Thursday, April 09, 2015

Election Season..Fever

It has been almost two weeks now, and the idea of change is finally sinking into the Nigerian psychology. Regardless of how Saturday's Gubernatorial races go, it is clear that Nigeria is never going to remain the same again...

During this period, I had my lows and my  highs..I'm dedicating this blog post to celebrate the is

Day in the life of Michael: 1. Wake Up check emails 2. Put on my co-founder hat and treat LoftyInc Allied Partners Limited​ business 3. Take calls from one or two concerned clients of Wazobia Investments in North America 4. Jump in the bath; all my day planning and best strategies come from this 30 mins everyday tradition 5. Kitted up, and Kissed my love, Abiola Anu Coker-Oluwagbemi​ and laid hands on the Bobo of the whole universe -prayed for him and a better Nigeria for him to grow up in 6. Swooch to the closest McDonalds for Hot Chocolate & Apple Pie 7. Take 2-3 calls from political associates, trying to check on Nigeria and the sanity of those of us trying to change it 8. Respond to another round of emails this time related to a mid-size energy company of which I'm director; we had to fire our HR Exec. Oh well! 9. Get tempted, open up my LoftyInc email and behold, three tech start-ups in our portfolio need help. I call, and offer it 10. Hungry for Lunch, but feels like end of day - off I go- this never ends. 11. On the way, take 2-3 calls from partners of one or two stealth Energy start-ups/SPVs of which I'm part 12.Take a call from a Cameroonian company of which I'm director - they need direction too on a developmental project we're undertaking. 13. In between finishing lunch, and engaging folks on Facebook and checking news on Twitter, I took call from Wifey- short but sweet. 14. Return to the office, need to send out this 150 page engineering business plan report to a multinational client; so I put on my technical and business hat on full throttle. Thank God for PVAMU and 15. Phone is GMB's Personal Assistant..okay... 16. I got inspired, and penned a 1000 word essay for NVS and NIA 17. My work got interrupted by AfriLabs emails - I'm a Board member, so I have to treat some strategic issues from the Secretariat. 18. GMB Calls...we talked for 5 minutes 19. I still need to finish this report (Bobo needs to eat abi?), so back to it..wrote more, and tied things up..will finish tomorrow. 20. Did that just happen? Did I talk to General M. Buhari? Yes I did! 21. On my way home, Dad calls- he never fails...True story. #inspired #lifeisnotaboutwhatyouget #vivaNigeria

Tuesday, January 20, 2015

Nigeria's Economy Forecast- 2015

In as much as I'm probably the most optimistic person you will find about the economic fortunes of Nigeria, it is always prudent to point out that Nigeria's success stories have been inspite of her national government - which has badly managed the economy on a whole lot of fronts to be honest. Indeed, the economy have grown largely due to state level governments (thank God we practice federalism like US) and probably faster in opposition controlled states starting with Lagos.

That said, Nigeria face some significant economic headwinds brought by these years of federal government mismanagement which states cannot possibly help head off or balance. But most public analysis of Nigeria's strenght have been wrong projecting optimism despite clear indications to the contrary:  skewed optimistic based on the last few years of performance. So for the next 2-3 years, macroeconomic factors - more on this later- flowing out of mismanagement (of crude oil revenues, tax policies, infrastructure policies and monetary policy) may now come to hunt us regardless of our latent strengths.
The interesting thing is that the only possible way to head off this disaster is a change in government, and reality on ground is that there is s 52-48 chance the opposition will actually win the elections of February 14 - again contrary to this report. So this might be good for Nigeria, but will not eliminate completely the upcoming pain.
A more nuanced view of the upcoming elections here from former US Ambassador to Nigeria -

