sector Levy Act (ESLA) revenues. Thus, these companies will become stronger financially, as well as more competitive.

Impact on Private Sector

Debts owed by government is cited as a major threat to the energy sector growth. The provision of the bond will allow space for energy companies to have stronger balance sheets, to grow, invest and attract investment. In general it would improve liquidity positions of BDCs and banks.

THOUGHT OF THE WEEK


Ghana’s Consumer Inflation Drops 40bps

Government’s effort to achieve an inflation target of 11.2% and economic growth of 6.3% for year end 2017 seems to be gaining traction as consumer price inflation falls gradually. The Consumer Price Index has dropped consistently over the last sixth month by 40bps from 13.2% to 12.8% in March 2017.

The macroeconomic variables are moving in the right direction, as inflation and exchange rates steadily drops on the back of strong fiscal incentives that have been put in place to enable a profitable business environment.

In addition, government’s commitment to continue with the IMF program and stability of the power supply competitively positions the economy to attain its key targets.

Outlook

The power stability and relatively low figures in the inflation rate, as well as slopping exchange rates provides a climate that is more favorable to sound, sustained economic growth and job creation. Moving forward, we expect the favorable movements of these key macro-economic indicators to continue its downward trend, further creating room for economic growth.

THOUGHT OF THE WEEK


Ghana Issues Its First 15-Year Bond

The Government of Ghana (GoG) issued a 15-year bond on Monday 3rd April 2017, along with a 7-year bond at a combined worth of GHS4.87 million. The bond gained strong interest, as it was oversubscribed by about 56%. From which government accepted 99.9% of total subscription worth GHS3.42 billion at a yield of 19.75%.

Convenants within the bond permit Government to call the bond at specified periods within the bonds tenor. This provision gives Government the opportunity to refinance at a lower rate when interest rates decline in the market.

Issuance of the 15-year bond provides a benchmark pricing matrix for companies to raise long-term funding in the fixed income market. In addition, the new issue will open up trading, improve liquidity and assist in pricing of bonds trading on the secondary market.

Outlook

We see a bright future for long tenor bond issuance and subsequent trading on the secondary market. This is underpinned by a growing pension fund industry that normally prefers long-dated bonds.

THOUGHT OF THE WEEK


Overview of Ghana’s Venture Capital Trust Fund & the Ghc 219 M Budgetary Allocations

The Venture Capital Trust Fund (VCTF) in Ghana was established in 2004 through an Act of Parliament (VCTF Act 680). The purpose of the Fund is to provide low cost financing to Small and Medium Enterprises (SMEs), so as to enable them expand, create wealth and jobs. This is achieved through the provision of credit and equity financing to eligible Venture Capital Finance Companies to support SMEs, as well as the provision of monies to support the activities and programs for the promotion of venture capital financing as determined by the Board.

Over the last 4 years, the Fund has been dormant without budget allocation. However, there has been a significant budget allocation of GHC 219million in the 2017 budget. In an economy where almost 90% of registered companies fall under the SMEs bracket, reviving the Fund is an effort to boost the economy in the long run.

The target group of the fund has been recognized as the catalyst for economic growth of the country, as they provide a major source of income and employment. Although, the Fund is ever revolving, SMEs in priority sectors such as agriculture, pharmaceuticals, ICT, tourism and energy (exception of imports to sell) will feel more positive impacts from the Fund.

In addition to equity and debt investments, VCTF organizes training and capacity building programs with top-tier institutions and management consultants to target companies.

THOUGHT OF THE WEEK


Understanding the 2017 Budget

Understanding the budget statement helps in making prudent investment decisions and financial forecasts. The budget statement helps inform businesses and citizens on how much Government expects to generate as revenue and how it intends to spend those revenues. Think of the budget as a projected income statement, which states clearly government’s expected revenue and expenditure.
In reading the budget, you first look at the revenue outlook for the year. In the 2017 budget. Government anticipates to generate revenue of GHC 44.96 billion in 2017 compared to GHC 33.67billion in 2016. Almost 76.5% of the projected revenue is expected to come from taxes with the other 23.5% projected to come from grants, social contribution and royalties.
The expenditure section should be the next step in reading the document. This will tell you how Government will spend the anticipated GHC 44.96billion revenue. In the 2017 budget, Government expects to spend a total of GHC 58.14billion to pay compensations, service interest on the debts, expend on capital expenditure and grants to other Government units.
A careful look at the GHC 44.95 billion revenue and GHC 58.14billion expenditure indicates that, Government anticipates spending about GHC13.19billion more than it generates as revenue. This is what we call a budget deficit. The approach Government uses to fund this deficit has a direct impact on the overall investment landscape and economy.

