Archive for October 2013 | Monthly archive page


IT’S clear from the latest Brait investment presentation that the delisting of fashion retailing conglomerate Pepkor in 2004 robbed the JSE of an outstanding consumer business.

The Pepkor that has emerged nine years later is vastly different to the listed company of 2004. Not only has Pepkor shifted strongly into African and international markets, but it has also diversified its core fashion offering to successfully include cellular sales and other nonclothing accessories.

Investors these days can only access Pepkor — which still has prime mover Christo Wiese as a major shareholder — via investment company Brait. Pepkor anchors Brait’s investment portfolio, representing — with a conservatively estimated value of R10.15bn — almost 60% of net asset value.

In a tough trading environment where listed fashion retailers have been battling to achieve double-digit sales growth, Brait was comfortable increasing the value of its Pepkor stake more than 30% at the end of September.

While this may raise eyebrows, Brait’s latest investment presentation (covering the half-year to end September) convincingly breaks down Pepkor’s year to end June performance to justify the marked increase in value.

Pepkor — trading mainly through Pep Stores and Ackermans in South Africa, Pepco in Eastern Europe and Best & Less in Australia — pushed up sales 27% to R33.6bn.

The company traded on a margin of 11.2%, and pumped up pretax profits 31% to R2.88bn. Cash flow from operations was 13% higher at R3.75bn, which represented a reassuring 99.9% of earnings before interest, tax, depreciation and amortisation (ebitda).

Pepkor’s operating performance makes most of its listed peers — most notably credit fashion retailers such as Truworths and The Foschini Group — look fairly dowdy by comparison.

In truth, though, Pepkor’s core southern African sales — taken in isolation — were not that different from the recent top-line performances from Mr Price, Truworths and Foschini.

Pep’s local sales increased 15.8% to R14.4bn following the opening of 101 new stores (bringing the chain to 1,578 stores).

Ackermans’ sales in southern Africa were up 11% to R5.3bn with 18 news stores opening.

Although Pepkor has exposure to high-growth living standard measure 1-6 categories, Brait CEO John Gnodde said in a presentation this week there were several factors hindering the company’s local growth, including the effect of unsecured lending and pressure on the growth in government grants.

Pepkor’s strength, though, is that its sizeable retail footprint in South Africa is scalable, but is not easy for competitors to replicate.

In the past financial year Pepkor’s retail space increased 15% to more than 1.6-million square metres and the number of retail outlets was up 8% to 3,418 stores.

Pepkor’s “X-factor” arguably comes from outside southern Africa. In the year to end June, R10.6bn, or 31%, of total revenue was derived from outside South Africa.

Pep Africa shows much promise with a 32% increase in revenue to R1.3bn. Mr Gnodde describes the African markets — where Pep Africa operates across 10 countries — as an exciting opportunity, but a challenging environment. He argues it is easier to cross geographies as a cash rather than credit retailer.

But he cautions: “Each country presents its own set of hurdles to overcome, and (Pep) needs a sizeable presence in each country to get a proper read.”

He says although African markets offer higher growth prospects, Pep only achieves enhanced margins once critical mass is reached.

Much has been made of Pep Africa’s recent push into Nigeria, Africa’s most populated country.

Mr Gnodde says it is still early days in Nigeria, but says Pep is trading well in a challenging environment.

The Brait investment presentation showed that in the year to end June, there were 15 new store openings in Nigeria and eight in Angola — representing the bulk of the 25 new stores opened by Pep Africa (which now operates 152 stores).

Mr Gnodde says Pep Africa is on track with a three-year store-growth target to exceed a 15% compound annual growth rate on June 2011’s 118 stores.

Pepkor’s second-biggest market is lumped under Southeast Asia, but is underpinned by the Best & Less offering in Australia, as well as recent acquisition Harris Scarfe.

The 276 outlets in this hub generated some R7.2bn in revenue, up 62% on last year. Mr Gnodde concedes this top-line growth is spurred mainly by the recent Harris Scarfe acquisition, but believes there is also opportunity for margin improvement in Australia in the financial year ahead.

