The Economy in Nigeria and its Maritime Sector: Characteristics and Challenges - February 2018

Transcription

1. The Economy in Nigeria and its Maritime Sector : Characteristics and Challenges Kainos Edge Markets Practice February, 2018
2. Outline • • • • • • Operating Context – The Nigerian Business and Economic Environment Characteristics of the Nigerian Maritime industry Outlook for the economy in Nigeria Outlook for the Maritime sector Key Challenges facing the Nigerian Maritime sector Nigerian Maritime Industry Forecast
3. The Nigerian Economic and Business Environment
4. The Domestic Economy in 2017 – Key Developments 1 After contraction in 2016, Economy records 2 quarterly output expansions amid fragility for major sectors • • • 4 Oil providing the growth impetus Non-oil sector still contracting Major sectors [Manufacturing, Telecoms, Trade & Real Estate] still contracting Subsisting Challenges: • • • • 2 Sticky Inflation, although year-end print alters the Outlook The Worsening of already High Unemployment Sustained Consumer Weakness Banking System Fragility Adjustment to FX policy • • • • 5 Introduction of I&E window Renewal of interest by international portfolio community Supportive external trade conditions – higher oil prices, increased production volumes Capital market rally 3 Other Important Issues: • • • Commencement of Electoral cycle and its influence Nigeria successfully accesses international debt markets with two successful foreign currencydenominated bond issuances Interest rates remain elevated and sticky, save for volatile Overnight rate Significant Attention to Investment Policy • • • • • Ease of Doing Business Executive Orders Business Environment Legislation Energy Policy – (Petroleum Industry Governance Bill (PIGB) passage, Gas Policy, Petroleum Policy Infrastructural projects Special Economic Zones (SEZs), Pioneer Status for Investors
5. The Domestic Economy in 2017 Oil prices ascend and production recovers 2 .00 20.00 40.00 1.50 15.00 30.00 1.00 20.00 Q1 Q3 2015 -4.7 -5.4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2015 2016 2017 3,000.00 2.00 0.00 2,000.00 -2.00 1,000.00 -4.00 - FDI FPI -6.00 Nov-17 -1.5 4.00 Sep-17 -1.8 4,000.00 Jul-17 -1.5 6.00 -1.73 -2.2 5,000.00 May-17 -0.1 8.00 % 0.1 Food FOREIGN RESERVES GROWTH, M/M (%) 10.00 6,000.00 2014-Q2 2.4 Core Gross Reserves Accretion CAPITAL IMPORTATION (US$, MILLIONS) 2014-Q1 1.6 US$, MILLIONS 7,000.00 3.4 3.2 -0.4 Headline Bonny Light Price Recovering Capital Inflows CURRENT ACCOUNT BALANCE, % OF GDP 0.8 2017 Bonny Light Quantity (right axis) Current Account surplus restored 2.3 2016 Mar-17 Q2 2017 0.00 3.42 4.33 Q1 0.00 0.15 Q4 5.00 Jan-16 -3.12 -1.2 Mar-16 -2.78 May-16 -2.59 -0.09 Jul-16 -2.97 Sep-16 -3.49 -2.36 Nov-16 Q3 2016 0.50 Q3 2017-Q1 Q2 Q2 2016-Q4 Q1 Q1 2016-Q3 Q4 Q4 2016-Q2 Q3 2015 Q3 2016-Q1 Q2 Q2 2015-Q4 Q1 Q1 2015-Q3 Q4 Q4 2015-Q2 Q3 Q3 2015-Q1 Q2 Q2 2014-Q4 Q1 10.00 Nov-17 1.87 0.00 2014 % 1.76 1.69 10.00 -20.00 4.0 3.0 2.0 1.0 0.0 -1.0 -2.0 -3.0 -4.0 -5.0 -6.0 1.61 0.14 1.83 3.19 2.09 4.11 0.31 1.81 50.00 Jan-17 -10.00 2.03 Jan-12 1.40 2.50 2.05 % -0.67 -1.49 -2.34 -1.73-0.91 0.72 2.17 2.16 mbpd 2.35 2.84 2.05 2.2 1.87 60.00 2.11 0.00 -30.00 2.18 2014-Q3 % 10.00 70.00 25.00 2017-Q3 6.21 6.54 6.23 5.94 3.96 Non-oil GDP US$/bbl. 20.00 Oil GDP INFLATION, Y/Y, % 2017-Q2 GDP 30.00 OIL PRICE & QUANTITY 9.22 5.03 GDP GROWTH, Y/Y, %) Inflation moderates in sticky fashion 0.64 Recession ends
6. Characteristics of the Nigerian Maritime Industry
7. A Representation of the Nigerian Maritime Ecosystem
