Scaling Up Innovations: IITA’s Commitment To African Agricultural Transformation

Brand Spur
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Scaling Up Innovations: IITA’s Commitment To African Agricultural Transformation

In 2017, IITA celebrated 50 years of service to Africa and its smallholder farmers in particular. Since then, the Institute has advanced even further in its mission to transform African agriculture through collaboration with farmers and farming communities, youth and women in agribusiness, and other partner-stakeholders. 

IITA’s 2019 Annual Report detailed this work and highlighted the delivery of research innovations on five impact areas:

  1. Nutrition and food security;
  2. Poverty reduction, livelihoods, and jobs;
  3. Gender equality, youth, and social inclusion;
  4. Climate adaptation and greenhouse gas reduction; and
  5. Environmental health and biodiversity.

IITA continues active participation in CGIAR Research Programs (CRP) and Platforms that align with its strategy to achieve this goal. 

Scaling Up Innovations Brandspurng IITA’s Commitment To African Agricultural Transformation
IITA works across sub-Saharan Africa in ensuring the delivery of research innovations.

The biggest challenge in agriculture is to feed the growing human population, which is projected to reach 9.7 billion in 2050 compared to 7.7 billion in 2019. Operating via its regional hubs and research stations across sub-Saharan Africa, IITA is keen to deliver research innovations even more efficiently through its Partnerships for Delivery (P4D) efforts. 

In 2019, IITA added the Sahelian region of West Africa—one of the world’s most vulnerable regions—as a priority impact zone. The agriculture sector here is under strain due to many risks that are likely to deteriorate in the face of climate change.

Hence, IITA and partners are making contributions in the Sahel through collaborative projects to improve livelihoods, enhance food and nutrition security, increase employment, and ensure natural resource integrity. 

“We believe that a better organized and more focused IITA can provide the food and agricultural research base and service and delivery partnerships necessary to ensure greater impact by complementing the ongoing efforts of African countries and their national undertakings,” said IITA Director General Nteranya Sanginga. 

As former president of Nigeria, and IITA Ambassador, Chief Olusegun Obasanjo noted at the 50th-anniversary celebrations, innovation is incomplete until the research products have gotten into the farmer’s hands.

“We must get whatever you produce out there to the farmers. And whatever it takes us to get your products to the farmers, I believe it’s worth it,” he said. He added that “getting the products to the farmers is almost as important as getting the products ready because the product that is not in the hands of the farmers is a wasted product.” 

IITA’s commitment to the farmer and African agricultural transformation remains fresh, and the 2019 Annual Report contains multiple highlights showcasing this commitment. “We would like to express our appreciation to our various funders, collaborators, and partners who have been with us throughout this continuing journey of hope, faith, trust, and learning,” concluded DG Sanginga. 

IITA gets biotechnology stewardship certification

Headline Inflation Spikes to 15.75%; As All Composite of the CPI Rose Higher

WSTC Research
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Headline Inflation Spikes to 15.75%; As All Composite of the CPI Rose Higher

Headline inflation spiked year-on-year (YoY) to 15.75% in December 2020 from 14.89% in November 2020, as all composites of the Consumer Price Index (CPI), increased in the period.

Month-on-month (MoM), the index increased by 1.61% in December 2020 from 1.60% in November 2020. Food inflation (the significant driver of the headline inflation) rose YoY to 19.56% in December 2020 from 18.30% in November 2020. MoM, the index increased further by 2.05% from 2.04% in November 2020.

Core inflation increased YoY to 11.37% in December 2020 from 11.05% in November 2020. The index rose MoM by 1.10% in December 2020 from 0.71% in November 2020. The twelve-month average headline inflation for full-year 2020 stood at 13.25%.

Analysis

The headline CPI continued to surge higher since the land border closure in August 2019, mainly due to the persistent increase in food prices. Food prices have been rising due to its short supply in the local market.

Local food supply had been affected by the rising insecurity in the central food-producing states, which had impacted adversely on farming activities. Thus, in December 2020, the headline inflation printed at 15.75%, a 37-month high, due to the surging food prices.

Food inflation came at a record high of 19.56%, a level last since November 2017, mainly due to surge in local prices. Imported food inflation rose YoY by 16.65% compared with overall food inflation of 19.56% in December 2020.

We believe that some of the crucial factors that led to increased food prices in December 2020 include festive activities, Naira devaluation, which impacted imported food prices and high transport costs.

Core inflation increased YoY by 32bps to 11.37% in December 2020 driven by FX adjustment, VAT increase, and hike in energy tariff. Decomposing the index, health, and transport cost rose the most YoY by 49bps to 14.06% and 13.07%, respectively.

We believe that the increases were occasioned by the increased risk in the health sector due to the second wave of COVID-19 and increased commuting activities due to the Christmas celebration.

Expectation

We expect the surge in the headline inflation to continue in the coming months on the back of increased food prices. Though the land borders are now open, importation of food items is still banned.

