Nigeria adds 11 non-oil products to export list

In line with the Federal Government’s efforts at diversifying the economy, the Nigerian Export Promotion Council said 11 more products had been added to the non-oil products that the country exported to the global market between 2013 and now.

The new products, according to the NEPC, are educational books, robusta coffee, double folded dust sheets, ice making machine, mica muscovite and leather furniture.

Others are high density polyethylene, aluminium ingots, reduced iron and iron pellets, garments and yam.

The primary markets and destinations for the products are Sierra Leone, Spain, the United Kingdom, Ghana, India, Republic of Benin, Japan, Bulgaria and the United States, while high density polyethylene is exported to the Economic Community of West African States member countries.

The NEPC said there was a steady growth in the non-oil exports, with a value of $2.97bn in 2013, accounting for 15.9 per cent increase over 2012, with a value of $2.56bn                             .

“We have about 11 new products, which we introduced from 2013 to various new markets in Africa and the world; these are products that give Nigeria competitive advantage; it is a very interesting development for the country,” the Executive Director, NEPC, Mr. Olusegun Awolowo, told our correspondent.

He added that the country’s exports were no longer limited to the traditional markets of Europe, especially the United Kingdom.

According to statistics by Cobalt International, other non-oil products that were exported from the country to other parts of the world in 2013 comprised cocoa and cocoa preparations, sheep and goat skins, sesame seeds, aluminium articles, rubber, tobacco products, cotton, yarns and woven fabrics, copper, cashew nuts, prawns, shrimp as well as fish.

The NEPC said at a recent workshop that the country’s participation in international trade fairs and exhibitions every year had contributed largely in exposing local companies to the international market and opened up new opportunities for foreign exchange.

It stated, “In the year 2013, 13 of such outings were spearheaded by the council. A total number of 126 companies, mainly Small and Medium Enterprises, benefited. On-the-spot sales and orders generated by these companies amounted to $627,108.23 and $3,716,920.51, respectively.

“Executed order as of the end of February 2014 that was reported to NEPC was $763,247.85. It is also on recorded that made-in-Nigeria products, especially in the West African sub-region market, elicited great demand.”

Awolowo said despite challenges in agricultural yield and the security issues in the northern part of the country, there were strong indications that the value of non-oil exports at the end of 2014 would be higher than the previous year’s.

“This is the second quarter, the year can be better and we feel we can do better with a little above the result we have in 2013,” he added.

Awolowo noted that the rebased Gross Domestic Product of the country had increased the confidence of other countries in the Nigerian economy.

“On the industry, there is an effect of the rebased GDP and we are using that as a wake-up call that we must export more. We must keep up with the Nigerian Industrial Revolution Policy by showing that we export processed goods so that we can add value and create jobs. It is a positive thing for Nigeria and we have the population to back it up,” he added.

Awolowo, however, expressed fears that the Export Expansion Grant might affect the performance of local manufacturers and consequently the export figure.

The Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, also said that with the productivity challenges plaguing the country, it would be difficult for the non-oil sector to make significant impact on the economy despite its growth rate.

He said, “The economy has very serious productivity challenges and as long as we have these problems, especially by enterprises and those that are in the real sector of the economy, it is difficult to make any significant impact in the non-oil sector.

“Currently, the bulk of what we export is primary products and that cannot give us much value as an economy. When you export something on which you have added value but because of productivity challenges, it is difficult to produce anything competitively; therefore, we are not making the kind of mark we should make in the non-oil export sector.

“Even within the oil sector, we are not supposed to be exporting just crude oil; that is a problem for Nigeria as an oil producing country.”

According to Yusuf, as long as the productivity level remains low, the country cannot be competitive. He added that lack of basic infrastructure, high production costs, bureaucracy and high cost of funds remained major problems for the non-oil export.

He said, “How can we produce for export with those conditions, or with a manufacturer using diesel in his factory? We need to address productivity issues in the real sector, and then, the government should be more serious in creating value addition even in the oil sector.

“It is bad that we are still exporting crude and importing refined products when we should be exporting refined and petrochemical products from our plants where we will make more money than crude oil itself.”

The President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Alhaji Mohammed Abubakar, also said there was a need for the country to align with global trend to enhance its competitiveness by re-focusing and re-strategising on productivity.

