Cowry market review for 2015 and outlook for 2016

89
Cowry Asset Management Limited Page 1 Report Date:, Jan 2016 Cowry Research Review of 2015 & Outlook for 2016

Transcript of Cowry market review for 2015 and outlook for 2016

Cowry Asset Management Limited Page 1

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Report Date:, Jan 2016

Cowry Research

Review of 2015 & Outlook for 2016

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 2

Table�of�Contents�

Executive�Summary� � � � � � � � 3�

Global�Economy� � � � � � � � 4�

Nigerian�Real�Sector�Update�� � � � � � � 9�

External�Sector�Update� � � � � � � 27�

Government�Sector�Update� � � � � � � 33�

Monetary�Sector�Update� � � � � � � 36�

Money�Market�Review�� � � � � � � 37�

Foreign�Exchange�Market�Review� � � � � � 44�

Bond�Market�Review� � � � � � � � 48�

Equities�Market�Review� � � � � � � 54�

Political�Review� � � � � � � � 70�

Outlook�for�2016� � � � � � � � 83�

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Executive�SummaryExecutive�SummaryExecutive�SummaryExecutive�Summary����

� In� the�October� 2015�World� Economic�Outlook� (WEO)�Update,� global� growth�

projection� for� 2015�was� revised� lower� to� 3.1%�(0.2ppt� below� forecast� in� the�

July�2015�and�0.3ppt�lower�than�forecast�in�2014).�The�lower�growth�forecast�

was�mainly�on� the�back�of�weaker�prospects�for�some� large�emerging�market�

economies�and�crude�oil�exporting�countries.�

� The� year� 2015� was� largely� sluggish� for� Nigerian� economy� as� it� recorded�

declining�growth�rates� in�the�first�two�quarters.�As�the�general�elections�took�

centre� stage,� implementation� of� the� N4.35� trillion� 2015� appropriation� Act,�

which�was�85.8%�skewed�towards�recurrent�expenditure,�took�the�back�seat�

� Inflation� remained� in� single� digits� throughout� 2015,� howbeit,� above� the�

monetary�authority’s� inflation�target�of�between�6%�and�9%.�The� increase� in�

general� price� level� during� the� year�was� partly� due� to� structural� effects.� As� a�

result,�annual�change�in�headline�inflation�rose�from�8.2%�in�January�to�9.4%�

in�November.�

� Despite� the� initial� enthusiasm� that� ushered� in� the� new�political� dispensation,�

the�NSE�All�Share�Index�declined�by�17.35%�to�28,642.25�points�while�market�

capitalization� fell� to�N9.85� trillion,�a�14.24%�drop.�The�precipitous�decline� in�

oil� prices� coupled� with� capital� restrictions� as� a� policy� response� by� the� apex�

bank,�triggered�massive�outflows�of�foreign�capital.�

� The� monetary� authorities� seemed� poised� to� retain� its� fight� against� dollar�

demand�in�the�face�of�diminishing�supply�of�the�greenback.�However,�without�

any�strong�source�of�dollar�supply�in�sight,�we�think�that�the�CBN�will�soon�hit�

its� limit� in� curtailing�dollar�demand� in�an� import�dependent�economy.�Hence�

we�expect�a�sustained�upside�pressure�on�the�foreign�exchange�rate.�

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Global�Economy��Global�Economy��Global�Economy��Global�Economy������

The�global�economy�in�the�year�2015�showed�much�resilience�amid�decline�in�the�

price� of� crude� oil� and� other� commodities.� Thus,� there� were� mixed� fortunes�

amongst� the� different� economic� regions.� Extensive� crude� oil� production�

particularly�from�the�United�States�of�America�and�Iran’s�resumed�oil�production�

resulted�in�sustained�supply�overhang�which�crashed�global�crude�oil�prices�and�

resulted� in� little�margins�for�crude�oil�producers.�According�to�the� International�

Monetary� Fund� (IMF),� commodity� exporting� countries� witnessed� sharp�

depreciations�of�their�currencies,�in�part,�due�to�lower�export�earnings�as�a�result�

of�decline�in�commodity�prices.�On�the�contrary,�advanced�economies�benefited�

from�lower�input�(commodity)�prices.�

In� the� October� 2015� World� Economic� Outlook� (WEO)� Update,� global� growth�

projection�for�2015�was�revised�lower�to�3.1%�(0.2ppt�below�forecast�in�the�July�

2015�and�0.3ppt� lower� than� forecast� in�2014).�The� lower�growth� forecast�was�

mainly� on� the� back� of� weaker� prospects� for� some� large� emerging� market�

economies�and�crude�oil�exporting�countries.�

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In�emerging�economies,�China’s�Gross�Domestic�Product�growth�slowed�to�6.9%�

in�Q3�2015�(from�7.2%�in�Q3�2014)�while�Brazil’s�GDP�declined�by�4.5%�(weaker�

than�-1.1%�in�Q3�2014).�In�advanced�economies,�United�States�GDP�grew�year-

on-year� by�2.2%� in� the� third�quarter�of�2015,� (slower� than�2.9%� in�Q3�2014)�

while�United�Kingdom’s�GDP�growth�slowed�to�2.3%�in�Q3�2015�(from�2.9%�in�

Q3� 2014).� However,� the� Eurozone� GDP� growth� rate� increased� to� 1.6%� (from�

0.8%�in�Q3�2014).�

However,�global�economic�activity�remained�on�the�expansionary�path�(above�50�

points)� throughout� 2015� –� the� J.P.� Morgan� Global� All-Industry� Output� Index�

posted�53.7�in�November�2015�(higher�than�52.3�registered�in�December�2014).�

This�followed� improvements� in�the�sub� indices�such�as�New�orders� index�which�

posted� 53.6� in� November� 2015� (higher� than� 52.0� in� December� 2014)� and�

Employment�Index�which�further�expanded�to�51.7�(from�51.2).�

7.40%6.90%

4.30%

2.84%2.30% 2.20%

1.80% 1.60% 1.60%1%

-4.50%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

Y-o-Y�GDP�Growth�Rates

Q3�2014 Q3�2015

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Global�Stock�Exchanges�Record�Mixed�Performance�

Year-to-date�performance�of�major�stock�exchanges�were�mixed�–�the�U.S.�stock�

exchanges,� Dow� Jones� Industrial� Average� mellowed� by� 1.67%� to� 17,524.91�

points�while� Standard� and� Poor’s� 500� Index�moderated� by� 0.75%� to� 2,043.41�

points.�However,�Germany’s�XETRA�DAX�Index�firmed�up�by�6.58%�to�10,450.38�

points�while�France’s�CAC�40�Index�gained�8%�to�close�at�4,614.40�points.�

Source:�Markit,�Cowry�Research�

47

48

49

50

51

52

53

54

55

56

JPMorgan�Global�All-Industry�Sub�Indices�

Output New�Orders Input�Prices

Output�Charges Backlogs

50.5

51

51.5

52

52.5

53

53.5

JP�Morgan�All-Industry�Employment�Index

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Primary�Commodity�Prices�Soften�From�Supply�Glut�

Market� value� of� primary� commodities� plunged� year-to-date� by� 25.23%� as� at�

November� 2015� mainly� on� the� back� of� weakened� crude� oil� prices� as� global�

supply�outpaced�demand.�Price�of�base�metals�tanked�by�26.63%�as�copper�fell�

by� 25.54%� to� USD4,799.90/MT.���� Opec’s� reference� basket� price� plunged� by�

25.13%� to� USD38.13� as� at� November� amid� slower� demand� from� China,�

technology�assisted�boost�in�U.S.�shale�oil�and�news�of�imminent�resumed�supply�

from�Iran�following�the�lifting�U.S.�oil�embargo�in�October,�amongst�others.�

Similarly,�agricultural�commodity�prices�softened�by�15.92%�-�wheat�prices�were�

pummeled� by� 41.51%� to� USD157.70/MT;� coffee� (Robusta)� prices� fell� by�

14.40%�to�88.60cts/lb;�rice�prices�declined�by�12.80%�to�USD358.40/MT;�while�

palm�oil�shed�19.42%�to�USD503.20/MT.�

2015�Performance�of�Global�Stock�Exchanges�

INDEX� 15-Dec-15� 31-Dec-14� YTD�%�Change� Difference�

DJIA���� 17,524.91�� 17,823.07�� -1.67�� -298.16��

S&P�500���� 2,043.41�� 2,058.90�� -0.75�� -15.49��

FTSE�100���� 6,017.79�� 6,566.09�� -8.35�� -548.30��

XETRA�DAX���� 10,450.38�� 9,805.55�� 6.58�� 644.83��

CAC�40���� 4,614.40�� 4,272.75�� 8.00�� 341.65��

Nikkei�225���� 18,565.90�� 17,450.77�� 6.39�� 1,115.13��

Hang�Seng���� 21,274.37�� 23,605.04�� -9.87�� -2,330.67��

JSE�SA�ASI���� 48,428.77�� 49,770.60�� -2.70�� -1,341.83��

NSE�ASI���� 26,950.76�� 34,657.15�� -22.24�� -7,706.39��

Source:�Financial�Times,�Cowry�Research�

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Global�Commodity�Prices�

�30-Nov-15� 31-Dec-14� YTD�%∆�

Some�Agricultural�Commodities�

Wheat�(USD/MT)� 157.70�� 269.60�� -41.51��

Rice�(USD/MT)� 358.40�� 411.00�� -12.80��

Palm�oil�(USD/MT)� 503.20�� 624.50�� -19.42��

Groundnuts�(USD/MT)� 1,730.50�� 1,995.10�� -13.26��

Sugar-�Free�Market�(cts/lb)� 14.90�� 15.00�� -0.67��

Coffee�-�Robusta�(cts/lb)� 88.60�� 103.50�� -14.40��

Cocoa�Beans�(USD/MT)� 3,360.80�� 2,946.90�� 14.05��

� � � �

Some�Base�Metals� � � �Copper�(USD/MT)� 4,799.90�� 6,446.50�� -25.54��

Aluminium�(USD/MT)� 1,467.90�� 1,909.50�� -23.13��

Source:�IMF,�Cowry�Research

Source:�Opec,�Cowry�Research

$30.00

$35.00

$40.00

$45.00

$50.00

$55.00

$60.00

$65.00

Jun

-15

Jun

-15

Jun

-15

Jun

-15

Jun

-15

Jun

-15

Jul-

15Ju

l-15

Jul-

15Ju

l-15

Jul-

15Ju

l-15

Jul-

15A

ug

-15

Au

g-1

5A

ug

-15

Au

g-1

5A

ug

-15

Au

g-1

5Sep

-15

Sep

-15

Sep

-15

Sep

-15

Sep

-15

Sep

-15

Oct

-15

Oct

-15

Oct

-15

Oct

-15

Oct

-15

Oct

-15

No

v-1

5N

ov-1

5N

ov-1

5N

ov-1

5N

ov-1

5N

ov-1

5D

ec-1

5D

ec-1

5

Daily�Crude�Oil�Basket�Price�(US$)

Source:�Opec,�Cowry�Research

29,000

29,500

30,000

30,500

31,000

31,500

32,000

Opec�Crude�Oil�Production�mbpd

In�March,�crude�oil�production�increased�by�

2.84%�following�increased�production�from�

Saudi�Arabia�and�Iraq.�

A�further�1.02%�increase�was�recorded�in�June�

as�Iraq�and�Nigeria�boosted�crude�oil�output.�

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Nigerian�Nigerian�Nigerian�Nigerian�Real�Real�Real�Real�Sector�UpdateSector�UpdateSector�UpdateSector�Update����

The�year�2015�was�largely�sluggish�for�Nigerian�economy�as�it�recorded�declining�

growth�rates�in�the�first�two�quarters.�As�the�general�elections�took�centre�stage,�

implementation�of� the�N4.35� trillion�2015�appropriation�Act,�which�was�85.8%�

skewed�towards�recurrent�expenditure,�took�the�back�seat.�Growth�in�real�gross�

domestic� product� slowed� in� the� first,� second� quarters� of� 2015� to� 3.96%� and�

2.35%�respectively�as�the�mining�and�manufacturing�sectors�recorded�declines�in�

output.��

Early�in�the�year,�Standard�&�Poor’s�downgraded�Nigeria's�rating�from�BB-�to�B+,�

attributing� the� downgrade� to� lower� global� crude� oil� prices� and� heightened�

political� risks.� However,� the� global� credit� rating� agency� gave� a� stable� outlook�

noting� the� country’s� more� diversified� economy� with� the� services� sector�

accounting�for�half�of�GDP.�On�the�other�hand,�Fitch�Ratings�cut�Nigeria’s�credit�

rating�outlook� to�negative,� also�citing� falling�oil�prices�and� rising�political� risks�

amid�tightly�contested�presidential�and�legislative�elections.�It�however�affirmed�

Nigeria’s�BB-�rating.�

During�the�first�two�quarters,� the�petroleum�sector�was�particularly�afflicted�by�

incessant� pipeline� vandalisation� and� crude� oil� theft� which� resulted� in� several�

production�setbacks�of�oil�and�gas�multinationals�and�consequently,�reduced�oil�

and� gas� output.� The� manufacturing� sector� on� the� other� hand� was� mostly� in�

contraction� territory� as� it� witness� weakened� demand� partly� as� a� result� of�

insecurity� in� the� northeastern� part� of� the� country� which� partly� resulted� in�

reduced�sales.�The�sector�was�also�challenged�by�irregular�power�supply�and�high�

interest�rates�and.�

However,� following� the� successful� change� in� government� from� the� Peoples�

Democratic�Party�(PDP)�to�the�All�Progressives�Congress�(APC),�real�GDP�growth�

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picked� up� with� the� economy� posting� 2.84%� in� the� third� quarter� as� crude� oil�

production�levels�increased�year-on-year�as�a�result�of�fresh�efforts�by�the�new�

President� Muhammadu� Buhari-led� administration� to� decisively� curb� crude� oil�

theft�in�the�oil�and�gas�sector.�

Nevertheless,� challenges� to� the� current� government� remained� the� dwindling�

international� crude� oil� prices�which� resulted� in� lower� oil� dollar� revenues�which�

constitute� a� very� significant� part� of� the� country’s� fiscal� plans.� In� the� near�

absence�of�economic�momentum�and�the�sustained�decline�in�foreign�exchange�

reserves,� the� local� currency� continued� to� depreciate� in� value� against� the� U.S.�

greenback.�

Given� erosion� of� foreign� exchange� reserves,� the� position� of� the� monetary�

authority�to�sustain�an�official�exchange�rate�and�prohibition�of�forty�two�import�

items� from� access� to� forex� led� to� the� phased� exit� of� Nigeria’s� fixed� income�

instruments� from� the� JP� Morgan� Emerging� Markets� Government� Bond� Index�

(GBI-EM)� –� first� by� the� end� of� September� and� then� by� the� end� of� October.�

Consequently,� performance� of� forex-dependent� economic� activities� was�

negatively� impacted.�The�growth� rates�and�contribution�of� trading�activities� to�

total�GDP�also�waned�in�all�three�quarters,�particularly�hit�by�forex�rationing�and�

scarcity�challenges.�

In�December,�nevertheless,�international�credit�rating�agency,�Moody’s,�affirmed�

Nigeria's� Ba3� Federal� Government� issuer� rating� with� a� stable� outlook.� The�

affirmation�was�based�on� the� strength�of� the�government�balance� sheet�partly�

due� to� the� low�general� government� debt� profile,� estimated� at� 14%� of�GDP� in�

2015� (against� a� Ba-rated� countries’� median� of� 45%� of� GDP)� and� a� mostly�

concessional�external�debt�of�only�2.2%�of�GDP.�This�is�in�addition�to�Nigeria's�

robust� medium-term� real� GDP� growth� prospects� and� expectations� of� political�

stability�and�institutional�growth.�

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Manufacturing�Activities�in�Neutral�Territory�

In�the�eleven�months�to�November�2015,�manufacturing�activities�were�generally�

neutral� on� the� average� (PMI� averaged� 50.0� in� eleven� months� to� November�

2015).�This�was�in�spite�of�expansion�in�production�level�and�new�orders�indexed�

at�55.4�and�52.9�respectively�as�at�November�2015.�The�drag�on�manufacturing�

activities� came� by� way� of� weakened� consumer� demand� as� suggested� by�

contraction� in� backlogs� of�work�which� averaged� 46.0� in� the� eleven�months� to�

November� 2015.� The� manufacturing� sector� also� witnessed� contraction� in�

employment�level�which�averaged�47.9�in�the�eleven�months�to�November�2015.�

�Source:�Central�Bank�of�Nigeria,�Cowry�Research�

40.0�

42.0�

44.0�

46.0�

48.0�

50.0�

52.0�

54.0�

56.0�

58.0�

60.0�

CBN�Manufacturing�Sector�PMI

PMI Production�level New�Orders Employment Backlogs

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Non-Manufacturing�Activities�on�Expansionary�Path�

The� non-manufacturing� sector� was� better� on� the� average� as� it� witnessed�

expansion� in� activities� during� the� eleven� months� to� November� 2015� (PMI�

averaged� 51.0� in� the� eleven� months� to� November� 2015).� The� sector� saw�

expansion�in�business�activity,�indexed�at�52.9�as�at�November�2015�while�the�

volume� of� new� orders� increased� as� well,� index� posted� 52.6� as� at� November�

2015.� However,� the� sector� was� also� affected� by� general� contraction� in�

employment� level� and� backlogs� of� work� which� indexed� 45.5� and� 46.0�

respectively�as�at�November�2015.�

�Source:�Central�Bank�of�Nigeria,�Cowry�Research�

40.0�

42.0�

44.0�

46.0�

48.0�

50.0�

52.0�

54.0�

56.0�

58.0�

60.0�

CBN�Non-Manufacturing�Sector�PMI

PMI Business�Activity New�Orders Employment Backlogs

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Nigeria’s�Economic�Output�

In� 2015,� Nigeria’s� economy� evidently� began� to� falter� amid� intense� political�

activities.� Over� a� period� of� twelve� months,� Nigeria’s� real� GDP� plunged� from�

6.54%�in�Q2�2014�to�2.35%�in�Q2�2015,�the�lowest�recorded�in�recent�times.�

� �

In� comparison� with� other� sub-Saharan� African� countries,� Nigeria’s� economy�

was�one�of�the�least�performing�between�Q3�2014�and�Q3�2015,�next�to�South�

Africa’s�which�eased�from�1.3%�in�Q2�2015�to�1%�in�Q3�2013.�In�Q3�2015,�the�

slowdown�in�South�Africa’s�economy�resulted�from�slower�growths�registered�in�

its�finance,�real�estate�and�business�services�sectors;�amid�political�uncertainty.�

However,�Uganda’s�economy�was�the�fastest�growing,�followed�by�Namibia’s.�

�Source:�National�Bureau�of�Statistics,�Cowry�Research�

6.23%5.94%

3.96%

2.35%

2.84%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

Q3�2014 Q4�2014 Q1�2015 Q2�2015 Q3�2015

Rebased�Quarterly�GDP�Growth�Rates

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�Source:�Trading�Economics,�Cowry�Research�

�Source:�Trading�Economics,�Cowry�Research�

5.90%

4.90%

3.50%

2.84%

1%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

Mozambique Uganda Namibia Nigeria South�Africa

Sub-Saharan�African�Countries�Q3�2015�GDP�Growth�Rates

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Q3�2014 Q4�2014 Q1�2015 Q2�2015 Q3�2015

Sub-Saharan�African�Countries�Real�GDP�Growth�Trends

Mozambique Uganda Namibia Nigeria South�Africa

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Cowry Asset Management Limited Page 15

Highlights�of�Q3�2015�GDP�

� In�Q3�2015,�Nigeria’s�nominal�Gross�Domestic�Product,�(GDP�at�current�prices)�was�

estimated�at�N24.31�trillion,�or�N17.98�trillion����in�real�terms.�This�was�higher�than�

Q3�2014�nominal�GDP�estimated�at�N22.93�trillion�or�N17.48�trillion�in�real�terms.�

The�real�Gross�Domestic�Product�(GDP)�grew�by�2.84%�(lower�than�6.23%�in�Q3�

2014).�

� The�oil�sector�grew,�in�real�terms,�by�1.06%�in�Q3�2015�compared�to�3.60%�decline�

recorded�in�Q3�2014.�On�the�other�hand,�the�non-oil�sector�grew�by�3.05%�in�Q3�

2014�(weaker�than�7.51%�growth�recorded�Q3�2014).�

� The� agricultural� sector� remained� the� largest� contributor� to� real�GDP� in�Q3�2015�

with�26.79%�or�N4.82�tillion�(of�which�crop�production�accounted�for�91.84%�or�

N4.42�trillion).�This�was�slightly�higher�than�26.63%�contribution�in�Q3�2014.�The�

industry�also�grew�by�3.46%�in�Q3�2014�(howbeit,�lower�than�4.47%�in�Q3�2014).�

� Trade� was� the� second� largest� contributor� to� real� GDP� in� Q3� 2015,� contributing�

16.24%�or�N2.92�trillion�of�real�GDP�in� the�Q3�2014�(higher�than�16.00%�in�Q3�

2014).�The�sector�also�grew�by�4.40%�in�Q3�2015�(lower�than�6.81%�in�Q3�2014).�

The� slower� growth� partly� resulted� from� the� overall� lull� in� economic� activities�

coupled�with�increased�depreciation�of�the�local�currency�relative�to�the�U.S.�dollar.�

� The� mining� and� quarrying� industry� (of� which� crude� petroleum� and� natural� gas�

constituted�98.69%)�contributed�10.40%�or�N1.87�trillion�to�total�real�GDP�in�Q3�

2015.�This�was� lower� than�10.58%�contribution� in�Q3�2014.�The� sector�grew�by�

1.13%�in�Q3�2015�(better�than�-3.43%�in�Q3�2014).�The�growth�in�the�oil�sector�

reflected�increased�crude�oil�production�to�2.17�million�barrels�per�day�in�Q3�2015�

(from�2.05�mbd)�according�to�preliminary�data.�

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Cowry Asset Management Limited Page 16

Breakdown�of�Q3�2015�Real�Economic�Output�at�2010�Constant�Prices����

Major�Sectors�Q3�2015�Contribution�

to�Real�GDP�(%)����Q3�2015����

Growth�Rate�(%)����Q3�2014�Contribution�

to�Real�GDP�(%)����

Agriculture� 26.79�� 3.46�� 21.12��

Trade� 16.24�� 4.40�� 17.22��

Mining�&�Quarrying� 10.40�� 1.13�� 9.95��

Information�and�Communication� 9.80�� 5.27�� 12.25��

Manufacturing� 9.40�� -1.75�� 9.55��

Real�Estate� 7.57�� 2.06�� 7.83��

Construction� 3.22�� -0.11�� 4.50��

Professional,�Scientific�&�Technical�Services�

3.70�� 5.38�� 3.56��

Financial�Services� 2.76�� 6.57�� 3.35��

Public�Administration� 2.14�� -12.78�� 2.55��

Other�Economic�Activities� 7.97�� �� 8.12��

Q3�2014�Real�GDP��

2.84� �

Source:�National�Bureau�of�Statistics,�Cowry�Research�

Comments:�

*Amounts�in�2010�constant�basic�prices�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 17

����

�������Source:�National�Bureau�of�Statistics,�Cowry�Research�

27%

16%

11%10%

9%

27%

Big�Five�Contributors�to�Q3�2015�Real�GDP

Agriculture

Trade

Mining�&�Quarrying

Inform�&�Comm

Manufacturing

Others

��Source:�National�Bureau�of�Statistics,�Cowry�Research�

6.57�

5.38� 5.27�4.40�

3.46�

2.06�1.13�

-0.11�

-1.75�

-12.78�-15.00�

-10.00�

-5.00�

0.00�

5.00�

10.00�

Q3�2015��Real�GDP�Growth�Hierarchy�(%)

Q2�2015 Q3�2015

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 18

Nigeria’s�National�Disposable�Income�Grows�4.54%�in�Q2�2015�

National�Disposable�Income�at�2010�purchasers'�value�increased�year-on-year�by�

4.54%�to�N16.13�trillion�in�Q2�2015.�The�increase�in�NDI�resulted�from�a�2.30%�

growth� in�domestic�factor� income�to�N15.36�trillion�of�which�operating�surplus�

of�businesses�rose�y-o-y�by�6.78%�to�N11.20�trillion�which�more�than�offset�an�

8.11%�y-o-y�decline�in�compensation�to�employees�to�N4.15�trillion.�Also,�other�

current� transfers� from� the� rest� of� the� world� increased� y-o-y� by� 17.96%� to�

N978.11� billion.� On� the� expenditure� side,� final� consumption� expenditure� of�

household� increased� y-o-y� by� 11.66%� to� N10.83� trillion� while� general�

government� final� consumption� expenditure� declined� y-o-y� by� 14.83%� to�

N936.59�billion.�

National�Disposable�Income�And�its�Appropriation�at�2010�Purchasers'�Value�(N�Million)� Q2�2015� Q2�2014� %�Change�

Compensation�of�Employees� 4,155,791.36�� 4,522,399.54�� -8.11%�

Operating�Surplus� 11,205,178.54�� 10,493,370.83�� 6.78%�

Domestic�Factor�Income� 15,360,969.90�� 15,015,770.37�� 2.30%�

Compensation�of�Employees�from�the�Rest�of�the�World�(Net)� 10,460.10�� 7,812.09�� 33.90%�

Property�and�Entrepreneurial�Income�from�the�Rest�of�the�World�(Net)� -377,152.13�� -586,629.34�� -35.71%�

Net�Taxes�on�Products� 159,711.97�� 164,744.67�� -3.05%�

National�Income�at�Market�Prices� 15,153,989.84�� 14,601,697.79�� 3.78%�

Other�Current�Transfers�from�the�Rest�of�the�World�(Net)� 978,113.60�� 829,204.19�� 17.96%�

National�Disposable�Income� 16,132,103.44�� 15,430,901.98�� 4.54%�

General�Government�Final�Consumption�Expenditure� 936,591.46�� 1,099,713.47�� -14.83%�

Final�Consumption�Expenditure�of�Household� 10,833,036.02�� 9,701,864.58�� 11.66%�

Final�Consumption�Expenditure�of�Non-Profit�Institutions�Serving�Household� 48,949.24�� 41,804.37�� 17.09%�

Saving� 4,313,526.72�� 4,587,519.55�� -5.97%�

Appropriation�of�Disposable�Income� 16,132,103.44�� 15,430,901.97�� 4.54%�

Changes�in�Inventories� 149,411.36�� 146,214.53�� 2.19%�

Gross�Fixed�Capital�Formation� 3,015,594.20�� 2,805,531.46�� 7.49%�

Total�Investments� 3,165,005.56�� 2,951,745.99�� 7.22%�

Consumption�of�Fixed�Capital� 959,108.79�� 934,002.04�� 2.69%�

Domestic�Absorption� 14,024,473.49�� 12,861,126.37�� 9.05%�

�Source:�National�Bureau�of�Statistics,�Cowry�Research

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Cowry Asset Management Limited Page 19

Also� in� the� review� period,� domestic� absorption� (comprising� domestic�

consumption� and� investment)� increased� y-o-y� by� 9.05%� to� N14.02� trillion.�

Savings� fell� by� 5.97%� to� N4.31� trillion� (following� increased� consumption�

activities)� while� investments� (comprising� changes� in� inventories� and� net� fixed�

capital�formation)�increased�by�9.32%�to�N2.21�trillion.�

Current�Account�Balance�Remains�in�Surplus�

Nigeria�remained�a�net� lender�to�the�rest�of�the�world�as�the�excess�of�savings�

over� investments� resulted� in� a� Current� Account� Balance� (CAB)� surplus,� which�

howbeit,� declined� y-o-y� by� 17.98%� to� N2.11� trillion.� CAB� as� a� percentage� of�

GDP�improved�to�12.80%�in�the�review�quarter�(from�9.72%�in�Q1�2015).�

�Source:�National�Bureau�of�Statistics,�Cowry�Research�

-

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015

nT

rill

ion

s

Consumption, Income, Investments, Savings & CAB

Domestic Absorption National Disposable Income

Total Investments Savings

Current Account Balance

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 20

Nigeria’s�Inflation�Grows�on�Structural�Defects�

Inflation� remained� in� single� digits� throughout� 2015,� howbeit,� above� the�

monetary� authority’s� inflation� target� of� between� 6%� and� 9%.� The� increase� in�

general� price� level� during� the� year� was� partly� due� to� structural� effects.� As� a�

result,�annual�change�in�headline�inflation�rose�from�8.2%�in�January�to�9.4%�in�

November.�

Structural� effects� resulted� from� scarcity� of� Premium�Motor� Sprit� (PMS)� which�

had� a� knock-on� effect� on� transportation� of� persons� and� goods� across� the�

country.�The�pump�price�of�PMS�in�the�country�has�risen�year-on-year�by�7.87%�

to�an�average�of�N115.35�a�litre.�

Similarly� imported� food� inflation� increased�y-o-y� to�10.83%� in�November� from�

8.4%� registered� in� January.� This�was� amid� enforcement� of� the� ban� on� foreign�

exchange� sales� to� importers� of� prohibited� food� produce� and� significant�

devaluation� in� the� alternative� foreign� exchange� markets.� The� increase� in�

imported� food� inflation� was� in� spite� of� a� 13.9%� decline� in� global� agricultural�

prices�between�January�and�November.�

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Cowry Asset Management Limited Page 21

�Source:�Nigerian�Bureau�of�Statistics,�Cowry�Research�

Annual�Inflation�in�Sub-Saharan�Countries�

In�Malawi,�consumer�prices�increased�to�24.6%�in�November�2015�from�21.2%�in�

January�2015,�climbing�higher�than�the�fiscal�year’s�target�of�15%,�amid�rising�

food� prices,� prolonged�weakness� of� the�Malawian� kwacha� relative� to� the� U.S.�

greenback�as�well�as�a�lack�of�capacity�of�the�economy�to�meet�local�demand�for�

goods.�

Similarly,�Zambia’s�headline� inflation�rose� to�19.5%�in�November�from�7.7%�in�

January�as�its�local�currency,�the�Zambian�kwacha,�also�depreciated�against�the�

U.S.� dollar� as� Africa’s� second� largest� producer� of� copper� was� challenged� by�

falling� prices� in� the� global� commodities� market� –� global� metal� prices� have�

plunged�between�January�and�November.�

9.29.4 9.4 9.5

9.810.04 10.05 10.13 10.17 10.13

10.32

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15

2015�Inflation�Rates�Trend

All�Items�Inflation Core�Inflation Food�Inflation

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 22

In�Ghana� inflation� rate�was�one�of� the�highest� in� sub-Saharan�Africa,� rising� to�

17.6%�in�November�from�16.4%�in�January.�Ghana’s�inflation�risk�remained�high�

on� the� back� of� lower� commodities� prices� and� a� fiscal� crisis� which� resulted� in�

depreciation� of� the� cedi� against� the� US� Dollar,� ultimately� leading� to� imported�

inflation.�

�Source:�Trading�Economics,�Cowry�Research�

24.60%

19.50%

17.60%

13.29%

9.40% 9.10%

7.50%6.60% 6.27%

4.80% 4.80%

2.90% 2.30%1.50%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Nov�2015�Inflation�Rates�of�Some�Sub-Saharan�Africa�Countries

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 23

Nigeria’s�Unemployment�Worsens�

National�Bureau�of�Statistics� (NBS)� reported� that�Nigeria’s�unemployment� rate�

increased� for� the� fourth� consecutive� quarter,� to� 9.9%� in�Q3�2015� (from�7.5%�

registered� in� Q3� 2014).� However,� the� underemployment� rate� decreased� to�

17.4%� in� Q3� 2015� (from� 19.0%� in� Q4� 2014).� The� improvement� in�

underemployment�was�partly�due�to�resumption�of�planting�season.�

Total�new�jobs�increased�y-o-y�by�36.02%�to�475,180�in�Q3�2015�on�the�back�of�

116.35%� growth� in� new� informal� jobs� to� 428,690.� Also,� labour� productivity�

increased� quarter-on-quarter� by� 5.14%� to� N768.42� per� hour� per� quarter� (or�

USD3.90�phpq)�from�N730.85�phpq�(or�USD3.71�phpq).�

�Source:�Nigerian�Bureau�of�Statistics,�Cowry�Research�

7.50%8.20%

9.90%

16.60%

18.30%17.40%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

Q1�2015 Q2�2015 Q3�2015

Nigeria's�Unemployment�Trends

Unemployment�Rate Underemployment�Rate

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 24

�Source:�Trading�Economics,�Cowry�Research�

There� was� a� growing� trend� in� unemployment� amongst� the� countries� which�

released� their� most� recent� jobless� numbers� towards� the� end� of� 2015.� South�

Africa’s� unemployment� rate� ranked� the� highest� in� comparison� to� other� sub-

Saharan� African� countries� at� 25.5%� in� Q3� 2015� (higher� than� 25%� in� the�

preceding� quarter);� Senegal’s� unemployment� rate� increased� to� 13.4%� as� at�

December�2015�(higher�than�12%�posted�in�the�preceding�year);�which�Nigeria’s�

unemployment�rate�ranked�the� least�at�9.9%�as�at�Q3�2015�(higher�than�8.2%�

recorded�in�the�preceding�quarter).�

25.50%

13.40%

9.90%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

South�Africa Senegal Nigeria

SSA�Sep/Dec�2015�Unemployment�Rates

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 25

Nigeria’s�Debt�Profile�in�2015�

In� the� period� under� review,� Nigeria’s� debt� profile� increased� amid� increased�

borrowing� activities� of� both� federal� government� and� sub� nationals.� Nigeria’s�

indebtedness� increased� year-on-year� by� 16.16%� to� N12.12� trillion� as� at� June�

2015� following� a� 13.14%� y-o-y� increase� in� federal� government� debt� stock� to�

N8.39� trillion�and�an�8.94%�y-o-y� increase� in� the� level�of� indebtedness�of� the�

various� state� governments� to� N1.69� trillion.� There� was� also� a� 39.14%� y-o-y�

increase� in� external� debt� stock� to� N2.03� trillion� from� both� multilaterals� and�

bilateral�parties�

Composition�of�multilateral�loans�to�total�external�debt�stock�shrank�to�70.11%�

as�at�June�2015�from�71.82%�as�at�June�2014�as�contribution�of�Bilateral�loans�

increased�to�15.35%�as�at�June�2015�from�12.17%�as�at�June�2014.�

�June�2015�(N’Millions)� June�2014�(N’Millions)� %�Change�

External�Debt�Stock�(FGN�+�States)� 2,031,897.80� 1,460,297.92� 39.14%�

Domestic�Debt�Stock�(FGN�Only)� 8,396,591.57� 7,421,097.30� 13.14%�

Domestic�Debt�of�States� 1,690,360.09� 1,551,650.13� 8.94%�

Total�Total�Total�Total����� 12,118,849.4512,118,849.4512,118,849.4512,118,849.45���� 10,433,045.3510,433,045.3510,433,045.3510,433,045.35���� 16.16%16.16%16.16%16.16%����

� � � �%age�of�External�Debt�to�Grand�Total� 16.77%� 14.00%�

�%age�of�Domestic�Debt�to�Grand�Total� 82.23%� 86.00%�

� � � �Real�GDP�as�at�June� 32,513,943.29� 31,523,301.80� 3.14%�

Total�Debt�Stock�to�GDP� 37.27%� 33.10%��

Source:�DMO,�Cowry�Research

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 26

Meanwhile,� a� part� of� the� significant� change� in� total� debt� stock� in� the� review�

period�resulted�from�other�economic�flows,�specifically,�an�18.01%�depreciation�

in� the� value� of� the� Naira� against� the� U.S.� dollar� from� an� average� of�

N155.73/USD�as�at�June�2014�to�N189.93/USD�as�at�June�2015.�Consequently,�

public� sector� outstanding� debt-to-GDP� ratio� increased� to� 37.27%� as� at� June�

2015�from�33.10%�as�at�June�2014.�

Nigeria's�External�Debt�Stock�(Million�USD)� June-15� June-14� %�Change�

MULTILATERAL�� � �

World�Bank�Group� ����������������������������������6,186.25�� ������������������������5,864.34�� 5.49%�

African�Development�Bank�Group� �������������������������������������946.53�� ���������������������������748.24�� 26.50%�

Others� �������������������������������������100.08�� ���������������������������117.87�� -15.09%�

� � � �Sub-Total� ����������������������������������7,232.86�� ���������������������������������6,730.45�� 7.46%�

%age�of�Grand�Total� 70.11%� 71.82%��

� � � �BILATERAL�

� � �China�(Exim�Bank�of�China)� ����������������������������������1,388.87�� ������������������������1,031.84�� 34.60%�

France�(AFD)� �������������������������������������140.25�� ���������������������������108.95�� 28.73%�

Japan�(JICA)� ����������������������������������������43.10�� ����������������������������������-����

India�(Exim�Bank�of�India)� �����������������������������������������������-��� ����������������������������������-����

Germany�(KfW)� ����������������������������������������11.73�� ����������������������������������-����

� � � �Sub-Total� ����������������������������������1,583.95�� ���������������������������������1,140.79�� 38.85%�

%age�of�Grand�Total� 15.35%� 12.17%��

� � � �COMMERCIAL�

� � �Eurobonds� ����������������������������������1,500.00�� ���������������������������������1,500.00�� 0.00%�

%age�of�Grand�Total� 14.54%� 16.01%��

� � � �GRAND�TOTAL� �������������������������������10,316.81�� ���������������������������������9,371.24�� 10.09%�Source:�DMO,�Cowry�Research

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 27

External�SectorExternal�SectorExternal�SectorExternal�Sector����UpdateUpdateUpdateUpdate��������

Nigeria’s�Foreign�Exchange�Reserves�on�the�Decline�

As�a�major�commodity�exporter,�Nigeria’s�balance�sheet�suffered�similar�fate�as�

with� other� commodities� exporting� countries� owing� to� general� decline� in� global�

commodities� prices� amid� supply� glut.� Nigeria’s� foreign� exchange� reserves�

declined� year-to-date� by� 14.52%� to� USD29.46� billion� as� at� Tuesday,� 15�

December�2015�following�a�declines�in�international�crude�oil�prices;�suboptimal�

crude�oil�production�volumes;�and�persistent�high�demand�for�foreign�exchange�

by�end�users.�

On�average,�Nigeria’s�crude�oil�production�fell�by�1.84%�to�1,884�barrels�per�day�

in�the�eleven�months�to�November�2015�relative�to�the�corresponding�period�of�

2014.�

Source:�Central�Bank�of�Nigeria,�Opec,�Cowry�Research�

$30.00�

$35.00�

$40.00�

$45.00�

$50.00�

$55.00�

$60.00�

$65.00�

$70.00�

$28.50�

$29.50�

$30.50�

$31.50�

$32.50�

$33.50�

$34.50�

$35.50�

External�Reserves�vs�Opec's�Reference�Basket�Price

Foreign�Reserves Opec

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 28

�Source:�Opec,�Cowry�Research�

�Various� measures� by� the� monetary� authority� to� ameliorate� the� downward�

trend� in� the� reserves,� without� appreciable� replenishment� via� foreign� inflows,�

had�only�so�much�as�kept�it�from�eroding�dramatically�while�the�local�currency,�

Nigerian� Naira,� continued� to� depreciation� in� value� against� major� world�

currencies.�

Source:�Central�Bank�of�Nigeria,�Cowry�Research�

1,650

1,700

1,750

1,800

1,850

1,900

1,950

2,000

2,050

Nigeria's�Crude�Oil�Production�('000�BPD)

2014�Estimates 2015�Estimates

180

200

220

240

260

280

300

320

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15

Naira�Depreciates�against�Major�Currencies

IFEM�NGN/USD BDC�NGN/USD NGN/GBP NGN/EUR

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 29

Foreign�Trade�Balance�In�Deficit�

In� the� ten� months� to� October� 2015,� Nigeria� recorded� a� balance� of� trade� deficit� against� a� trade�

surplus� recorded� in� the�corresponding�period�of� the�preceding�year.�This� resulted� from�a�46.05%�

decrease�in�exports�to�USD38.85�billion,�accompanied�by�an�18.76%�drop�in�imports�to�USD43.79�

billion�as�at�October�2015.�Consequently,�total�trade�fell�by�34.37%�to�USD82.64�billion.�

Nigeria’s�Foreign�Trade�Summary�(USD�Millions)�� � �

�10�Months�to�Oct�2015� 10�Months�to�Oct�2014� %�Change�

Exports�(FOB)� 38,847.36� 72,006.61� -46.05%�

Imports�(CIF)� 43,794.08� 53,909.29� -18.76%�

Total�Trade� 82,641.44� 125,915.90� -34.37%�

Balance�of�Trade� -4,946.72� 18,097.29� -127.33%�Source:�Central�Bank�of�Nigeria,�Cowry�Research�

Capital�Importation�Slows�

In� the� ten� months� to� October� 2015,� Nigeria� recorded� a� 29.27%� year-on-year� decline� in� foreign�

direct� investments� to� USD1.39� billion.� The� resulted� from� a� 38.32%� fall� in� foreign� equity� direct�

investments� to� USD1.39� billion� amid� policy� uncertainty� from� the� fiscal� authorities.� Also,� foreign�

portfolio� investments�plunged�by�62.22%�to�USD5.25�billion�as�at�October�2015,�mainly�due�to�a�

64.54%� decline� in� foreign� equity� portfolio� investment� to� USD4.06� billion� amid� a� controversial�

exchange�rate�control�policy�from�the�monetary�authority.�

Nigeria’s�Capital�Importation�(USD�Millions)����� � �

�10�Months�to�Oct�2015� 10�Months�to�Oct�2014� %�Change�

Foreign�Direct�Investment� 1,398.54� 1,977.40� -29.27%�

Portfolio�Investment� 5,246.98� 13,886.41� -62.22%�

Source:�Central�Bank�of�Nigeria,�Cowry�Research�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 30

Foreign�Trade�Statistics�2015�vs�2014�

� �

Source:�CBN,�Cowry�Research�

Source:�CBN,�Cowry�Research�

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

USD�Billions

Lower�and�Declining�Exports�in�2015

2014�Exports�(FOB) 2015�Exports�(FOB)

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

USD�Billions

Lower�Imports�in�2015

2014�Imports�(FOB) 2015�Imports�(FOB)

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

USD�Billions

Lower�and�Declining�Total�Trades�in�2015

2014�Total�Trade 2015�Total�Trade

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

USD�Billions

Trade�Deficits�Dominates�2015

2014�Balance�of�Trade 2015�Balance�of�Trade

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 31

Chart�Analysis�of�Capital�Imports�by�Investment�Type�in�2015�vs�2014�

Source:�CBN,�Cowry�Research�

Source:�CBN,�Cowry�Research�

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

500.00

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

USD��Millions

Foreign�Direct�Investments

2014�Foreign�Direct�Investment 2015�Foreign�Direct�Investment

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

USD��Millions

Foreign�Portfolio�Investments

2014�Portfolio�Investment 2015�Portfolio�Investment

11%

72%

17%

2014�%age�Capital�Importation�by�Investment�Type

FDI FPI Others

17%

62%

21%

2015�%age�Capital�Importation�by�Investment�Type

FDI FPI Others

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 32

Capital�Imports�by�Nature�of�Business�in�2015�vs�2014�

Source:�CBN,�Cowry�Research�

Source:�CBN,�Cowry�Research�

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

16,000.00

USD�M

illions

2014�%age�Capital�Importation�by�Nature�of�Business

0.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

USD�M

illions

2015�%age�Capital�Importation�by�Nature�of�Business

66%

13%

5%

5%5%

6%

2014�%age�Capital�Importation�by�Nature�of�Business

SHARES FINANCING TELECOMMUNICATION

BANKING MANUFACTURING Others

60%11%

10%

9%

4%6%

2015�%age�Capital�Importation�by�Nature�of�Business

SHARES TELECOMMUNICATION FINANCING

BANKING MANUFACTURING Others

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 33

����Government�Sector�UpdateGovernment�Sector�UpdateGovernment�Sector�UpdateGovernment�Sector�Update�

The� public� sector� saw� decline� in� revenues� amid� general� decline� in� economic�

activities� and� as� attention� shifted� to� electioneering.� Gross� Federation� Account�

Revenue�in�the�first�nine�months�to�September�2015�decreased�y-o-y�by�32.02%�

to�N5.36�trillion�relative� to�gross�amount� in�the�corresponding�period�of�2014.�

Decline� in�gross� revenue�was�driven�by�43.70%�y-o-y�plunge� in�oil� revenue� to�

N2.99� trillion� as� crude� oil/gas� sales� plummeted� by� 56.18%� to�N685.78� billion�

while�PPT/Royalties�declined�by�47%�to�N1.39�trillion.�On�the�other�hand,�non-

oil� revenue� fell� y-o-y� by� 7.74%� to� N2.37� trillion� as� Companies� Income� Tax� &�

Other�Taxes�declined�by�25.37%�to�N749.97�billion.�

���Source:�Central�Bank�of�Nigeria;�Cowry�Research�

5,365.62�

2,999.24�

2,366.39�

0.00�

1,000.00�

2,000.00�

3,000.00�

4,000.00�

5,000.00�

6,000.00�

7,000.00�

8,000.00�

9,000.00�

Fed-collected�revenue�(Gross)

Oil�Revenue Non-Oil�Revenue

Breakdown�of�Gross�Federation�Account�Revenue�(N�billion)

9�Months�to�2014 9�Months�to�2015

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 34

Federal�Government�Fiscal�Operations�

The� Federal� Government’s� fiscal� operations� during� the� first� nine� months� to�

September�resulted�in�deficit�balance�of�N450.90�billion,�albeit,�33.27%�less�than�

N675.70� billion� recorded� in� the� corresponding� period� of� 2014.� This� followed� a�

16.68%�y-o-y� decrease� in� retained� revenue� to� N2.33� trillion,� accompanied� by� a�

19.90%� y-o-y� decrease� in� expenditure� to� N2.78� trillion.� In� the� review� period,�

recurrent� expenditure� accounted� for� 84%� of� total� spends� (higher� than� 74%� in�

2014)�while�capex�got�only�6%�(lower�than�8%�in�2014).�

Components�of�Gross�Oil�Revenue�(N�billion)� �� �� ��

�� 9�Months�to�2015� 9�Months�to�2014� %�Change�

Oil�Revenue� 2,999.24�� 5,327.50�� -43.70%�

Crude�oil/Gas�Sales� 685.78�� 1,565.03�� -56.18%�

PPT/Royalties� 1,393.72�� 2,629.67�� -47.00%�

Others� 919.74�� 1,132.80�� -18.81%�

� � � �

� � � �

Components�of�Gross�Non-Oil�Revenue�(N�billion)� �� �� ��

�� 9�Months�to�2015� 9�Months�to�2014� %�Change�

Non-Oil�Revenue� 2,366.39�� 2,564.39�� -7.72%�

Value-Added�Tax�(VAT)� 600.95�� 601.34�� -0.06%�

Companies�Income�Tax�&�Other�Taxes� 749.97�� 1,004.92�� -25.37%�

Customs�&�Excise�Duties� 404.50�� 409.44�� -1.21%�

Others� 610.97�� 548.69�� 11.35%�

Source:�Central�Bank�of�Nigeria;�Cowry�Research�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 35

����

����

����

����

����

����

����

����

����

����

����

����

����

����

����

���Source:�Central�Bank�of�Nigeria;�Cowry�Research�

����Breakdown�of�Federal�Government�Expenditure�(N�Billion)�

��� �Source:�Central�Bank�of�Nigeria;�Cowry�Research�

2,332.40�

2,783.30�

-450.90�-1,000.00�

-500.00�

0.00�

500.00�

1,000.00�

1,500.00�

2,000.00�

2,500.00�

3,000.00�

3,500.00�

4,000.00�

Retained�Revenue Expenditure Overall�Balance

Federal�Government�Fiscal�Operations�(N�billion)

9�Months�to�2014 9�Months�to�2015

74%

18%

8%

9�Months�to�2014

Recurrent Capital Transfers

84%

10%

6%

9�Months�to�2015

Recurrent Capital Transfers

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 36

Monetary�Sector�UpdateMonetary�Sector�UpdateMonetary�Sector�UpdateMonetary�Sector�Update����

Total�money� supply,�M2,� in� the� economy� increased� year-to-date� by� 9.11%� to�

N18.37� trillion� in� November� as� Net� Domestic� Assets� declined� by� 3.70%� to�

N13.08�trillion�and�Net�Foreign�Assets�fell�by�28.14%�to�N5.29�trillion.�Increase�

in� M2� followed� a� 7.76%� growth� in� quasi� money� (near� money� financial�

instruments)� to�N11.39� trillion�over� the� same�period.� In� the� same�vein,�narrow�

money,�M1,�increased�by�11.39%�to�N6.98�trillion�as�demand�deposits�increased�

by�16.73%�to�N5.72�trillion�which�more�than�offset�a�7.76%�decline�in�currency�

outside� banks� to� N1.26� trillion.� Meanwhile,� reserve� money� fell� by� 5.45%� to�

N5.64�trillion.�On�the�asset�side�of�the�banking�system�balance�sheet,�credit�to�

the� private� sector� increased� by� 3.08%� to� N18.71� trillion� as� credit� to� the�

government�fell�by�187.43%�to�N1.76�trillion.�

Monetary�Survey� Date� Value� YTD�%�∆�

Currency�outside�banks�(Ntrn)� Nov,�2015� 1.26� -7.76�

Bank�reserves�(Ntrn)� Nov,�2015� 4.01� -3.85�

Currency�in�circulation�(Ntrn)� Nov,�2015� 1.63� -9.16�

Reserve�money�(Ntrn)� Nov,�2015� 5.64� -5.45�

Demand�deposits�(Ntrn)� Nov,�2015� 5.72� 16.73�

M1�Money�(Ntrn)� Nov,�2015� 6.98� 11.39�

Quasi�money�(Ntrn)� Nov,�2015� 11.39� 7.76�

M2�Money�(Ntrn)� Nov,�2015� 18.37� 9.11�

Monetary�Policy�Rate�(%)� Nov,�2015� 11%� -15.38�

Credit�to�the�Government�(Ntrn)� Nov,�2015� 1.76� -187.43�

Credit�To�the�Private�Sector�(Ntrn)� Nov,�2015� 18.71� 3.08�

Net�Domestic�Credit�(Ntrn)� Nov,�2015� 20.47� 26.92�

Net�Foreign�Assets�(Ntrn)� Nov,�2015� 5.29� -28.14�Source:�Central�Bank�of�Nigeria,�Cowry�Research

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 37

Money�Market�ReviewMoney�Market�ReviewMoney�Market�ReviewMoney�Market�Review����

Monetary�Authority�Relax�Policies�to�Egg�Economic�Growth�

In�the�year�under�review,�the�interbank�money�market�witnessed�greater�boost�in�

financial�system�liquidity�in�comparison�to�the�corresponding�period�of�2014.�This�

was�against�the�backdrop�of� less�withdrawal�via�auctions� in�both�primary�market�

and�open�market�operations�which�made�up� for�decline� in� inflows� through�both�

market�segments.�

In�the�eleven�months�to�November�2015,�the�banking�system�also�recorded�lower�

disbursements� from� Federation� Accounts� Allocation� Committee� (FAAC)� into� the�

accounts� of� the� three� tiers� of� governments� –� a� 22.46%�year-on-year� decline� to�

N5.43�trillion.�

Monetary� policies� which� were� initially� tightened� in� order� to� curb� inflationary�

pressures� from� increased� political� spending� activities� and� high� foreign� exchange�

demand,� amongst� others,� were� eventually� loosened� up,� partly� due� to� the�

expediency� of� egging� economic� growth� amid� high� foreign� exchange� rates� in� a�

highly�import-dependent�economy.�The�Monetary�Policy�Rate�(MPR)�was�reduced�

from�13%�to�11%�(with�an�asymmetric�corridor�+2�and�-7%�around� the�MPR�as�

against�a�previously�symmetric�corridor�of�±2%).�Net�Open�Position�was�increased�

to�0.5%�from�0.1%.��

In� May,� the� Monetary� Policy� Committee� (MPC)� harmonized� the� Cash� Reserve�

Ratio� (CRR)� on� public� and� private� sector� deposits� at� 31.0%� (from�public� sector�

deposits� CRR� of� 75%� and� private� sector� deposits� CRR� of� 20%)� but� was�

subsequently� reduced� to� 25%� in� September� and,� eventually,� 20%� in�November.�

Liquidity�Ratio�was�unchanged�at�30%.�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 38

Decreased�Open�Market�Operations�Activities�in�2015�

As�at�December�15,�2015,�Central�Bank�of�Nigeria�sold�less�treasury�bills�in�its�bi-

monthly� auctions� at� the� primary� market� in� 2015� relative� to� the� corresponding�

period� of� the� preceding� year.� In� the� review� period,� CBN� sold� a� total� of� N3.58�

trillion,�a�6.34%�year-on-year�decrease�compared�to�N3.82�trillion�in�2014.��

There� were� also� relatively� less� matured� treasury� bills� which� fell� by� 26.04%� to�

N8.69� trillion� via� both� primary� market� and� OMO.� Consequently,� the� Interbank�

money�market� recorded� net� inflows� amounting� to�N1.29� trillion,� 94.77%�higher�

N664.02�billion�net�inflows�in�2014.�Also,�average�marginal�rates�of�the�182-day�

and� 364-day� tenors� were� relatively� higher� in� the� review� period� than� in� the�

corresponding�period�of�2014�amid�increased�political�and�economic�risks.�

Marginal�Rates�of�Treasury�Bills�in�2015�and�2014�

Source:�Central�Bank�of�Nigeria,�Cowry�Research�

0

2

4

6

8

10

12

14

16

18

91-day 182-day 364-day 2014�Inflation�(YoY)

0

2

4

6

8

10

12

14

16

18

91-day 182-day 364-day 2015�Inflation�(YoY)

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 39

Central�Bank�2015�Monetary�Operations����

2015�� 2014�

(N�‘million)� (N�‘million)� %�Change�

System�Injections� ��

Primary�Market� 3,850,932.82�� 5,063,008.71�� -23.94%��

Open�Market�Operations� 4,843,184.83�� 6,692,593.19�� -27.63%��

Total�Inflows� 8,694,117.65�� 11,755,601.90�� -26.04%��

�� �� �� ��

System�Withdrawals��

Primary�Market�Auctions� 3,580,844.72�� 3,823,375.52�� -6.34%��

Open�Market�Operations� 3,819,952.45�� 7,268,202.40�� -47.44%��

Total�Outflows� 7,400,797.18�� 11,091,577.92�� -33.28%��

� ��

�Net�System�Inflows� 1,293,320.47�� 664,023.99�� 94.77%��Source:�Central�Bank�Nigeria,�Cowry�Research�

FAAC�Disbursements�in�2015����

����2015� 2014� �

�(N�‘million)� (N�‘million)� %�Change�

January� 580.4� 581.5� -0.19%�

February� 500.10� 629.12� -20.51%�

March� 522.05� 641.29� -18.59%�

April� 435.06� 641.38� -32.17%�

May� 388.34� 634.72� -38.82%�

June� 359.37� 683.3� -47.41%�

July� 923.88� 755.95� 22.21%�

August� 521.27� 630.30� -17.30%�

September� 442.61� 611.70� -27.64%�

October� 389.9� 603.59� -35.40%�

November� 369.88� 593.34� -37.66%�

December� NA*� 628.77� �

Total� 5,432.86� 7,634.96� �Source:�Cowry�Research�

*Not�Available�as�at�report�time�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 40

Spiked�Movements�in�Interbank�Rates�on�TSA�and�CRR�Adjustments�

The� implementation� of� Treasury� Single� Account� (TSA)� coupled� with� the� prior�

adoption�and�subsequent�adjustments�of�CRR�mechanisms�exerted�pressure�on�

liquidity� in� the� interbank�money�market� resulted� in� the� spike� in� lending� rates,�

particularly�for�overnight�funds�which�got�to�93.12%.�On�the�average,�overnight�

funds� rate� and� 3� months� NIBOR� rose� to� 15.06%� and� 15.77%,� higher� than�

12.55%�and�13.43%�in�2014.�

Nigerian�Interbank�Offer�Rates�in�2015�vs�2014����

�Overnight�NIBOR���� 3�Months�NIBOR����

��������

Overnight�NIBOR���� 3�Months�NIBOR����

2015�Low� 0.85%� 10.43%��

H1�2014�Low� 9.50%� 11.17%�

2015�High� 93.12%� 22.26%��

H1�2014�High� 65.79%� 18.79%�

2015�Average� 15.06%� 15.77%��

H1�2014�Average� 12.55%� 13.43%�

Source:�Financial�Markets�Dealers�Quotation;�Cowry�Research�

NIBOR�movement�in�2015�vs�2014�(in�%ages)�

� � �Source:�Financial�Markets�Dealers�Quotation;�Cowry�Research

10

20

30

40

50

60

70

Overnight�NIBOR 3�MTHS�NIBOR

0�

10�

20�

30�

40�

50�

60�

70�

80�

90�

100�

Overnight�NIBOR 3�MTHS�NIBOR

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 41

Lenders�Shun�Investments�via�Standard�Deposit�Facility�

In� the� review� period,� deposit� money� banks’� investments� via� standard� deposit�

facility�declined�on�account�of�restriction�of�remunerable�daily�placements�with�

the�apex�bank� to�N7.5�billion�per�bank;�consequently;�standard�deposit� facility�

decreased�by�63.80%�to�N21.54�trillion.�On�the�other�hand,�the�DMOs�accessed�

more� loans� from� the� apex� bank� as� standard� lending� facility� rose� 123.63%� to�

N6.71�trillion.��

Transactions�with�Apex�Bank�(N�Million)�

�2015� 2014� %�Change�

Standard�Lending�Facility� 6,713,521.71� �����3,002,031.19�� 123.63%�

Standard�Deposit�Facility� 21,542,233.42� ���59,513,559.18�� -63.80%�

Source:�Central�Bank�of�Nigeria,�Cowry�Research�

Lower�Real�Returns�in�2015…�

Against�the�backdrop�of�relatively�high�CRR�regime�in�the�first�nine�months�to�

September,� commercial� banks� increased� interest� rates� on� their� term� deposit�

between�May� and� September� in� order� to� attract� more� funds� from� the� private�

sector.�However,�as�CRR�was�reduced�to�20%�in�September,�interest�rates�began�

to� fall� from� October.� In� addition,� relatively� inflation� rate� in� the� review� year�

resulted� in� lower� real� returns� to� depositors� in� 2014.� Real� returns� in� 2015�

averaged�0.06%�compared�to�1.37%�in�2014.��

In�the�eleven�months�to�November,�Savings�deposit�rate�averaged�3.61%�in�the�

review�period�(higher�than�3.36%�in�2014);� interest� rates�on�1�month�deposits�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 42

averaged�8.58%�in�2015�(higher�than�8.32%�in�2014)�while�interest�rates�on�12�

months�deposits�averaged�9.02%�in�2015�(higher�than�9.11%�in�2014).�

�Source:�Central�Bank�of�Nigeria,�Cowry�Research�

-5

-4

-3

-2

-1

0

1

2

3

Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

Real�Returns�on�12�Months�Deposits

2015�Real�Returns 2014�Real�Returns

Real� returns� on� 12� months� deposits� with�

commercial�banks�turned�negative�in�April,�

May,�October�and�November�of�2015�amid�

increased�inflation�rates�

Source:�Central�Bank�of�Nigeria,�Cowry�Research�� � � � � � ������������

2

3

4

5

6

7

8

9

10

11

2014�Interest�Rates�vs�Inflation�Rates�(%ages)

1�Month�Deposit�Rate 12�Months�Deposit�Rate

Savings�Deposit�Rate Inflation

2

3

4

5

6

7

8

9

10

11

12

2015�Interest�Rates�vs�Inflation�Rates�(%ages)

1�Month�Deposit�Rate 12�Months�Deposit�Rate

Savings�Deposit�Rate Inflation

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 43

GAP�between�Prime�Lending�Rates�and�Maximum�Lending�Rates�Widens�

In�the�review�period,�maximum�lending�rates�to�borrowers� increased� in�tandem�

with�the�increase�in�interest�rates�on�deposits.�Prime�lending�rates�also�increased�

compared�to�rates� in� the�corresponding�period�of�2014.�On�average,�maximum�

lending� rate� was� 26.69%� in� 2015� (higher� than� 25.73%� in� 2014)� while� prime�

lending� rate� in� the� review� period� was� 16.84%� (lower� than� 16.61%� in� 2014).�

Consequently,�the�gap�between�prime�lending�rates�and�maximum�lending�rates�

widened�further.�

����

Source:�Central�Bank�of�Nigeria,�Cowry�Research� � � � � � �

14

16

18

20

22

24

26

28

Jan Feb Mar Apr May June Jul Aug Sep Oct Nov

Prime�Lending�Rates�vs�Maximum�Lending�Rates

2015�Prime�Lending�Rate 2015�Maximum�Lending�Rate

2014�Prime�Lending�Rate 2014�Maximum�Lending�Rate

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 44

ForeignForeignForeignForeign����ExchangeExchangeExchangeExchange����MarketMarketMarketMarket����ReviewReviewReviewReview����

Spread�between�Official�and�Alternative�Market�Segment�Widen…�

In�furtherance�to�the�apex�bank’s�strategic�priority�aimed�at�achieving�exchange�

rate� stability,� the� bank� continued� to� enforce� strict� capital� controls,� which� are�

central�to�its�foreign�exchange�management�strategy�as�the�apex�bank�grapples�

with�dwindling�external�reserves�and�declining�oil�prices.�The�central�bank�largely�

employed� unconventional� policies� aimed� at� curbing� rent� seeking� activities.�

However,�this�led�to�a�further�widening�of�the�spread�between�official�rates�and�

parallel�market�rates.�In�addition,�a�USD�sale�via�the�RDAS�window�was�annulled�

while�a�‘clearing�rate’�of�N197/USD�was�instituted.�This�act�represented�a�tacit�

devaluation�of� the�Naira�by� the�apex�bank.�Also,�dollar� sales� to� lenders�at� the�

interbank� foreign� exchange� market� was� changed� to� an� order� driven� system�

(known� as� the� order� based� two�way� quote� system)� as� against� the� OTC� quote�

driven�system.��

Source:�Central�Bank�of�Nigeria,�Cowry�Research�

USD�150.00

USD�170.00

USD�190.00

USD�210.00

USD�230.00

USD�250.00

USD�270.00

USD�290.00

rdas Parallel

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 45

Major�CBN�Interventions�in�the�year�under�review�

Measures�adopted�by�the�apex�bank�to�conserve�the�foreign�exchange�reserves,�

check� speculative�activities� in� the� foreign�exchange�market� as�well� as�enhance�

availability�of�foreign�currency�to�genuine�end�users�include:�

� In� January,� banks� were� required� to� utilize� funds� purchased� from� the�

autonomous/interbank�foreign�exchange�market�within�72�hours�from�the�

value�date,� failing�which� such� funds�must�be� returned� to� the�CBN�at� the�

Bank’s�purchase�rate.�

� In�order�to�curb�speculative�demand�in�the�market,�the�apex�bank�directed�

that�both�RDAS�and�interbank�funds�be�used�strictly�for�funding�of�Letters�

of�Credit,�Bills�of�Collection�and�other�invisible�transactions.�The�CBN�also�

directed� that� these� funds� could� no� longer� be� sold� to� BDCs� and� other�

authorized�dealers.�

� To� improve� trading� liquidity,� Net� Foreign� Exchange� Trading� Position�

(NFETP)� was� reviewed� upward� from� 0.1%� to� 0.5%.� The� NFETP� is� the�

percentage� of� shareholders’� funds� unimpaired� by� losses� at� the� close� of�

trading�each�day.�Also,�weekly�forex�cash�sales�to�Bureaux�De�Change�was�

reviewed�upward�from�USD15,000�to�USD30,000.�

� The�RDAS/WDAS�foreign�exchange�window�at�the�CBN�was�annulled�and�

all�demand� for� foreign�exchange�was�channelled� to� the� interbank� foreign�

exchange� market� tied� to� a� clearing� rate� of� N199/USD.� This� was� a� tacit�

devaluation�of�the�Naira�as�USD�was�previously�sold�at�N168/USD�+/-5,�at�

the�RDAS�auction.�

� Trading� in� the� interbank�market� was� changed� to� an� order� driven� system�

(order� based� two� way� quote� system)� as� against� the� OTC� quote� driven�

system�which�is�standard�global�practice.��

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Cowry Asset Management Limited Page 46

� All� authorized� dealers� required� to� repatriate� export� proceeds� into� the�

export�proceeds�domiciliary�accounts�of�the�respective�exporters’�accounts�

within�90�days�(for�oil�exports)�and�180�days�(for�non-oil�exports),�failing�

which�the�collecting�bank�will�be�liable�to�a�fine�of�10%�of�the�FOB�value�

of�the�transaction.�

� In� March,� Central� Bank� set� the� price� at� which� banks� could� access� U.S.�

Dollars�from�oil�companies�at�not�more�than�N2�spread�to�its�clearing�rate.�

Banks�were�also�barred� from� reselling�oil� company�dollars�except� the� sale�

was�backed�by�a�customer�order.�

� In� furtherance� of� CBN’s� efforts� to� reduce� the� demand� for� forex� and�

manage�the�country’s�foreign�reserves,�the�apex�bank,�in�April,�announced�

the� downward� review� of� the� existing� limit� on� the� usage� of� Naira�

denominated� debit/credit� cards� used� for� overseas� transactions.�

Consequently,�the�annual�transaction�limit�was�reduced�to�USD50,000�from�

USD150,000,� while� the� daily� transaction� limit� was� reviewed� to� USD300�

from�the�previous�USD500.�

� In� June,� the� CBN� prohibited� importers� of� certain� items� from� accessing�

foreign� exchange� market.� The� affected� items� include� staples,� textiles,�

plastics,� steel-based� products,� wood-based� products� and� financial�

instruments� such� as� Eurobonds,� foreign� currency� bonds� and� shares.� The�

measure,� according� to� the� apex� bank,� was� expected� to� help� conserve�

foreign�reserves.�

� CBN� introduced� 20%� charge� on� dollar� cash� deposits� by� Deposit� Money�

Banks� (DMB).� Consequently,� some� DMBs� discouraged� public� dollar� cash�

deposits� by� raising� the� charge� for� such� deposits� to� 25%� of� deposited�

amount�while�others�discouraged�dollar�deposits�all�together.�

� In�the�month�of�November,�the�CBN�began�enforcing�the�use�of�the�Bank�

Verification�Number�for�authenticating�foreign�exchange�transactions.�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 47

� In� December� of� 2015,� Deposit� Money� Banks� banned� the� use� of� Naira�

denominated�debit�cards�overseas�effective�January�2016.�

The�Local�Currency�Weakens�at�Local�Forex�Markets�

As� a� direct� impact� of� CBN� policies,� the� Naira� depreciated� by� 17.26%� to�

N196.95/USD�at� the�official� segment�of� the� foreign�exchange�market� in� the�

year�under�review.�Similarly,�the�Naira�lost�6.99%�year-to-date�to�N199.1/USD�

at� the� interbank�market.�The� local� currency�also� suffered�massive�declines�at�

the�alternative�market�segments-� the�Naira� lost�39.84%�to�N265/USD�at� the�

Bureau� De� Change� segment� while� it� slid� by� 38.74%� at� the� parallel� market�

segment�to�N270/USD.�

USD/Naira�Foreign�Exchange�Rates�� �� ��

Foreign�Exchange�Markets� 2015�Close� 2014�Close� 2015�YTD�%∆� 2014�YTD�%∆�

USD/Naira�Pair�� � � �

RDAS/Clearing�Rate� 197� 168� 17.26�� 7.90��

Interbank�Market� 199.1� 186.1� 6.99�� 16.28��

Bureau�De�Change� 265� 189.50� 39.84�� 10.82��

Parallel�Market� 270� 191.00� 41.36�� 10.40��

Source:�Central�Bank�of�Nigeria;�Financial�Markets�Dealers�Quotation,�Cowry�Research�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 48

Bond�Market�ReviewBond�Market�ReviewBond�Market�ReviewBond�Market�Review����

The�local�debt�market�remains�robust�and�resilient�

The�Nigerian� bond�market� grew� in� the� domestic� debt� segment� as� against� the�

market� for� international� debt� which� saw� declines� in� issues� in� sovereign� and�

corporate� debt� issuance� in� 2015.� The� face� value� of� the� Nigerian� local�

denominated�debt�market�grew�by�28.6%�to�N6.9�trillion�(from�N5.37�trillion�in�

2014).� This� was� driven� by� the� face� value� for� FGN� Naira� denominated� bonds�

which�grew�by�24%�to�N5.93�trillion.�The�rise�in�the�value�of�FGN�bonds�was�due�

to� the� recent� conversion� of� state� loans� into� the� 20-year� FGN� 12.1493%� JUL�

2034�bond�at�a� transaction�yield�of�14.83%.�The�outstanding�value�of�the�20-

year� FGN�12.1493%�JUL�2034�bond� jumped�by� 504%� to�N1.075� trillion� from�

N178�billion�in�the�preceding�year.�

FGN�Bond�Outstanding�Value�2014��������

(N�Billions)�Outstanding�Value�2015��������

(N�Billions)�5-Year,�4.00�23-APR-2015�

�����������������������������535� ������������������������������������������0�

5-Year,�15.10�27-APR-2017�

���������������������������������452.80�� ���������������������������������480.13��

5-Year,�15.54�13-FEB-2020�

������������������������������������������-���� ���������������������������������451.93��

10-Year,�14.20�14-MAR-2024�

���������������������������������414.68�� ���������������������������������719.99��

20-Year,�12.1493�18-JUL-2034�

���������������������������������178.00�� ������������������������������1,075.92��

Source:�Financial�Markets�Dealers�Quotation,�Cowry�Research�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 49

The�Local�Primary�Market�

Demand� for� FGN� Bonds� Remained� Strong� Despite� the� Exit� of�

Foreign�Interests�

The�Central� Bank� issued� bonds�worth�N788.72� billion� on� the� primary�market�

for�Federal�Government�bonds.�This� is� a�15.8%�decline� in�debt� issued� in� the�

preceding�year�amid�the�redemption�of�the�5-year,�4%�FGN�APR�2015�bonds�

issued� in�April�2010.�All� the� issued�bonds�were�re-openings�except�for�the�5-

year,�15.54%�FEB�2020�debt�which�was�first� issued� in�April�2015.�The�bonds�

offered�recorded�a�total�subscription�of�N1.75�trillion,�an�over�subscription�of�

122%�in�total.�

FGN�Bond� Amount�Allotted����

Amount�Subscribed���� %Subscription����

5-Year,�4.00�23-APR-2015� -� -� �5-Year,�15.10�27-APR-2017� 58,000� 116,750� 101.29��

5-Year,�15.54�13-FEB-2020� ���������������������������288,000.00��

���������������������������663,700.00��

130.45��

10-Year,�14.20�14-MAR-2024� ����������������������������225,220.00��

����������������������������529,135.00��

134.94��

12-Year�18-JUL-2034� ���������������������������217,500.00��

����������������������������442,386.00��

103.40��

� ���������������������������788,720.00��

������������������������������������1,751,971.00��

122.13��

Source:�Debt�Management�Office,�Cowry�Research�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 50

State�Government�Bond�Market�Remained�Robust…�

Debt� issued� by� sub-national� entities� this� year� increased� by� 190%� to� N54.13�

billion�as�against�N18.68�billion�in�the�previous�year.�The�bonds�were�issued�by�

Oyo,�Benue,�Plateau,�Kogi,�Cross-river� state�and�Zamfara� state�governments.�

The�details�can�be�found�in�the�table�below:��

State�Govt�Bond� Issue�Date� Coupon� Outstanding�Value��(N’Bn)�

Maturity�Date�

7-Year,�16.50�OYO�16-FEB-2022� 17-Feb-15� 16.50� 4.61� 16-Feb-22�7-Year,�16.50�BENUE�27-FEB-2022� 27-Feb-15� 16.50� 4.75� 27-Feb-22�7-Year,�17.50�PLATEAU�30-MAR-2022� 30-Mar-15� 17.50� 27.10� 30-Mar-22�7-Year,�17.00�KOGI�II�31-MAR-2022� 01-Apr-15� 17.00� 3.00� 31-Mar-22�7-Year,�17.00�CROSS�RIVER�27-MAY-2022� 27-May-15� 17.00� 7.68� 27-May-

22�7-Year,�17.00�ZAMFARA�19-MAY-2022� 19-May-15� 17.00� 7.00� 19-May-

22�Total� � � 54.13� �Source:�Financial�Markets�Dealers�Quotation,�Cowry�Research�

As�at�December�2015,�the�total�value�of�outstanding�sub-national�bonds�stood�

at�N474.72�billion,�a�marginal�0.78%�increase�from�the�previous�year.�Meanwhile�

against� the� backdrop� of� steep� decline� in� revenue,� bank� loans� to� states� were�

authorised�for�restructuring�into�Federal�Government�bonds.�Twenty�three�states�

participated�in�this�process�in�two�phases;�eleven�states�were�involved�in�the�first�

phase� and� the� sum� of� N322.788� billion� was� converted� into� 20-year� Federal�

Government�bonds�effective�August�17,�2015.�Twelve�states�participated�in�the�

second�phase�with�loans�to�the�tune�of�N252.728�billion�were�restructured.�The�

total� restructured� amount� for� the� twenty� three� states� amounted� to� N575.516�

billion.�

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Cowry Asset Management Limited Page 51

Corporate�Bonds�

The�bond�market�remained�a�veritable�source�of�funding�for�corporate�entities�as�

new� debt� issued� by� corporate� entities� were� worth� N47.94� billion,� although,� a�

59.6%� decline� (from� N76.54� billion)� with� respect� to� new� issues� in� 2014.� The�

corporate�entities�that�raised�fund�from�the�bond�market�include�Fidelity�Bank,�

Transcorp�and�the�Nigerian�Mortgage�Refinancing�Company.�

Corporate�Naira�Bonds� Issue�Date� Coupon�Outstanding�Value(N’Bn)�

Maturity�Date�

16.48�FIDELITY�13-MAY-2022� 13-May-15� 16.48� 30.00� 13-May-22�

16.00�TRANSCORP�26-OCT-2022� 26-Oct-15� 16.00� 10.00� 26-Oct-22�

14.90�NMRC�29-JUL-2030� 29-Jul-15� 14.90� 7.94� 29-Jul-30�

Total� � � 47.94� �

Source:�Financial�Markets�Dealers�Quotation,�Cowry�Research�

The� face� value� of� total� debt� issued� by� corporate� entities� jumped� by� 307%� to�

N507.55�billion.�Local�Corporates�have� shied� away� from� the� international� debt�

market� as� the� face� value� for� corporate� Eurobonds� fell� by� 23.3%� to� USD3.65�

billion.� No� corporate� Eurobond� was� issued� in� 2015� given� that� about� USD1.8�

billion�was�raised�via�the�international�market�in�2014.�

The�OTC�Bond�Market�Activities�Remained�Strong…�

FGN�bonds�proved� investor� favorite�as�appetite� for� local�debt� remained� strong�

amid� phased� removal� of� Nigerian� bonds� from� the� JP� Morgan� GBI-Emerging�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 52

Markets� Index� (included� in�October�2012)�and� the�Barclays�Capitals’�Emerging�

Markets-�Local�Currency�Bond�Index�(included�in�March�2013).�Tracked�indices�

suggest� robust� demand� as� investors� sought� alternatives� to� the� bearish�

performance� of� the� equities� market.� As� at� December� 15,� 2015,� the� 20-year,�

10.00%� FGN� JUL� 2030� bond� advanced� by� N29.79� (yield� fell� to� 10.95%� from�

14.75%).�The�10-year,�16.39%�FGN�JAN�2022�paper�gained�N17.89�(yield�fell�

to�10.84%�from�15.25%);�the�7-year,�16.00%�FGN�JUN�2019�note�strengthened�

by� N14.59� (yield� decreased� to� 9.83%� from� 15.27%);� the� 5-year� 15.10%� FGN�

APR�2017�bond�rose�by�N8.34�(yield�slid�to�7.85%�from�15.17%)�while�the�3-

year,�13.05%�FGN�AUG�2016�bond� jumped�by�N6.65�(yield�slumped�to�5.96%�

from�13.45%).�

On�the�international�debt�market,�amid�steady�declines�in�crude-oil�prices�as�well�

as�external�reserves,�investors�sold�off�their�holdings�of�FGN�dollar�denominated�

debt.�The�6.75%�FGN�JAN�2021�note� lost�USD�9.29�(yield� increased�to�8.32%�

from�6.12%)�while�the�5.13%�FGN�JUL�2018�debt�decreased�by�USD�3.86�(yield�

rose� to� 6.81%� from�5.02%).� Similarly,� the� 6.38%�FGN� JUL�2023�bond� fell� by�

USD�10.49�(yield�increased�to�8.44%�from�6.48%).�

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Cowry Asset Management Limited Page 53

Bond�Summary��

Source:�Financial�Markets�Dealers�Quotation,�Cowry�Research�

The�Federal�government�still� remains� the� largest�borrower�on� the� local�market,�

while� it� has� also� provided� the� opportunity� to� restructure� short-term� loans� into�

long�term�debt�for�state�governments.�

FGN�Bonds�,�5,936

State�bonds�,�465

Corp�Bonds�,�508

Agency�Bond,�2Sukuk,�10

Supranational�Bond,�25

Face�Values�of�Local�Outstanding�Bonds�in�2015�(N�Billion)

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 54

Equities�Market�ReviewEquities�Market�ReviewEquities�Market�ReviewEquities�Market�Review����

In� the� year� 2015,� the� Nigerian� bourse� lost� 17.35%�Year-on-Year� compared� to�

the�47%�return�delivered� in�FY�2014�as�the�best�performing�equities�market� in�

Africa.� Despite� the� initial� enthusiasm� that� ushered� in� the� new� political�

dispensation,�the�NSE�All�Share� Index�declined�by�17.35%�to�28,642.25�points�

while�market�capitalization�fell�to�N9.85�trillion,�a�14.24%�drop.�The�precipitous�

decline�in�oil�prices�coupled�with�capital�restrictions�as�a�policy�response�by�the�

apex�bank,�triggered�massive�outflows�of�foreign�capital.�

mparative�Performances� FY�2015� FY�2014� FY�2013� FY�2012�

NSE�All�Share�Index�(%)� (17.35)� 2.79�� 47.19� 35.45�

Market�Capitalisation�(%)� (14.24)�� 6.06�� 47.38� 37.38�

�Source:�Nigerian�Stock�Exchange,�Cowry�Research�

��

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 55

Source:�Nigerian�Stock�Exchange;�Cowry�Research�

Decline�in�Investments�Reflecting�Political�Realities…�

Following�the�postponement�of�the�general�elections�from�14�February�2015�to�

28�March�2015,�the�negative�performance�of�equities�market�performance�in�the�

first� quarter� was� reflected� by� month-on-month� increase� in� Foreign� Portfolio�

Investment�(FPI)�outflows�by�59.73%�to�N81.60�billion� in�February�while�retail�

investors�participation� in�the� local�bourse�remained� low-key�–�foreign�portfolio�

investments� accounted� for� 72.1%� of� total� investments� in� February.� With�

increased� domestic� participation� which� rose� to� 44.27%� of� investments� (from�

27.39%� in� the� previous� month),� as� well� as� a� steep� 35.78%� decline� in� FPI�

outflows,�the�market�began�a�steady�and�consistent�rise.�

Following� successful� conduct� of� the� elections,� the� equities�market� rallied-� the�

NSE� All� Share� Index� reached� a� year� high� of� 35,728.12� points� while� market�

capitalization�went�past�the�N12�trillion�mark�on�April�2,�2015.�This�was�due�to�a�

significant�rise�in�domestic�participation�coupled�with�a�rebound�in�post�election�

FPI�inflows.�Domestic�investment�increased�by�26.33%�to�N102.91�billion�which�

8,000.00�

8,500.00�

9,000.00�

9,500.00�

10,000.00�

10,500.00�

11,000.00�

11,500.00�

12,000.00�

12,500.00�

26,000.00�

29,000.00�

32,000.00�

35,000.00�

Billion�Naira

2016�Local�Bourse�Performance

Market�Capitalization�(Bn�N) NSE�ASI

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 56

formed� about� half� of� the� total� transactions� in� the� bourse� (49.75%),�while�FPI�

inflows�rose�by�8%.�

As� the� incoming� government� failed� to� clearly� articulate� its� policy� direction,�

investors� adopted� a� ‘wait� and� see’� approach� as� seen� in� the� weak� domestic�

transactions� in� June� and� a� slight� rise� in� FPI� inflows.� However,� poor� half-year�

earnings�result�aggravated�sell-offs�in�Q3�2015.�Exchange�rate�losses,�high�input�

costs�and�increased�costs�of�lending�were�reasons�for�most�of�the�disappointing�

results.�Furthermore,� in� response� to� the� sharp� fall� in� crude-oil�prices,� the�apex�

bank� instituted� strict� capital� controls� aimed� at� managing� depleting� reserves�

rather� than�devaluing� the�Naira.�This�action�has� led� to�massive� sell-offs� in� the�

equities�markets�as�‘hot�money’�left�the�financial�system�in�vast�sums�as�foreign�

participation�in�the�market�declined�while�domestic�investment�switched�to�fixed�

income�securities.�

�Source:�Nigerian�Stock�Exchange;�Cowry�Research�

0

20

40

60

80

100

120

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

Foreign�Portfolio�Investments�in�2015�(N�billion)

FPI�inflows FPI�Outflows Domestic�Spending

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 57

�Source:�Nigerian�Stock�Exchange;�Cowry�Research��

Sub�Indexes�FY�2015�Performance�(%age)�

� DEC�2015� DEC�2014�

NSE-30� (17.63)� (18.03)�

NSE�BANKING� (23.59)� (21.53)�

NSE�INSURANCE� (4.70)� (2.11)�

CONSUMER�GOODS� (17.41)� (17.88)�

NSE�OIL/GAS� (6.20)� 11.84�

NSE�IND� 1.27�� (21.63)�

Source:�Nigerian�Stock�Exchange;�Cowry�Research�

The�underwhelming�performance�of�the�Nigerian�Bourse�is�duly�reflected�in�the�

sub-indices�given�that�most�sectored�gauges�declined.��The�NSE�Banking�Index�

slid�by�23.59%�followed�by�the�NSE�Consumer�Goods� Index�which�declined�by�

17.41%.� The� NSE� 30,� the� sample� market� basket� of� a� diversified� portfolio,�

0

50

100

150

200

250

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

Equities�Investments�in�2015�(N�billions)

foreign�transactions domestic�transactions

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 58

declined�by�17.63%,�however,�the�only�bright�spot�was�the�NSE�Industrial�Index,�

which�rose�by�a�marginal�1.27%.��

Investment�Levels�and�Activities��

����FY�2015� FY�2014� %�Change�

Total�Deals� 1,034,280� 1,195,639� (13.50)�

Total�Volume� 104,627,785,996� 101,604,015,590� 2.98��

Total�Value� 1,079,221,079,245� 1,322,225,732,815.06� (18.38)�

No�of�Trading�Days� 247� 250� (1.20)�

Average�Deals� 3,859� 4,782� (19.30)�

Average�Volume� 390,402,187� 432,437,542� (9.72)�

Average�Value� 4,026,944,326� 4,111,651,216.86� (2.06)�

There�was�a�general�decline�in�investment�activity�at�the�Nigerian�bourse�in�year�

under� review� with� respect� to� the� previous� year.� Total� deals� and� Naira�

transactions�declined�respectively�by�13.50%�and�18.38%�respectively,�however�

traded� volumes� rose� by� 2.98%� to� 104.63� billion.� Financial� services� stocks�

remained�investors’�favourite�as�about�half�of�Naira�votes�were�spent�on�financial�

services�equities.��

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 59

�Source:�Nigerian�Stock�Exchange;�Cowry�Research��

Corporate�Actions�on�the�Bourse…�

Company� New�Listings/Delisting� Supplementary�Listings� Date�

Evans�Medical�Plc�

Rights:�486,472,800�ordinary�shares�of�50k�each�at�N2.50�per�share�

09-Jan-15�

Transcorp�Hotels�Plc�

7,600,403,900�ordinary�shares�of�50k�each�at�N10.00�

15-Jan-15�

Union�Dicon�Salt�Plc�

Special�Placement:�41,000,000�ordinary�shares�of�50k�each�

15-Jan-15�

Mansard�Insurance�Plc�

Share�Option:�500,000,000�ordinary�shares�of�50k�each��

15-Jan-15�

Cappa�&�D’alberto�Plc�

Voluntary�delisting�

15-Jan-15�

Fin�Serv63%

Conglomerates4%

Consumer�Goods20%

oil/gas12%

others1%

Naira�Votes�by�Sector

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 60

Sterling�Bank�Plc�

Special�Placement:�7,197,604,531�ordinary�shares�of�50k�each�

06-Feb-15�

Lafarge�Africa�Plc�

Consolidation�of�Lafarge�Africa’s�Assets:�1,402,575,984�shares�

27-Mar-15�

Forte�Oil�Plc� Bonus�Shares:�217,080,184�ordinary�shares�of�50k�each�added��

02-Apr-15�

Nigerian�Breweries�Plc�

Allotment�of�shares�to�minority�members�of�Consolidated�Breweries�in�the�Nigerian�Breweries�merger:�366,396,456�shares�

02-Apr-15�

AIICO�Insurance�Plc�

Share�Restructuring:�Cancellation�of�1,870,000,000�ordinary�shares�Nigerian�Breweries�merger:�366,396,456�shares�

02-Apr-15�

Glaxo-Smithkline�Plc�

Bonus�Shares:�239,175,298�Ordinary�Shares�of�50�Kobo�each�added�

22-May-15�

NAHCO�Aviance�Plc�

Bonus�Issue:�147,656,250�Ordinary�Shares�of�50�Kobo�each�

22-May-15�

VitaFoam�Plc� Bonus�Shares:�163,800,000�Ordinary�Shares�of�50�Kobo�each�added�

22-May-15�

Skye�Bank�Plc� Bonus�Issue:�660,966,734��Ordinary�Shares�of�50�Kobo�each�

22-May-15�

PharmaDeko�Plc�

Rights�Issue:�116,819,694���Ordinary�Shares�of�50�Kobo�each�at�N1.85�per�share�

22-May-15�

Champion�Breweries�Plc�

Special�Placement:�629,496,464�Ordinary�Shares�of�50�Kobo�each�

22-May-15�

PharmaDeko�Plc�

Special�Placement:�482,754�Ordinary�Shares�of�50�Kobo�each�

03-Jun-15�

International�Breweries�Plc�

Bonus�Shares:�31,722,850�Ordinary�Shares�of�50�Kobo�each�

19-Jun-15�

McNichols�Consolidated�Plc�

Conversion�of�Preference�Shares�to�Ordinary�Shares:�16,114,665�Ordinary�Shares�of�50�Kobo�each�

27-Jun-15�

ETI���1.250m�OS�of�USD0.025�each�at�N15.47�per�share��

� 16-Jul-15�

UBA�Plc� �Rights�Issue:�3,298,138,756�OS�of�50K�at�N3.50��

24-Jul-15�

Academy�Press�Plc�

Scrip�Issue:�1�for�5,�100,800,000�units�added.�

3-Aug-15�

Access�Bank�Plc�

Rights�Issue:�6,045,052,723�ordinary�shares�of�50K�(1�for�3)��

28-Aug-15�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 61

Seplat�Petroleum�

Ordinary�shares�of�10,134,248�units�which�arose�from�a�Long-Term�Incentive�Scheme.�

� 5-Nov-15�

Standard�Alliance�Insurance�Plc�

�Convertible�Preference�Shares:�3,500,000,000�shares�of�50K�each�

27-Nov-15�

Source:�Nigerian�Stock�Exchange;�Cowry�Research�

Mergers�and�Acquisitions�in�2015.�

The�following�transactions�were�executed�in�the�year�2015.��

� Mansard� Insurance� acquired� 60%� of� Penman� Pensions� Limited.� The�

acquisition� extended� its� subsidiaries� to� four� (4),� having� already� made�

significant� inroads� into� Asset� Management,� Health� Insurance� and�

Property� segments� through� its� wholly� owned� subsidiaries� (Mansard�

Investments�Limited�and�Mansard�Health�Limited)�as�well�as�its�majority�

holding�in�the�property�joint�ventures,�APD�Ltd.�

� Oando� Plc� entered� into� a� definitive� agreement� with� HV� Investments� II�

B.V.,� a� joint� venture� owned� by� a� fund� advised� by� Helios� Investment�

Partners�and�The�Vitol�Group,� to�acquire�51%�of� the�voting� rights�and�

60%� of� the� economic� rights� in� Oando’s� downstream� businesses,� for�

USD461.3� million,� which� will� be� funded� by� a� cash� consideration� of�

USD276� million� from� HVI� and� USD184.5� million� in� preference� shares�

issued�to�Oando�Plc.�The�Oando�downstream�businesses�primarily�consist�

of:� Oando� Marketing� Plc,� Oando� Supply� &� Trading� Limited,� Oando�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 62

Trading� Limited� (Bermuda),� Apapa� SPM� Limited� and� Ebony� Oil� &� Gas�

Limited.�

� Similarly� the� Nigerian� Cement� Holdings� B.V.� (NCH),� a� 50%� affiliate� of�

Large� Africa� Plc� completed� the� acquisition� of� the� second� and� final�

tranche� of� 15%� of� equity� interest� of� Flour� Mills� of� Nigeria� Cement�

Industries�in�UNICEM,�bringing�their�ownership�to�100%�of�UNICEM�and�

consequently� Lafarge� Africa� Plc� now� owns� 50%� of� the� equity� of�

UNICEM.��

Market�Developments�in�2015�

NSE�Introduces�Pension�Index��

The�Nigerian� Stock� Exchange� introduced� the�Pension� Index.� The� Index� values,�

which� provided� data� from� 2013� with� December� 31,� 2012� as� base� year� was�

exposed�to�the�investing�public�on�Thursday,�July�2,�2015.��The�creation�of�the�

NSE�Pension�Index�is�expected�to�encourage�the�development�of�other�products�

such�as�Exchange�Traded�Products�(ETP’s)�and�Index�Futures.��Also,�the�Index,�

provide� a� tracking� mechanism� for� PFAs,� CPFA� and� others� that� follow� the�

PENCOM�guidelines.��It�can�act�as�a�benchmark�for�measuring�performance�and�

reporting�performance�to�RSA�Holders.��

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 63

Top�20�Gainers�in�FY�2015�

Listed�Companies� TICKER�Price�as�@�31�DEC�2015�

Price�as�@�31�Dec�2014�

%�Change�

Unity�Bank�Plc� UNITYBNK� 0.50�� 1.12�� 124.00��

Beta�Glass�Company�Plc� BETAGLAS� 27.78�� 53.45�� 92.40��

Goldlink�Insurance�Plc� GOLDINSURE� 0.53�� 0.93�� 75.47��

Forte�Oil�Plc� FO� 227.90�� 330.00�� 44.80��

University�Press�Plc� UPL� 4.22�� 6.00�� 42.18��

Law�Union�and�Rock�Insurance�PLC� LAWUNION� 0.50�� 0.71�� 42.00��

Nigerian�Police�Force�Microfinance�Bank�Plc�

NPFMCRFBK� 0.80�� 1.10�� 37.50��

Presco�Nigeria�Plc� PRESCO� 24.50�� 33.00�� 34.69��

Vitafoam�Plc� VITAFOAM� 4.03�� 5.41�� 34.24��

Airline�Services�and�Logistic�Plc� AIRSERVICE� 1.70�� 2.21�� 30.00��

Cutix�Plc� CUTIX� 1.30�� 1.66�� 27.69��

Unilever�Nigeria�Plc� UNILEVER� 35.80�� 43.25�� 20.81��

Lafarge�Africa�Plc� WAPCO� 80.50�� 96.80�� 20.25��

The�Okomu�Oil-Palm�Company� OKOMUOIL� 25.35�� 30.30�� 19.53��

NASCON�Allied�Industries�Plc� NASCON� 6.22�� 7.15�� 14.95��

Ashaka�Cement�Plc� ASHAKACEM� 21.90�� 25.00�� 14.16��

Neimeth�Pharmaceuticals�Plc� NEIMETH� 0.78�� 0.89�� 14.10��

Custodian�and�Allied�Insurance� CUSTODYINS� 3.62�� 4.10�� 13.26��

AIICO�Insurance�Plc� AIICO� 0.81�� 0.91�� 12.35��

Berger�Paints�Plc� BERGER� 9.00�� 10.00�� 11.11��

Source:�Nigerian�Stock�Exchange;�Cowry�Research��

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 64

Bottom�20�losers�in�FY�2015� �

Listed�Companies� TICKER�Price�as�@�

31�DEC�2015�Price�as�@�

31�Dec�2014�%�Change�

Evans�Medical�Plc� EVANSMED� 2.28�� 0.50�� (78.07)�

Tiger�Branded�Consumer�Goods�Plc� TIGERBRANDS� 4.55�� 1.13�� (75.16)�

Oando�Plc� OANDO� 16.11�� 5.90�� (63.38)�

Diamond�Bank�Plc� DIAMONDBNK� 5.58�� 2.30�� (58.78)�

Cadbury�Nigeria�Plc� CADBURY� 40.00�� 17.15�� (57.13)�

Academy�Press�Plc� ACADEMY� 1.18�� 0.55�� (53.39)�

Transnational�Corporation�of�Nigeria�Plc� TRANSCORP� 3.25�� 1.52�� (53.23)�

AG�Leventis�Nigeria�Plc� AGLEVENT� 1.31�� 0.62�� (52.67)�

Northern�Nigeria�Flour�Mills�Plc� NNFM� 18.05�� 8.55�� (52.63)�

Champion�Breweries�Plc� CHAMPION� 6.98�� 3.37�� (51.72)�

�Learn�Africa�Plc� LEARNAFRCA� 1.35�� 0.71�� (47.41)�

Flour�Mills�of�Nigeria�Plc� FLOURMILL� 39.20�� 20.80�� (46.94)�

The�Seplat�Development�Company�Plc� SEPLAT� 371.01�� 203.00�� (45.28)�

FBN�Holdings�Plc� FBNH� 8.80�� 5.13�� (41.70)�

Livestock�Feeds�Plc� LIVESTOCK� 2.28�� 1.33�� (41.67)�

Honeywell�Flour�Mills�Plc� HONYFLOUR� 3.46�� 2.05�� (40.75)�

Skye�Bank�Plc� SKYEBANK� 2.66�� 1.58�� (40.60)�

May�and�Baker�Nig.�Plc� MAYBAKER� 1.58�� 0.96�� (39.24)�

UAC�of�Nigeria�Plc� UACN� 34.00�� 20.75�� (38.97)�

Stanbic�IBTC�Holdings�Plc� STANBIC� 27.00�� 16.53�� (38.78)�

Source:�Nigerian�Stock�Exchange;�Cowry�Research�����

���

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 65

2015�Dividends�and�Bonuses�

Company� Dividend� Bonus�Closure�of�Register�

AGM�Date�Payment�Date�

Nigerian�Breweries�Plc�

N3.50� Nil��5th�-�11th�March�2015�

13th�May�2015� 14th�May�2015�

Forte�Oil�Plc� N2.50� 1�for�5�1st�–�7th�April�2015��

15th�April�2015�

22nd�April�2015�

Nestle�Nigeria�

N17.50� Nil��27th�April�2015�

11th�May�2015� 12th�May�2015�

Greif�Nigeria�Plc�

60�kobo� Nil�25th�-�27th�March�2015�

28th�April�2015�

5th�May�2015�

Guaranty�Bank�Plc�

N1.50�(final)�� Nil��17th�March�2015�

31st�March�2015�

31st�March�2015�

Zenith�Bank�Plc�

N1.75� Nil�16th�-�20th�March�2015�

26th�March�2015�

27th�March�2015�

Neimeth�� Nil�� Nil��18th�–�20th�March�2015�

24th�March�2015�

N/A�

Africa�Prudential�Registrars�

35�kobo� Nil��18th�–�20th�March�2015�

8th�April�2015�10th�April�2015�

United�Capital�Plc�

20�kobo� Nil��23rd�–�27th�March�2015�

16th�April�2015�

20th�April�2015�

Lafarge�Africa�Plc�

N3.60� Nil��27th�April�–�1st�May�2015�

22nd�May�2015�

25th�May�2015�

Access�Bank�35�kobo�(final)�

Nil��24th�April�2015�

7th�May�2015� 7th�May�2015�

Transcorp�Hotels�

37�kobo� Nil��30th�March�2015�

15th�April�2015�

17th�April�2015�

PZ�Cussons�Nigeria�(interim)�

20�kobo� Nil��30th�March�2015�

N/A� 7th�April�2015�

FCMB�Group�Plc�

25�kobo� Nil��30th�March�2015�

23rd�April�2015�

24th�April�2015�

Julius�Berger�Nigeria�Plc�

N2.70� Nil�� 1st�June�2015�17th�June�2015�

18th�June�2015�

Mobil�Oil�Plc� N6.60� Nil��29th�April�2015�

28th�May�2015� 4th�June�2015�

Livestock�Feeds�Plc�

10�kobo� Nil�� 28th�May�2015�17th�June�2015�

18th�June�2015�

Sterling�Bank�Plc�

6�kobo� Nil��13th�April�2015�

30th�April�2015�

30th�April�2015�

United�Bank�for�Africa�Plc�

10�kobo� Nil��7th�–�9th�April��2015�

24th�April�2015�

27th�April�2015�

Unilever�� 10�kobo� Nil��13th�April�2015�

12th�May�2015� 15th�May�2015�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 66

NAHCO� 20�kobo� 1�for�10�18th�–�22nd�May�2015�

11th�June�2015�

11th�June�2015�

Fidson�� 15�kobo�� Nil�� �� �� ��Dangote�Cement�

N6.00� Nil��20th�April�2015�

29th�April�2015�

30th�April�2015�

Total�Oil�Nigeria��

N9.00� Nil��20th�April�2015�

10th�June�2015�

12th�June�2015�

Trans-Nationwide�Express�

10�kobo� Nil�� 13th�July�2015� 23rd�July�2015�7th�August�2015�

McNichols�� 4�kobo� 1�for�10� 17th�July�2015� 23rd�July�2015� 27th�July�2015�

Cadbury�� 65�kobo� Nil��11th�–�15th�May�2015�

10th�June�2015�

11th�June�2015�

Infinity�Trust�Mortgage�Bank�

3�kobo� Nil��17th�April�2015�

14th�May�2015� 15th�May�2015�

Glaxo�SmithKline�

75�kobo� 1�for�4� 14th�May�2015�11th�June�2015�

12th�June�2015�

Caverton�� 10�kobo� Nil��23rd�April�2015�

6th�May�2015� 6th�May�2015�

Berger�Paints� 75�kobo� Nil�15th�–�17th�June�2015�

21st�July�2015� 23rd�July�2015�

Fidelity�Bank� 18�kobo� Nil��20th�–�24th�April�2015�

7th�May�2015� 7th�May�2015�

Custodian�and�Allied�

12�kobo� Nil��13th�–�17th�April�2015�

13th�May�2015� 14th�May�2015�

Diamond�Bank�

10�kobo� Nil��16th�–�17th�April�2015�

30th�April�2015�

4th�May�2015�

CAP� 85�kobo� Nil��1st�–�5th�June�2015�

18th�June�2015�

19th�June�2015�

MRS�Oil� 88�kobo� Nil��13th�–�17th�July�2015�

5th�August�2015�

6th�August�2015�

CCNN� 35�kobo� Nil��20th�–�24th�July�2015�

13th�August�2015�

18th�August�2015�

Okomu�� 25�kobo� Nil��18th�–�22nd�May�2015�

24th�June�2015�

29th�June�2015�

Learn�Africa� 12�kobo� Nil��11th�–�15th�May�2015�

4th�June�2015� 5th�June�2015�

Ashaka�Cement�

45�kobo� Nil��21st�April�2015�

5th�May�2015� 6th�May�2015�

Beta�Glass� 62�kobo� Nil��15th�June�2015�

9th�July�2015� 10th�July�2015�

BOC�Gases� 10�kobo� Nil�� 15th�May�2015�11th�June�2015�

15th�June�2015�

Stanbic�IBTC�Holdings�

15�kobo� Nil��14th�April�2015�

3rd�June�2015� 5th�June�2015�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 67

Chams�� 2�kobo� Nil��20th�April�2015�

29th�April�2015�

11th�May�2015�

UACN� 175�kobo� Nil��6th�–�10th�July�2015�

23rd�September�2015�

24th�September�2015�

FBN�Holdings�

10�kobo�� 1�for�10� 4th�May�2015� 21st�May�2015� 25th�May�2015�

Transcorp�� 6�kobo� Nil��22nd�April�2015�

8th�May�2015� 11th�May�2015�

UACN�Prop.�Development��

50�kobo� Nil��10th�–�14th�August�2015�

1st�September�2015�

2nd�September�2015�

Seplat�Petroleum�

$0.09�dollar/naira�exchange�rate�as�at�21�May�2015�

Nil��22nd�May�2015�

2nd�June�2015�10th�June�2015�

May�&�Baker� 5�kobo� Nil��20th�–�24th�April�2015�

28th�May�2015� 8th�June�2015�

Aluminium�Extrusion�

8.5�kobo� Nil��26th�June�–�10th�July�

10th�July�2015� 13th�July�2015�

Dangote�Sugar�

40�kobo� Nil��28th�–�30th�April�2015�

22nd�May�2015�

22nd�May�2015�(25th�May�2015�for�those�without�e-mandate)�

ETI� Nil�� 1�for�15� 22nd�July�2015�19th�June�2015�

N/A�

Cornerstone�Insurance�

2�kobo� Nil��6th�–�10th�July�2015�

21st�July�2015� 25th�July�2015�

Vitafoam�� 30�kobo� 1�for�5�20th�–�22nd�May�2015�

4th�June�2015� 9th�June�2015�

Continental�Reinsurance��

11�kobo� Nil��20th�–�24th�July�2015�

30th�July�2015� 31st�July�2015�

NPF�Microfinance�Bank�

15�kobo� Nil��1st�–�5th�June�2015�

23rd�July�2015� 24th�July�2015�

Smart�Products��

25�kobo� Nil��3rd�–�10th�July�2015�

30th�July�2015�11th�August�2015�

eTranzact�International�

5�kobo� Nil��22nd�–�26th�June�2015�

23rd�July�2015�6th�August�2015�

National�Salt� 50�kobo� Nil��25th�–�26th�May�2015�

10th�June�2015�

12th�June�2015�

Skye�Bank� Nil�� 1�for�20� 21st�May�2015� 8th�June�2015� N/A�International�Breweries�

25�kobo� Nil��20th�–�25th�July�2015�

10th�August�2015�

11th�August�2015�

2015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 20162015 Review & Outlook for 2016 ��

Cowry Asset Management Limited Page 68

Airline�Services�&�Logistics�

15�kobo� Nil��15th�–�19th�June�2015�

2nd�July�2015� 3rd�July�2015�

C�&�I�Leasing� 8�kobo� Nil��15th�–�19th�June�2015�

25th�June�2015�

7th�July�2015�

Presco�� 100�kobo� Nil��6th�–�8th�July�2015�

22nd�July�2015� 27th�July�2015�

Niger�Insurance�

3.5�kobo� Nil�13th�–�17th�July�2015�

22nd�July�2015� 29th�July�2015�

NEM�Insurance�

6�kobo� Nil��6th�–�10th�July�2015�

29th�July�2015� 31st�July�2015�

Academy�Press�

Nil�� 1�for�5�3rd�–�7th�August�2015�

17th�September�2015�

N/A�

Seven�Up�Bottling�Co.�

275�kobo� Nil��13th�–�17th�July�2015�

22nd�September�2015�

29th�September�2015�

Stanbic�IBTC�(Interim)�

90�kobo� Nil�� 31st�July�2015�6th�August�2015�(EGM)��

28th�August�2015�

Royal�Exchange�

2�kobo� Nil��13th�–�17th�July�2015�

30th�July�2015�3rd�August�2015�

Courteville�(Interim)�

4�kobo� Nil��10th�August�2015�

N/A�31st�August�2015�

Honeywell�Flour�Mills�

5�kobo� Nil��14th�–�18th�September�2015�

29th�September�2015�

30th�September�2015�

Red�Star�Express�

35�kobo� Nil��5th�–�7th�August�2015�

3rd�September�2015�

14th�September�2015�

Africa�Prudential�(Interim)�

17�kobo� Nil��19th�–�24th�August�2015�

N/A�31st�August�2015�

Northern�Nigeria�Flour�Mills�

30�kobo� Nil��10th�-�14th�August�2015�

8th�September�2015�

14th�September�2015�

Consolidated�Hallmark�(Interim)�

2�kobo� Nil��10th�–�14th�August�2015�

N/A�27st�August�2015�

Flour�Mills�of�Nigeria��

210�kobo� Nil��10th�–�14th�August�2015�

9th�September�2015�

14th�September�2015�

Triple�Gee� 4�kobo� Nil��25th�–�30th�September�2015�

15th�October�2015�

19th�October�2015�

AXA�Mansard�(Interim)�

3�kobo� Nil��14th�October�2015�

N/A�26th�October�2015�

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Custodian�&�Allied�(Interim)�

6�kobo� Nil��17th�–�21st�August�2015��

N/A�15th�September�2015�

SCOA�Nigeria� 7.5�kobo� Nil��25th�–�28th�August�2015�

17th�September�2015�

24th�September�2015�

Cutix�� 12�kobo� Nil��19th�–�23rd�October�2015�

30th�October�2015�

19th�November�2015�

Zenith�Bank�(Interim)�

25�kobo� Nil��24th�August�2015�

N/A�28th�August�2015�

Guaranty�Trust�Bank�(Interim)�

25�kobo� Nil��8th�September�2015�

N/A�21st�September�2015�

Access�Bank�(Interim)�

25�kobo� Nil��3rd�September�2015�

N/A�10th�September�2015�

University�Press�

20�kobo� Nil��1st�-�4th�September�2015�

30th�September�2015�

2nd�October�2015�

PZ�Cussons� 61�kobo� Nil��14th�–�18th�September�2015�

29th�September�2015�

30th�September�2015�

Nigerian�Enamelware�

45�Kobo� Nil��7th�–�11th�September�2015�

29th�September�2015�

2nd�October�2015�

United�Bank�for�Africa�(Interim)�

20�Kobo� Nil��10th�–�11th�September�2015�

N/A�16th�September�2015�

Guinness�Nigeria��

320�Kobo� Nil��12th�October�2015�

26th�November�2015�

27th�November�2015�

Conoil�� 100�Kobo� Nil��28th�Sept�–�2nd�Oct�2015�

23rd�October�2015�

2nd�November�2015�

Source:�Nigerian�Stock�Exchange;�Cowry�Research��

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Political�ReviewPolitical�ReviewPolitical�ReviewPolitical�Review����

In� the� period� under� review,� major� political� highlights� include� the� successful�

transition�to�a�new�government,�the�fight�against�insurgency�and�corruption,�and�

political�appointments� into�public�offices�as�the�new�administration�settles� into�

power.� Indeed,� the� year� 2015� was� politically� charged� with� a� lot� of� political�

intrigues� and� manoeuvres.� Furthermore,� based� on� its� electoral� campaign�

promises,� the�President�Muhammadu�Buhari’s� administration� clearly� has,� as� its�

core�mandate,�improving�the�country’s�fortunes�in�terms�of�social�security,�anti-

corruption�crusade�and�revamping�a�weakened�economy.��

A�Successful�Interparty�Transition…�

The�shift�in�Nigeria’s�political�landscape�was�largely�peaceful,�albeit,�not�without�

tremors.� Nigeria’s� general� elections� of� March� 28� 2015,� was� viewed� as� largely�

peaceful� despite� limited� incidents� of� election� violence� in� some� parts� of� the�

country.� The� heavy� deployment� of� security� throughout� the� country� helped�

forestall� violence.� Following� the� peaceful� conduct� of� the� general� elections,�

Retired�General�Muhammadu�Buhari�of�the�All�Progressives�Congress�(APC),�was�

elected� as� Nigeria’s� President� having� pulled� 15.42� million� votes� to� defeat�

incumbent�President�Goodluck�Ebele�Jonathan�of�the�Peoples�Democratic�Party�

(PDP)� who� garnered� 12.85� million� votes.� In� addition,� President� Muhammadu�

Buhari�won�in�21�states�and�received�25%�of�the�total�votes�cast�in�26�states�and�

the�Federal�Capital�Territory�(FCT)�while�Jonathan�won�in�15�states�and�the�FCT�

and� received� 25%� of� the� votes� in� 25� states� and� the� FCT.� However,� in� a�

statesman-like� manner� uncommon� of� African� leaders,� President� Jonathan�

congratulated�the�General�even�ahead�of�the�announcement�of�the�Final�results.�

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APC�wins�more�territories�Gubernatorial�Elections�

The� April� 11� gubernatorial� elections� were� conducted� in� a� relatively� peaceful�

atmosphere,�howbeit,�with�some�flash�points�of�violence�in�the�Rivers�and�Akwa�

Ibom� States.� In� line� with� our� expectations,� the� APC� won� the� gubernatorial�

election� in�most�states� (nineteen�out�of� twenty�nine� states�where�election�was�

conducted)�having�recorded�victory�in�almost�all�the�South�West,�all�North�East�

and�North�West�states,�while�most�South�South�and�South�East�states�remained�

with� the� ruling� PDP.� Elections� in� two� states,� Imo� and� Abia,� were� inconclusive�

while�the�Taraba�State�elections�were�cancelled�–�all�bordering�on�alleged�high�

incidence�of�election�malpractices.�

National�Assembly�Leadership�Politics…�

Following� APC’s� dominance� of� the� political� space� in� both� the� Presidency� and�

Federal� House� of� Assembly,� the� political� equation� even� within� the� Party� was�

reset� in� the� outcome�of� the� elections� into� leadership� positions� in� the�National�

Assembly.� The� emergence� of� Senator� Bukola� Saraki� of� the� APC� as� Senate�

President� and� Honourable� Yakubu� Dogara� as� Speaker� of� the� House� of�

Representatives�was�mainly�due�to�the�support�of�Senators�from�the�opposition�

PDP.�Consequently,�PDP�seemed�to�have�gotten�its�grove�back�drawing�from�the�

critical� role� it�played� in� the�emergence�of� leadership�of�the�National�Assembly.�

Their�support�for�the�victors,�themselves�former�members�of�PDP,�paved�the�way�

for�Senator� Ike�Ekweremadu’s�re-emergence�as�Deputy�Senate�President.�It�will�

be�recalled�that�the�APC�was�formed�from�the�coalition�between�several�political�

parties� which� include:� Action� Congress� of� Nigeria,� Congress� for� Progressive�

Change,�All�Nigeria� Peoples� Party,� a� faction� of�All� Progressives�Grand�Alliance�

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and�much�later,�the�New�Peoples�Democratic�Party�(made�up�of�defecting�PDP�

governors).�

Rift�between�APC�Senate�Caucuses�and�Leadership�Widened…�

APC’s� internal� crises� widened� and� dissatisfaction� within� the� party� played� out�

following� the� nominations� of� principal� officers� at� the� Senate� by� the� Party’s�

Senate� caucuses� against� the�wishes� of� the� APC� leadership.�On� the� day� of� the�

leadership� nominations,� Senate� President,� Bukola� Saraki,� read� the� nomination�

letters�of�the�various�caucuses�which�endorsed�Senator�Ali�Ndume�(North-East)�

as� the�Majority�Leader,�Senator�Bala� Ibn�Na’Allah� (North-West)�as� the�Deputy�

Majority�Leader�and�Senator�Francis�Alimikhena�(South-South)�as�Deputy�Chief�

Whip.�However,� the� position� of� Chief�Whip� allotted� to� the� South-West� caucus�

remained� vacant� as� the� Senate� President� refused� to� entertain� the� nomination�

letter� from� APC’s� national� leader,� Chief� John� Odigie-Oyegun,� to� which� the�

South-West�caucus�deferred.�It�was�quite�obvious�that�efforts�at�mending�fences�

in�the�APC,�caused�by�the�rebalancing�of�the�political�equation�within�the�Party,�

was�a�tall�order�as�the�crises�remained�largely�a�dispute�between�vested�interests.�

In� July,� The� Senate� also� announced� Senator� Emmanuel� Bwacha,� representing�

Taraba�Central� as� the�Deputy�Minority� Leader� just� as� it� named� senators� Philip�

Aduda,� representing� the� Federal� Capital� Territory,� FCT,� and� Biodun� Olujimi,�

representing� Ekiti� South,� as� Minority� Whip� and� Deputy� Minority� Whip�

respectively.�

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Relative�Calm�Returns�to�Lower�Chamber…�

In�July,�the�long�drawn�squabble�within�the�lower�arm�of�the�National�Assembly�

occurring� side� by� side� with� that� of� the� Senate� ameliorated� as� Hon� Femi�

Gbajabiamila� emerged� as� the�minority� leader� despite� initial� strong� oppositions.�

The� peace� pact�was� brokered� by� President�Muhammadu�Buhari�who�met�with�

the�Representatives�on�July�27.�Speaker�Dogara�also�announced� the� names�of�

other� principal� officers� as� follows:��Buba� Jibrin� (North-Central)� as� the� deputy�

house� leader,�Alhassan�Ado�Doguwa�(North-West)�as�the�chief�whip,�and�Pally�

Iriase� (South-South)� deputy� chief� whip.� For� the� minority� party,� Leo� Ogor�

(South-South)�emerged�as�the�minority�leader;�Chukwuma�Onyema�(South-East)�

as�the�deputy�minority�leader;�Yakubu�Umar�Barde�(North-West)�as�the�minority�

whip;� and�Binta�Bello� (North-East)� as� the� deputy�minority�whip.� Similarly,� the�

Senate,� named� immediate� past� governor� of� Akwa� Ibom� State� and� Senator�

representing�Akwa�Ibom�North�West,�Godswill�Akpabio�as�the�Minority�Leader.�

Senate�President,�Dr.�Bukola�Saraki�Battles�for�Political�Life…�

The�turf�battle�within�the�All�Progressives�Congress�(APC)�resumed�in�September�

as� forces� opposed� to� the� emergence� of�Dr.� Bukola� Saraki� as� Senate�President�

ensured�that�he�was�docked�by�the�Code�of�Conduct�Tribunal�(CCT)�on�charges�

of�false�asset�declaration.�The�embattled�Senator�was�ordered�to�appear�before�

the� CCT� on� a� 13-count� criminal� charge� that� bordered� on� corruption,� false�

declaration� of� assets,� and� illegal� operation� of� a� foreign� bank� account�while� in�

office�as�former�governor�of�Kwara�State.�Dr.�Saraki’s�current�travails�is�coming�

on�the�heels�of�the�arrest�and�investigation�of�his�wife,�Oluwatoyin�Saraki,�by�the�

Economic� and� Financial� Crimes� Commission� (EFCC)� on� fraud� related� charges�

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shortly�after�he�emerged�as�Senate�President.�However,�Dr.�Saraki�pleaded�“not�

guilty”�to�the�charges�and�was�released�on�bail�with�commencement�of�his�trial�

scheduled� for�October�21,�2015.�Eventually,� the�embattled�Senator�breathed�a�

sigh� of� relief� as� the� Supreme� Court� ordered� the� suspension� of� his� trial� at� the�

Code�of�Conduct�Tribunal�where�he�faces�a�13-count�corruption�charge,�pending�

the�conclusion�of�an�appeal�the�Senator�brought�before�the�highest�court.�

National�Assembly�Gets�Standing�Committees�

In� November,� Senate� President,� Bukola� Saraki� named� sixty-five� standing�

committees� of� the� Senate� –� eight� more� than� his� predecessor,� Senator� David�

Mark.�The�All�Progressives�Congress�(APC)�Senators�got�the�majority�forty-one�

chairmanship� positions� while� the� opposition� Peoples� Democratic� Party� (PDP)�

Senators� got� twenty-four� chairmanship� slots� in� a� Senate� that� comprises� sixty�

APC� Senators� and� forty-nine�PDP�Senators.� Thus,� in� the� current� arrangement,�

the�ruling�party�got�more�than�proportionate�number�of�chairmanship�positions�

than�the�opposition�party.�Howbeit,�against�the�backdrop�of� internal�squabbles�

in� the� ruling� party� as� well� as� unbroken� ties� across� party� lines,� it� appeared� as�

though�opposition�was� handed� a� good�number� of� key� positions.� Same� can� be�

said�of�the�House�of�Representatives�which�also�named�its�committee�chairmen�

very�recently.�

President�Buhari�Swears�in�New�Ministers�to�Drive�His�Agenda…�

In� November,� President� Muhammadu� Buhari,� after� almost� 6�months� of� delay,�

finally�swore�in�his�new�cabinet�of�ministers�into�office�and�reduced�the�number�

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of� federal� ministries� to� twenty� five� from� thirty� six.� The� President� had� earlier�

appointed� eighteen� new�permanent� secretaries,� some�of�whom� came� from� the�

private� sector,� while� retiring� seventeen� others.� Members� of� his� substantive�

cabinet�of�ministers�and�their�respective�portfolios�include:�Senator�Udoma�Udo�

Udoma�(Budget�and�National�Planning),�Babatunde�Fashola�(Power,�Works�and�

Housing),� Dr.� Okechukwu� Enelamah� (Trade,� Industry� and� Investment),� Kemi�

Adeosun� (Finance);� Ibe� Kachikwu� (Petroleum� Resources),� Kayode� Fayemi�

(Mining);�and�Audu�Ogbeh�(Agriculture�and�Rural�Development).�Others�include:�

Rotimi� Amaechi� (Transportation),� Chris� Ngige� (Labour� and� Employment),� Lai�

Mohammed�(Information),�Muhammadu�Bello�(Federal�Capital�Territory),�Adamu�

Adamu� (Education),� Abubakar� Malami� (Justice),� Amina� Mohammed�

(Environment),� Adbulrahman� Dambazau� (Interior),� Suleiman� Adamu� (Water�

Resources),� Solomon� Dalong� (Youth� and� Sports),� Usani� Uguru� (Niger� Delta),�

Osagie� Ehanire� (Health),� Aisha� Alhassan� (Women� Affairs),� Adebay� Shittu�

(Communication),�Geoffrey�Onyema� (Foreign�Affairs),�Ogbonaya�Onu� (Science�

and�Technology)�and�Dan�Ali�(Defence).�

Nigeria’s�War�on�Terror�Assumes�International�Dimension�

Nigeria’s� war� against� terror� assumed� international� dimension� as� Boko�Haram’s�

leader,� Abubakar� Shekau,� allied� with� international� terror� group,� Islamic� State�

group� in�Syria� and� Iraq� (ISIS)�with� the�hope� to� attract� support� from� ISIS� in� its�

own� struggle� to� create� an� Islamic� caliphate� in� Nigeria.� This� was� part� of� its�

response� to� the� recapture� of�major� towns� in� the� North� East,� especially� Bama,�

Buni�Yadi,�etc�by�members�of�Nigerian�armed�forces�and� its�allies�–�Cameroon,�

Chad�and�Niger.�

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Boko�Haram�Proves�It�Is�Not�Yet�Defeated�

The� Islamic� insurgents’� resilience�was�proven�as� they�executed�guerrilla�attacks�

on�communities�in�Northern�Nigeria,�particularly�in�the�North-East.�Boko�Haram�

also� launched� cross� border� attacks,� killing� scores� of� people� in� neighbouring�

countries,�Chad�and�Niger�Republics�in�retaliation�to�their�alliance�with�Nigeria.�

In� response,� Chad’s� military� authorities� claimed� that� they� conducted� reprisal�

attacks� against� the� militant� group� in� Nigerian� territory,� a� claim� which� their�

Nigerian�counterparts�dismissed.�Despite�being�a�predominantly�Muslim�country,�

Chad�banned�the�wearing�of�the�full�Muslim�veil�even�in�the�ongoing�Ramadan�

season�–�warning�that�"no�drop�of�Chadian�blood�spilled�will�go�unpunished".�

The� resurgence�of�Boko�Haram� further�necessitated� the� relocation�of�Nigeria’s�

Military�Command�and�Control�Centre�(MCCC)�from�Abuja�to�Maiduguri,�Borno�

State� with� the� expectation� that� the� war� on� terror� would� be� more� effectively�

executed.�Also,� the�Multi-National� Joint�Task�Force� (MNJTF)�was�expected� to�

be�deployed�at�the�Lake�Chad�Basin�in�July�so�as�to�add�more�teeth�to�the�fight�

against� terror.� However,� the� Lake� Chad� Basin� Commission� MNJTF� was� not�

functional�as�at�report�time.�

Emboldened�Boko�Haram�Spreads�Terror�to�North-Western�Nigeria�

In� an� apparent� expansion� of� the� theatre� of� war,� the� Islamic� militants,� Boko�

Haram,� attacked� Zaria,� Kano� and� Jos� in� the� North� West� and� North� Central�

regions�of�the�country�in�July.�This�was�despite�their�intensified�attacks�in�North�

East,� with� suicide� bombers� reported� to� have� detonated� bombs� in� Borno� and�

Adamawa� states.� Meanwhile,� there� were� reports� that� the� emboldened� terror�

group� offered� to� free� more� than� 200� young� women� and� girls� kidnapped� in�

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Chibok,�in�April�2014,�in�exchange�for�the�release�of�militant�leaders�held�by�the�

Nigerian�authorities.�

� �

FG�Admits�Lack�of�Intelligence�on�the�Chibok�Girls�

In� a�media� chat� on�December� 30,� 2015,� President�Muhammadu� Buhari� expressed� his�

position� on� some� critical� issues.� These� included� alleged� flouting� of� court� orders�with�

regards� to� the� continued�detention�of� the� leader�of� the� Indigenous�People�of�Biafra,�

IPOB,� Nnamdi� Kanu,� the� integrity� of� all� 36� ministers,� war� against� corruption,�

implementation�of�the�N5,000�monthly�transfer�to�vulnerable�Nigerians,�the�kidnapped�

Chibok�girls,�devaluation�of�the�naira�and�the�fate�of�the�Islamic�cleric,�Sheikh�Ibraheem�

El-Zakzaky.�On� the� Chibok� girls,� he� affirmed� the� fact� that� his� administration� did� not�

have� any� concrete� information�of� their�whereabouts�but� are�willing� to�negotiate�with�

genuine�leaders�of�the�Boko�Haram�sect.�In�his�words,�“The�question�of�Chibok�girls� is�

on�our�minds�all�the�time.�But�we�do�not�have�any�information�on�where�they�are.�I�am�

honest�with� you,� I� don’t� know�whether�Chibok�girls� are� alive.”� “We�are� looking� for� a�

credible� Boko�Haram� leadership� that�will� convince� us� that� Chibok� girls� are� alive.� Our�

priority�is�on�orphaned�IDPs�to�get�them�back�to�schools,�resettle�them�and�giving�them�

hope.”��

President�Buhari�Replaces�Service�Chiefs�to�Prosecute�War�on�Terror�

In� line�with� public� expectations� and� part� of� his� response� to� the� resurgence� of�

terror�bombings�across�the�entire�North,�President�Muhammadu�Buhari,�in�July,�

sacked�the�services�chiefs�who�he�inherited�from�the�previous�administration.�In�

their�stead,�he�appointed�Major�General�T.Y.�Buratai�(Chief�of�Army�Staff),�Major�

General� Abayomi� Gabriel� Olonishakin� (Chief� of� Defence� Staff),� Rear� Admiral�

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Ibok-Ete� Ekwe� Ibas� (Chief� of�Naval� Staff),� Air� Vice�Marshal� Sadique�Abubakar�

(Chief� of� Air� Staff),� and� Air� Vice� Marshal� Monday� Riku� Morgan� (Chief� of�

Defence� Intelligence).� In� addition,� President� Buhari� replaced� the� National�

Security�Adviser,�Colonel�Sambo�Dasuki� (retd.)�who�was�also�appointed�by� the�

former�regime�with�Major�General�Babagana�Monguno�(retired).�

President�Buhari�Criticizes�U.S.�Leahy�Law�as�Boko�Haram�Reclaims�

Territories…�

During� a� four-day� visit� to� the� United� States� in� July,� President� Muhammadu�

Buhari�partly�attributed�the�escalation�of�the�insurgency�crisis�in�Nigeria�to�lack�

of� cooperation� from� the� host� country,� stating� that� the� U.S.� Leahy� Law�

unwittingly� aided� and� abetted� terrorism� in� Nigeria,� particularly� during� the�

previous� administration.� Occurring� simultaneously,� the� dreaded�militant� group,�

Boko�Haram,�continued�to�pursue�their�destructive�cause�as�they�launched�bomb�

attacks�at�two�bus�stations�in�Gombe,�north-east�Nigeria,�resulting�in�the�deaths�

of�about�fifty�people.�The�terrorists�also�conducted�suicide�attacks,�through�two�

teenage� females�who�posed�as�beggars,� in�Maroua,�northern�Cameroon,�which�

left�eleven�people�dead.�

Federal�Government�Moves�to�Strengthen�Security�

The� Federal� Government� announced� plans� to� recruit� additional� 10,000� police�

officers,� by� engaging� the� unemployed� youth,� in� order� to� arrest� the� trend� of�

kidnappings� and� other� social� vices.� The� President� Buhari� also� stated�

government’s� intention� to� establish� a� functional� Federal� Anti-Terrorism�Multi-

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Agency� Task� Force� that� will� more� effectively� address� future� insurgencies� in� a�

sustainable�manner.�More� so,� he� ordered� the� Inspector� General� of� Police,�Mr.�

Solomon�Arase,�to�prune�down�the�number�of�policemen�serving�as�orderlies�to�

dignitaries,� to� enable� the� said� personnel� perform� their� regular� statutory� police�

functions.�

Nigerian-Iranian�Relations�Threatened�on�Killing�of�Shiite�Faithful…�

In�December,�violence�erupted�between�members�of�the�Shiite�Islamic�adherents�

belonging� to� the� Islamic�Movement� of�Nigeria�and�Nigerian�army�personnel� in�

Zaria,�Kaduna�State,�resulting�in�the�deaths�of�several�Shiite�faithful.�The�Army�

alleged�that�the�Shiite�followers�attempted�to�assassinate�Nigeria’s�Chief�of�Army�

Staff,� Tukur� Buratai,� accusing� the� sect� of� barricading� the� roads� with� bonfires,�

heavy�stones�and�tyres�and�pelting�the�military�convoy�with�dangerous�objects.�

Rumor� that� the� leader�of� the�Movement,�Sheikh� Ibraheem�El-Zakzaky,�and�his�

wife�were�killed�was�refuted�by�the�Army�who�claimed�that�the�two�were�safe�but�

in� its� custody.� The� sect’s� spokesperson� on� their� part� described� the� claims� of�

attempted�assassination�of�the�COAS�as�a�blatant�lie,�insisting�its�procession�was�

peaceful.�

The�clashes�and�resulting�deaths�sparked�worldwide�outrage�and�are�threatening�

the� relations� between� Nigeria� and� Islamic� Republic� of� Iran� who� are� the�

custodians� of� the� Shiite� faith.� The� Nigerian� Senate� consequently� set� up� an�

inquiry�into�the�deaths�of�civilians�during�the�clash.�

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Pro-Biafra/Military� Clashes� Increase� Social� and� Political� tension� in�

South�East�Zone�

The�lingering�political�unrest�in�the�South�East�of�Nigeria�worsened�as�hundreds�

of� pro-Biafran� secessionists� took� to� the� streets,� bringing� the� city� of� Onitsha,�

Anambra�State,�to�a�halt.�The�protests�bordered�on�the�continued�detention�of�

Mr.� Nnamdi� Kanu,� a�major� proponent� for� a� breakaway� Republic� of� Biafra� and�

director� of� banned� Radio� Biafra� who� was� arrested� in� October� and� still� in�

detention�despite�a�court�order�to�free�him.�The�Federal�High�Court�in�Abuja�had�

earlier� ordered� the� release� of� Radio� Biafra� director� and� Indigenous� People� of�

Biafra�(IPOB)�leader,�Nnamdi�Kanu,�after�being�kept�in�custody�for�eighty�days�

by� the� state� security� service� (DSS)� on� charges� of� criminal� conspiracy� and�

belonging� to� an� unlawful� organization.�However,� the� actions� of� the� protesters�

including�blockage� of� the�Onitsha�end�of�River�Niger�Bridge�on�December�01,�

2015� and� their� defiance� of� police� orders� led� to� clashes�with� the� Joint�Military�

Task�Force�(comprising�the�army,�navy,�police�and�civil�defense�personnel),�and�

resulted�in�deaths�of�nine�people�and�injuries�to�eighteen�others.�

Federal�Government�Files�Fresh�Charges�against�IPOB�leader�

The� federal� government� further� violated� its� avowed�policy� on� rule� of� law� as� it�

disregarded� the� Federal� High� Court� ruling� which� ordered� the� Department� of�

State� Service� (DSS)� to� release� the� Director� of� Radio� Biafra� and� leader� of� the�

Indigenous�People� of� Biafra� (IPOB),�Mr.�Nnamdi�Kanu,�who�had� long� been� in�

detention� on� charges� of� criminal� conspiracy� and� belonging� to� an� unlawful�

organization.�Instead,�the�Government�filed�a�fresh�six-count�charge�against�the�

detainee�and�two�others,�Messrs�Benjamin�Madubugwu�and�David�Nwawuisi,�as�

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confirmed�by� Kanu's� counsel,�Mr.� Vincent�Obeta.� Part� of� the� charges� include:�

intention� to� levy� war� against� Nigeria� and� preparations� for� the� states� in� the�

South-east� geopolitical� zone,� South-south� geopolitical� zone,� the� Igala�

community� of� Kogi� State� and� the� Idoma/Igede� community� of� Benue� State� to�

secede�from�the�Federal�Republic�of�Nigeria�and�form�themselves�into�a�Republic�

of�Biafra.�

Presidency�Commences�Probe�into�Government�Agencies…�

In� August,� efforts� by� the� Presidency� to� recover� mismanaged� government�

resources� shifted� to� several� key� government� agencies.� The� National� Economic�

Council’s�Mr.�Adams�Oshiomhole-led�Ad-hoc�Committee�on�the�Management�of�

Excess� Crude� Account� Proceeds� and� Accruals� into� the� Federation� Account�

commenced� its�probe� into� the�management�of� the� federation�accounts� by� the�

preceding� administration.� The� probe� was� expected� to� look� into� financial�

activities� of� the� Nigerian� National� Petroleum� Corporation� (NNPC),� Nigeria�

Customs�Service,�Central�bank�of�Nigeria,� and� the�Nigeria� Extractive� Industries�

Transparency� Initiative� (NEITI)� among� others.� Also� in� the� month,� President�

Buhari� approved� the� appointment� of� former� Executive� Vice-Chairman� and�

General� Counsel� of� Exxon-Mobil� (Africa),� Dr.� Emmanuel� Ibe� Kachikwu,� as� the�

Group�Managing�Director�of�the�NNPC�to�replace�Dr.�Joseph�Dawha.�Following�

his�appointment,�the�new�GMD�retired�eight�Group�Executive�Directors�(GEDs),�

an�action�which� is�expected� to� apply� to� other� senior�management� staff�of� the�

highly�mismanaged�petroleum�corporation.�

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Cloud�Thickens�from�Corruption�Probe…�

The�political� space�was�also�engulfed� in�anxiety�as� the�President�Muhammadu�

Buhari’s�corruption�probe�plan�gathered�momentum.�In�August,�while�addressing�

the� National� Peace� Committee� led� by� a� former� military� Head� of� State,� Gen.�

Abdulsalami� Abubakar,� President� Buhari� said� “Those� who� have� stolen� the�

national� wealth� will� be� in� court� in� a�matter� of� weeks� and�Nigerians� will� know�

those� who� have� short-changed� them”.�Meanwhile,� although� details� were� kept�

out� of� the� public� knowledge,� it� was� highly� speculated� that� the� visit� of� the�

immediate�past�President,�Dr.�Goodluck�Jonathan�to�President�Buhari�may�have�

been�triggered�by�apprehension�over�the�lurking�probe.�

USD2�Billion�Arms�Procurement�Scandal�Implicates�Top�Shots…�

In� December,� the� Federal� Government,� through� the� Economic� and� Financial�

Crimes� Commission� (EFCC),� commenced� prosecution� of� erstwhile� public� office�

holders� that� served� in� the� previous� administration� on� allegation� of� fraud� in� a�

USD2�billion�arms�procurement.�The�suspects� include:�former�National�Security�

Adviser,�Colonel�Sambo�Dasuki� (retd);� former�Finance�Director� in� the�office�of�

the�NSA,� Shuaibu� Salisu,� former�Minister� of� State� for� Finance,� Bashir� Yuguda;�

former� Sokoto� State� Governor,� Attahiru� Bafarawa;� and� founder� and� Chairman�

Emeritus� of� Daar� Communications� Plc� and� Daar� Investment� and� Holdings�

Limited,�High�Chief�Raymond�Dokpesi.�Meanwhile,�embattled�National�Security�

Adviser,�NSA,�Sambo�Dasuki,�was�eventually�granted�bail�by�a�High�Court�of�the�

Federal�Capital�Territory,�Abuja,�along�with�his�co-accused.�

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Outlook�forOutlook�forOutlook�forOutlook�for����2012012012016666����

Fiscal�Outlook�

The�policy�thrust�of�the�proposed�Federal�Government�budget�for�the�year�2016�

is�hinged�on�inclusive�growth�and�job�creation�across�the�board.�Specifically,�it�is�

expected�to� increase�by�35.26%�to�N6.08�trillion.�The� increase� in�the�spending�

plan� is� mainly� meant� to� prioritise� infrastructural� development� as� capital�

expenditure� is� expected� to� increase� by� 163.1%� to� N1.85� trillion.� Recurrent�

expenditure� (non-debt),� on� the� other� hand,� is� expected� to� grow� by� 1.65%� to�

N2.65�trillion.�

Total�revenue�is�projected�at�N3.82�trillion�(higher�than�N3.6�trillion�planned�for�

2015).�The� revenue�projection�was�predicated�on�crude�oil�price�benchmark�of�

USD38�per�barrel�(from�USD65�per�barrel�benchmarked� in�2015),�an�estimated�

crude� oil� output� of� 2.2� million� barrels� per� day� (from� 2.28mbpd� projected� for�

2015)�and�an�exchange�rate�of�N198/USD.�Also,�contribution�of�value�added�tax�

(VAT)� in� 2016� is� expected� to� rise� marginally� to� N67.7� billion� in� 2016� (from�

N67.5�billion�projected�in�2015).�

The�resulting�budget�deficit�is�expected�to�amount�to�N2.22�trillion�(or�2.16%�of�

Gross� Domestic� Product),� 148.8%� higher� than� the� deficit� of� N0.81� trillion� in�

2015�(excluding�supplementary�budget�of�N0.57�trillion).�The�deficit�is�expected�

to�be�partly� financed�by�domestic�borrowing�amounting� to�deficit�N984�billion�

and�foreign�borrowing�of�amounting�to�N900�billion.�

Specifically,� Nigeria’s� revenue� base� remains� highly� skewed� to� the� oil� and� gas�

sector�that�is�currently�experiencing�supply�surplus�with�its�attendant�price�crash.�

The�threats�of�currently�soft�crude�oil�prices�and�suboptimal�crude�oil�production�

amid�global�crude�oil�supply�glut�pose�strong�downside�risk�to�realization�of�the�

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revenue�projections.�We�therefore�anticipate�innovative�financing�solutions�such�

as� Public� Private� Partnerships� in� order� to� make� up� for� the� likely� shortfall� in�

resources.�

2016�Key�Budget�Estimates� 2016� 2015� Change��

Appropriation�Bill� 6,077,680,000,000� 4,493,363,957,158� 35.26%�

Supplementary� 0� 574,532,726,857��

Projected�Revenue� 3,860,000,000,000� 3,602,000,000,000� 7.2%�

Appropriation�Bill�+�Supplementary� 6,077,680,000,000� 5,067,896,684,015� 19.9%�

Statutory�Transfers� 351,370,000,000� 375,616,000,000� -6.5%�

Debt�Service� 1,475,320,000,000� 953,620,000,000� 54.7%�

������Domestic�Debts� 1,307,400,000,000� 882,605,000,000� 48.1%�

������Foreign�Debts� 54,480,000,000� 59,010,000,000� -7.7%�

������Sinking�Fund�To�Retire�Maturing�Loans� 113,440,000,000� 12,005,000,000� 844.9%�

Total�Recurrent�(Non-Debt)� 2,648,600,000,000� 2,607,132,491,708� 1.6%�

Subsidy�Re-investment� 0� 21,030,000,000��

Capital�Expenditure� 1,845,540,000,000� 701,415,465,449� 163.1%�

������Less:�Capital�Expenditure�in�Statutory�Transfers� 157,150,000,000� 144,420,000,000� 8.8%�

������Less:�Interest�on�Capitalised�Loans� 86,000,000,000� 0���

Capital�Expenditure�as�%�of�total�expenditure�� 30.37%� 13.84%��

Budget�Deficit�(N’tn)�� 2,217,680,000,000� 891,363,957,158� 148.8%�

Deficit�as�percentage�of�GDP� 2.16%� 0.79%��

Daily�Crude�Oil�Production�(M/Barrels)�� 2.28� 2.28��

Crude�Oil�Bench�Mark�($)�� 38� 65� -41.5%�

Domestic�Borrowing� 984,000,000,000� 570,000,000,000� 72.6%��Source:�Budget�Office�of�the�Federation;�Cowry�Research�

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The�Oil�&�Gas�Industry�Outlook�

Prospect�for�the�Nigerian�Oil�and�Gas�industry�remains�uncertain.�Firstly,�there�is�

the� likelihood�of� a� full� deregulation� of� petrol� pump�price� as� suggested� by� the�

paltry�N65�billion�provision�for�fuel�subsidy�in�2016.�Two�scenarios�are�expected.�

The�first�and�the�most�likely�is�the�possibility�of�a�continued�downward�spiral�in�

the� international� price� of� crude� oil� to� below�USD�20� as� predicted� by� IMF� and�

partly� buoyed� by� the� expected� resumption� of� crude� oil� supply� from� Iran�

following�the� lifting�of� its�suspension�by�the�United�States�of�America�and�the�

European� Union.� This� will� by� extension� reduce� the� landing� cost� of� petroleum�

products� significantly� below� current� local� pump� price� thereby� technically�

terminating�fuel�subsidy�without�any� increase� in� local�pump�price.�Already,� the�

Nigerian� government� has� responded� to� the� lower� landing� cost� through� the�

downward� review� in� pump� price� of� petrol� from� N187� to� N186.50� for� private�

marketers� and�N186� for� the�Nigerian�National� Petroleum�Corporation� (NNPC).�

This� scenario� will� ensure� uninterrupted� supply� of� petroleum� products� thereby�

boosting�the�activities�and�income�generation�of�the�downstream�sub-sector.��

The� second� scenario� anticipates� the� remote� possibility� of� an� upbeat� in� the�

international� price�of� crude�oil�which�will�mount�upside�pressure�on�petroleum�

products�importation�costs�and�consequently�on�pump�price�cum�petrol�subsidy.�

This�is�expected�to�create�initial�upheavals�and�supply�disruptions�as�petroleum�

marketers�remain�skeptical�on�the�possibility�of�getting�subsidy�refund�from�the�

Federal� Government.� By� implication,� the� downstream� industry� turnover� is�

expected�to�shrink.��

However,� we� expect� an� improvement� in� the� capacity� utilization� of� the� local�

Petroleum�Refineries�and�a�consequent�increase�in�refined�products�supply.�This�

will� reduce� the� amount� of� importation� and� the� requirement� for� petrol� subsidy�

provisions.���

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Lastly,�the�upstream�subsector�would�remain�unattractive�to�investors�as�long�as�

the�international�crude�oil�price�remains�low.�We�therefore�expect�the�number�of�

operational� upstream� oil� rigs� to� continue� to� decline� as� the� international� oil�

companies�continue�to�divest�their�holdings�in�the�Nigerian�oil�wells.�

Inflation�Outlook�

In� line�with�our�expectations� for�2015�as� contained� in�our�2014�Cowry�Market�

Review�and�Outlook�for�2015,�inflation�remained�within�the�single�digit� region,�

occasioned�by�the�largely�conractionary�monetary�and�fiscal�measures�witnessed�

in� 2015.� However,� following� increased� spending� activities� expectations� from�

implementation� of� the� 2016� budget,� inflationary� pressure� is� likely� to� be�

sustained.�We�also�anticipate�that�expected�increase�in�spending�on�construction�

activities� and� infrastructure� development,� will� likely� stimulate� private� sector�

demand,�particularly� from�labour.�Cost�push� inflationary�pressures�are�also�very�

likely� given� the� continued� upside� pressure� on� foreign� exchange� rates.� Lastly,�

seasonal�increase�in�food�price�during�planting�season�will�likely�increase�upside�

risk� of� inflation.� Consequently,� we� expect� inflation� rate� to� break� through� the�

10%�mark.�

Interest�Rate�Outlook�

Towards�the�end�of�2015,�the�monetary�authority�began�to�relax�its�policy�stance�

in� a� bid� to� stimulate� economic� activities� in� the� face� of� relatively� high� foreign�

exchange� rates,� dwindling� external� reserves� and� low� productive� base.� For� the�

early� part� of� 2016,�we� expect� the� trend� to� continue� in� tandem�with� the� fiscal�

authority’s� position� in� favour� of� lower� cost� of� funds.� However,� the� increased�

inflation�outlook�may�necessitate�upward�adjustment�of�the�benchmark�interest�

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rate� towards� the� third� quarter� in� 2016,� thus� incentivizing� fixed� income�

investments�towards�to�end�of�the�2016�fiscal�year.�

Foreign�Exchange�Outlook�

The�determination�shown�by�the�present�administration�to�keep�the�official�rate�

at�N199/USD�is�laudable�but�somewhat�unconventional�and�unsustainable.�The�

monetary�authorities�seemed�poised�to�retain�its�fight�against�dollar�demand�in�

the� face�of�diminishing� supply�of� the�greenback.�However,�without�any� strong�

source�of�dollar�supply� in�sight,�we�think�that� the�CBN�will�soon�hit� its� limit� in�

curtailing�dollar�demand� in�an� import�dependent�economy.�Hence�we�expect�a�

sustained�upside�pressure�on�the�foreign�exchange�rate.�

Bond�Market�Outlook�

Fixed� income� as� an� investment� outlet� is� expected� to� improve� in� 2016.� The�

Federal� Government� has� indicated� interest� in� borrowing� to� fund� the� 2016�

budget�from�the�local�and�international�markets.�Consequently,�increased�public�

sector� borrowing� may� lead� to� crowding� out� of� the� private� sector� given� the�

expanded� size� of� planned� Governments� expenditure� in� 2016.� However,� the�

bearish�outlook�on�short-term�oil�prices�has�remained�a�risk�factor�that�may�force�

the� federal� government� to� compensate� investors� with� higher� marginal� rates.�

Hence,� bond� yields� are� expected� to� remain� in� the� double� digit� region� despite�

contracted� money� market� rates.� This� again� might� create� a� rent� seeking�

opportunity�for�the�deposit�money�banks.�State�government�bonds�are�likely�to�

shrink�in�size�as�they�battle�recurrent�expenditure�due�to�high�wage�bill.�

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Equities�Market�Outlook�

In� the� equities� market,� companies’� fundamentals� are� expected� to� weaken�

particularly� on� increased� operational� cost� coming� from�higher� import� costs� for�

manufacturers,� lower� earnings� potentials� for� the� Banking� and�Oil� sectors,� and�

deteriorating� banking� assets.� This� in� addition� to� the� increased� risk� profile� in�

terms� of� dollar� liquidity� amid� dwindling� external� reserves� will� remain� major�

disincentive�to�foreign�portfolio�capital�inflows.�Moreso,�the�robust�bond�market�

outlook� remains� a� veritable� investment� alternative� to� fund� managers.� We�

therefore�expect�an�overall�bearish�market�outlook.��

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Disclaimer�

This�report�is�produced�by�the�Research�DeskResearch�DeskResearch�DeskResearch�Desk�of�Cowry�Asset�Management�Limited�(COWRY)�

as� a� guideline� for� Clients� that� intend� to� invest� in� securities� on� the� basis� of� their� own�

investment� decision� without� relying� completely� on� the� information� contained� herein.� The�

opinion�contained�herein�is�for�information�purposes�only�and�does�not�constitute�any�offer�or�

solicitation�to�enter�into�any�trading�transaction.�While�care�has�been�taken�in�preparing�this�

document,�no�responsibility�or�liability�whatsoever�is�accepted�by�any�member�of�COWRY�for�

errors,� omission� of� facts,� and� any� direct� or� consequential� loss� arising� from� the� use� of� this�

report�or�its�contents.

For�further�enquiries,�please�contact:��

Cowry Asset Management Limited,

Phone: +234-1-2715008-9

+234-1-2716614-5

E-mail: [email protected],

[email protected]

Other branches in Abuja, Port-Harcourt &

Onitsha

URL: www.cowryasset.com

Plot 1319, Karimu Kotun Street,

Off Sanusi Fafunwa,

Victoria Island,

Lagos.