Though we believe that the implementation of the African Continental Free Trade Area agreement may ease the inflationary pressure, we think it may take time to materialise. We believe that inflation is skewed to the upside in 2021 due to further headroom for Naira devaluation and some austerity measures due to limited government revenue.

Expected Policy Response

The Monetary Policy Committee (MPC) meeting is scheduled to hold on January 20, 2021. The current macroeconomic realities are expected to be debated and a policy decision to steer the economy made.

In our view, we expect the Committee to leave the policy rates unchanged despite the upward trend in inflation. The rationale for our position is that we think the Committee is rather focused on stimulating the economy out of recession.

The typical policy response to an inflation increase would be to hike rates; however, the policy decision could hamper the government’s economic recovery efforts.

Therefore, we do not expect to see changes in policy rates.

What It Means for the Financial Markets

We expect to see a slight repricing of yields in the fixed-income market, especially at the long end of the curve. On the shorter end of the yield curve, we expect the low yields to sustain.

On the basis that we expect the Committee to leave policy rates unchanged, it is most likely that the Central Bank of Nigeria would manage liquidity in the financial markets using fixed-income yields.

Rising inflation portends a higher risk expectation, mainly as it feeds into the stocks’ equity risk premium. Nonetheless, we believe that the positive momentum in the equities market would sustain.

Firstly, we expect the full-year earnings releases and dividend declarations to drive increased attention in the stock market in the near term. Secondly, we expect liquidity in the financial system and the low-yield environment to persist. In our view, we think that the equities market could still absorb more inflows in the near term.

We do not expect to see a material deviation in the FX markets. The illiquidity and vulnerabilities in the Nigerian foreign exchange market are still prevalent. Meanwhile, a higher inflationary trend heightens the macroeconomic weaknesses of the Nigerian economy.

Other Highlights:

Headline Inflation Spikes to 15.75%; As All Composite of the CPI Rose Higher Brandspurng

  • Food inflation increased by 126bps to 19.56% YoY in December 2020 from 18.30% in November 2020. Month-on-month, the index rose by 2.05%, relative to 2.04% recorded in November 2020. The sharpest price increases in the index were on bread & cereals; fish; potatoes, yam, and other tubers; vegetables; meat; oil & fats; and fruits.
  • Core inflation increased YoY to 11.37% in December 2020 from 11.05% in November 2020. The index increased MoM by 1.10%, from 0.71% in November 2020. Significant price increases were recorded in passenger transport by air; medical services; motor cars, maintenance and repair of personal transport equipment; dental services; hairdressing salons and personal grooming establishments; motorcycle; hospital services; vehicle spare parts; passenger transport by road; bicycles; repair of furniture; miscellaneous services relating to the dwelling; paramedical services; and shoes and other footwear.

PFAs Increase Investments in FGN Bonds by N935 Bn to N6.64 Trn in 9 Months…

Esan Bolaji
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PFAs Increase Investments in FGN Bonds by N935 Bn to N6.64 Trn in 9 Months…

Freshly released report on pension fund assets by National Pension Commission (NPC) showed that the total value of pension assets for the first nine months of the year rose by 10.90% to N11.57 trillion in September 2020.

According to the report, most of the pension fund assets were invested in FGN bonds. Hence, the share of FGN bonds to total assets climbed to 57.41% (or N6.64 trillion) in the period under review, from a 54.70% (or N5.71 trillion) it printed in January 2020.

However, PFAs’ investments in T-bills declined sharply year to date (YTD) by 102.90% to N780.57 billion as at September 2020 from N1.58 trillion recorded in January 2020 as treasury bills yields plummeted to ridiculously below single-digit.

Given the reduction in the weight of FGN Securities to the total assets (it fell to 65.29% in Sept.

2020 from 70.96% in January 2020) as money flow to T-bills dropped, we saw Pension Fund Administrators (PFAs) investment preference drift towards Local Money Market Securities (LMMS) as total funds invested in this investment category rose by 70.34% to N2.01 trillion in September 2020 (lifting its share of the total assets to 17.37%), from N1.18 trillion in January 2020 (or 11.31% of total assets).

Also, investment in LMMS showed that more pension fund assets were invested in Banks (which include Open Market Operations and DMBs fixed deposits) than in commercial papers.

Total invested fund placed with banks as a percentage of total pension fund assets stood at 15.09% (or N1.75 trillion) in September 2020, rising from 10.13% (N1.06 trillion) in January 2020 while investment in commercial papers,  onstituting 2.27% of investment in LMMS, increased to N0.26 trillion from N0.12 trillion.

Similarly, we saw Cash and Other Assets which constituted 1.29% (or N0.15 billion) of the total pension fund assets in September 2020 rise from 0.28% (or N29.29 billion) in January 2020.

However, funds invested in Real Estate Properties as a fraction of the total pension fund assets dropped to 1.29% (or N0.15 trillion) from 2.08% (or N0.22 trillion) in the period under review.

Investments in Sukuk and Green Bonds were relatively low as their respective shares of allocated pension assets stood at N107.57 billion and N13.05 billion in the month under review, rising from N84.80 billion and N15.07 billion respectively in January 2020.