Pepkor’s Pepco — which currently trades in Poland and Slovakia through a 451-store network — is the fastest-growing division, with revenue growing 56% following 92 new stores opening.

Source: BD Live


Zimbabwe has the potential to become the fastest growing economy in Africa over the next seven years according to Harvard University professor Ricardo Hausmann.

And this will not simply be because of its natural resources, especially the diamonds that are being discovered all over the country.

Growth, Hausmann says in his 362-page reported entitled: The atlas of economic complexity-mapping paths to prosperity, is “driven by knowledge at the level of society, not the individual”.

According to the report, Zimbabwe has the potential to become the world’s sixth fastest growing economy in the world in the seven years to 2020 behind the world’s economic giant, China, followed by India, Thailand, Belarus and Moldova.

The highest placed African country after Zimbabwe is Tunisia at 47. Followed by South Africa at 55, Egypt at 63, Namibia at 72, Kenya at 73, Senegal at 74 and Mauritius at 77.

The study was restricted to 128 countries, but they account for 99 percent of world trade, 97 percent of the world’s total gross domestic product and 95 percent of the world’s population.

Zimbabwe is, however, fourth in terms of growth domestic growth behind the three East African countries of Uganda, Kenya and Tanzania.

Source: Zimbabwe situation

african summit

Africa’s current growth “turning point” should not be construed as a sustainable-development “tipping point”, African Development Bank (AfDB) president Donald Kaberuka stressed on Monday. He added that accelerated economic integration would offer the greatest prospect for sustaining the current growth momentum and building resilience against internal and external shocks.

Addressing the eighth Africa Economic Conference in Johannesburg, Kaberuka said Africa, which was currently growing at around 5.5%, needed a minimum growth rate of 7% over a sustained period to create jobs and tackle chronic poverty. The debate, he added, was no longer about the need for regional integration to support that vision, but rather about ensuring accelerated implementation.

“If you look at where the global economy is going now, the export model is beginning to show its limitations. So, all countries are trying to develop their domestic markets,” he said, asserting that Africa’s “domestic market” was currently inhibited by the fact that it was broken into 54 individual countries.

Flanked by African Union chairperson Dr Nkosazana Dlamini-Zuma, Kaberuka likened the fragmentation to declaring South Africa’s nine provinces as separate countries and still expecting the same economic performance, notwithstanding the accompanying limitations to the movement of goods and people and the proliferation of currencies and bureaucratic restrictions.


For her part, Dlamini-Zuma urged the continent’s eight, often overlapping, regional economic communities (RECs) to “take the bull by the horns” and deal with the prevailing constraints to accelerated regional integration.

She commended the 27 countries participating in an initiative to create a free trade zone, or Tripartite Free Trade Area (T-FTA), from Cape Town to Cairo up Africa’s East coast and lauded the recent decision of the Economic Community of West African States to pursue a customs union. But she also lamented the slow pace of progress, particularly with regard to the T-FTA talks between the three RECs of the Common Market of Eastern and Southern Africa, the East African Community and the South African Development Community.

Dlamini-Zuma also lambasted the European Union’s efforts to conclude reciprocal Economic Partnership Agreements (EPAs) with individual African countries, saying that these did not “encourage the spirit of integration” that Africa was currently envisaging. “If anything, they [the EPAs] undermine that.”

Kaberuka encouraged leaders to “rethink the zero-sum calculus” currently impeding regional-integration progress for fear that should one country benefit the other might lose out. “Evidence is ample that along the way it is a win-win for each and every one.”

However, United Nations Economic Commission for Africa deputy executive secretary Dr Abdalla Hamdok cautioned that, while regional integration is a key developmental tool, it would also be essential for countries to weigh both the benefits and costs so as to boost gains and minimise losses. “Strategies should include a transparent, equitable, rules-based system for sharing gains and resolving disputes,” Hamdok said.


Also speaking at the event, South Africa’s Finance Minister Pravin Gordhan stressed the need for early successes and tangible progress on both cross-border infrastructure projects and trade-facilitation initiatives, such a one-stop border posts.