THOUGHT OF THE WEEK


Overview of the Afreximbank and Ecobank US$500mn Partnership

The African Export-Import Bank (Afreximbank) and Ecobank have signed a memorandum of understanding worth US$500mn to finance private sector projects and trade finance transactions amongst Afreximbank member countries where Ecobank is present. Afreximbank currently has 41 member countries across the African continent, while Ecobank is present in 36. The agreement is aimed at promoting intra-African trade and facilitate industrial and export development. Under the agreement, the banks have committed to designing joint innovative tailor-made financial instruments and solutions to support private sector corporates, select strategic public sector institutions, as well as SMEs.

Our Expectations about the Partnership

Creates Efficiency in Trade Financing: The Partnership will lead to a more efficient way of channeling trade finance towards supporting growth of intra-African trade and industrial development. The enhanced access to these funds would revamp local companies as it opens up more opportunities for local businesses to access financing for their trading activities. It is expected that, export oriented companies operating within the partnership zone would benefit greatly, as access to trade financing become readily available and easily accessible

Increased Investment Inflows through Export Development: With the agreement focusing particularly on transactions involving trade and investments, it is expected that overall economic growth will be spurred, resulting in increased productivity and employment opportunities.

THOUGHT OF THE WEEK


Overview of the New Continental Free Trade Area Agreement

At the 28th Ordinary Session of the African Union (AU) Assembly in 30th January 2017, the Heads of States and Governments, within the continent, agreed to a Continental Free Trade Area agreement (CFTA). CFTA would enable all African States to trade among themselves freely, which if successfully executed, would lead to a significant reduction in the cost of doing business in Africa. The agreement is expected to deepen regional integration, boost intra-Africa trade and facilitate overall economic growth.

Our Expectations about the CFTA Deal

Free Trade Zone to Positively Impact Economic Growth Continentally: The CFTA deal will attract multi-national companies into the continent whiles consequently allowing native companies to sell in other foreign markets. Companies within the free trade zone would benefit from a bigger market size that will provide opportunities to develop and explore new products and services, as the marginal cost of doing business reduces amid increased sales and decreased operational overheads.

Increased Investment Inflows: Elimination of trade barriers and increased cross country mobility will help attract capital into the continent, specifically, Foreign Direct Investments (FDI’s). This will benefit member countries in the form of increased economic growth emanating from an upward productivity cycle. An inflow of foreign capital will further stabilize our banking system, by providing much needed forex for operations.

THOUGHT OF THE WEEK


Impact of Hidden Budget Overrun

Investor’s expectation of high economic growth, in the first year of the new administration, experienced a dent this week on announcement of hidden budget overrun for yearend 2016. The deficit, which amounts to approximately 7 billion Cedi ($1.6 billion), is believed to have been hidden from the general public and supervising IMF team. This pushes the inherited budget deficit to 10% as against the projected 7% figure for year-end 2016.

Possible Impact

The discovery can have numerous impacts on the economy and financial markets as a whole for year 2017. First, investor confidence will be shaky as we await measures on how the issue will be resolved. This can lead to a low foreign participation in our money markets, which currently stands at 40% of total market size. Also, with credibility of prior economic data in doubt, the perceived risk for the country is expected to rise leading to high cost of borrowing and increased pressure on the Cedi, currently, one month cedi forward contracts are trading for 4.452 whiles the yield on the 2023 Eurobond trades increased to 8.48% on Thursday 2nd February 2017.
We expect sustained pressure on the Cedi to continue through half year of 2017, as deficit is brought under control

ECONOMIC NEWS


IMF reports slow down in economic growth for Sub-Saharan Africa in 2017: Economic growth in sub-Saharan Africa including Ghana has been projected at 3 percent in 2017 lower the 3.3 percent projected for 2016. According to the IMF regional economic Outlook report for October 2016, on the Sub-Saharan Africa on the theme “Time for a Policy Reset.” The report revealed that a combination of lower commodity prices, decrease of inflows from major trading partners and the tightening of borrowing conditions. As well as domestic factors such as political instability and conflict and electricity shortages. The report highlighted severely affected was commodity exporters like Congo, whereas the best performers like Ivory Coast were resilient due to high investment in infrastructure and greater diversification. Output among oil exporters is expected to shrink by 1.3 percent this year, while other resource-intensive countries are expected to struggle too.


