Nigeria’s Sticky Upstream Upgrades
Nigerian shares topped the frontier MSCI list ahead almost 50 percent as a sovereign rating upgrade to BB followed inclusion in the local JP Morgan index benchmark, and the stock exchange under a new chief executive previewed a raft of upcoming IPOs after a long post-crisis drought. To pave the way a handful of companies will be delisted after fifty were suspended temporarily from trading pending accounting updates. Foreign investors have recently absorbed two-thirds of daily volume and stiffer licensing standards will consolidate the brokerage industry. With petroleum sector modernization private entrants may be represented in the still bank-heavy market. Prominent investigations have revealed widespread fraud and corruption in energy dealings the past decade to the tune of $30 billion, with $7 billion alone lost from 2009-11 fuel subsidies before reform. Under the bill signed by President Jonathan and pending in parliament the state monopoly NNPC, at the bottom of its peer group according to Transparency International, would continue to control all operating aspects with multinational partners, although it could be partially privatized over time. A deal with Shell-Eni has come under scrutiny for an alleged $1 billion bribe and recent oil spills by Royal Dutch Shell and Chevron in the Delta region have triggered claims at a multiple of that amount. T-bill yields have crept up again after the post-index addition rally to 14 percent as the central bank stays on hold to attain the single-digit inflation goal. With portfolio inflows reserves are over $40 billion as the sovereign wealth fund was launched with a $1 billion endowment to be overseen by a former Goldman Sachs banker. Returning expatriates are welcomed but often subject to vicious criticism for forgetting local mores. Head of the Securities Commission Oteh, who previously served at the African Development Bank, was placed on leave on mismanagement charges thought to be instigated by professional and legislative subjects of her governance crackdowns. The President declared his support after she was cleared initially but lawmakers continue to call for dismissal.
Kenya has matching performance to date as the central bank slashed the policy rate another 200 basis points on exchange rate and inflation stability and good banking system stress test results. Through mid-year credit growth was half 2011’s 30-percent plus level, as Moody’s assigned a B1 sovereign rating warning about the 50 percent/GDP debt ratio. The 2-year $600 million syndicated loan is priced at near 5 percent over LIBOR and in the next fiscal year a $1 billion Eurobond is planned for refinancing. Domestic debt may also be restructured under a medium-term strategy as GDP growth was 3 percent in Q2 as pre-election fear and lethargy again loom. President Kibaki steps down for good next March and sporadic ethnic clashes have broken out which may once more keep the economy from entering the breakout phase.