“We need to show a half a dozen success stories over the coming five years,” Gordhan averred, while also underlining the need for a greater sense of urgency and the creation of institutions capable of supporting economic integration.

He also emphasised the need to improve project preparation, indicating that money could be secured for well-designed infrastructure projects. Part of that finance could be mobilised through creating the conditions necessary for African investors to repatriate the $500-billion in savings that was currently invested abroad.

Kaberuka saw a major opportunity arising in the power sector, but said progress would only be possible if reforms were made to deal with ill-conceived energy subsidies, which were placing severe strain on even well-managed national utilities.

The development of African infrastructure would require “loads of money”, but Kaberuka said major strides could also be made simply through the implementation of the commitments that had already been made by African leaders.

He referred specifically to the Yamoussoukro Agreement, which was concluded in 1998 in a bid to deregulate the aviation sector. “That single act alone would most likely bring more investors into the sector, driving flying costs down, probably as much as 40%,” Kaberuka said.

Source: Engineering news


First National Bank’s eWallet continues to show strong growth in its African operations with a 119% year-on-year increase. It has also maintained growth in SA with the total number of eWallets in all countries reaching 2.5m‚ an 84% increase from the previous financial year.

The eWallet was launched in 2009 as part of FNB’s strategy to increase the accessibility of financial services to all South Africans. According to the Mobility 2012 report by World Wide Worx‚ 51% of the mobile money users in SA were FNB eWallet users. Mobile money involves the use of a cellphone to transfer funds between people and bank accounts‚ to deposit or withdraw money‚ to pay bills or to buy services such as airtime and pre-paid electricity.

At a presentation in Cape Town last week‚ Yolande van Wyk‚ chief executive of eWallet solutions at FNB‚ said that the success of eWallet in SA and in the rest of the continent proved there was a growing need to send money easily and instantly. She said over the past financial year alone‚ over R3.2bn had been sent into eWallets across countries in which the service is available. These include SA‚ Botswana‚ Namibia‚ Swaziland‚ Lesotho and Zambia.

Botswana, Namibia show growth

“Outside SA‚ two countries in particular had shown high customer acceptance‚” Van Wyk said.”Both Namibia and Botswana’s growth has exceeded expectations with about 17% of citizens in Botswana and‚ in less than a year‚ more than 5% of the population in Namibia receiving money in an eWallet,” she said.

“The growth of eWallet in the African subsidiaries has been a lesson in how local conditions (influence) how people adopt and use a service. We have noticed that Botswana and Namibia’s low population density contributes to the take-up. With a population density of less than four people per square kilometre in both these countries‚ there is clearly a need to send money across a distance‚ and eWallet has fulfilled this need‚” Van Wyk said.

Building the business in Africa

She said that in SA there were no discernible corridors as eWallet users tend to send money within a region or province‚ with Gauteng being the predominant province from which people are sending and receiving money.

“Outside of Namibia and Botswana we are still building the eWallet business. Some of our (businesses in) countries such as Zambia and Lesotho are relatively young‚ and we believe that eWallet will support the growth of the bank in those countries‚” Van Wyk said.

“Also with the expansion of our ATM network‚ as well as new technologies such as the Slimline ATMs‚ we have the potential to grow the eWallet business even further across all countries‚” she said.

Recently the bank introduced the Slimline ATM‚ to replace its mini-ATMs‚ which are designed to function in remote and rural areas that are not supported by conventional bank branches or ATMs. Slimline has a touch screen with an integrated camera‚ a card reader for chip- and pin-enabled cards with a numeric keypad.

Source: biz community


Russian technology company Fairwaves was one of 40 companies that launched at last week’s Demo Africa conference in Nairobi, Kenya. Venture capitalists, angel investors, investment fund managers, entrepreneurs and technology experts attended the two-day conference billed as Africa’s premier launch pad for emerging technologies.

Founded in 2011, Fairwaves sells equipment and provides hosted services for mobile operators. The Moscow-based company launched a low cost field-deployable GSM base station at last week’s conference.