“To achieve this feat of boosting non-oil exports in the country, with a view to making the sector vibrant and competitive in terms of exportable products and revenue generation, the government must be ready to demonstrate the political will by ensuring the provision of the desired enabling environment, including, of course, adequate infrastructure and incentives to encourage the production of quality goods and services in Nigeria,” he said.

Source: Punch Newspaper.

Firm, AMCON disagree on divestment from Mainstreet Bank

The ongoing proceedings at the International Court of Arbitration (ICA), instituted by Intangis Holdings Limited may stall the divestment plans of Asset Management Company of Nigeria (AMCON) in Mainstreet Bank.

  The new twist at the threshold of the sale of the bridged bank was at the instance of Intangis, which alleged a breach of agreement it reached with Afribank Plc in 2009.

  It would be recalled that Mainstreet Bank emerged from the financial bailout programme in the banking industry by the Central Bank of Nigeria (CBN) and AMCON.

  The said agreement, tagged “Confidential and Non-Circumvention Agreement,” had held that Afribank would not enter into discussions or negotiations with any potential investor in relation to acquisition of a portfolio of non-performing loans and that of a minority stake in its share capital.

  But in a draft response to the company claims by AMCON, the bad debt agency explained that Intangis was pursuing a frivolous claim.

  According to AMCON, it was not party to any agreement with Intangis and Mainstreet was not existing at the time the agreement was reached.

  Mainstreet, which came after a special audit in the banking industry that found it, along with nine others in “grave situation,” sacked the bank’s board and management, with a view to cleaning and repositioning it.

  However, according to AMCON, with apparent lack of capacity to recapitalize before the September 2011 deadline given to it by CBN, Affribank’s license was revoked.

  But with the Nigerian Deposit Insurance Corporation (NDIC), pursuant to its enabling Act (section 39), in collaboration with CBN, executed a Purchase and Assumption Agreement, whic allowed Mainstreet Bank to purchase assets and assume certain liabilities of Afribank, while AMCON subscribed to the shares of the emerged bank.

  AMCON pointed out that Intangis’ claim, anchored on its ongoing divestment of interest in Mainstreet, is frivolous because neither it nor Mainstreet was a party to the agreement and neither party assumed Afribank’s obligations on the agreement.

  It also noted that the agreement in question had expired by November 2, 2011, and there was no subsisting or existing contract, which AMCON can be said to be breaching or inducing its breach.

  “Even if the CNCA had not expired, the ongoing transaction relating to divestment of AMCON’s shareholding in Mainstreet Bank does not constitute a prohibited transaction under its expired terms,” the response added.

Source: Guardian Newspaper

Economy Contracts By An Annualised 2.9%

Last week focused on the surprising announcement that the US Federal Reserve is downgrading their overall 2014 economic growth forecasts.Their reason for doing so was due to an admittance that the adverse weather the United States faced over the New Year period, had a far more detrimental impact on their economy than they first envisaged. The US central bank’s economic downgrade created a fear of anxiety regarding the US first quarter GDP confirmation, scheduled to be announced last Wednesday. Unfortunately, it was not positive news. The US economy contracted by an annualised 2.9% during the first quarter of 2014, their worst GDP reading since 2009.

Although it is predominately accepted that the GDP contraction was caused by an atrocious winter weather period, attention will now be focused upon how much of the GDP contraction can be recovered in the following quarter. In reference to other US economic releases last week, performances were mixed. US Manufacturing ISM’s expanded at their fastest rate in four years. This is positive news, considering the US manufacturing sector equates to nearly 17million US jobs, but Durable Goods Orders (-1%) and Personal Spending (0.2%) fell below expectations. Bearing in mind that consumer spending contributes to 70% of the US economy, the personal spending release was looked at unfavorably.

Moving on to the United Kingdom, although economic releases were low in volume last week, the Bank of England (BoE) and more specifically, BoE Governor Mark Carney were still featured in the headlines. Last Tuesday, Carney and three members of the Monetary Policy Committee (MPC) testified in front of the UK Parliament Treasury Committee, and the testimony concluded with the group being accused of sending mixed messages regarding a UK interest rate hike. Just under three weeks ago, Carney announced that the BoE may increase interest rates sooner than the markets expect. However, during the testimony in front of the UK Parliament Treasury Committee, Carney announced that there is no specific time duration to increase interest rates, instead the decision will be encouraged by data driven economic data. Although, Carney did hint that a UK unemployment rate below 6%, alongside a noticeable advancement in UK average wage growth would entice a rate hike sooner. 