Meanwhile, pension fund assets invested in the domestic equities market moderated to N0.59 trillion in September 2020 from N0.60 trillion in January 2020; thus, reducing the weight of total pension funds in local equities market to 5.06% from 5.71%.

Nonetheless, the equities market continued to receive some “patronage” from “RSA FUND II” as its total invested funds stood at N385.10 billion in September 2020, from N395.80 billion in January 2020.

Elsewhere, the West Texas Intermediate (WTI) crude price rose strongly by 5.39% w-o-w to USD53.57 a barrel gave the 1.91% w-o-w rise in US crude oil input to refineries to 14.65 mb/d as at January 8, 2021 (however, It declined y-o-y by 13.69% from 16.97 mb/d as at January 10, 2020).

Also, the U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) moderated by 0.66% w-o-w to 482.21 million barrels as at January 8, 2021 (albeit, inventories rose by 12.53% y-o-y from 482.21 million barrels as at January 10, 2020).

We note that the increased investment by PFAs in Bank Placements and FGN Bonds was essentially to take advantage of the relatively high yields in OMO and bonds markets.

Hence, we saw the demand pressure for T-bills spill over to the bonds market as CBN kept the focus on expansionary monetary policy aimed at stimulating economic growth. In 2021, we do not envisage dramatic upside in bond yield but a marginal lift from the current position, as the need for CBN to stabilize FX and rising inflation (it hits 15.75% in Dec) may have become pressing.

Insight Redefini Appoints Group Creative Director

Esan Bolaji
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Insight Redefini Appoints Group Creative Director

Insight Redefini Group, a member of Troyka Holdings has deployed Sinmisola Hughes-Obisesan to the role of Group Creative Director Insight Redefini, in furtherance of its Power of One initiative.

Formerly playing the role of Creative Director of Leo Burnett Lagos, this new redeployment will see Sinmisola Hughes-Obisesan steer the creative operations of the group.

`Insight Redefini Appoints Group Creative Director Brandspurng
Sinmisola Hughes-Obisesan, Group Creative Director Insight Redefini | www.brandspurng.com

With her vast knowledge across an array of sectors and over 14 years’ experience on a plethora of global and local brands, she has led teams across both agencies to deliver award-winning work in Nigeria and across other international markets for brands such as Pepsi, Heineken, Nivea, Amstel Malta, Cadbury, P&G, Nestlé, Tecno Mobile, AXA Mansard, FCMB, Leadway Assurance and others.

Speaking on her new redeployment, Group Creative Director, Insight Redefini Group, Sinmisola Hughes-Obisesan said,

“as a creative storyteller, well known for my ability to create deep experiences between brands and consumers, my goal continues to be to create clutter-breaking, impactful content that resonates with today’s digital consumer.”

As a firm believer in co-creation and collaboration in order to produce ‘creative magic’, she went on to speak about her philosophy. “My driving philosophy is to win consumers, not just to sell or tell, but to build meaningful relationships,” she said.

In her new position, she joins the group leadership team to drive the ‘Power of One’ and ‘Humankind’ way of working and winning for Clients.

Group CEO, Insight Redefini, Dr. Ken OnyealiIkpe, expressed optimism for the new chapter of the group, as it just recently celebrated its 41st anniversary.

“With this new redeployment, we will be elevating our reverence, agility, deep thinking, and magic with the aim of continuing to lead the existing marketing communications landscape and drive continuous innovation,” he said.

He went on to highlight the Power of One approach as “a strategic concept that is driven by a common purpose, a powerful spirit, shared behaviour, great character and a relentless focus on clients.”

As a regular judge on international and local award shows and advertising festivals, Sinmisola Hughes-Obisesan is one of the most admired and decorated Creative Directors in Nigeria.

Some of her achievements include breaking steel barriers and having led agency teams to achieve several feats such as the first Nigerian agency to win highly coveted international awards such as Epica, WARC and in 2019, the highest Publicis Africa Groupe network award, the Black Giraffe.

Insight Redefini Appoints Group Creative Director Brandspurng
Sinmisola Hughes-Obisesan, Group Creative Director Insight Redefini | www.brandspurng.com

Being an eternal student of human behaviour, she places diversity and inclusion at the forefront which saw her Leo Burnett Lagos team of vibrant and passionate creatives win ‘Young Agency of the Year’ in 2019.

Insight Redefini Group consists of five integrated marketing communication companies which also includes; Quadrant MSL, Starcomms Media Perspectives and All Seasons Zenith.

Heirs Holdings Significantly Expands Oil and Gas Portfolio

Esan Bolaji
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Heirs Holdings Significantly Expands Oil and Gas Portfolio
  • Acquires 45% of OML 17 from Shell, Total and ENI
  • Existing Production Capacity of 27,000 barrels of oil equivalent per day Estimated 2P Reserves of 1.2 billion barrels of oil equivalent
  • Estimated Additional 1 billion barrels of oil equivalent of further exploration potential
Heirs Holdings, the leading African strategic investor, in partnership with affiliated company Transnational Corporation of Nigeria Plc, Nigeria’s largest publicly listed conglomerate, announced today the unconditional acquisition of a 45% participating interest in Nigerian oil licence OML 17 and related assets, through TNOG Oil and Gas Limited (a related company of Heirs Holdings and Transcorp), from the Shell Petroleum Development Company of Nigeria Limited, Total E&P Nigeria Limited and ENI.