Fairwaves CEO Alexander Chemeris told How we made it in Africathat the company is seeking to solve the “huge problem of connectivity” in most of Africa’s rural areas.

“We are specifically targeting the African market. There are so many people here who are still not connected to mobile networks. We are designing in Moscow, manufacturing in Europe but our market is here. This is the biggest market for us. There are 600m people in Africa who still have no access to mobile networks.”

The small base station made by Fairwaves enables mobile phone users in unconnected regions to make calls within a 10km radius. The base station currently sells for US$5,000.

“We may work with traditional mobile operators helping them expand their networks. But the most interesting thing we are trying to push is a model where a village or a county buys their own mobile network,” says Chemeris.

“We are working with Mexico installing networks in villages. We also have some base stations in Russia and the Netherlands. We are doing trials in different other countries. There are people in Somalia ready to buy.”

Spectrum regulation and working with traditional mobile operators, said Chemeris, are the biggest hurdles Fairwaves faces in Africa.

“Technology here works; it’s not a problem. Building partnerships is not a big deal, but changing the policy [to allow villages to own their networks] is a challenge.”

However, Chemeris is optimistic.

“We believe we can find very good partners here in Africa like in NigeriaKenyaSouth Africa andRwanda. We are looking at all those countries.”

Russian investment in Africa

He noted that while there is significant Russian investment in Africa, most investors are unaware of the opportunities on the continent.

“There are investors who are interested in Africa, but it is not mainstream yet. They [investors] need to see some success stories,” said Chemeris. “Russia is a fast growing country itself and there is a lot of business to do there. Russian investors are more focused on Europe and US as more stable markets and more predictable markets. Most of them are slightly afraid of less stable economies.”

Andrey Bakhmat, chief operating officer at Fairwaves, said there is a need for more education among Russians about Africa and its changing business environment.

“It is difficult to find potential of Africa when you are sitting in Moscow in comfortable apartments. It is simply difficult to understand that potential here is huge,” said Bakhmat.

Chemeris agreed, adding: “Very few people in Moscow travel to Africa expect [to] Egypt and [even there] they just go to resorts. [Russian] people just don’t know about Africa.”

He advised Russian investors coming to Africa to seek partnerships with local companies and people.

“They should understand that Africa is not a country, it’s a continent. [You need] to find people. People are the key everywhere. If you have good partners, it’s a good deal.”

Source: How we made it in Africa


Johannesburg -Shoprite [JSE:SHP] reported a 10% rise in July-September sales on Monday, helped by a strong showing at its sub-Saharan stores outside its struggling home market.

Shoprite, Africa’s biggest grocer with stores in several sub-Saharan countries, said sales outside South Africa surged 29.1% in the three months to end-September, more than three times the growth rate at home.

Consumer demand in the local economy remains tepid, given the weak economy and as banks tighten their lending criteria. Shoppers have also been squeezed as the weaker rand currency fuels inflation and higher petrol prices.

Shoprite, which runs more than 150 supermarkets in 16 African countries outside South Africa, opened 14 new outlets in those markets in the past year, it said.

On Monday it said it would open a total of 46 new stores by the end of the year.

The company said in August it could double the number of stores across the fast-growing continent in next four years with the bulk of new outlets in oil-rich Angola and Nigeria.

After more than two years as investor favourites, South African retailers have fallen out favour due to concern that high personal debt levels and reluctance among banks to lend will put further pressure on spending.

Shares in Shoprite, which are down about 12% so far this year, fell 0.7% to R179.46, lagging behind a 0.6% gain the JSE Top 40 index.

Source: fin24


NELSPRUIT – Mozambique could be on the brink of another civil war. On Monday, the Mozambican army staged an attack on the rebel group, Renamo, and took over its military base near the Gorongosa Mountains in central Mozambique. In response to this attack, Renamo attacked a police station in Maringue, about 1 000 km from Maputo. The attack lasted for nearly an hour.