NDIC urge banks to restore banking services to North East: Nigeria Deposit Insurance Corporation (NDIC) has called on banks to restore banking services to the North Eastern part of Nigeria. Due to the ravages Boko Haram, a high number of bank closed its doors in the region. The states are doing their best in rebuilding the region’s economy. However, without access to finance the progress that has been made will be hindered. Blue prints developed by the CBN could not be implemented because of the terror group. Without the success of the Nigerian Army in curbing the group, banks are urged to return banking services to the locals. The corporation is geared towards promoting financial education, enlighten on the benefits of having a savings culture, cooperative societies and trading in order to raise the standard 0f living in Nigeria.

Co-operative Bank’s after-tax profit soars to hit Sh10.5 billion: The bank registered a 22 per cent jump in net earnings in Q3 to Sh10.5 billion profit after-tax, 2.1 billion increase from last year Q3. Thus the shares edged up 0.4 per cent, trading at Sh13.40; with notable foreign investor demanding amounting to 60 per cent of buys. Shareholders’ funds grew from Sh49.5 billion to Sh59.2 billion, supported by a steady retention of earnings and improved earning over the years. The lender’s loan book grew by 6.9 per cent to Sh227.1 billion while deposits jumped from Sh257.5 billion in September last year to Sh260.6 billion. The bank projects it will double this loan growth by the end of the year and grow deposits almost six times. This success has been due to the two-year strategic transformation, that has focused on improvement in operating efficiency, sales fore effectiveness and innovative customer delivery platforms.


Africa Markets in Focus

Country 2015 P GDP Growth (%) 2016 GPD (USD ‘b) 2016 P GDP Growth (%) 2017 P GDP Growth (%) Credit Rating
Ghana 3.881% 42.761 3.337% 7.38% B-/S&P, B/Fitch
Nigeria 2.653% 415.080 -1.746% 0.65% B+/S&P, BB-/Fitch
Kenya 5.649% 69.170 5.987% 6.14% B+/S&P, B+/Fitch
Mauritius 3.500% 11.740 3.523% 3.90% Baa1/Moody’s

Source: IMF World Economic Outlook Database (Oct. 2016), GDP (P- Projected)

 

Economic Rates

Country 91 Day T-Bill 182 Day T-Bill Inflation (%) Policy Rate (%)
Ghana 20.42% 22.50% 15.80% 25.50%
Nigeria 14.50% 19.05% 17.70% 14.00%
Kenya 8.20% 10.32% 6.34% 10.50%
Mauritius 2.60% 2.72% 1.50% 4.00%

Source: Various Central Banks.

 

Exchange Rates (Local Currencies against the USD)

Country Year Open 31-Dec-2015 Week Close YTD Change YTD (%)
Ghana 3.8011 3.9813 -0.1802 -4.74%
Nigeria 196.899 313.849 -116.95 -59.40%
Kenya 100.529 99.9922 0.5368 0.53%
Mauritius 34.8304 34.4846 0.3458 0.99%

Source: Oanda

 

Stock Market Performance

Country Year End 2015 Week Close Week Change YTD Return (%)
Ghana 1,994.91 1,688.92 -305.99 -15.34%
Nigeria 28,642.25 25,537.54 -3,104.71 -10.84%
Kenya 145.7 138.73 -6.97 -4.78%
Mauritius 1,811.07 1,820.76 9.69 0.54%

Source: Various Stock Exchanges

ECONOMIC NEWS


Ghana set to issue maiden 10-year domestic bond to ease rates: Ghana has demand it’s first 10-year domestic bond in an effort to restructure debt to ease interest rates and raise longer term funds to support government pending. The 2026 issuance, is open to non-resident buyers and will seek roughly 200 million Cedis. The pricing guiders are Barclays Bank Ghana, Stanbic Ghana and Strategic African Securities. In line with the IMF program, Ghana signed up to in 2015 to restore fiscal balance to the economy. With prudent economic management and reducing short-term debts to a sizeable amount, the financing gap in the economy could be narrowed. Positive effects felt in the long run by the private firms seeking debt financing.