In regards to the European economy, economic releases continued to add substance to the speculation that there are signs that the EU economic momentum may be slowing down. This was suggested by the Head of the International Monetary Fund, Christine Lagarde during a recent EU Finance Ministers meeting in Luxembourg, and last week’s economic performances provided some validity to those claims. Last Monday’s Markit PMI showed that EU economic activity slowed to a six-month low. Monday’s PMI’s also showed further PMI contraction in France, while Germany’s IFO estimates on Tuesday failed to meet expectations.

However, the week ended on a positive note when it was announced that Germany’s CPI (inflation) increase month on month to 0.3%. This encouraged some optimism that the recent ECB stimulus measures, may be having a positive effect. 

What to watch this week:

Due to the United States markets being closed this Friday for Independence Day, the US non-farm payroll (the number of jobs the US economy created last month) will be released this Thursday. With the latest European Central Bank (ECB)interest rate decision and Mario Draghi’s live press conference also being scheduled for Thursday, this has the potential to become one of the most volatile trading days of the year.

In regards to the US non-farm payroll release, after last week’s disappointing GDP contraction, the United States would highly benefit from a positive NFP this Thursday. Although Janet Yellen refrained from offering a specific time duration regarding an interest rate rise during the latest FOMC meeting, a figure above 230,000 may entice domestic speculation regarding what timeframe the Federal Reserve may be considering for an interest rate increase.

In reference to the ECB interest rate decision, I feel it is unlikely that the European Central Bank will change monetary policy for two consecutive months. However, there is still the potential for market volatility during Mario Draghi’s press conference, following the interest rate decision. Draghi will likely be answering questions regarding whether he feels the EU economic momentum is slowing down (like IMF head Christine Lagarde has recently suggested) or whether he feels the ECB needs to implement a quantitative easing program in the future. If he is asked these questions, the manner in which he answers them will be pivotal towards which direction the EU currency fluctuates.

Written by Jameel Ahmad, Chief Market Analyst at FXTM.

For more information please visit: ForexTime

Dovish Federal Reserve Weakens the Greenback

Bank of Japan Governor Kuroda 

Last Wednesday evening, a more dovish than expected Federal Reserve weakened confidence in the USD. Although the Federal Reserve continued to taper their Quantitative Easing stimulus by a further $10bn, the US central bank surprisingly downgraded their economic growth projections for 2014. Beforehand, speculation emerged that the Federal Reserve would actually upgrade economic projections during the FOMC minutes (following Yellen’s acknowledgement at a public speaking event in New York during May that US economic growth was set to accelerate throughout the latter half of 2014). In reference towards why the Federal Reserve downgraded their 2014 economic growth projections, the central bank admitted that the adverse winter weather period the United States faced over the New Year, had a larger detrimental effect on the US economy than they first envisaged. Overall, the US central bank are now projecting their economy to expand between 2.1% and 2.3% this year, a considerable decline from the 2.8% to 3% forecasted in March.  

Janet Yellen inspired further USD weakness during her live press conference address, when she refrained from offering any indications regarding what timeframe the Federal Reserve would consider raising interest rates. Previously, Yellen had indicated that this could happen around six months after the Federal Reserve concluded their Quantitative Easing program. Generally, Yellen maintained a dovish tone throughout her press conference. For example, despite the US employment sector making substantial progress over the past few months, (the US economy has now regained all of the 8.7 million jobs lost during the recession and for the first time in nearly 15 years, the US economy has added over 200,000 jobs to their payroll for four consecutive months) Yellen identified that the US employment sector was still underperforming. All in all, the dovish Federal Reserve tone contributed towards the EURUSD reaching a two-week high, the AUDUSD recovering all losses from a dovish RBA minutes release two days prior and the GBPUSD finally advancing to a new 5-year high.

Moving on to the United Kingdom, although the GBPUSD finally advanced to a new 5-year high, the advancement occurred in a slightly more unorthodox manner than many were expecting. Since BoE Governor Carney hinted nearly two weeks ago that the BoE might increase interest rates sooner than the markets expect, anticipation was high that either the UK inflation levels had reached the BoE 2% threshold target, or a member of the BoE’s MPC (Monetary Policy Committee) had voted in favor of a UK interest rate increase during the latest BoE meeting. Neither of these hypothetical situations materialized. In fact, UK inflation CPI fell to a new 5-year low, with inflation increasing at an annualized 1.5%, and the BoE minutes release showed that the BoE’s Monetary Policy Committee still voted 9-0 in favor of maintaining interest rates at a record-low 0.5%. In reference to when the GBPUSD advanced towards a new 5-year high, it occurred after the Federal Reserve weakened the USD last Wednesday evening.