In addition, TNOG Oil and Gas Limited will have sole operatorship of the asset.

The transaction is one of the largest oil and gas financings in Africa in more than a decade, with a financing component of US$1.1 billion, provided by a consortium of global and regional banks and investors.

OML 17 has a current production capacity of 27,000 barrels of oil equivalent per day and, according to our estimates, 2P reserves of 1.2 billion barrels of oil equivalent, with an additional 1 billion barrels of oil equivalent resources of further exploration potential.

The investment demonstrates a further important advance in the execution of Heirs Holdings’ integrated energy strategy and the Group’s commitment to Africa’s development, through long term investments that create economic prosperity and social wealth.

Heirs Holdings’ strategy of creating the leading integrated energy business in Africa is executed through a series of strategic portfolio holdings. Transcorp is one of the largest power producers in Nigeria, with 2,000 MW of installed capacity, through ownership of Transcorp Power Plant and the recent acquisition of Afam Power Plc and Afam Three Fast Power Limited.

Transcorp closed the US$300 million Afam acquisitions in November 2020.  Transcorp supplies electricity to the Republic of Benin, as part of an emphasis on promoting regional integration and delivering robust power supply to catalyse development in Africa.

Transcorp also operates OPL281, under a production sharing contract with the Nigerian National Petroleum Corporation (“NNPC”). Similarly, Heirs Holdings’ subsidiary, Tenoil is the operator of OPL 2008, under a production sharing contract with NNPC.

Tenoil also owns the Ata Marginal Field, which will commence production in Q2, 2021, with 3,500 barrels of oil per day.

Chairman of Heirs Holdings, Tony Elumelu stated:

“We have a very clear vision: creating Africa’s first integrated energy multinational, a global quality business, uniquely focused on Africa and Africa’s energy needs. The acquisition of such a high-quality asset, with significant potential for further growth, is a strong statement of our confidence in Nigeria, the Nigerian oil and gas sector and a tribute to the extremely high-quality management team that we have assembled.

Heirs Holdings Significantly Expands Oil and Gas Portfolio

As a Nigerian, and more particularly an indigene of the Niger Delta region, I understand well our responsibilities that come with stewardship of the asset, our engagement with communities and the strategic importance of the oil and gas sector in Nigeria. 

We see significant benefits from integrating our production, with our ability to power Nigeria, through Transcorp, and deliver value across the energy value chain.”

Speaking further, he said

“I would like to thank Shell, Total and ENI, for the professionalism of the process, the Federal Government of Nigeria, the Ministry of Petroleum Resources, and the NNPC for the confidence they have placed in us.”

Speaking on the investment, the President/GCEO of Transcorp, Owen Omogiafo, said:

“This deal further demonstrates Transcorp’s integrated energy strategy and our determination to power Africa.”

Heirs Holdings was advised by Standard Chartered Plc, as Global Coordinator, and United Capital Plc, with a syndicate of lending institutions including Afreximbank, ABSA, Africa Finance Corporation, Union Bank of Nigeria, Hybrid Capital, and global asset management firm Amundi. The deal also involves Schlumberger as a technical partner, as well as the trading arm of Shell as an off-taker.

Heirs Holdings has created one of Africa’s largest, indigenous owned, oil and gas businesses, headquartered in Lagos, Nigeria and led by a board and management team with significant regional and global experience in production, exploration, and value creation in the resources sector.

The HH Group is committed to the highest standards of safety, health, and community relations, together with best practice in governance and accountability.

Heirs Holdings is a leading pan-African investment company. Its investment portfolio spans the power, oil and gas, financial services, hospitality, real estate, and healthcare sectors, operating in twenty-three countries worldwide.

Heirs Holdings is inspired by Africapitalism, the belief that the private sector is the key enabler of economic and social wealth creation in Africa. Driven by this philosophy, Heirs Holdings invests for the long-term, bringing strategic capital, sector expertise, a track record of business success and operational excellence to companies we invest in.

OPEC Predicts A Rebound In U.S. Shale

Brand Spur
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OPEC Predicts A Rebound In U.S. Shale

Oil prices fell back on Friday over demand concerns. News that China has reported its highest Covid-19 case count in months weighed on market sentiment.

OPEC sees shale rebounding.

OPEC admitted that an improved outlook for crude oil prices could result in higher U.S. shale production. OPEC upgraded its forecast for U.S. oil production, expecting an increase of 370,000 bpd, up from a previous forecast of 71,000 bpd.

LNG spike causing havoc worldwide.

Bitter cold and skyrocketing prices for LNG is now being felt in more places than just Asia. The ripple effects are affecting gas markets everywhere, straining supplies and forcing consumers to cut back. Another potential side effect could be the undermining of the spot market, potentially leading to more emphasis on oil-linked contracts, which would provide more stability.