Securities Africa Group sets up Kenyan subsidiary: Stockbroking and financial services firm, Securities Africa Group has launched a subsidiary, after it was granted a license by Kenya’s Capital Markets Authority (CMA). As well as being admitted as a trading participant at the Nairobi Securities Exchange. Kenya is the largest and most liquid regional market; thus it is an important entry point into the East African market when considering the securities in Africa. In order to position itself as the top brokerage firm, SAG would need a focused business plan that not only intends to have impact on the Kenyan capital markets, but across the African capital markets as a whole by leveraging their network of corporations, institutions, sovereign and retail investors.


Nigeria FG plans N6.8tn budget for 2017: In the 2017-2019 Medium-term Expenditure Framework and Fiscal Strategy Paper, the 2017 budget is estimated to be N6.8tn, 13.3% increase of the 2016 budget. Against the backdrop of the generally adverse global economic environment and the fiscal challenges in the domestic economy; thus the 2017 budget will hopefully restore the economy to a sustainable, inclusive growth path, with emphasis on job creation and private-sector investments. A projection of 3.02% in GDP growth and an expected moderation of inflation to 12.92% was also stated in the paper. Assumptions on crude oil, projected 2017 price per barrel to be $42.5, The Naira is expected to appreciate against the dollar, being pegged at N290 per dollar. With adequate financial management focusing on employment growth and labour productivity, the FG are confident in repealing the recession.


Africa Markets in Focus

Country 2015 P GDP Growth (%) 2016 GPD (USD ‘b) 2016 P GDP Growth (%) 2017 P GDP Growth (%) Credit Rating
Ghana 3.881% 42.761 3.337% 7.38% B-/S&P, B/Fitch
Nigeria 2.653% 415.080 -1.746% 0.65% B+/S&P, BB-/Fitch
Kenya 5.649% 69.170 5.987% 6.14% B+/S&P, B+/Fitch
Mauritius 3.500% 11.740 3.523% 3.90% Baa1/Moody’s

Source: IMF World Economic Outlook Database (Oct. 2016), GDP (P- Projected)

Economic Rates

Country 91 Day T-Bill 182 Day T-Bill Inflation (%) Policy Rate (%)
Ghana 22.50% 22.55% 15.80% 26.00%
Nigeria 14.51% 18.68% 17.70% 14.00%
Kenya 8.11% 10.30% 6.34% 10.50%
Mauritius 2.53% 2.68% 1.50% 4.00%

Source: Various Central Banks.

Exchange Rates (Local Currencies against the USD)

Country Year Open 31-Dec-2015 Week Close YTD Change YTD (%)
Ghana 3.8011 4.003 -0.2019 -5.31%
Nigeria 196.899 316.063 -119.164 -60.52%
Kenya 100.529 99.842 0.687 0.68%
Mauritius 34.8304 34.2458 0.5846 1.68%

Source: Oanda

Stock Market Performance

Country Year End 2015 Week Close Week Change YTD Return (%)
Ghana 1,994.91 1,679.41 -315.50 -15.82%
Nigeria 28,642.25 26,170.88 -2,471.37 -8.63%
Kenya 145.7 140.01 -5.69 -3.91%
Mauritius 1,811.07 1,787.88 -23.19 -1.28%

Source: Various Stock Exchanges

ECONOMIC NEWS


Ghana- Total Petroleum to pay interim dividend before Christmas: Total Petroleum Ghana Limited has projected an interim dividend of GHS0.0902 per share in respect of the 2016 financial year, expected to be paid on the 9th of December 2016. This could improve the liquidity position of TOTAL shareholders ahead of the Christmas period. With the per share price, the expected total dividend payout is GHS10.09 million based on the issued shares of 111.87 million shares. Reflecting a dividend payout ratio of 38.3% on the net income attributable to equity holders.


Kenya- Kenya’s Equity Bank sees mobile banking growth offsetting rate cap: The Kenyan Equity Bank Group announced strong growth in its mobile banking services help offset the country’s cap on lending rates, after posting an 18% rise in its pretax profits and net interest income surged by a third. The government had capped commercial lending rates at 4% points above the central bank’s lending rate in September, spooking foreign investors, who sold off bank shares. Through their mobile lending money subsidiary Equitel, the volume of loans disbursed on its mobile platform had increased to 30 billion Shillings at September ending from 1.6 billion in the same period in 2015.