Speaking of macroeconomic factors:
  • The foreign reserve is $30 billion plus, but it has fallen 50% in less than 6 months. Many state governments could not even meet their payroll in December. The entire reserve will not be available to defend the naira and the dwindling price of crude oil has not bottom just yet as OPEC is not budging
  • Speaking about depreciation; the official depreciation was 12% but nobody trades official dollar. The parallel informal market went as far as 25-35% depreciation by EoY 2014. I exchanged the $$ at Lagos Airport for 200 naira to 1 USD; it used to be 160 naira up until October.
  • Furthermore, the MPC have been very political especially since the new governor replaced a previous one that blew the cover off a $20billion scam by the President's men. So MPC have not depreciated the naira prior to the election as much as it should and have instead been defending the naira with the dollar reserve. Expect that to change quickly once the election is over - either way and regardless of who emerges victor.
  • As a proof of my point and to counter deflationary impact of fuel imports, the official price of gasoline was cut by 10% this week when world prices have moved down by more than 40%. This is because of the discount imposed devaluing the naira, and the fact that a country that produces 2.5 million barrels of crude oil, still depend on import (80%) to meet her local demand due to comatose state owned refineries crippled by corruption. The good thing is that entrepreneurs are now taking cue and will soon cut off the dependence on the government or imports ( ) but the use of arcane subsidy schemes can distort the market and discourage investment. Change of guard can help this cause as well.
  • While I don't expect post-election violence, this cannot be written off and remains a huge risk on the economy; banks as a result are experiencing outflow into election financing or flee to quality outside the country due to this as well as devaluation fears.
In sum total, wait until March ending to decide and until after May 29 to put your money to work. I have significant exposure to Nigeria equities, but I won't buy just yet until some degree of certainty in policy direction is restored after the election. The greatest risk to any foreign investor remains the uncertain valuation of the currency due to economic mismanagement by the Feds.
The best sectors to invest in Nigeria remain the consumer and technology sectors. It is however best to utilize domestic funds for this purpose.
Impact of Crude Oil Price Drop on Nigeria Indigenous E&P
Do you think the price drop is temporary or will be externed? On one hand, I will like to think it will be extended given prevailing general wisdom, but we have to remember other key drivers of oil price i.e. geopolitical forces (an imbalance of supply from Libya or Iraq or Russia can increase pressure on the market without warning) and net increase in world demand due to economic growth (a 6-9 months sustained lower price of crude oil will inevitably lead to economic growth in China and South America which will lead to higher net demand and then higher price)
I think we will be very lucky to see prices stay below $60 until summer. But I also don't think we will see $100 any time soon. Best median price is $55, and I hope Nigerian small producers are using something discounted to this figure to manage their books

Monday, October 27, 2014

Previewing the Mid-Terms 2014 & US Senate Outcomes

2014 is not a wave election, and both GOP and Dems should be very afraid going to the last stretch. Unless we get some major October surprise, upper Tuesday may be a major surprise for either major is why: prediction for Midterm 2014 - Balance of US Senate

1. Despite what you hear in the media, GOP is not closing. Many races still remain in the air, and more traditional red states like Kansas and Georgia, previously not in play are now coming into play. Coming at the last minute with Ebola and ISIS in the news and all the advantage, this is not good for GOP. 

2. Incumbents be it Democrats (in Arkansas and Colorado) or Republicans (in Kentucky and  are in trouble. This means the GOP must defend and attack simultaneously.  This is reflected in races where incumbents are running, and no one is getting 51%. Question on all inquiring minds are, who will the undecided voters break for and will they even show up?

3. Major party brand is in shambles, and voters don't want to reward GOP partisanship. This is why Independent candidates are having impact from NC to Alaska.

4. Governor races matter; the Governor race in Colorado may save the Senate for them there; this is also true for Kansas where the republican incumbent had overreached. In Georgia as well, the son of President Carter may win the race and help Nunn remain competitive for a run-off.

5. The poll may be over-estimating likely voters, as the GOP assumes it has intensity and there is no concrete evidence from 1 through 4 above that shows this. Early ballot, superior game by the Dems on ground and the mountain of evidence that the voters are not in the mood to reward GOP points to a surprise outcome in many close races.

6. This said, the Obama brand is killing democrats in Alaska, Arkansas, Louisiana and even Gubernatorial races in Connecticut and Massachusetts. So while the Dems have hope, the overwhelming mood of the country is to send a message to the President.

So what will happen on Tuesday, and what should you be watching for?

1. Outcome indicators? Sharp political analysts always like to select odd number of bellwether states to use as predictor of the night. My three states are Iowa, Colorado and Kansas. Whoever wins two of the three will win the night, with Independent win in Kansas counting for the Dems.

2. No Decision? This is particularly so, because two states will DEFINITELY end the night UNDECIDED. There is a requirement for 50+1 in both Louisiana and Georgia. While both states have been challenging for Dems historically, the GOP have bad candidates there and the black votes is carrying the Dems to postpone the decision day. I expect a split outcome if the Dems triumph under scenario one above (Louisiana will like to keep a committee chair in place) and a one sided decision in favor of GOP if the GOP win two of my 3 bellwether state. Hence why my 3 picks above matter.

3. Long Night Indicator? Well, if the Dems can't keep North Carolina or have it called for them early to mid-way of the night, then a terrible tragedy have befallen them. If the GOP don't have Kentucky called for them early, then they should forget their dreams of majority in the Senate.


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