Communique from Dec. 4,2017 Breakfast Meeting


    The maiden Breakfast Meeting of the treasurers of the non-bank corporate sector was held at The Intercontinental Hotel, Lagos on Thursday, 14th December, 2017. The theme of the Breakfast Meeting was “2017 Economic review and Prospects for 2018”, with panel discussions on Impacts of the Business Environment and Ways of Restoring Confidence in the Financial Markets.
    The keynote address was delivered by Dr. Doyin Salami, Member, Monetary Policy Committee of the Central Bank of Nigeria while the Panel Discussants were experienced practitioners drawn from the Nigerian financial markets, Market Organizers and the Corporates. It was generally noted that the Breakfast Meeting was very apt given the need to review the Nigerian economic situation and its impact on businesses in the face of its recovery from recession during the second quarter of year 2017 as well as ensuring that Corporates are well prepared for the year 2018.

    2017 Economic Review and Prospects for 2018

      According to Dr. Doyin Salami, despite the GDP growth of 1.4% recorded in Q3 2017, up from 0.55% as at Q2, the economy remains fairly fragile as major sectors; manufacturing, telecoms, trade and real estate are contracting and this recorded growth in the oil sector can be attributed to two main factors which remain unsustainable:

      • Higher Oil Prices
      • Calmness in the Niger Delta

      In his opinion, Nigeria is yet to grow at the required rate given the recent acclaimed recovery from recession. To this end, the three ways to recover from a recession were put forth:

      • Grow the economy
      • Accelerate growth
      • Recover

      Growth for Nigeria implies getting growth back to 6.4% as it was in Q2, 2014 which is a far cry from this figure. A brief review of 2017, brought to light the following:

      • Costs are high and rising, especially food cost which is rising at about 20% YoY.
        Inflation stands at about 15.98%.
      • Only two of the big six sector appear to be growing; oil 26% and agriculture 3.06%.
      • Nigeria still faces a multiple foreign exchange challenge, which impacts negatively on reserves.
      • There seem to be political pressure to bring interest rate down as the top 100 borrowers are responsible for about 44% of loans.
      • Government budget assumptions seem not realistic. E.g non-oil revenues to grow by 30%.

      It was further opined that 2018 will be driven majorly by 3 impulses:

      • Oil prices – this will be constrained by shale oil production which is likely to revolve around USD55/58 per barrel. With production quantities projected at 1.85 million barrels. Nevertheless, oil prices will also be prone to two likely possibilities.
        • Outcome of the anti-corruption war in Saudi Arabia (e.g; stability will lead to an upside)
        • A couple of unfortunate tweets to instigate the market.
      • Impact of foreign policies. Two key policies to look out for include;
        • James Powell becomes the US Fed Peace in 2018 and revenue goes down
        • US President spends USD3 trillion on infrastructures which further widens the market
      • Election
        • Naira weakens in response to the election
        • Inflow of FDI should be expected by Q2

      If APC continues in power, policies are likely to remain the same;

        • State budgets for the period are worrisomely high
        • The fiscal space is likely to create a bit of problem
        • Growth is likely to revolve around 3%
        • Downward pressure on Inflation between 13-15%
        • Exchange rate to revolve around plus/minus 5% of the current rate
        • Central bank to reduce MPR by 200bps or less
        • Fragility of the economy will ease because staff salaries will be paid
        • Interest rate to remain stable

      Implication for Corporate

        Rates are still high, given the fact that Nigeria is unable to fund the economy (Compared to South Africa, which is able to fund her economy about 10 times) resulting in high interest rate. Also, foreign exchange is likely to pose a bit of challenge for Corporates due to oil volatility. To this end, it was recommended that expanding the size of the Nigeria financial sector and lower government domestic borrowing will shrink interest rate. The Association of Corporate Treasurers (ACTN) was further implored to evolve a framework for naira management.

        Panel Session

          The panel session brought to the fore a number of deliberations and was strategic in addressing pressing issues as they relate to the Corporates.
          It was recommended that to achieve stability in the management of foreign exchange, the Central Bank should allow forces of the market to dictate and stabilize the naira. Also, it should put in place a framework that is internally consistent.
          Other options asides borrowing from foreign markets were stated as issuing Commercial Papers and bonds, which calls for creativity, proactiveness and deepening skills to face the changing environment.
          As part of the deliberations, Manufacturers anticipate a predictable market that aids planning through the elimination of multiple foreign exchange rates, dollar leakages, crowding out interest rates and inability of the government to fund the economy.
          Key areas of focus for Treasurers in this clime as they manage liquidity, risk and pricing were put forward to include:

          • Taking advantage of the capital market, which will be influenced by interest rate.
          • Taking advantage of hedge products. FMDQ plans to build a functioning derivative market to support Corporates also.
          • Proactively manage business by considering interest and exchange rates
          • Timing is crucial and the capital market needs to be accessed within the first quarter of 2018

          Corporates were further encouraged to be forward looking, plan based on forecast exposures and take advantage of the association to engage and compel the government on policies of interest.