8. The Nigerian Maritime Industry Value Chain and Drivers • The generic Value Chain of a typical industry/sector comprises its Upstream, Midstream and Downstream segments • The present configuration of the Nigerian Maritime sector is such that Midstream activities dominate • Midstream activities revolve primarily around the Use of Maritime facilities, supported by the necessary manpower • Pre-Shipment Sea-worthiness and Cargo-worthiness Management; Int’l Shipping Trade; Coastal and Inland Waterways Shipping Trade; Ferrying; Trans-shipment, Bunkering, Tugging Boating and Berthing, Fishing, Trawling, Shrimping, Oceanic Resource Extractive Industries • Activities such as Vessel building and Construction (Upstream) and Vessel Recycling (Downstream) have a low footprint
9. Dimensions of the Maritime Industry ’s Contribution to the Economy …And Surrounding Issues Seaborne Transportation Territorial waters in the Atlantic Ocean abutting an 852km coastline which is harnessed to facilitate over 95% of Nigeria’s international trade by volume Oceanic Extractive Resource Exploitation • • Export Processing Zones Although established as the economy’s revenue and foreign exchange mainstay, Nigeria’s Oil and Gas resources seem a lot more vast than has been fully explored when known or potential offshore deposits are considered Nigeria’s marine fishing resources, although prevalent, may still be vastly underutilized Oceanic Assets Governance • Developed primarily in the Calabar area in the South-South; Emerging in the Lekki area of Lagos • Auditing and establishing the extent of wealth and potential that exists in Nigeria’s marine ecosystem and surrounding blue economy is a growing imperative Economic sustainability should, of course, be a major dynamic to this process
10. The Nigerian Maritime Space : A Data Cross-Section Linear Shipping Connectivity Index National Fleet 2017 20 4 3.5 3 2.5 2 1.5 1 0.5 0 5000 2016 21.3 4000 2015 21.4 3000 2014 22.9 2000 2013 1000 21.4 2012 0 21.8 2011 19.9 18.3 5 10 15 20 15 500 400 10 % 300 200 5 100 0 0 2012 2013 Total fleet 2014 2015 2016 Growth Rate 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Nigeria- Port Infrastructure quality 1(low)- 7(high) 20 600 2011 non oil tanker Nigeria- Total Fleet Nigeria- Total Fleet 700 Oil Tanker 25 2017 Thousand DWT 0 Total Fleet 4500 4000 3500 3000 2500 2000 1500 1000 500 0 20 15 10 5 0 % -5 -10 -15 2011 2012 2013 Total fleet 2014 2015 Growth Rate 2016 2017 800 Tanker Freight Rate 30.0000 20.0000 Thousand DWT 2010 No. of ships Nigeria-Port Infrastructure Quality 600 10.0000 400 0.0000% -10.0000 200 -20.0000 0 -30.0000 2009 2010 2011 2012 2013 2014 2015 2016 2017 Tanker freight
11. How does the Surrounding Economy relate to the Maritime Sector ? 150.00 15.00 150.0 RGDP (RHS) 2016 2015 2014 2013 2012 2011 2010 2009 2008 0.00 -20.00 Oil Tanker Oil Trade (RHS) 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 -40.00 %, Oil Trade 20.00 2005 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 -50.00 40.00 2004 0.00 60.00 2003 50.00 80.00 2001 100.00 50 40 30 20 10 0 -10 -20 -30 -40 2000 150.00 %, Oil Tanker 200.00 %, GDP Growth 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 -2.00 -4.00 250.00 %, Total Fleet Total Trade (RHS) TOTAL OIL TRADE GROWTH VS OIL TANKER (Y/Y) 300.00 GDP Growth (RHS) 2007 General Cargo GDP GROWTH VS TOTAL FLEET GROWTH (Y/Y) Total Fleet 2006 -100.0 2000 2016 2015 2014 2013 2012 2011 -50.0 2002 General Cargo 2010 2009 2008 2007 2006 2005 2004 -5.00 2003 -100.00 2002 0.00 2001 -50.00 0.0 2005 0.00 50.0 2004 5.00 2003 50.00 100.0 2002 10.00 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 -10.0 -20.0 2001 100.00 %, General Cargo 200.0 %, GDP 20.00 2000 %, General Cargo 200.00 %, Total Trade TOTAL TRADE GROWTH VS GENERAL CARGO GROWTH (Y/Y) REAL GDP GROWTH VS GENERAL CARGO GROWTH (Y/Y)