Renamo, which is also the main opposition party, accused the Mozambican government of trying to kill the group’s president, Mr Afonso Dhlakama. The group then annulled the peace accord which was signed in 1992 and ended the country’s 16-year-long civil war.

It ended in 1992 against communist-backed Frelimo, after Renamo lost its Cold War backers Rhodesia and apartheid South Africa. About one million Mozambicans lost their lives in this conflict.

Renamo spokesman Mr Fernando Mazanga said in a press release, “The Frelimo government used troops and heavy artillery to attack the residence of the Renamo president, Afonso Dhlakama, to kill him in cold blood.

“This irresponsible attitude of the commander in chief of the country’s security forces (president Armando Guebuza) signals the end of the Rome Peace Accord,” Mazanga added.

Monday’s attack had no casualties, with Renamo saying their leader had escaped unhurt, though it did not release any details about his whereabouts. However, other reports suggested that 36 lives had been lost in the battles.

Tension between the Mozambique Liberation Front, also known as Fremlio, and Renamo has been escalating since last year.

The rippling effect of these incidents has not been really addressed locally. The Department of International Relations and Cooperation spokesman Clayton Monyela said on Thursday, that South Africa had called for calm in Mozambique. He said it had called for all parties to engage in dialogue to resolve their differences.

Lowvelder asked him if he knew whether in this specific instance, it was safe for South Africans to go to Mozambique at present. Monyela responded by saying “How must I know that, we don’t deal with tourists.”

With the festive season only six weeks away, numerous tourists are gearing themselves up for their annual holiday in Mozambique. According to police Col Mike Mhlanga, stationed at the Lebombo border, and the information provided to them by the Department of Home Affairs, the number of South Africans who went through the border to Mozambique in December 2011, was 438 220 and it excluded those flying in or entering at other border posts.

A senior analyst of Africa Global Risk Analysis, Mr Markus Weimer, said the security situation in Mozambique remained dynamic in the wake of the government assault on Renamo headquarter. He said Renamo guerrilla-style attacks were likely but would probably target government security services.

“Nevertheless opportunistic attacks or acts of sabotage against transport infrastructure and road users cannot be ruled out, especially in central Sofala province. The situation is likely to stabilise before the holiday period in December, but developments should be closely monitored. Crime continues to be a threat and incidents typically spike during this time.”

Lowvelder spoke to defence analyst Mr Helmoed Heitman about the situation across the border. He said that, in his opinion, the chances of a war depended solely on how the government reacted to Renamo.

“If the government now tries to establish peace talks or negotiations with Renamo, it could avoid another civil war.”

He said the biggest challenge Renamo faced was finance. Yet Heitman pointed out that last month off-shore gas resources were discovered off the Mozambican coastline.

“This could lead to Renamo getting financial backing from a number of areas such as other interested countries in negotiating contracts on resources after it was placed in a position of power.”

He added that illegal activities also contributed financially towards the funding of many rebel groups. “Mozambique is plagued by illegal activities including rhino poaching, as well as drug and human trafficking.”

Heitman said their borders were not guarded and the government had not upgraded the arms and weapons to safeguard itself from attack. An eyewitness from Mozambique also clarified this by telling Lowvelder that the governments military vehicles had looked as if they were still from the ’70s.

“This leads it to be very open to arms easily smuggled into the country to a rebel group as not even the coastline is guarded. You could easily land tanks on the coast without being noticed.

“It is not uncommon for rebel parties to have agreements with illegal traders, for example Al Shabaab has a deal with Somalian pirates for sharing profits.”

Source: Low velder


SOUTH African retailers’ expansion into the rest of Africa is increasing the availability of — and demand for —-quality agricultural produce and processed food products, the MD of logistics firm DHL Express SA, Hennie Heymans, said on Wednesday.

According to a report by the World Bank released in March, the size of Africa’s food and beverage market is projected to reach $1-trillion by 2030 — more than three times the current market, which is worth $313bn.