Total quits API.

Total (NYSE: TOT) announced its decision to withdraw from the American Petroleum Institute, the industry’s most powerful lobby. The French oil giant cited API’s opposition to methane regulations, EV subsidies, and carbon pricing. Total also disagreed with API’s political contributions to U.S. politicians that oppose the Paris Climate Agreement.

Gas projects in Mozambique at risk. 

A chronic insurgency puts Total’s (NYSE: TOT) $23 billion gas production and LNG export project at risk. The same is true of ExxonMobil’s (NYSE: XOM) planned $33 billion facilities. The total has halted work at its site due to nearby attacks.

JPMorgan touts commodities, pro-risk posture.

JPMorgan told investors to boost commodity positions, go underweight on bonds and take a pro-risk exposure to equities. “We increase our overweight in commodities, in particular energy, both as an inflation hedge and to position for a continued cyclical recovery,” analysts wrote.

Exxon target of new SEC probe.

ExxonMobil (NYSE: XOM) is under investigation by the Securities and Exchange Commission (SEC) after an employee filed a whistleblower complaint last fall, alleging that the company has overvalued its Permian assets.

Shale boosts hedging.

U.S. shale drillers increased hedging with WTI surging above $50 per barrel.

Is the rally in renewables sustainable? 

Solar and wind power companies have soared in value. The New York Times explores the potential bubble in cleantech stocks.

Biden’s $1.9 trillion stimuli could preview energy package.

President-elect Biden proposed a $1.9 trillion covid rescue package, which included vaccination efforts, $1,400 checks to Americans, and other stimulus measures. He has indicated that a sequel package in the spring, which could be even larger, would target major investments in clean energy.

Halliburton turns to the grid instead of diesel.

Halliburton (NYSE: HAL) is swapping out diesel engines for the electric grid for its Permian basin operations.

Shell declares force majeure on Forcados.

Royal Dutch Shell (RDS.A, RDS.B) says loadings of Nigeria’s key export grade Forcados are on force majeure due to the shutdown of the Trans Forcados pipeline.

Summit Midstream Partners soars on greenlight.

Summit Midstream Partners, LP (NYSE: SMLP) saw its share price shoot up after its Double E Pipeline received a green light from FERC.

ExxonMobil upgraded by JPMorgan.

JPMorgan upgraded ExxonMobil (NYSE: XOM) to Overweight for the first time in seven years.

Siemens to produce hydrogen from the wind.

Siemens Gamesa (BME: SGRE) and Siemens Energy (ETR: ENR) are developing a commercial offshore wind turbine that produces hydrogen via electrolysis, the companies said.

EIA: Oil production to rise to 11.49 mb/d in 2022.

The EIA unveiled its first forecast for 2022, projecting that U.S. oil production rises to 11.49 mb/d, a 3% increase over this year’s levels.

Proterra to go public.

Electric bus producer Proterra will launch an IPO, with preliminary estimates valuing the company at $1.8 billion.

Saudi cuts exports to Asia. 

Saudi Arabia has reduced sales of oil to at least 11 refiners in Asia, evidence that it is following through to some degree on its pledge to cut production by 1 mb/d.

Gasoline profit margins increase.

The profit margin for refining gasoline has widened to its largest extent since July, as markets anticipate demand recovery by mid-year.

The U.S. warns European companies on Nord Stream 2.

The Trump administration warned European companies that they risk U.S. sanctions over their involvement in the Nord Stream 2 pipeline.

Equinor wins offshore wind contract in New York.

Equinor (NYSE: EQNR) was selected for a major offshore wind project off the coast of Long Island. The combined 3.3 GW Empire Wind and Beacon Wind projects will be the largest offshore wind installation in the U.S. to date.

Chesapeake Energy to emerge from bankruptcy. 

Chesapeake Energy will emerge from bankruptcy valued at over $5 billion.

Occidental to use direct air capture for oil production.

Occidental Petroleum (NYSE: OXY) plans to build a direct air capture (DAC) facility, which will remove carbon dioxide from the atmosphere, and then use the CO2 to produce more oil. The project could be the world’s first large-scale DAC facility and it could cost hundreds of millions of dollars.

Forest Service gives go-ahead to Marcellus pipeline.

The U.S. Forest Service approved the construction of the Mountain Valley Pipeline through a sensitive part of the Jefferson National Forest, a big win for a project that would carry Marcellus shale gas to the U.S. southeast.

Ireland drops another LNG terminal over methane concerns.

The Port of Cork in Ireland allowed an agreement with NextDecade Corp. (NASDAQ: NEXT) for an LNG import terminal to expire. It’s the latest setback for the LNG company in Europe over concerns about methane emissions. NextDecade is planning an LNG export terminal in Texas.

Nigeria Inflation: Cost-Push Pressures Stoke Prices All-Year.

Vetiva Research
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Nigeria Inflation: Cost-Push Pressures Stoke Prices All-Year.

