BUSINESS AM FIRST EDITION, FEB 2018

14
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
FINANCE & INVESTMENT
Wealth
S&P sees
uncertain
outlook..
Page 13
vice Board (IFSB) issued several new
standards in 2017 aimed ultimately
at smoothing the process of sukuk
issuance. For example, the former
published a standard for central
sharia boards and the latter published
one on disclosure requirements
for sukuk,” they said.
Specifically, they feel market
participants still think that standardization
is unrealistic and that the
market should rather aim for harmonization–defined
as having standards
that may differ from one jurisdiction
to another, leaving some flexibility for
implementation.
Sukuk issuance in 2017 increased
by 45.3 percent, reaching $97.9
billion, up from $67.4 billion in
2016, underpinned primarily by the
jumbo issuances of some Gulf Cooperation
Council (GCC) countries.
Driving this performance, S&P
Global Ratings believes, were good
liquidity conditions in the GCC and,
more generally, globally, as well
as activity by some countries with
the goal of further developing their
Islamic finance industries.
Jumbo local and foreign currency
issuance by some GCC countries
drove the sukuk market higher in
2017. Of specific note, the $9 billion
sukuk issued by Saudi Arabia was
the largest issued globally to date.
The market also attract some
Islamic finance noncore countries,
with Hong Kong tapping the market
for the third time and the first issuance
of a Sukuk in Nigeria.
The N100 billion Nigeria sukuk
bond with a 7-year tenor was oversubscribed,
attracting a whopping
N105.88 billion.
“We expect this trend to continue
as Morocco and Tunisia plan to tap
the market in 2018 and the U.K.
announced its intention to go to
the market again in 2019 upon the
maturity of the Sukuk it issued in
2014,” S&P noted.
Tax seen major
constraint on SMEs...
Page 13
sence of supportive environment,
as well as poor access to finance
have reduced the competitiveness
of SMEs in Nigeria.
She recommends that tax policies
should be designed in such a
way that they do not only directly
affect SMEs but also indirectly
push them to grow.
Giving an instance, she said
provision of finance for SMEs
could be encouraged by granting
exemptions from business tax for
financial institutions that provide
guarantee for loans to SMEs.
“Policies can also be implemented
to ensure that businesses
in the informal sector regularize
their tax status to have access
to finances and tax incentives,”
she stressed, adding that this
way, business owners are able to
see the gains of moving from the
informal sector to formal sector.
This would also translate to a
much wider pool of taxpayers for
the government.
Nigerian market outlook: Analysts upbeat,
entertain no fears of election risk
Steve Omanufemi
THERE APPEARS a no
fears outlook for the
Nigerian market and
economy despite rising
geopolitical tensions and the
coming general election, according
to a cross section of market
and economic analysts who spoke
to businessamlive.com.
The analysts say growth in the
economy is anticipated to strengthen
as commodity prices firm up
and domestic demand gradually
gains ground, adding that the usual
downside risk of the 2019 elections
would not count for much.
According to United Capital
analysts, the sustained policy
stimulus by the European Central
Bank (ECB) and the Bank of Japan
(BOJ are seen positive for global
financial markets, while a stable
outlook for oil prices suggests
that the appetite for assets in oilexporting
economies like Nigeria
is set for another bullish year.
“Our outlook on the currency
market, the flow of funds and
movement of external reserves is
medium-term stable amid expected
stability in the oil market and
supportive policy environment.
The risk to this outlook includes
outsized exposure to Foreign
Portfolio Investments (FPIs) and
uncertainties associated with the
build-up to the 2019 election,”
the United Capital analysts noted.
The worry on the election risk to
the economy is equally expressed
by Bisi Oni, executive director and
chief operating officer at Fund-
Quest Financial Services Limited.
“Preparations for the coming
elections will begin in earnest in 2018
and may stand in the way of the CBN
in managing price movements and
the exchange rate,” he said.
He noted that the CBN has been
proactive since the past eleven
months with a cocktail of policies
that has brought to bear on
the economy, which has seen the
reflation of the forex market and
the return of foreign investors to
the capital market.
On the 2019 elections, Oni said
the hawks are already gathering.
“My fears are that election
spending may decide how far the
CBN can go defending the naira.
In a year to an election, attention
always shifts from the economy.
In real terms we just have only six
months to put value into the economy
before politicking starts,” he
pointed out.
However, analysts from other
investment houses who spoke to
businessamlive and who want to
be anonymous as they have no authority
to speak on the record for
their organisations, have played
down the impact of the elections.
They said international investors
seem to be wiser now following
the panic which heralded the
2015 elections in Nigeria and the
Real estate investment market slows
on ambiguous taxes, mispricing
Edidi Abdulrafiu
THE NIGERIAN
real estate investment
trust
market is bogged
down by a lack of assurance
on ambiguous ‘tax
pass through’ laws, that have
not provided comfort to
institutional investors, both
local and foreign, as well
as a traditionally opaque
market, which has resulted
in mispricing and undermining
confidence in real
estate assets.
These were the views of
real estate analysts at a recent
West African Property
Investment Summit in Lagos,
who noted that the Nigeria’s
real estate investment
trust market (REIT) is one of
the most underinvested and
marginalised markets of the
Nigerian stock market.
“Despite its existence for
more than ten years, the Nigerian
REITs market is underdeveloped
with only three established
and with a combined
market capitalisation of $151
million, or 0.36% of the local
stock market,” they noted.
They stated that the low
investment in the market
is a result of a lack of assurance
on ambiguous ‘tax
pass through’ laws, that
have not provided comfort
to institutional investors,
both local and foreign, resulting
in deficit of A-grade
real estate compared to
similar urbanising environments
combined with
an inherently volatile and
non-diversified economy
overly reliant on crude oil.
“These factors have created
cycles of boom and bust
which have negatively impacted
the real estate sector
and crucially investor confidence,”
adding that the REITs
market has failed to develop to
its potential, which they hope
new reforms would address.
The analysts, Adeniyi
Adeleye, head of real estate
elections in Kenya and Ghana,
which at the end did not turn out
as expected.
“Elections come and go but the
market remains,” one said, adding
that most portfolio investors
would make stakes on the market
with the hope of reaping big when
the elections are done with.
They are upbeat that the implementation
of a decent list of
pro-market policy actions with
the fact that the chill of recession
has given way to spring and leading
indicators turning positive,
may sustain investors’ sentiments
despite the coming elections.
finance for West Africa at
StanbicIBTC Capital and
Thomas Mundy global commercial
real estate provider,
in a collaborative white paper
on the market, were bullish
on a rebound in the market in
2018 provided that regulatory
improvements take place
coupled with the sustainable
creation of assets to reduce
the supply gap in Nigeria.
Adeleye and Mundy are
optimistic that these changes
will lead to a vibrant RE-
ITs market, which will transform
the real estate sector
and the larger economy.
They predict that an
evolving and reformed RE-
ITs market will strengthen
and deepen capital markets
and that it would also
assist in providing greater
transparency and data to a
traditionally opaque market,
which has resulted
in mispricing and undermining
confidence in real
estate assets.