Since then, the GBPUSD has depreciated slightly. BoE Governor Carney and three members of the Monetary Policy Committee (MPC) testified in front of the UK Parliament Treasury Committee in London and specified that there is still no confirmed timeframe regarding when the BoE may increase interest rates. In fact, Carney specified that when the UK rate hike occurs, it will be encouraged by data driven economic data, such as the UK unemployment rate extending below 6% and a noticeable advancement in UK average wage growth. Domestically, the BoE are now being criticized for sending contradictory messages regarding when the BoE will raise interest rates. Before Tuesday’s testimony to the UK Parliament Treasury Committee, 80% of economists had predicted an interest rate hike in November. Following Carney’s admission that a UK rate hike will data driven, rather than time specified, economists are delaying their expectations for a UK interest rise until February 2015.   

In reference to the EU economy, with the exception of confirmation that EU inflation increased at an annualized 0.5% last month, economic releases last week were low in quantity. However, the EU economy still remained in the news headlines. During an EU Finance Ministers meeting in Luxembourg, Christine Lagarde (Head of the International Monetary Fund) announced that the EU economic recovery had not been robust, or sufficiently strong. Lagarde also signaled that there were signs that the EU economic momentum was slowing, and the ECB needs to consider introducing asset based purchases (Quantitative Easing), if inflation levels remain low.

Unfortunately, since Lagarde’s comments, there have been further indications that EU economic growth is slowing down. The latest Markit Purchasing Manager’s Index (PMI) showed that EU economic activity in June slowed to its weakest rate in six months. The PMI for private sector activity this month fell to 52.8, from 53.5 in May. Additionally, Monday’s EU Manufacturing and Services PMI release displayed further signs of contraction in France, while Germany’s IFO estimates in June failed to meet expectations.  

Elsewhere, for the second consecutive month, a dovish RBA minutes release encouraged AUDUSD weakness. Last month, the Reserve Bank of Australia weakened confidence in the Australian currency by announcing that the Australian economy was set to enter a period of weaker than expected economic growth. Although this month’s RBA minutes release made some reference towards a similar message, the Australian Central Bank also announced its displeasure with an overvalued AUDUSD. 

Finally, Bank of Japan Governor Kuroda announced during a press conference in Tokyo that the Japanese economy was recovering moderately and he expected Japanese inflation levels to continue to increase throughout 2014. However, Kuroda admitted that a sales tax imposed in April had encouraged some distortion with recent Japanese economic releases. The BoJ is set to continue issuing monetary easing until the Japanese economy is recording a consistent 2% inflation rate. The latter statement refutes an emergence of speculation last month that the BoJ was already internally discussing how to withdraw from its Quantitative Easing program.

What to Watch this Week:

I am expecting the final confirmation of United States first quarter GDP on Wednesday to attract the majority of attention over the upcoming days. Following the Federal Reserve’s surprising announcement during last Wednesday’s FOMC minutes that they were downgrading their economic growth forecasts for 2014 (due to the adverse winter weather period), it is possible that Wednesday’s GDP release will show that the US economy contracted further than originally anticipated during the 1^st quarter of 2014.

Other than Wednesday’s US GDP release, market volatility will likely witness an increase from Thursday evening onwards. On Thursday evening, the latest Japanese CPI (inflation) readings are released. This is followed by UK and France GDP announcements on Friday.

France’s GDP release has the potential to raise a few eyebrows. We are expecting French Gross Domestic Product (Quarter on Quarter) to be confirmed at 0.0%, but their services and manufacturing PMI’s have contracted for several consecutive months and this could consequently correlate towards a worse than expected GDP figure.

Written by Jameel Ahmad, Chief Market Analyst at FXTM.

For more information please visit: Forex Time

Kiwi accelerates following RBNZ interest rate hike

For the third consecutive month, the Reserve Bank of New Zealand raised its benchmark interest rates on Wednesday evening, this time to 3.25%. Not only is the RBNZ the first major central bank to begin raising interest rates since the beginning of the global financial crisis, but they offered strong indications on Wednesday evening that further interest rate hikes are likely to follow. Following the interest rate hike, the NZDUSD climbed to its highest valuation in over a month. It is widely expected that this coming Wednesday's New Zealand GDP release is set to show that the New Zealand economy is rapidly expanding at above a 3% annualized level. 60% of economists are already predicting a further interest rate hike in July.

