Mark Mobius, the 77 year-old emerging
markets Guru who is executive chairman of Templeton Emerging Markets had
described Nigeria, along with some emerging and frontier markets, as ‘the next
big thing’. In this optimism on Africa’s largest economy, he is in elite company.
Investor relations professionals and indeed all marketers of the Nigerian
economy should own this message.
Though recent external shocks and
local policy bungling helped cast doubts on the country’s prospects, the
economy can only rebound.
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| Mark Mobius |
Before the tumbling of oil prices,
Nigeria’s main foreign exchange earner, the International Monetary Fund (IMF)
had forecast growth of the country at 7.3 percent on the back of rising oil
prices, strong external position, rising internal reserve and fiscal buffers among
several other factors.
This wild growth projection was
recently reviewed downwards to 4.8 percent citing the global sink in crude
prices occasioned by the supply glut orchestrated by the Oil producing
Countries (OPEC).
Back track to the mid 2000s, Jim
O’Nill was a lone champion of the country’s prospect as a likely challenger of
the BRICS with potential to cause concern for the more developed economies. He
had dared coined the N-Eleven consisting of cohort economies including Nigeria,
The Philippines, Indonesia, Turkey, South Korea, Mexico, Egypt, Vietnam,
Bangladesh, Pakistan and Iran, declaring that several countries in this group
could rival the G7 in time.
Since identifying the N-11, the
economies have boomed and gone on to become investors haven, attracting sizable
foreign inflows, Nigeria for instance attracted over $24 billion net inflows in
2014.
IR Pros should understand and let it
be known that following every boom is a burst where macro economic conditions
take a turn for the worse. Indeed for oil producing countries including
Venezuela, Russia and Nigeria these are very bad times.
Venezuela has been in deep recession
owing to the slump in oil prices. There is a balance of payments problem and a
yawing foreign exchange gap. Foreign
exchange outflows now substantially exceed inflows and reserves are down to
$22bn and falling fast. Not a few analysts believe that the Venezuelan economy
is headed for the rocks what with the Caa3 rating by moody’s. This is only one
step above default.
Russia, though a superpower, is caving-in
to the oil price hick-ups as it is crawling under the hammer of a US led
sanctions for interfering in the Ukraine.
Reserves have since fallen from $510.5 billion to $386.2 billion,
GDP is down year-on-year and the Russian ruble has tremendously depreciated against major world currencies such
as the US Dollar and the Euro. The drop is despite The Russian Central Bank raising interest rates by 6.5% to
17%, hoping that it would, if not reverse the current trend, slow down the free
fall of the Ruble against the US Dollar.
A
decrease in exports resulted in a reduction of the foreign currency flow in the
country, and falling oil prices accelerated this process.
Bursts for Nigeria, as other oil
exporters have meant more than 50 percent drop in prices since last year’s peak
in June. Beyond the downside of the oil cycle, which are considered exogenous
are other value eroding factors including poor handling of monetary controls,
fears that the Boko Haram sect would further cause damage to the social system
and what is generally perceived as a bungling of the electoral process as
government pushes national votes from February 14 to March 28.
...to be continued
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