South African consumer goods and food and beverage companies have been growing their exposure to the rest of the continent, targeting countries offering strong economic growth and rising consumer demand. Last year, Tiger Brands acquired a majority stake in Nigerian flour milling company Dangote Flour Mills, adding to its other food interests in the country.

For the six months ended March, Tiger Brands reported strong demand from Southern African countries for exports, and said its east and central African businesses in Kenya, Ethiopia and Cameroon achieved strong turnover growth.

Meanwhile, Pioneer Foods has prioritised Africa for growth, flagging the continent as “a significant opportunity for the group in the medium term”. Pioneer’s African operations span Botswana, Namibia, Zambia and Uganda.

Brait said earlier this month it was looking for opportunities for its Premier Foods company in the fast-moving consumer goods market in the rest of Africa, while other companies such as AVI say they have built a strong presence in some African countries and are eyeing further opportunities.

Global brewing giant SABMiller has shown strong growth from its emerging-market businesses, including Africa.

Mr Heymans said the agribusiness sector in particular was an industry showing significant growth in Africa. Agribusiness referred to agricultural production by farmers, as well as secondary processing, distribution and retailing.

The expected growth of Africa’s food and beverage market “highlights the growing market and many opportunities for South African agribusiness and related value chain role players to expand into Africa,” Mr Heymans said.

However, a lack of infrastructure was a constraint, as the lack of access roads hindered the delivering of produce to the market. “Removing logistical barriers will increase productivity and improve service delivery greatly,” Mr Heymans said.

Agribusiness Development Corporation CEO Hennie van der Merwe says farmers in South Africa and other agribusiness firms were increasingly looking to Africa for growth opportunities largely because of stifled growth locally. He said lack of skills in Africa provided opportunities for local businesses and farmers.

Source: BD Live


Olive Ndaka, writing for Rwanda Eye, says that the country will see the launch of a high-speed (4G LTE) broadband network at the Transform Africa 2013 Summit taking place at the end of the month.
For more:

The launch of the network will happen during the Transform Africa 2013 Summit which is taking place in Rwanda from 28-31 October 2013.

Source: biz community


NIGERIAN President Goodluck Jonathan’s political troubles are increasing pressure on the central bank of Africa’s second-largest economy to devalue its currency, risking higher prices on all goods from food to oil.

While Nigeria is the continent’s biggest producer of crude, it must import 70% of its fuel needs because of inadequate refining capacity. That leaves the nation vulnerable to swings in exchange rates, leading the central bank to manage its currency, the naira, in a trading range against the dollar. The peg is becoming more difficult to defend as a schism in the ruling party pushes the naira’s six-month volatility to 6.72%, the most since June last year.

Sub-Saharan Africa’s second most-traded currency fell 2.4% this year as central-bank governor Lamido Sanusi warned of increasing demand for dollars to be used for political patronage before elections in 2015.

“In the run-up to 2015, we’re going to see a lot of investors using that as an excuse to just exit the market,” said Wale Okunrinboye, an analyst at Asset & Resource Management, which manages more than $2.8bn.

“Given the current state the ruling party’s in, there might be more spending next year ahead of the elections.”

The naira weakened to 163.9 against the dollar on September 10, its lowest since December 2011 based on closing prices, and was at about 159.90 on Tuesday.

Its price swings are Africa’s biggest after the rand at 15.3% and Botswana pula at 8.7%.

Currency volatility and depreciation are pressuring Mr Sanusi to adjust the naira’s trading band to allow it to weaken beyond 155 a dollar, plus or minus 3%.

“Mounting market pressure” will lead the central bank to lower the peg to 160 naira to the dollar in three months and 165 naira in a year, JF Ruhashyankiko, an economist at Goldman Sachs in London, said last Monday.

Mr Sanusi has pushed back by maintaining a record-high 12% interest rate since 2011 to stem the naira’s decline and cool inflation, which slowed to a five-and-a-half-year low of 8% last month.

“We should be able to maintain the naira within our target band,” Mr Sanusi said on September 24. “We’re committed to the stability of the exchange rate and we’ll not, unless we’re forced to, allow the naira to weaken.”