Nigeria- Gross Official Reserves Decline by 580m USD in October 2016: Data from the CBN show that gross official reserves declined by US$580m in October on a 30-day moving average basis to US$24.0bn. The monthly average movement has been an outflow of US$490m over the past 12 months. The moving average basis dilutes the immediate impact of forward contract sales of FX by the CBN: it entered into three contracts (for one, two and three months) on 20 June and last week sought to sell US$500m under a fourth. Its spot sales are regularly less than US$5m daily; such is its need to slow the depletion of its reserves.

An extreme free market solution to the FX shortage would be to meet all demand and hope that, before reserves had fallen to a critical level, with confidence, restored, offshore investors had returned to Nigerian markets and autonomous inflows were on a scale to create the fully functioning FX regime predicted in the liberalization/devaluation in June.

In reality, autonomous (non-CBN) inflows to the interbank market remain modest, with the largest component still FX sales by the oil majors. Many of these transactions are with downstream players in the industry, which supports the availability of petroleum products but does not satisfy the demand of manufacturers and airlines.


Africa Markets in Focus

Country 2016 GPD (USD ‘b) 2015 P GDP Growth (%) 2016 P GDP Growth (%) Credit Rating
Ghana 38.171 3.48% 4.53% B-/S&P, B/Fitch
Nigeria 537.966 2.65% 2.32% B+/S&P, BB-/Fitch
Kenya 64.688 5.59% 5.98% B+/S&P, B+/Fitch
Mauritius 11.865 3.37% 3.78% Baa1/Moody’s

Source: IMF World Economic Outlook Database (Apr. 2016), GDP (P- Projected)

Economic Rates

Country 91 Day T-Bill 182 Day T-Bill Inflation (%) Policy Rate (%)
Ghana 21.34% 24.54% 17.20% 26.00%
Nigeria 14.51% 18.68% 17.80% 14.00%
Kenya 7.69% 10.28% 6.34% 10.50%
Mauritius 2.48% 2.65% 1.00% 4.00%

Source: Various Central Banks.

Exchange Rates (Local Currencies against the USD)

Country Year Open 31-Dec-2015 Week Close YTD Change YTD (%)
Ghana 3.8011 3.96064 0.15954 4.19%
Nigeria 196.899 314.677 117.778 59.81%
Kenya 100.529 99.8424 -0.6866 -0.68%
Mauritius 34.8304 34.4293 -0.4011 -1.15%

Source: Oanda

Stock Market Performance

Country Year End 2015 Week Close Week Change YTD Return (%)
Ghana 1,994.91 1,706.19 -288.72 -14.47%
Nigeria 28,642.25 26,981.60 -1,660.65 -5.80%
Kenya 145.70 141.50 -4.20 -2.88%
Mauritius 1,811.07 1,803.98 -7.09 -0.39%

Source: Various Stock Exchanges

ECONOMIC NEWS


ETI emerges as best performing share on Ghana Stock Exchange: Ecobank Transnational Incorporated (ETI) has so far stood out as the best performing stock on the Ghana Stock Exchange in terms of returns to investors. Returns reached 73 percent to investors who bought into the company from January to August. This comes as a surprise to analysts following some challenging times the bank has been experiencing through 2013 to the beginning of this year. ETI really stood out among its peers, as most big companies on the market have seen their value go down substantially on the market. On the other hand, SG-SSB topped the chart in terms of volumes traded on the market, with 4.6 million shares.


Nigeria maintain resilience against the ‘storm’: The Nigerian economy received a confidence boost following reports of the country reclaiming the position of Africa’s largest economy from South Africa. According to the International Monetary Fund (IMF), Nigeria’s GDP currently stood around $415.08 billion in October while South Africa at $280.36 billion, sparking discussions on the nation’s stand against the ‘economic storm’. Oil’s volatility and rising rate hike expectations enticed bearish investors to send the Naira to the lows of N475 against the Dollar in early October before prices staged a remarkable rebound towards N450, currently trading around N460 on the black market exchange.