Nigeria Inflation soared to a 37-month high of 15.75% (Vetiva:15.91%) in December, driven more recently by festive demand alongside earlier multiple cost-push factors which stoked prices all through 2020-border closure, supply chain disruptions, FX and energy reforms.

These translated to an average inflation outcome of 13.25% (Vetiva: 13.22%) for the year, reflective of the business climate hostilities that characterized the year on account of the pandemic.

Nigerian Inflation Rate Rises To 13.71%, Highest In 32 Months - NBS
Wempco Road, Nigeria | Photo by Ima Enoch

Structural factors raise inflationary pressures on the non-edible segment

Core inflation rose by 32bps to a 34-month high of 11.37% y/y (Nov’20: 11.05% y/y) no thanks to pre-existing pressures. Given the 31.5% y/y depreciation in the parallel exchange rate and 10.3% y/y higher fuel prices, all sub-divisions of the core segment experienced inflationary pressures.

Reflecting higher energy costs, the Housing, Water, Electricity, Gas and other fuels (HWGS) inflation spiked to a 39-month high of 9.08% (Nov’20: 8.72%). Meanwhile, other segments continued to reel from multiple inflations levers. Health and transport inflation lead other core segments, rising to multi-year highs of 14.06% and 11.76% respectively.

FX and energy pressures to steer inflation further

As we progress into the new year, we expect reform implementation to continually take a toll on consumer prices. Pre-existing headwinds and base effect will drive inflation further to 16.73% y/y in the current month, despite the reopening of the borders and suspension of electricity tariff review.

In 2021, erosion of purchasing power is imminent given implementation of reforms in the energy sector. In addition, the continuing divergence of the parallel market rate from the official peg alongside persistent current account deficit raises fears of further FX-related inflationary pressures. Thus, we expect inflation for the year to an average of 18.91% (2020: 13.25%).

How Might Nigeria’s Investment Cycle Pan Out in 2021?

Esan Bolaji
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How Might Nigeria’s Investment Cycle Pan Out in 2021?

The COVID-19 pandemic was perhaps humanity’s first-ever health and economic crisis in the 21st century that brought the greatest of the nations to their knees.

No one knew how to handle the dilapidating economy, and people were at their wit’s ends when it came to containing the virus that claimed millions of lives across the globe. But life goes on, and nations had to pick what was left of them and start afresh.

It needs little mention that the global economy is in tatters, and most countries saw a sharp decline in their GDP and went into a phase of recession. Nigeria was one of those many nations that entered a period of recession and had to brave insurmountable economic challenges.

However, the Federal Government has asserted that there is hope for Nigeria to exit its phase of recession by Q1 2021 even amidst the second wave of the pandemic that has been disrupting the financial markets.

Nigerian investors and speculators, however, have taken cues from the first wave of the pandemic and are prepared better to deal with the economic crisis. They are anticipating more downside risks in the path of recovery to Nigeria’s economy in 2021.

How Might Nigeria’s Investment Cycle Pan Out in 2021?

What Does the African Development Bank Have to Say?

The African Development Bank, in a data that has been retrieved, revealed that Nigeria could expect growth in its Real GDP to 3.3 per cent in 2021. However, there are a number of factors that shall determine if such a growth shall materialize in reality. It depends on whether Nigeria’s fiscal officials emphasize on economic diversification and implement the Economic Recovery Growth Plan. The apex bank has directed the Nigerian banks to hold loan-deposit ratios of 60 per cent. Only when all these factors are put in place, the Nigerian economy shall recover, and the GDP can rise as is expected.

Nigeria’s Export Earnings and Stock Market:

Now coming to Nigeria’s export earnings, the sector witnessed an increase. The Brent crude futures trades improved the foreign exchange reserves which further provided the central bank with an impetus to intervene in the foreign exchange market of Nigeria.

The Nigerian stock market has also shown some positive results over the last couple of months, even with the pandemic in full swing.

The stock market closed Year-to-date return at 44.56 per cent, and the market capitalization was at N20.3 trillion. This led Nigeria to emerge as the best performing stock market in the world. It further promises to rebound higher in 2021.

How Might Nigeria’s Investment Cycle Pan Out in 2021?

How Does the Investment Sector of Nigeria Look in 2021?

Amidst all the growth and promising results, the question that is still bugging every investor and speculator is just one. How does the investment sector in Nigeria hope to look in 2021? It is still the beginning of the New Year, and there might be massive changes throughout the year, but some financial experts shared their wisdom and predictions.

Some speculators say that it is still too soon to predict how the investment sector shall pan out in 2021, and the performance of the same shall depend on how quickly the virus is contained. With the new strain of the coronavirus at large, the growth of Nigeria economy might take a backseat too.

However, it is expected that with the gradual deployment of vaccines across the planet, the economy shall gain momentum. The prices of crude oil shall gradually pick up, economic activities shall increase that shall further drive capital flows and minimize uncertainties in 2021. It is also expected that the trend of tech companies’ stocks influenced investment behaviour shall continue well in the first half of 2021.