Known as the New People’s Democratic Party, the ruling party faction led by former vice-president Atiku Abubakar is challenging the leadership of chairman Bamangar Tukur, who has the support of Mr Jonathan.

Political infighting and spending increases before elections are “part of the domestic risk”, Giulia Pellegrini, a sub-Saharan Africa economist at JPMorgan Chase & Company said. The naira would probably trade at the weaker end of its official band in the next nine months, she said.

Presidency spokesman Reuben Abati, Olisa Metuh, a spokesman for the ruling party, and Ugochukwu Okoroafor, a spokesman for the central bank, did not respond to phone or e-mail requests for comment.

The Central Bank of Nigeria has already tightened controls at twice-weekly auctions to manage the naira since October 2.

Banks can now only buy dollars with proof of requests from customers and the reasons for the purchases, Lagos-based Forward Marketing Bureau de Change CEO Abubakar Mohammed said. The central bank was seeing “non-imported related demand” for dollars due to “the build-up in political activities”, Mr Sanusi said in the capital Abuja on September 24. He said Nigeria was waging “a civil war” against those indulging in political patronage.

“Elections tend to support a weakening of the local currency as the demand for dollars increases significantly,” said Morten Bugge, the Kolding, Denmark-based chief investment officer at Global Evolution, which manages $2bn and holds Nigerian debt.

“It’s a major concern.”

Higher currency market volatility risks hurting carry trades in the naira, where investors borrow cheaply in one country to invest in others where returns are higher. Nigeria’s main rate compares with a range of zero to 0.25% for the US and Switzerland and 0.5% for the euro region.

Six-month volatility in the naira has jumped from a low for the year of 2.62% on February 22. Price swings can wipe out the profit they get from the interest-rate differential.

UBS’s V24 carry index climbed 4.8%, to a reading of 437.41 on Monday, since reaching a seven-year low of 417.32 last month. Globally, the trade has prospered in the past two months. JPMorgan’s global FX volatility index slid to 7.74%, its lowest since January and down from a one-year high of 11.96% in June.

The naira is the ninth worst-performer among 24 African currencies tracked by Bloomberg this year, with both the rand and Namibian dollar tumbling 14% versus the greenback.

Daily trades average about $400m in the spot market compared with $3.5bn for the rand and $175m for Kenya’s shilling, according to Standard Bank Group, Africa’s largest lender.

Nigeria’s currency got a lift last year after JPMorgan added the nation’s bonds to its benchmark emerging-market indices, helping to push the price fluctuations down from the 14.53% level reached in February of that year.

The naira strengthened 3.9% versus the dollar last year, following four successive years of declines, when it plunged 30%.

For all its political upheavals, Nigeria, with an economy that trails only SA’s in size, has a number of advantages over its emerging-market peers, largely because of its prominence in Africa’s oil-export business.

The West African nation posted a surplus in its current account, the broadest measure of trade in goods and services, of $6.1bn, or 9.9% of gross domestic product, for the first quarter, according to a central bank report on July 3.

That is up from 7.3% in the previous three months.

Policy makers are scheduled to report second-quarter numbers this week.

“Nigeria can count on a good amount of foreign-exchange reserves and a current-account surplus, which is something some of the larger emerging markets cannot,” Ms Pellegrini said.

There are signs that these advantages are diminishing.

While the central bank has been using foreign-exchange reserves to support the naira, these are declining amid a dip in crude output, partly due to oil theft that authorities say costs 400,000 barrels of oil a day.

Nigeria’s crude shipments amounted to 2.7-trillion naira ($16.9bn) in the second quarter, down 11% on the previous period, the National Bureau of Statistics said on September 16.

The country’s oil exports account for 80% of government revenue and more than 90% of foreign-currency income.

The West African nation’s foreign-exchange reserves are at their lowest level since January 18 at $45bn, according to the central bank, while the excess crude account, where oil revenue above the budgeted benchmark oil price is held, had fallen to about $5bn in May, from $9.2bn in January this year, according to the finance ministry.

Source: bdlive