Middle East & African Monitor - 31 October 2016

  • Oil Producer Meeting Disappoints
  • Major Terror Attack In Saudi Arabia Foiled
  • Egypt Signs Currency Swap Agreement With China
  • Libyan Economy Is Nearing “Collapse” – World Bank
  • Business leaders Call For Nigeria’s Naira To Be “Fully Liberalized”
  • Saudi Arabia’s Net Foreign Assets Decline
  • UAE’s 5-Year Federal Budget Approved
  • Moodys Maintains Investcorp Rating & Outlook

Oil Producer Meeting Disappoints.
A 2-day technical meeting between OPEC and non-OPEC producers which began in Vienna last Friday, did not manage to achieve any major breakthroughs, although a joint statement issued after the gathering said it had been “positive.” Disappointment was reflected in the market which saw oil prices dip back below the US$50 level, while media reports suggested Iran and Iraq’s continued insistence on their exemption from any agreement also prevented substantive progress on including some non-OPEC members into a freeze/cut program. All sides will reconvene for further discussions on the subject at the end of November.

Major Terror Attack In Saudi Arabia Foiled.
Saudi Arabia’s security forces managed to foil a planned car bomb attack on a World Cup football qualifying game in Jeddah earlier this month, according to a statement issued by the country’s interior ministry. A four-man terror cell behind the planned attack, and consisting of two Pakistanis, a Syrian, and a Sudanese citizen, were detained a day before the game at the Al-Jawhara stadium was due to take place. Meanwhile, the ministry also said it had arrested four Saudi nationals belonging to another cell in the central province of Shaqra. According to officials the men had been caught receiving instructions from ISIS elements in Syria to carry out terror activities within the Kingdom.

Egypt Signs Currency Swap Agreement With China.
According to a Bloomberg article, the Egyptian government finalized a US$2.7 bio currency swap agreement with China yesterday, although the exact terms and price of the deal has not yet been made public. Cairo has been in talks with Beijing over this swap since September but its completion means Egypt has probably now met the US$6 bio additional funding condition demanded by the IMF ahead of its final approval on a US$12 bio loan program. Meanwhile the head of Egypt’s General Federation of Chambers of Commerce has called on members to avoid buying hard currency via the unofficial parallel market for at least the next two weeks, and for a 3-month moratorium on the import of non-essential goods to be implemented. His comments come as USD/EGP hit a new record high of 17.00 in the “kerb” market against the official rate of 8.78/8.88.

Libyan Economy Is Nearing “Collapse” – World Bank.
In its latest economic review, the Central Bank of Libya has estimated that the country’s inflation rate increased to 25.30% during the first half of this year, compared to 8.70% for the same period in 2015. Meanwhile the World Bank has warned that the Libyan economy is “nearing collapse” due to erratic oil production and rising inflation. “The Libyan economy is near collapse as political stalemate and civil conflict prevent it from fully exploiting its sole natural resource: oil. With oil production just a fifth of potential, revenues have plummeted, pushing fiscal and current account deficits to record highs. With the dinar rapidly losing value, inflation has accelerated, further eroding real incomes. In addition to near-term challenges of macroeconomic and social/political stability, medium-term challenges include rebuilding infrastructure and economic diversification for job creation and inclusive growth,” the executive summary from the WB report stated. You can read the entire report which was published earlier this month here.

Business leaders Call For Nigeria’s Naira To Be “Fully Liberalized.”
High profile businessmen in Nigeria have again criticized the Central Bank’s current policies with regards to the exchange rate regime. Muda Yusuf, the head of the Chamber of Commerce in Lagos, was quoted by the Vanguard Nigeria website as saying that many local firms were still struggling to access hard currency via official channels, and claimed that part of the problem was that the Naira was being kept at an artificially high level. “Not many businesses have access to the official forex window to source their requirements and bring in the needed raw materials for production,” Yusuf stated adding, “the currency should be allowed to fully liberalize, because a flexible exchange rate regime will encourage inflows. If this is done the supply side of forex will improve and there will be more dollars to go around.” The USD/NGN “kerb” rate was last quoted at around 470.00 last Friday against an official rate of 317.00.

Saudi Arabia’s Net Foreign Assets Decline.
Net Foreign assets held by the Kingdom’s Central Bank fell by US$7.4 bio to US$546.7 bio in September compared to the previous month, according to the latest official data. This is the lowest level since January 2012.

UAE’s 5-Year Federal Budget Approved.
The UAE cabinet has approved a AED 248 bio federal budget for the next 5 years with a focus on healthcare, education and social development.

Moodys Maintains Investcorp Rating & Outlook.
Moodys Investors Service has affirmed Investcorp Bank BSC’s rating at Ba2 with a negative outlook. According to a statement issued by the ratings agency its unchanged stance reflected; “Investcorp's strong franchise in the GCC region as a leading alternative investment provider to Gulf investors, as well as investors in the US and Europe. The ratings also reflect Investcorp's high financial leverage and balance sheet risk related to its co-investment activities. Moody's negative outlook reflects the potential that Investcorp might face increasing difficulties in raising new capital or reinvesting clients' capital in the coming year due to the weakening operating environment in the GCC.”


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NBAD Middle East & African Monitor - 31 October 2016

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