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Middle East & African Monitor - 11 January 2017

  • Lebanon’s President looks to mend relations with Saudi Arabia
  • Indian oil consumption jumps
  • Iran to reduce its stockpile of enriched uranium
  • Nigerian BDCs adjust exchange rates in battle against parallel market
  • Oman denies rumours of deposit request
  • KSA, Oman & Egypt prepare for fresh bond issuances
  • Egypt’s inflation rate continues to rise
  • Muhibbah wins road contract in Qatar

REGIONAL COMMENTARY

Lebanon’s President looks to mend relations with Saudi Arabia
Lebanon’s new President, Michel Aoun, held talks with Saudi Arabia’s King Salman this week in an attempt to push the restart button on relations between the two countries which were severely affected by the Lebanese government’s decision not to condemn attacks on the Kingdom’s diplomatic missions in Iran at the beginning of last year, and consequent concerns over the perceived growing influence of Hezbollah on Lebanon’s political direction. This in turn led to the suspension of more than US$4 bio in military and other aid to Lebanon as well as the issuance of a travel advisory by Saudi Arabia and other Gulf states warning their citizens against visiting the Mediterranean country. Aoun’s trip to Riyadh, along with a number of senior Lebanese officials is his first foreign visit since he was appointed in November and underlines the importance his administration puts on achieving a rapprochement with the Kingdom.

Indian oil consumption jumps
Oil consumption in India jumped by 11% last year due primarily to the greater use of cars and motorcycles. In fact petrol demand alone was up 12% at 23.7 mio tonnes as improved income distribution saw more Indians buying vehicles ,but while this trend looks set to continue in 2017, the recent demonetization shock may temper overall auto sales numbers at least in the near term. The World Bank has lowered its growth forecast for India’s 2016/17 fiscal year to 7.00% against its previous call of 7.60% due specifically to the government’s decision to demonetize but expects economic expansion to head back up towards 7.80% from 2018.

Iran to reduce its stockpile of enriched uranium
According to the WSJ, Iran agreed this week to reduce its stockpile of enriched uranium significantly below the 300kg cap set in the P5+1 agreement, as both Tehran and Washington look to solidify the 2015 accord ahead of an incoming Trump administration. However separate news that Russia plans to deliver 116 tonnes of natural uranium to Iran has been slammed by some Republican Senators including Arkansas’s Tom Cotton who decried a White House decision to allow such a shipment. (Iran’s importation of natural uranium is not banned under the nuclear agreement.)

Nigerian BDCs adjust exchange rates in battle against parallel market
The President of Nigeria’s Bureaux de Change association, Aminu Gwadabe, announced yesterday that his members would begin posting a ‘reference’ exchange rate of the Naira against a number of other major currencies every Monday beginning Jan 16th. This follows a decision by the association yesterday to publish a USD/NGN rate of 399.00 compared to an official interbank rate of 315.00, and the recent 490.00 level quoted by the ‘kerb’ market. Gwadabe said that this move had been taken in consultation with the Central Bank and was an attempt to “improve liquidity” and narrow the margin between the official and parallel markets. It’s not clear however how such a move will make a significant difference to the current shortage of hard currency or encourage a unification of exchange rates unless the official rate is truly allowed to float.

Oman denies rumours of deposit request
Oman’s Ministry of Finance has described a Reuters article published late last night and suggesting that Oman had approached a number of GCC states for a multi-billion dollar deposit to help boost its FX reserves as “false.” The MOF’s full statement was published on Oman’s state news agency’s website.

KSA, Oman & Egypt prepare for fresh bond issuances
Recent press reports claim that Saudi Arabia is preparing to conduct an Islamic bond issue as early as next month although details around this remain sketchy. However there has been talk that a SUKUK would soon be offered with different tenors to last October’s jumbo conventional issue, such as 7 and 16 years. Towards the end of last year Mohammed Al Jadaan, Saudi Arabia’s Finance Minister, did say that his country could tap the international debt markets again during the first quarter of 2017, but that this would be dependent on market conditions at the time and that they were “very comfortable” with the Kingdom’s current cash flow position. In Oman the Muscat Daily newspaper has reported that the Sultanate is also looking to conduct another US dollar bond sale soon and that discussions with arrangers is already underway. Meanwhile Egypt has announced that an international roadshow for its planned Eurobond issuance will begin in Dubai on the 17th of Jan. The size of the Egyptian issue is expected to be between US$2 –2.5 bio and the Finance Minister, Amr El Garhy, was quoted late last year saying that his country would be looking to raise up to US$ 6 bio via Eurobond sales in 2017.

Egypt’s inflation rate continues to rise
The annual core inflation rate in Egypt rose to 25.86% in December against 20.73% in November according to data released by the Central Bank yesterday. Urban inflation jumped to 23.30% driven primarily by a sharp rise in the cost of food products since the devaluation of the Egyptian Pound.

Muhibbah wins road contract in Qatar
Malaysia’s Muhibbah Engineering has been awarded a US$100 mio road and related infrastructure works contract in Qatar.

11-01-2017

AND FINALLY…
Did you know that the CAT scan was originally invented by a South African born physicist called Allan Cormack who consequently went on to win the Nobel prize for medicine in 1979?

Glenn Wepener, Executive Director & Geopolitical Analyst Middle East & Africa
National Bank of Abu Dhabi
MarketInsights&Strategy@nbad.com
Tel: +971 2 6110 127

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NBAD Middle East & African Monitor - 11 January 2017

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