In 2020, the global economy was deluged with cheap funds, owing to very limited investment opportunities amidst the pandemic. However, this negative yield that we saw in the space of fixed investment promises to reverse in the first quarter. The government’s borrowing is expected to outrun the figures of 2020, and Nigeria’s administration shall successfully walk the economy out of its phase of recession in 2021.

This shall lead to the investors’ confidence to increase, and they shall once again be keen on investing in the right portfolios. More funds are expected to flow back into Nigeria’s economy and lead to higher yields. The sectors that are predicted to dominate the investors’ focus are the stocks in pharmaceutical, aviation and manufacturing.

The entertainment industry in Nigeria also looks hopeful with more and more investors showing interest in the gaming sector. These investments in the gaming sector shall help the sector grow in leaps and bounds and contribute to the economy. It is hoped that growth in this sector shall push the casinos in Nigeria to become almost equal to the online casino in Canada with the fastest payouts, which shall bring about a massive change.

The Takeaway:

Though there are several factors that hint at the steady growth of the Nigerian economy and show that the investment scenario in 2021 looks bright, Nigeria still has to enforce a number of economic reforms.

These economic reforms, when implemented rightfully, shall encourage foreign portfolio investors to invest more. A clear forex policy is the need of the hour to imbibe confidence amongst the investors in Nigeria.

Understanding Private Equity and Alternative Investments – FBNQuest

Esan Bolaji
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Understanding Private Equity and Alternative Investments – FBNQuest

Although there are a variety of options for raising capital and attracting investors, equity is one of the two most sorts after options. It allows a company to give a share of ownership of its business to an investor in expectation of a return as the business grows.

Unlike public equity (stock market) with ownership of shares in a public company, private equity (PE) simply means ownership of shares in a private company. 

Private equity is a type of capital investment (asset or security) made to (target) companies that are not publicly traded on a stock exchange. As an alternative form of private financing, private equity allows investors directly invest in companies through which such investors gain an ownership stake in the companies. Investors seek PE funds to earn returns that are considered to be better than those from the public equity markets. 

To avoid debt, companies can sell their stocks to raise money that can be used to fund new technology, make acquisitions, expand working capital, and fund projects geared towards business growth. Usually, the financial information on stocks of such a company is not disclosed to the public, rather an investor can only speculate on the asset worth of the intending company. 

Private equity involves three parties: the investors who supply the capital, the private equity firm that manages and invests the money on behalf of the investor via a private equity fund, and the company (known as Portfolio Company) that the private equity firm invests in.

A private equity firm’s ultimate goal is to sell or exit portfolio companies to deliver superior returns (above the benchmark return also referred to as Internal Rate of Return (IRR) to earn carried interests). 

The most widely adopted investment strategies by PE investments are leveraged buyouts (LBOs) and venture capital (VC) investments. In LBOs, a PE firm will raise debt from institutional investors on the back of a target company and assume control of the target company, while using the cash flows of the target company to pay the acquisition capital.

Whereas, the VC makes investment in young and fast-growing companies in an industry that has the potential for exponential growth while adding value to the firm being taken up. In some cases, PE firms grow and improve a middle-market company with the aim to sell or exit to a mature company within a specified period. 

Generally, private equity firms are active investors who are involved in the board level and monitor the financial and operating performance of portfolio companies. However, some private equity firms are involved in the day-to-day operations of portfolio companies and may take C-level positions such as CEO, CFO, CIO and COO to ensure that value creation initiatives are implemented in the portfolio companies to ensure that increase in revenue, improvement of operational efficiency and corporate governance. 

A private equity fund is typically opened to institutional and accredited (individual or business entity) investors who invest large sums of money for a long period. Institutional investors are companies or organisations like endowment funds, commercial banks, hedge funds, mutual fund managers, and insurance companies that invest money on behalf of other people. 

Accredited investors on the other hand are individuals or a business entity that invest based on their income, net worth, asset size, governance status, or professional experience. The reason is that private equity as an asset class is generally illiquid and has a long lock-up period and only ideal for investors with a large asset size (or AuM). 

Other alternative investments include infrastructure assets, art, antique furniture, automobiles, real estate, commodities, exchange-traded funds, and hedge funds. The market performance of traditional investments and alternative investments are independent of each other, hence, the inclusion of alternative investments in a portfolio can reduce its risk through diversification. 

Before the coronavirus outbreak, PE investments in Nigeria have been flourishing and as a result in 2019 Nigeria was described by the African Private Equity and Venture Capital  Association  (AVCA) as one of the most attractive destinations for PE investments.

Between January and February 2019, PE in Nigeria recorded investments worth 277.64 billion ($767 million), an improvement of 345 per cent compared to   62.37 billion  ($172 million) worth of deals closed during the corresponding period in 2018.

The deals within the first two months of 2019 included the 100 per cent acquisition of Chi Ltd by Coca-Cola Company for the sum of $500 million, which accounted for 65 per cent of the total private equity investments within that period.

Other notable deals included Access Bank Plc’s acquisition of Diamond Bank Plc., the Partech- led Series A funding of Kudi, a financial services provider, and the acquisition of Wakanow, a travel agency, by the Carlyle Group valued at $40 million, to mention a few.