          Communique from May 4 ,2017 Breakfast Meeting


            The quarterly breakfast meeting of the Treasurers of the corporate sector was held in Africa & Asia Room of the Eko Hotels & Suites, Lagos on Thursday 4th May, 2017. The theme of the Breakfast meeting was “Nigeria’s Road to Economic Recovery: 59 Steps in 60 Days” with panel discussions on the Nigerian Autonomous Foreign Exchange Fixing (NAFEX).

            The Keynote speech with the title “Getting Out of Recession” was delivered by Dr. Ayo Teriba, Chief Economist and CEO, Economic Associates. Other panel Discussants were experienced practitioners drawn from the banking industry. In his keynote speech, Dr. Teriba, conceded to the irrefutable fact that the current state of the economy is challenging and turbulent in terms of economic growth, inflation, foreign exchange rate. Hence, the focus of his address was on ways of deriving value from the current economic state, which he discussed on two main heads of ‘economic circles’ and ‘policies’.

            It was strongly opined that the recession, although presumed and anticipated to be structural, is purely cyclical as evidenced in the way it appears to be temporary but has begun the process of reversing itself. The recent success of the OPEC price rally and dialogue in the South-South region of the country which resulted in the current increase in oil price are indisputable evidences that the recession is cyclical.

            Asides the many deliberations on the impact of the recession, suggestions on a possible way out (ranging from diversification of the economy to intensive investment in agriculture) have been made. While the suggestions remain laudable ones, we cannot fail to recognise the fact that there is a global commodity glut and hence commodity prices cannot lead to recovery – at least in the short term. Needless to say, agriculture is being held back by the huge gap between production and supply due to transportation cost, which leaves us with a slim chance of reaping the immediate benefits of diversification.

            However, it is not all gloom and doom for Nigeria as there are sure avenues, like infrastructural development in rail and energy, that can ensure sustainable growth and development in the country. In essence, diversification can only thrive in the presence of infrastructural development in such areas that amplify the nation’s area of strength and prepare the ground for future diversification. Also, contrary to popular opinion, oil exports can lead to a greater boost of the Nigerian economy compared to other non-oil revenue.

            Economic policy was the other focal discussion point at the breakfast meeting. These policies were considered in the light of their impact on easing the burden placed on the economy by the recession.

            Financial policy was discussed in view of the foreign exchange rate. The CBN responded to the hike in foreign exchange by restricting domestic and external demand of FX. However, the appropriate reaction should have been a quantitative easing not a tightening.

            Accordingly, the following were put forward as a way of curbing forex scarcity; bridging the infrastructural gaps, promoting economic stability and deriving value from the current economic situation, promoting exports, opening the vents of forex through non-oil channels and investments by soliciting remittances from diaspora via government bonds and FDI. Countries like India and Saudi Arabia are laudable examples of countries that are opening up their economy by relaxing policies and making public announcements that would attract FDI even though they still maintain a restricted list of sectors not opened up to FDI. The undeniable benefits of opening up the economy are evidenced in India, which is currently the most open economy for FDI in the world.

            Panel Session

              Another major highlight of the seminar was the panel session where astute practitioners in the financial market sector deliberated on issues bordering on the Nigerian Autonomous Foreign Exchange Fixing (NAFEX). They also buttressed the need for the Federal Government to stimulate liquidity by opening up the economy. As a call to action, it was advised that the government should put in place a department that would focus on encouraging FDI through various channels and policy appeals.

              In addition, it was also recommended that the CBN should be more transparent with their policies and replace the current reactionary approach to managing forex with a more sustainable one that thinks ahead in order to boost supply. Further, it was recommended that the CBN needs to ensure firm banking supervision in order to aid impactful policy implementation and end the instability commercial banks bring due to their excess liquidity.

              Market participants were also not left out as they were encouraged to actively participate in the market and cease in their deliberate speculations and inaction as no nation can shrink its way to economic recovery. It lies with the corporate bodies to bring the economy back on track. FMDQ is also helping with transparency by providing price quotes to boost the confidence of market players.

