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Middle East & African Monitor – 26 May 2017

  • Crude Steadies Again After Initial Disappointment Over OPEC Statement.
  • Iran Constructs Third Missile Production Facility – US Prepares Fresh Sanctions Bill.
  • Nigerian Senators Pass Oil Industry Reform Bill.
  • Egypt Conducts Successful Eurobond Issuance.
  • Moroccan Dirham Under Pressure As CB Prepares To Widen Band.
  • Mozambique’s Economy Expands By 3.90% - Asset Manager Misses Loan Payment.
  • Overseas Consortium Wins Solar Power Contract In The UAE.
  • Itinera Seals US$300 Mio Road Contract In Kuwait.

REGIONAL COMMENTARY

Crude Steadies Again After Initial Disappointment Over OPEC Statement.
The agreement, by OPEC/NOPEC members in Vienna yesterday, to extend their production reduction deal for a further 9-months was as we mentioned in our earlier notes, already expected and pretty much priced-in, thus there was some disappointment in the market that no added measures were announced, and that Iran had said it would not reduce its output, leading WTI to dip back towards US$48 per barrel overnight. However there has been a minor recovery this morning after Russia’s  energy minister, Alexander Novak, suggested that signatories to the agreement will act if “any further actions or adjustments are needed.” We maintain our view that crude prices will hold above the US$40 level now, and while range bound trading looks set to remain the state-of-play in the near term, oil demand and supply will continue to rebalance during the second half of this year.

Iran Constructs Third Missile Production Facility – US Prepares Fresh Sanctions Bill.
Iran has allegedly constructed a third underground missile production plant in the south-west of the country according to the head of the Revolutionary Guards airspace program, Amirali Hajizadeh; “We are increasing our missile capabilities, Iran's third underground factory has been built by the Guards in recent years, and we will continue to further develop our missile capabilities forcefully. It is natural that our enemies America and the Zionist regime are concerned and angry about the missile production and missile tests, and showing our ‘missile cities’ because they want the Iranian nation to always be in a weak position,” Hajizadeh was quoted as saying by Iran’s main state media outlet. Meanwhile the US Foreign Relations committee voted to support a new bi-partisan bill yesterday which, if passed by the Senate, would impose mandatory sanctions on anyone involved in Iran’s ballistic missile program, it would also tighten sanctions on Iran’s Revolutionary Guard and reinforce an arms embargo. However the committee also agreed not to tinker with the current P5+1 agreement over Iran’s nuclear program. The decision to press ahead with a fresh round of sanctions was criticized by the former US Secretary of State, John Kerry, who warned the committee that such a move could inadvertently lead to a collapse of the nuclear accord; “We need to consider the implications of confrontation without conversation,” Kerry tweeted earlier this week.

Nigerian Senators Pass Oil Industry Reform Bill.
Nigeria’s Senate has finally approved a long-delayed oil-sector governance bill which its supporters say will improve transparency and stimulate growth. The ‘Petroleum Industry Governance Bill’ is however just one part of the wide-ranging and comprehensive reforms that make up the overall Petroleum Industry reform proposal, aimed at completely overhauling Nigeria’s energy sector, which has suffered from years of neglect and corruption. The passing of the PIGB means that Nigeria’s National Petroleum Corporation will now be effectively split into two agencies; the National Petroleum Company which will be responsible for petroleum products only, and the Nigerian Petroleum Assets Management Company which will manage the assets currently held by the NNPC as a commercial entity.  A regulator called the Nigeria Petroleum Regulatory Commission is also set to be established and it will oversee licensing, monitoring, supervision of petroleum operations enforcing laws, regulations and quality standards across the sector.

Egypt Conducts Successful Eurobond Issuance.
Egypt raised US$3 bio via its latest Eurobond sale this week at rates which were lower than its last foray into the international debt market in January. The latest issue saw Egypt sell 5Y paper at 5.45% (US$750 mio), 10Y at 6.65% (US$1 bio) and 30Y at 7.95% (US$1.25 bio). The bulk of investor interest came from Europe and the US and it seems that the strong demand encouraged Egypt to offer US$3 bio instead of an anticipated US$1.5-2 bio.  Egypt’s Finance Minister said that this latest bond issue along with the expected ongoing financial support from the IMF and other international agencies means that the government’s funding gap within its 2017/18 budget has “largely been plugged.”

Moroccan Dirham Under Pressure As CB Prepares To Widen Band.
As we approach the time of year when the Moroccan Central Bank had previously indicated it would begin adjusting the country’s long-standing managed FX regime, with the eventual aim of making it free-floating, general liquidity in the small MAD FX market has worsened, driven in part by increased importer demand for hard currency ahead of Ramadan, but also as some firms/players have allegedly become nervous that the changes in June/July could initially result in a weaker MAD, and as such are trying to cover any of their exposures/commitments ahead of it. However this process is expected to be implemented on a very gradual basis, and suggestions are that the CB will begin by first widening its current ‘fluctuation’ band by between 1-3%, and a full free-float is probably still a few years away. We also expect that due to this cautious approach the CB will likely step in to prevent any undue volatility and/or depreciation at the time of implementation. Overall an even more transparent and flexible FX regime is also in the long-run better for the economy, it will allow the CB to have a more independent monetary policy and potentially attract greater investment flows, so the process should be considered a step in the right direction. The current FX regime is a managed basket, consisting primarily of EUR and USD, and the CB currently allows the MAD to float within a 0.6% band, around a mid-rate.

Mozambique’s Economy Expands By 3.90% - Asset Manager Misses Loan Payment.
Mozambique Asset Management has reportedly failed on a US$133 mio loan payment which had also been state-guaranteed. A local newspaper ‘Mediafax’ claims in an article published earlier this week that when the payment deadline on installment ended, an official from the  Ministry of Economy and Finance, had insisted that it was MAM that was responsible for servicing the debt, and that the state guarantee “was not triggered because negotiations to establish a new payment plan are still under way, and interest on arrears which accrues to successive defaults are subject to the same negotiation.” MAM was one of three state-owned firms which took out undisclosed loans totaling close to US$2billion. Meanwhile Mozambique’s economy registered growth of 3.90% during the 1st quarter of this year, although this was lower than the  5.30% achieved during the same period in 2016.

Overseas Consortium Wins Solar Power Contract In The UAE.
A consortium led by China’s JinkoSolar Holdings and Japan’s Marubeni Corporation has been awarded a contract to build and operate a AED3.2 bio solar power plant in the Emirate of Abu Dhabi. The facility will be the world’s largest independent solar plant and once complete will be able to generate up to 1.17 GW of power.

Itinera Seals US$300 Mio Road Contract In Kuwait.
Italy’s Itinera has been awarded a US$300 mio contract to build a new highway in Kuwait.

28-05-2017

AND FINALLY…
The world’s first operational robot policeman has begun pounding the beat in Dubai. The five-foot-seven robot is equipped with cameras, an array of sensors, and has sophisticated artificial intelligence capabilities. Always-on connectivity means that the Dubai Police Force can monitor it remotely 24-7, and are able to tune into a live video stream as the robot makes its rounds.

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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