Shortly following the news that a hawkish RBNZ raised interest rates, close neighbors Australia released employment data which sent the AUDUSD just short of a yearly high. Although the Australian economy unexpectedly lost 5,000 jobs in May, the unemployment rate remained at a steady 5.8%, below the expected 5.9%. After analyzing the employment data in deeper detail, it turned out that the employment contraction last month was enticed by a decline in part time vacancies. In reference to full time employment, over 20,000 jobs were created in Australia last month.  

In a major market surprise, BoE Governor Mark Carney sent the GBPUSD narrowly close to a five-year high, following remarks made at a keynote speech in London. Carney enticed a sudden surge in demand for the GBP, after publically announcing that a UK interest rate rise could happen sooner than the markets expects. Previously, Carney talked down the prospects of a UK interest rate hike, stating that the BoE was in absolutely no hurry to raise rates. This news has again soared suspicions that the BoE may now raise rates this autumn. Also last week, the UK employment rate fell to a 5-year low.

Moving on to the United States, economic performances were mixed last week. The week started positively following the news that US Small Business Optimism reached its highest level in over 7 years last month. This prompted suggestions that small business hiring and expenditure will increase, further elevating the recent progress noted in the employment (initial jobless claims and non-farm payroll) and capital expenditure (durable goods and factory orders).

Unfortunately, Thursday's advance retail sales figure failed to extend the chances of a USD rally. After consumer expenditure advanced to its second highest level in 5 years last month, it was hoped that this would correlate towards an impressive advance retail sales performance. Advance retail sales increased by only 0.3%, short of the 0.6% expectation.

Analysts were quick to decipher why we are not yet encountering additional consumer expenditure, despite the employment sector making substantial progress. So far, the consensus is that average wage growth is not yet increasing to the levels required. Average wage growth increased by 2.1% (annualized) last month, but economists predict that this figure needs to be around 3% before we witness appreciated consumer spending. In theory, with job growth now expanding at pre-recession levels in the United States, this should correct itself. However, bearing in mind that the US economy is heavily reliant on consumer expenditure (70% GDP), patience for improved consumer expenditure releases will be thin. 

What to Watch this Week:

Looking ahead to the coming week, we have a variety of higher risk economic data released throughout the major economies. On Monday morning, we are expecting confirmation that EU CPI figures expanded at an annualised 0.5% in May and on Monday evening, the latest RBA minutes are released.

The RBA minutes pose a potential event risk for the week because last month, the RBA encouraged AUD weakness when they announced that the Australian economy is set to enter a period of weaker than expected economic growth. Despite the previous week's GDP release impressing, it was quickly noted that 0.9% of the 1.1% quarter expansion was led by mining exports. The Australian economy is under pressure to sway towards domestic consumption and away from mining reliance. If the RBA reiterates its dovish comments from last month, or implies that there is going to be a decrease in demand for mining exports, there will be downside risks for the AUD.

Tuesday and Wednesday are the particular days of the week where a sharp increase in volatility is probable. Over these two days, we are expecting key data from the United Kingdom and United States economy. Starting with the United Kingdom, on Tuesday morning the latest UK CPI figures are released. UK inflation is a key benchmark for the BoE to consider an interest rate increase. The BoE’s inflation target is 2%. With Carney now seemingly softening his stance in regards to an interest rate hike, this has the potential to be a market mover.

Last month, the UK inflation level rebounded from a four-year low 1.6% to 1.8%. Since then, UK Services PMI’s (main contributor to the UK GDP) have expanded beyond expectations and UK retail sales growth reached a decade high. Any improvement on last month’s 1.8% CPI reading will likely extend demand for the GBP. A potential rally could extend into Wednesday’s now expectedly hawkish BoE minutes release.

Tuesday is also the start of the latest Federal Reserve two-day meeting. Although the FOMC decision on Wednesday is expected to be a further $10bn taper of the Federal Reserve’s Quantitative Easing program, there will be an added significance to this month’s Federal Reserve meeting because it is expected to be followed by an updated version of the Federal Reserve’s latest economic projection, and a live press conference from Federal Reserve Chair, Janet Yellen.