12. The Outlook : The Economic and Business Conditions Consequential for the Maritime Sector
13. Economic and Business Conditions Consequential for the Maritime Sector On the Domestic Side : • • • • Economic Growth and its Drivers The impulses from Economic Growth to Trade The components of Trade; in the case of Nigeria, Oil and Non-Oil The Availability of Foreign Exchange to facilitate Trade Transactions External Impulses • Global Economic Conditions • Global Trade and Maritime Industry Conditions
14. Drivers of the Maritime Industry Outlook : Synchronizing the Various Dimensions
15. Drivers of the Domestic Economic Outlook 1 . Oil price and production conditions ➢ ➢ ➢ Impact of agreement between Oil Producers - OPEC & Allies Imposition of production ceiling of 1.8mbdp on Nigeria How may 2019 politics affect the gameplay of militant groups in the Delta? 2. Impulses from the various legs of Policy ❖ ❖ ❖ ❖ Fiscal Policy – Any tailwinds from the 2018 Budget? Monetary Policy – What Direction? Regulatory Policy & Legislation – What Plans & Aspirations? Political Risk ➢ ➢ ➢ Internal tensions and strife – Simmering security challenges Potential for risk-induced Portfolio Outflows in H2 as electoral uncertainty mounts How might electoral calculus affect fiscal policy? Monetary policy? FX?
16. Macroeconomic Outlook Parameter Oil Price (US$) Scenario 2018 2019 2020 Baseline (ERGP/MTEF) 47.0 60 45.0 2.3 2.4 2.0 3.5 3.8 2.0 12.4 11.0 14.0 48.0 50.0 42.5 307.0 300.0 315.0 50.0 58.5 42.0 2.4 2.5 2.2 4.5 5.0 2.3 13.4 11.3 14.2 60.1 62.0 54.0 307.0 300.0 315.0 52.0 54 40.0 2.5 2.6 2.3 7.0 7.4 3.0 9.9 10.8 13.0 79.6 81.0 72.0 307.0 300.0 315.0 Upside Downside Baseline (ERGP/MTEF) Oil Production (mbpd.) Upside Downside Baseline (ERGP/MTEF) GDP Growth (%) Upside Downside Baseline (ERGP/MTEF) Inflation (%) Upside Downside Baseline (ERGP/MTEF) FX Reserves, Yr. End (US$ ‘billions) Upside Downside Baseline (ERGP/MTEF) Exchange Rate (Official, NGN/US$) Upside Downside
17. Regulation and Legislation – What Plans and Aspirations? In 2017, the regulatory and legislative impetus made significant moves in the direction of Easing Business Conditions: • Ease of Doing Business Executive Orders • Business Environment Legislation • Energy Policy – (Petroleum Industry Governance Bill (PIGB) passage, Gas Policy, Petroleum Policy • Infrastructural projects • Special Economic Zones (SEZs) • Pioneer Status for Investors
18. International Maritime Economy Outlook • Anticipated recovery in world GDP and Trade; containment of protectionist threat • Sustained and steady growth in China, despite internal economic re-jig o Chinese trade accounts for significant proportion of world shipping activity • Are commodity prices recovering? On a steady basis? Or a dead cat bounce? • Are there structural price restrictions on commodities, especially Energy commodities, in light of the end of the super-cycle?
19. Emerging Challenges & Implications for the Nigerian Maritime Industry • Security: Incidents of piracy and armed robbery against ships in the Gulf of Guinea remains an arear of concern which affects the industry negatively. • The Regulation & Policy Context • Labour Supply • The Efficiency of Ports and Shipping Companies • Funding/Financing
20. Nigerian Maritime Industry Forecast • The forecast period covers a period of continuing recovery from recession, runs through the 2019 General Elections and finally culminates in post-Election environment. • The forecast scenarios are: • The Baseline Scenario, driven by the Economic Recovery and Growth Plan (ERGP) which covers the period to 2020. • Scenario B is a slightly pessimistic scenario relative to the Baseline • Scenario C is a slightly optimistic scenario relative to the Baseline