              Communique from Dec. 15, 2016 Breakfast Meeting


                The maiden breakfast meeting of the Treasurers of the corporate sector was held in Africa & Asia Room of the Eko Hotels & Suites, Lagos on Thursday 15th December, 2016. The theme of the Breakfast meeting was “The Economic Outlook for 2017”, with panel discussions on Currency, Funding and Liquidity Management.

                The Keynote address was delivered on behalf of the Deputy Governor, Economic Policy, Central Bank of Nigeria, Dr. (Mrs.) Sarah Alade by the Director of Monetary Policy, Central Bank of Nigeria, Mr. Moses Tule. Other panel Discussants were experienced practitioners drawn from the Nigerian financial markets. It was genarally noted that the breakfast meeting was very apt and appropriate given the current state of the global and domestic economy. The global growth has stalled while the Nigerian economy has been expressing sluggish growth and has been in recession since the 1st quarter of 2016.

                Building a strong Financial Institution: The Role of Monetary Authorities, Regulators and Policy makers

                  The keynote address alluded to the fact that the external environment is fraught with so many uncertainties; ranging from oil prices, foreign exchange, outcome of the US elections and the impact on the Asian economy, and the Nigerian situation is worsened by poor infrastructure, fallen price system, depreciation of the currency, low fiscal capacity, weak commodity prices, etc. which have left monetary authorities with very difficult choices in the tradeoff between tackling inflation, supporting growth and exchange rate stability.

                  The speaker was emphatic that there is a need to focus on building strong financial institutions that can withstand these shocks and uncertainties. Noting also, that the era of cut throat competition was over for good and the survival of the financial system and the economy rest on the collective effort of treasurers by ensuring increased financial intermediation.

                  The address also observed that the rising fiscal activities in the country has put pressure on the exchange rate. Therefore, while the CBN is working on tackling inflation, poor economic growth and foreign exchange, the Bank regardless needs to keep a keen eye on prices, stability and the quality of financial intermediation. A call was also made to corporate treasurers to promote the treasury function through transparency, professionalism, corporate governance and ethics.

                  Possible Economic Policy Outcome for 2017 & Implication for the Corporates

                    A focal discussion point at the breakfast meeting was on the impact and implication of policies on Corporates. Highlight of key economic policies that corporates are advised to watch out for in 2017 are listed below;

                    • Corporates should be concerned about the liquidity of the institution which is fundamental to the treasury function.
                    • Given that Interest rates are high and the economy is tightening, focus should be on access to liquidity especially by medium size corporates.
                    • The need for corporates to be aggressive in terms of pricing (commissions, fees/cost of services, interest rate etc.).
                    • The changing macroeconomic environment; as the ability to accurately forecast the likely changes will be one of the biggest challenges for Corporate Treasurers in 2017.
                    • More clarity to the process of pricing will also be key in 2017.
                    • Higher cost of borrowing.

                    Speaking also on the impact of politics on policy, and the measures put in place to check the negative impact, it was observed that policy and politics both work in harmony. To this end, the following were advised;

                    • The need to build democratic institutions.
                    • Strong political institutions need to be put in place as macroeconomic policies can only be effective when
                    • political institutions are strong.
                    • Government must provide a forward-looking policy framework that economic builders can key into
                    • The need for stakeholders’ collaboration

                    Corporates and counterparty risk management

                      The panellist emphasised the need for government to accurately articulate the key economic issues. Adding that the economic cash flow issue needs to be addressed and the Government needs to encourage and boost production to tackle stagflation.

                      There was also a call to relieve the banks of the pressure of funding to enable corporates access funds from other sources, as this would promote competitive rates.

                      Considering counterparty risk, corporates are therefore advised to plan with the resources at their disposal, while ensuring their cash flow can support funding.

                      Alternative and non-conventional mode of funding available to corporates: The role of FMDQ

                        Corporate Treasurers were advised to always articulate their problems and think of solutions to them from the bankers’ and investment bankers’ perspectives.

                        FMDQ to publish private company bond rules in 2017. This is anticipated to open the debt capital market to private companies.

                        Foreign exchange disparity: issues and recommendations

                          A major problem identified for 2017 at the breakfast meeting, was the lack of confidence in the ability of the CBN to implement its policies.

                          Given the harsh impact of the foreign exchange disparity in the economy, measures that could be taken to reduce the disparity were identified to include; promoting liquidity in the capital market, focus on the productive sector and on producing quality finished products that are price competitive in the global market.

                          There was also a call to the government to consider restructuring the economic team to encompass a more diverse calibre of representatives in terms of skills and expertise as this would be a major foundation for addressing the current structural issues in the economy.



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