The media will be paying particular attention to Yellen’s tone, specifically any particular hints towards when the Federal Reserve may look to begin raising interest rates. Last month, Yellen confirmed that the Federal Reserve has begun discussing how they will raise interest rates, but added that no time frame for this has been discussed. Since the latest FOMC meeting, US economic data has been widely positive, apart from consumer expenditure. There is a suspicion that the Federal Reserve may pick up on this.

Finally, the week concludes with the latest New Zealand GDP release on Thursday morning, followed by a live press conference from the BoJ’s Kuroda on Friday morning. In reference to the New Zealand GDP, economists are expecting confirmation that the New Zealand economy is expanding at a level above an annualised 3%, and this will likely validate the RBNZ’s indications that there will be further interest rate hikes in the coming months.

Written by Jameel Ahmad, Chief Market Analyst at FXTM.

For more information please visit: Forex Time

Paypal expands payment services to Nigera, 9 other markets

 PayPal is entering 10 new countries this week, including Nigeria, providing online payment alternatives for consumers via mobile phones or PCs in markets often blighted by financial fraud.

Rupert Keeley, the executive in charge of the EMEA region of PayPal, the payments unit of eBay Inc, said in an interview on Monday the expansion would bring the number of countries it serves to 203.

Starting on Tuesday, consumers in Nigeria, which has 60 million users and has Africa's largest population, along with nine other markets in sub-Saharan Africa, Eastern Europe and Latin America will be able to make payments through PayPal.

"PayPal has been going through a period of reinvention, refreshing many of its services to make them easier to use on mobile (phones), allowing us to expand into fast-developing markets," Keeley said.

Once the services go live, customers in the 10 countries with access to the Web and a bank card authorized for Internet transactions will be able to register for a PayPal account and make payments to millions of sites worldwide.

Initially, PayPal is only offering "send money" services for consumers to pay for goods and services at PayPal-enabled merchant sites while safeguarding their financial details. This is free to consumers and covered by fees it charges merchants.

"We think we can give our sellers selling into this market a great deal of reassurance," said Keeley, a former regional banking executive with Standard Chartered Plc and senior executive with payment card company Visa Inc.

PayPal does not yet cover peer-to-peer transactions, which allow consumers to send money to other consumers. It has not yet enabled local merchants in the new markets to receive payments, nor is it offering other forms of banking services, he said.

A 2013 survey of 200 UK ecommerce sites by Visa's CyberSource unit estimated that 1.26 percent of online orders are fraudulent and that 85 percent of merchants expected fraud to increase or remain static last year.

CyberSource also estimated that suspicion of fraudulent transactions result in 8.2 percent of online orders in Latin America being rejected by merchants, compared with 5.5 percent in Europe and 2.7 percent in the United States and Canada.

Such fraud can include ID theft, social engineering, phishing and automated harvesting of customer financial data via botnets, or networks of computers controlled by hackers.

A total of 80 million Internet users stand to gain access to PayPal global services this week, including those in five European markets - Belarus, Macedonia, Moldova, Monaco and Montenegro, four in the African nations of Nigeria, Cameroon, Ivory Coast, and Zimbabwe, as well as Paraguay. Internet usage figures are based on research by Euromonitor International.

PayPal counts 148 million active accounts worldwide.

Last week, MasterCard Inc, the world's second-largest debit and credit card company, and a PayPal rival in payment processing, said it was working with the Nigerian government on a pilot to overlay payment technology on a new national identity card.

PayPal has operated in 190 markets since 2007 and added three countries - Egypt, Georgia and Serbia last year. Roughly a quarter of the $52 billion in payment volumes PayPal reported in the first quarter of 2014 were for cross-border transactions. PayPal reported $1.8 billion in revenue during the period.

Culled from www.reuter.com

Online forex trading: Nigeria, bride of brokers

Nigeria is so blessed that it has been described as the ‘Giant of Africa’. But the giant does not seem to recognise her gigantic posture in many areas. The giant goes to sleep and often needs to be awakened. This may be the reason why she still crawls at 100.

The above situation is also playing out in online forex trading and other instruments.

Let me share an experience here. I once opened a forex account with a trading arm of a world-class United Kingdom bank. Before I could fund this account, I got a mail that my account would be closed and it was thus closed. The reason may not be farfetched; the regulatory authorities in such strict financial jurisdiction give their brokers no breathing space. The giant trading outfits of such strictly regulated countries are excluding traders from non-regulated countries.

Also, these strict countries do not get capital gain tax from traders outside their jurisdiction.