Dividend at last for Centum investors as firm earns Sh9.9bn in Kenya: Centum Investment has ended a dividend drought for its shareholders that lasted nearly a decade, with a planned payout of Sh1 per share after announcing a double-digit growth in after-tax profit to Sh9.9 billion. The dividend represents a Sh665 million total payout by the firm listed on the Nairobi Securities Exchange. The company had a strong performance during the year and closed in a good liquidity position. We have chosen to recommend the dividend payout as delivering value to our shareholders is our primary focus and the company has sufficient liquidity to fund its deal. As the company has had a no-dividends policy since 2009, providing a means for the company to use funds to make acquisitions. Over the years have seen, the investments have seen asset classes multiply, while its stock value has multiplied nearly seven times.


ExxonMobil discover a billion-barrel oil field offshore Nigeria: Barely a week after it sold its downstream subsidiary in Nigeria, ExxonMobil Corporation, has announced the discovery of up to one billion barrels of oil reserves in the Owowo field, offshore Nigeria. This development helps boost Nigeria’s efforts to increase her crude oil reserves from the current 36 billion barrels to 40 billion barrels’ target, which was set for 2010 but could not be achieved as a result of lack of investment in exploratory activities. ExxonMobil had recently announced the sale of its 60 per cent stake in Mobil Oil Nigeria Plc to NIPCO Plc, thus exiting from the Nigeria’s downstream oil and gas sub-sector.


Africa Markets in Focus

Country 2016 GPD (USD ‘b) 2015 P GDP Growth (%) 2016 P GDP Growth (%) Credit Rating
Ghana 38.171 3.48% 4.53% B-/S&P, B/Fitch
Nigeria 537.966 2.65% 2.32% B+/S&P, BB-/Fitch
Kenya 64.688 5.59% 5.98% B+/S&P, B+/Fitch
Mauritius 11.865 3.37% 3.78% Baa1/Moody’s

Source: IMF World Economic Outlook Database (Apr. 2016), GDP (P- Projected)

 

Economic Rates

Country 91 Day T-Bill 182 Day T-Bill Inflation (%) Policy Rate (%)
Ghana 22.81% 24.45% 17.20% 26.00%
Nigeria 14.51% 18.68% 17.61% 14.00%
Kenya 7.69% 10.28% 6.34% 10.50%
Mauritius 2.48% 2.65% 1.00% 4.00%

Source: Various Central Banks.

 

Exchange Rates (Local Currencies against the USD)

Country Year Open 31-Dec-2015 Week Close YTD Change YTD (%)
Ghana 3.8011 3.95899 -0.15789 -4.15%
Nigeria 196.899 315.256 -118.357 -60.11%
Kenya 100.529 99.5768 0.9522 0.95%
Mauritius 34.8304 34.5384 0.292 0.84%

Source: Oanda

Stock Market Performance

Country Year End 2015 Week Close Week Change YTD Return (%)
Ghana 1,994.91 1,710.67 -284.24 -14.25%
Nigeria 28,642.25 27,294.21 -1,348.04 -4.71%
Kenya 145.7 137.04 -8.66 -5.94%
Mauritius 1,811.07 1,815.10 4.03 0.22%

Source: Various Stock Exchanges

ECONOMIC NEWS


Mauritius Entrepreneurs to Do Business in Ghana: The maiden session of the Mauritius Trade and Investment Forum held in Accra, where about 40 Mauritian entrepreneurs will discuss business opportunities with their Ghanaian counterparts. The event aims at strengthening bilateral trade and investment relation between Mauritius and Ghana. It will also be a platform for business meetings between entrepreneurs of the two countries. The meeting will feature Mauritian entrepreneurs looking for investment opportunities in Ghana in all priority sectors, including joint venture collaboration, strategic alliances, franchising, project financing among other businesses. The Mauritian investors would be interested in exploring business opportunities in the services, agriculture, energy, and infrastructure sectors as well as in the area of higher added financial services.


Central Bank expects Cedi to remain stable: The BoG expects the Cedi to remain relatively stable going forward on the back of a tight monetary policy stance that has seen the policy rate maintained at 26% and USD inflows from the recently issued US$750 million Eurobond and other funds. Investors and businesses would be satisfied with the relative stability of the Cedi, which posted a year-to-date depreciation of 4.1% against the USD at the close of September 15, 2016. However, the Cedi’s projection to continue to depreciate steadily against the USD to end the year at GHS3.98 due to insufficient USD supply to meet anticipated strong demand to settle end of Q3 2016 bills and restock for the final quarter of 2016. This should result in an overall depreciation of 4.7% against the USD in 2016 versus 15.7% depreciation in 2015 and 31.3% in 2014.