WHY INVEST IN PRIVATE EQUITY?

Private equity firms have grown over the years to become attractive investment vehicles for wealthy individuals and institutions who manage large pools of capital. PE often guarantee better returns compared to other investments, with some private equity managers outperforming the public markets.

To diversify holdings, investors turn to private equity for higher returns than do public market. Specifically, such investments are for investors who can afford to have capital locked up for long periods.

Investors in private equity funds are called limited partners. As a limited partner, you get a return on your investment when the private equity firm sells the company it purchases while the private equity firm (also called general partners) takes some percentage as profit.

In Nigeria, different PE firms like FBNQuest Funds have their specific deal sizes, investment horizons, sector focus, fundraising timelines, and exit strategies.

As one of the leading alternative investments managers in Nigeria, FBNQuest Funds has been in operations for over 17 years and has invested in over 70 private companies through direct investing and their expertise and exposure to PE and VC Funds.

Domiciled in Nigeria, the firm has investments in companies in Nigeria and other countries within the Sub-Saharan Africa region.

FBNQuest is a wealth manager with strong investment banking capabilities. From securing wealth to financing business opportunities we live at the edge of tomorrow, constantly searching for what comes next so we can take you there.

McKinsey acquires Candid Partners, a leader in cloud consulting

Brand Spur
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McKinsey acquires Candid Partners, a leader in cloud consulting

McKinsey often helps clients grow by assessing new business opportunities, finding new partners, and undertaking due diligence. But in the case of our newest acquisition, Candid Partners, it happened to be a client who helped us make the match.

A large organization asked us to help them with a major cloud transformation. They independently brought McKinsey and Candid together to solve a complex technical problem, and we worked side by side from initial strategy development through final implementation.

McKinsey acquires Candid Partners, a leader in cloud consulting

This is just one of several examples in which our firms collaborated. Recognizing the value of our combined capabilities, we recently formalized the relationship, welcoming Candid Partners and their accomplished team of 100+ senior technical experts into our community.

Moving forward, we will continue to bring our deep industry and functional expertise to cloud projects and Candid Partners’ distinctive assets will be incorporated into the work processes, including their Matter platform, which assists in planning, provisioning and managing cloud security compliance.

“We were immediately struck by the impressive depth and collaborative approach of the people we met at Candid Partners—and their track record of both solving complex technical challenges and delivering cloud programs for some of the world’s largest organizations,” said Steve Van Kuiken, a senior partner and global leader of McKinsey Technology.

“With Candid Partners’ people and knowledge, we will scale our technical capabilities and accelerate the rate at which we can help our clients achieve tangible business value from cloud adoption,” said Liz Hilton Segel, managing partner for North America.

While our firms’ talent profiles differ, the cultures are very similar. “As an organization, Candid Partners applauds technical depth, creative problem solving, and a total focus on getting the job done,” explains Merrick Olives, who co-founded the firm with John Peak. “What our people value most is the opportunity to work on the most challenging technology projects out there – McKinsey can help our team realize this.”

When you have a client migrating a critical financial application into the cloud, we can bring experts to the table who’ve done this multiple times.

Merrick Olives, co-founder of Candid Partners

This partnership comes at a time when companies are increasingly turning to cloud for its advantages over traditional IT models in terms of flexibility, speed, resilience, and scalability–critical features for virtual working, collaboration and accessing data—that have become more important during the pandemic.

“Cloud is now a significant CEO/Board level topic and the most pressing enterprise tech opportunity our clients are dealing with today. It’s an important area that we will continue to grow,” said Kevin Sneader, global managing partner of McKinsey.

Candid Partners, founded in 2013 in Atlanta, is one of the fastest-growing cloud firms in the country, with 95 percent of their work focused on Fortune 500 companies. They have successfully completed 250 cloud programs and are one of the only companies to migrate 100 percent of a Fortune 100 client’s applications to the cloud.

“We have assembled a group of very experienced people including engineers, developers, architects and agile coaches. When you have a client migrating a critical financial application into the cloud, we can bring experts to the table who’ve done this multiple times,” says Merrick. “Our average technical person is 20 years into his or her career, which makes a big difference.”

The integrated McKinsey-Candid Partners team will help clients with end-to-end cloud transformations, from initial strategy, business-case development and road mapping through to designing the architecture, migrating applications, and optimizing workloads.

Our capabilities are essential given the greatest value from the cloud is in enabling businesses to realize their strategic goals such as enhancing innovation, speed and scale, rather than simply cutting costs.

For example, airlines can streamline their customer experiences, manage global information networks, and route crews and aircraft more effectively. Healthcare systems can rationalize complex infrastructures and deploy patient services that are mobile and flexible while adhering to regulatory requirements. Automotive manufacturers can seamlessly connect thousands of suppliers in real-time across the value chain.

“We believe the cloud holds immense potential, but most companies are only scratching the surface”, says Steve. “We are going to continue to invest in this area to bring the most distinctive capabilities to our clients.”

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