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Middle East & African Monitor - 15 November 2016

  • European Firms Ponder Risks Of Investing In Iran Following US Election Result
  • Oil Prices Bounce After OPEC Comments
  • Nigeria Tries To Shut Down NGN Black Market
  • Saudi Arabia Affirms Commitment To US$ Peg
  • FX Liquidity In Egypt Slowly Improving
  • Moody’s Revises Outlook On Oman’s Banking Sector
  • UAE Looks To Expand Its Industrial Sector
  • POSCO Wins US$900 Mio Contract In Saudi Arabia

REGIONAL COMMENTARY

European Firms Ponder Risks Of Investing In Iran Following US Election Result.
European firms who may have been contemplating significant investment opportunities in Iran since the P5+1 agreement was signed last year, could be forced to re-consider such plans at least until it becomes clear whether or not Trump’s administration will try to unwind all or a part of the nuclear accord. The President-elect and a number of his potential official appointees have long expressed their unhappiness with the Iran deal, and thus there is the potential risk of a return of some US sanctions which in turn could penalize foreign firms doing business with Tehran. Of course this is unlikely to dissuade Russia from continuing to widen its military relations with Iran, and is highlighted by the news that Tehran is currently negotiating the purchase of US$10 bio worth of Russian arms and equipment including T-90 tanks, combat helicopters and artillery. Iran already received a number of S-300 missile systems from Russia last month.

Oil Prices Bounce After OPEC Comments.
Oil prices rose overnight driven by a number of factors including some short-covering, but also on the news that Iraqi exports from Basra will set to fall to 3.16 mio bpd in December against 3.24 mio bpd this month, and over a renewed flurry of diplomatic activity as OPEC members work to try and get a freeze/cut agreement in place ahead of their final meeting for the year, which is due to take place on the 30th of November. On Sunday, Khaled al Faleh, Saudi Arabia’s Energy Minister stated that; “In this period marked by unstable oil prices it is imperative to reach a consensus between OPEC nations and to agree on an effective mechanism and precise figures to activate the historic Algiers accord.”

Nigeria Tries To Shut Down NGN Black Market.
The President of Nigeria’s Association of Bureau de Change Operators, Aminu Gwadabe, has claimed that the police have been ordered to arrest any dealers who quote an exchange rate worse than 400.00 per US dollar, as the government again attempts to rein in the disparity between the parallel exchange rate and the official one, but which still stood at 455.00 and 315.50 respectively yesterday. "The issue of Naira depreciation has been narrowed to the activities of speculators and we have decided, with the cooperation of both the Central Bank and the security agents, to enforce a new rule on pricing," Gwadabe said. Several currency exchange offices were raided by the authorities late last week. Meanwhile Nigeria’s CPI hit 18.30% in October, a 0.48% increase over the previous month and touching a 11 year high, driven by a strong rise in housing, fuel, and food costs. This inflationary environment also increases the chances of an official interest rate hike of between 100-200bp at next week’s Central Bank meeting.

Saudi Arabia Affirms Commitment To US$ Peg.
Saudi Arabia’s Central Bank Governor, Ahmad al Kholifey, yesterday affirmed his country’s intention to maintain the USD/SAR peg at 3.7500, adding that exchange rate stability was still considered a priority. The governor also said that liquidity pressures were easing and that SAMA was succeeding in its efforts to press SAIBOR rates lower, although there were no plans to introduce Repos longer than 90 days at this stage. Meanwhile a recent Reuters article claims that the Saudi government has set aside SAR 100 bio in order to settle the bulk of outstanding debts owed to construction firms and other private sector contractors by the end of this year.

FX Liquidity In Egypt Slowly Improving.
USD/EGP was trading steady between 15.50 -16.00 yesterday after touching 18.00 last Thursday, and there are reports that importers of key materials have been able to get their required quota of hard currency this past week. Interbank dealing however remains limited as banks concentrate on trying to fulfil their own client backlogs first, and an issue which is expected to take some time to resolve. Meanwhile Moody’s Investors Service says the improvement of US$ liquidity in the local market, and the hike of the country’s official interest rate following the floatation of the pound is credit positive for Egypt’s banks as it will support these institutions profitability.

Moody’s Revises Outlook On Oman’s Banking Sector.
Moody’s Investors Service has revised its outlook on Oman’s banking system from negative to stable, saying that the change reflects the agency’s expectation that domestic banks' credit profiles will remain broadly stable over the next 12-18 months, as increased government borrowing and higher hydrocarbon output will support a level of public spending that will help stabilize the economy. It also assumes that the government’s willingness to provide financial support to the local banking sector will remain high.

UAE Looks To Expand Its Industrial Sector.
The UAE’s Economy Minister, Sultan bin Saeed Al Mansouri, said yesterday that his government was looking to attract over US$70 bio in industrial sector investment over the next 9 years and aims to raise this specific sector’s contribution to GDP from 16% last year to 25% by 2025. In order to help achieve this target the government will be drafting new legislation around industrial investment and continue to enhance the sector’s supporting infrastructure to make it more attractive.

POSCO Wins US$900 Mio Contract In Saudi Arabia.
South Korea’s Posco Engineering and Construction Company has been awarded a US$900 mio contract to build a four-star hotel complex near Medina in Saudi Arabia.  

Middle-East-African-Monitor-15-11-2016

AND FINALLY…
Did you know that Nigeria’s population was just 16 million in 1911? By 2013 it had reached 173 million and is projected to expand to more than 400 million by 2050, which would then make it the 4th most populous nation in the world behind China and India.  

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NBAD Middle East & African Monitor - 15 November 2016

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