Nigeria’s inter-bank lending rate jumps to record high: The Central Bank of Nigeria has been tightening liquidity and intervening directly with dollar sales to banks. In order to support the ailing Naira, as the economy is currently receding due to the fall in oil prices. The inter-banking rate soared to a record high of 128% on Naira cash shortages after commercial banks funded their account with the CBN to participate in last Friday’s forward auction. Overnight rates opened at 100 per cent on Monday, traders said, after the money market ended on Friday with no deals as commercial lenders held onto Naira to be able to participate in the auction. The CBN held a two-month dollar forward auction on Friday to clear a backlog of demand from airlines, manufacturers and other companies, as the Naira crisis deepens.


Sh30bn infrastructure bond bids cause T-bills under subscription: The 15-year tenor infrastructure bond, the longest ever, was fully subscribed by investors, with the government taking Sh30.6 billion from the Sh35 billion offered by investors at a rate of 13.17 per cent. Bidding for Treasury bills fell for the first time in weeks as attention turned to the higher-yielding Sh30 billion 15-year infrastructure bond auctioned on Wednesday. Alongside, the Treasury failed to raise the full amount on offer from the 91 and 364-day T-bills, even though the interest rate on the latter rose slightly to 10.4 per cent from 10.3 per cent the previous week as the market remained static, with all eyes on the primary bond auction.


Africa Markets in Focus

Country 2016 GPD (USD ‘b) 2015 P GDP Growth (%) 2016 P GDP Growth (%) Credit Rating
Ghana 38.171 3.48% 4.53% B-/S&P, B/Fitch
Nigeria 537.966 2.65% 2.32% B+/S&P, BB-/Fitch
Kenya 64.688 5.59% 5.98% B+/S&P, B+/Fitch
Mauritius 11.865 3.37% 3.78% Baa1/Moody’s

Source: IMF World Economic Outlook Database (Apr. 2016), GDP (P- Projected)

Economic Rates

Country 91 Day T-Bill 182 Day T-Bill Inflation (%) Policy Rate (%)
Ghana 22.81% 24.45% 17.20% 26.00%
Nigeria 14.40% 18.68% 17.61% 14.00%
Kenya 7.67% 10.28% 6.34% 10.50%
Mauritius 2.43% 2.64% 1.00% 4.00%

Source: Various Central Banks.

Exchange Rates (Local Currencies against the USD)

Country Year Open 31-Dec-2015 Week Close YTD Change YTD (%)
Ghana 3.8011 3.95915 -0.15805 -4.16%
Nigeria 196.899 313.664 -116.765 -59.30%
Kenya 100.529 99.642 0.887 0.88%
Mauritius 34.8304 34.2296 0.6008 1.72%

Source: Oanda

Stock Market Performance

Country Year End 2015 Week Close Week Change YTD Return (%)
Ghana 1,994.91 1,755.61 -239.30 -12.00%
Nigeria 28,642.25 27,596.82 -1,045.43 -3.65%
Kenya 145.7 135.79 -9.91 -6.80%
Mauritius 1,811.07 1,820.89 9.82 0.54%

Source: Various Stock Exchanges

GHANA: CHOCOLATE DEMAND FALLS AS CANDY BARS SHRINK AND ASIA GROWTH SLOWS: Candy bars have shrunk and economic growth in Asia has slowed, meaning people are eating less chocolate and its key ingredient cocoa, which has seen its price fall this year after defying commodities trends to soar in 2015…

GHANA: DEBT-PLAGUED GHANA COCOA GRINDER SHUTS FOR MAINTENANCE: Ghana’s Cocoa Processing Company (CPC), the West African nation’s largest domestically-owned processor, has shut its main facilities due to maintenance, according to the company while analysts cite debt as reason for this action…

NIGERIA: GOVERNMENT URGES THE PRIVATE SECTOR TO HOLD ON TO RETRENCHMENT PLANS: The federal government of Nigeria has taken pragmatic steps to avert the decision the organised private sector against massive lay off of workers. The government is embarking on the course due to the negative repercussions on the economy…

GHANA: EX-PUMP PRICES INCREASE CONTRARY TO DECREASING PRICES ON THE WORLD MARKET: While analysts were expecting the direction of petroleum prices to be heading in a similar direction post National Petroleum Authority’s (NPA) new pricing policy, the Ghanaian economy has been experiencing continuous hikes in fuel prices while the world…