Nigeria, according to the first Lagos forex expo website, is estimated to have 300,000 traders (active and docile, I guess); and by Google, its forex trading is ranked as the fastest growing.

With a conservative trading fund/investment of $1,000 per trader, it means Nigeria traders have about $150m worth of investment outside the shores of the country with foreign brokers.

That amount in the local currency at an average exchange rate of $1to N160 is N48bn. What a whooping amount that ought to reside in our banks.

I can bet that if online forex trading is regulated in Nigeria, many brokers will jostle to pick up licences. A renowned forex brokerage firm has Nigeria generating over 20 per cent of its $600m profit, yet it has no presence in the country. It, therefore contributes nothing in terms of tax, human capital development in this field and no direct investment.

An average licence of FX brokerage firms is worth more than $200m, if not more. This is more than what used to be a GSM firm license fee. If 10 forex brokers are in Nigeria, our government can rake in over $2bn (N320bn). The influx of foreign brokers can also spur the emergence of a true Nigerian forex broker.

If we have an estimate of 300,000 traders, assuming each trader places an average of 10 standard lots per month, conservatively, it means foreign brokers are making $20 per standard lot and $200 on 10 trade orders, thus totalling $60m (N10bn) per month. Can’t we have a local broker?

What about the job opportunities this will offer to our populace? This submission is an eye opener about what we stand to gain collectively as a nation with our ‘giant’ status. Africa is seen as the emerging market; in this area, Nigeria is the bride of brokers. There is need to open our doors to this opportunity.

Our financial regulatory authorities should be proactive by swiftly coming up with a framework to harness these opportunities. The world has gone online. We are a sleeping giant; we must wake up to the reality of the current situation.

Market tips for the week Mon June 16 – Fri June 20

Entry (SEP) and exit (TP) could also be at trader’s discretion.

A lot of trading opportunities abound this week in the pairs below.

The strategy is to buy up to the region of sell limits and also sell up to the region of buy limits. Entries can then be as suggested. The last TP could be used also as reversal points.

EUR/NZD: SELL LIMIT@ 1.5700 – 1.5750 TP: 1st – 1.5480   TP:2nd –1.5400 SL: 1.6057

GOLD (XAU/USD): BUY LIMIT@ 1273-1276.20 TP1: 1289.20 TP2:1294.00 SL:1250.14

SILVER (XAG/USD): BUY LIMIT@ 19.75-19.60 TP1: 19.75 TP2:19.97 SL:18.95

EUR/JPY: SELL LIMIT@ 138.50-138.90 TP: 1st – 137.46   TP:2nd –137.01 SL: 140.10

GBP/CHF: BUY LIMIT@ 1.5165 – 1.200 TP: 1st – 1.5475 SL: 1.4990

CHF/AUD: SELL LIMIT@ 1.1860 – 1.1878 TP: 1st – 1.1655   TP:2nd –1.1610 SL: 1.1989

NZD/USD: BUY LIMIT@ 0.8600 – 0.8605 TP: 1st – 0.8745   TP:2nd –0.8778 SL: 0.8401

AUD/CHF: BUY LIMIT@ 0.8399 – 0.8410 TP: 1st – 0.8576   TP:2nd –0.8610 SL: 0.8337

      : by ‘Kunle Adeyeri from Mon, June 30th.

(Visit www.naijaonlinetraders.com and www.kardsfx.com)

Source: Punch Newspaper

The coming 'tsunami of debt' and financial crisis in America

According to research, sectors of the American economy are building to a bubble of parallel and possibly larger scope than the conditions preceding the 2008 financial crisis.

The US Congressional Budget Office is projecting a continued economic recovery. So why look down the road – say, to 2017 – and worry? 

Here's why: because the debt held by American households is rising ominously. And unless our economic policies change, that debt balloon, powered by radical income inequality, is going to become the next bust.

Our macro models at the Levy Economics Institute are showing that the US economy is about to face a repeat of pre-crisis-style, debt-led growth, based on increased borrowing. Falling government deficits are being replaced by rising debts on everyone else's ledgers – well, almost everyone else's.

What's emerging is a new sort of speculative bubble, this time based on consumer and corporate credit.

Right now, America is wrestling a three-headed monster of weak foreign demand, tight government budgets and high income inequality, with every sign that these conditions will continue. With that trio in place, the anticipated growth isn't going to be propelled by an export bonanza, or by a government investment boom.

It will have to be driven by spending. Even a limping recovery like the one we're nursing along today depends on domestic demand – consumer spending not just by the wealthy, but by everyone else.

We believe that Americans will keep consuming at the same ever-rising rates of past decades, during good times and bad. But for the vast majority, wages and wealth aren't going up, so we're anticipating that the majority of Americans – the 90% – will once again do what was done before: borrow, and then borrow more.

By early 2017, with growth likely to stall even according to CBO predictions, it should be apparent that we're reliving an alarming history. Middle- and low-income households have been following a trajectory of an ever-higher ratio of debt to income. That same ratio has been decreasing for the most well-off 10%, who are continuing to see debt decline and wealth rise.

 Forces that prompted Occupy movements protesting income inequality and financial misconduct are again in action, according to research. Photograph: Spencer Platt/Getty Images

Why is the relationship between the debt of the 90% and the gains of the 10% so significant?

The evidence demonstrates that the de-leveraging of the very rich and the indebtedness of almost everyone else move in tandem; they follow the same trend line. 

In short, there's a strong and continuous correlation between the rich getting richer, and the poor – make that the 90% – going deeper into debt.

That the share of income and wealth to the richest has skyrocketed is certainly not a new revelation. The heralded data tabulations of Thomas Piketty and Emmanuel Saez have demonstrated just how spectacular the plutocrats' portion became in the run-up to the Great Recession. They codified the belief that no one else can ever catch up with the very wealthiest.

One important explanation for that consolidation of wealth emerged from our latest research: The more – proportionally – that the top 10% has prospered, saved and invested (naturally, the gains found their way into the financial markets), the more the bottom 90% has borrowed.

Look at the record of how these phenomena have travelled in lockstep. In the first three decades after the second world war, the income of the 90% rose at the same pace as its consumption. But after the mid-1970s, a gap formed – the trend lines on earning and outlays spread apart. Spending continued apace. Real income, meanwhile, stagnated. It was lower in 2012 than it had been forty years earlier. That ever-increasing gap between income and consumption has been filled by borrowing.

 In less than 30 years the richest 20% became twice as wealthy. Photograph: Jan Butchofsky-Houser/Corbis

These were the debt dynamics in the lead-up to the recession. But they are also the dynamics leading out of the crisis, and continuing today with no end in sight.

Before and after the crash, the fortunes of the most fortunate sped upward. Between 1983 and 2010, for example, the richest 20% increased in wealth by 100%. But their proportion of debt to wealth fell.

The bottom 40%, meanwhile, lost 270% in wealth. 

It was much applauded when households began to rapidly pay down debt after 2007. And yet, despite this, their debt to equity ratio actually rose. With incomes plunging and the value of their assets – notably, housing – in a free-fall, they couldn't de-leverage fast enough. Debt outpaced everything else.

Insolvency for the 90% – the overwhelming majority of Americans – has become, in the decade's catch phrase, "the new normal". Unsustainable? Of course.

The debt picture is also changing dramatically for corporations. Historically, the private sector, which often goes by the moniker Corporate America, had not, overall, been borrowers. They increased their revenues far more than they borrowed money. Their net lending was exceptionally low, hovering at around 4% of GDP between 1960 and the mid 1990s.

 Corporations are increasing their debt in the same way households did before the 2008 crisis, which left many families homeless and erecting tent cities, like this one in Sacramento. Photograph: Justin Sullivan/Getty Images

After the crisis, corporations, like households, pulled way back on borrowing. But, also like households, they are now increasing their debt. The steep rise began for non-financial corporations in 2010 (for families and individuals, debt levels began to go upwards again in 2013). We think these businesses will add another $4tn of debt between now and 2017.

Under the current disastrous economic and tax policies, we can look forward to rapid increases in debt for both corporations and households from at least 2015 to 2017: a tsunami of debt.

Alternatively, a teeth-gritting brake on household and corporate spending would be no help at all.

That's because if levels of debt and consumer consumption go down, the nation would move into what's called secular stagnation: anemic growth, if any, and higher unemployment. The CBO projections for growth can't possibly be met unless Americans take on massive liabilities, piling debt upon debt. Without debt accumulation, there wouldn't be enough demand – spending – to keep the economy moving.

To paraphrase Voltaire's words on God, even if bubbles and debt did not exist, it would be necessary to invent them. And that is exactly what we are doing. 

Source: The Guardian(UK.)