The earth is under a lot of pressure but the most pressing is without doubt environmental. Some of these are, at the moment, beyond man’s control while others can be contained. A substantial amount of these pressures has built gradually over time, as the world population grew and had to be supported by increasing industrialization.
Okinola A. Alabi and his colleagues at the Federal University of Technology, Akure and Federal College of Education, Oyo, noted that between 1950 and 2018, the world witnessed the production of about 6.3 billion tonnes of plastics and out of these, only 9% and 12% have been recycled and incinerated respectively.
Africa has a huge share of this problem. Nigeria, as the most populous nation in Africa, is among the biggest generators of solid waste with an estimated 32 million tonnes annually. From this number, plastic waste constitutes 2.5 million tonnes. This is a huge problem for everyone and a serious concern for any forward-thinking stakeholder. It is particularly worrisome for the organisers of Health, Safety and Environment (HSE) Summit 2020, who have themed the event; HSE in our DNA: Recycling to Wealth.
Global concerns around the negative impact of single-use plastics on the environment have led governments and corporations to act, with the European Union, China and several states in the United States announcing regulations that discourage such. These regulations generally include ban on plastic tableware and straws, ban on the use of non-degradable plastic bags and ban on non-degradable single-use plastics.
With the spotlight on stakeholders in industry, especially International Oil Companies (IOCs) and makers of Fast Moving Consumer Goods (FMCGs), and with the additional pressure that the Covid-19 pandemic has exerted on the world in the beginning of a new decade, there is no better time than now to begin a deliberate move to consolidate a national agenda on economic opportunities in recycling and the reuse of resources.
It is very strategic to have the IOCs and FMCGs in any conversation on plastic recycling. The IOCs produce the materials used in making plastics and the FMCGs use plastics in the packaging and distribution of their products. They have critical roles to play in commitments towards recycling.
Bringing together stakeholders in manufacturing, academics, government, policymakers & shapers, nonprofits and social engineers, the HSE Summit draws from the intertwining issues of health, safety, environment, security and social economics to build consensus on national agenda on waste recycling for improved economic opportunities.
One of its promoters, Ken Etete, noted that the focus of HSE conversations in Nigeria are currently around compliance-based goals, which need to shift to conversations that will underscore commitments to solving environmental problems and at the same time creating economic opportunities. “All over the world, there are conversations around environmental sustainability that are tied to economic opportunities to be derived from them; if we look at this from a resource efficiency perspective, the opportunity is around $4.5 trillion according to the World Economic Forum,” Etete said, adding that, “As Africa’s largest economy, we must have active national and regional platforms that engage stakeholders in industry, regulators, the academia and the general public; this is what we seek to do with the HSE Summit.”
Obviously, manufacturers have a strong role to play here, what with the entire chain of operation sitting with them. Land pollution, water pollution, air pollution and other animal and plant concerns are some of the impacts of the source-produce-and-discard model that is mostly obtainable now. Experts have flagged this as an unsustainable production model. Fortunately, science has established that these resources can be used in more efficient and safer ways and the waste they generate can be transformed from one form to another to serve diverse purposes.
To this end, the summit will specifically call IOCs and FMCGs in Nigeria to the table and engage them on these issues. “Multinational corporations have generally done a good job globally in clearly articulating their sustainability ambitions and we cannot take for granted the progress that this represents, considering that many of them publish sustainability reports that hold them accountable,” Etete said, adding, “There is however a need to localise this global conversation in Nigeria.”
Trump or Biden? How the US Presidential election will impact the stock market
A Trump victory will see a stock market bump, as traders buy shares to cover their Put options.
US stocks are falling and volatility is going to increase as the US election head to a close on November 3rd. However, this is a systematic fall, meaning every stock in every sector is falling. Every sector save for a few healthcare stocks is down – irrespective of earnings. Why would Amazon stocks fall, even as demand is up? This is a big market “tell” that the market sell-off has nothing to do with fundamentals.
Another key indicator that shows the market’s hand is the “VIX” – the trading symbol for the CBOE Volatility Index – that measures the implied volatility of the S&P 500 index. The VIX is muted, it’s up slightly – but nowhere near the levels seen in March and July of this year. What this tells us is that the market is less fearful. In other words, this is a planned sale by institutional investors not driven really by COVID-19 or stimulus fears.
Why are all sectors in the market falling? The answer is simple; Investors are hedging against a Joe Biden victory in November.
Joe Biden‘s tax plan calls for an across the board tax hike on income, including Capital Gains taxes. This means if you filed as a single, bought the US Stocks in 2016 by buying the Vanguard Total Stock Market Index Investor (VTSMX), your return in 2019 would have been 52.2%. This return would have triggered a capital gains tax of 20%, if your income exceeded $441.451 as a single filer.
Donald Trump on the other hand will tax long-term capital gain at 39.6$% on income above $1m. The maths is simple, investors that have made money in the stock market under the Trump tax cuts have an incentive to sell their stocks today or buy a Put option – to take in cash today and wait.
If Biden wins, they pay Capital gains taxes at the lower 20%; if Trump wins, they already have banked on their cash.
Can you see the opportunity?
If Trump wins, these investors have to buy back those shares. Thus, a Trump victory and the Republican Party retaining the Senate will see a stock market bump, as traders buy shares to cover their Put options.
This is a simple play – if you think Trump will win, buy the market and go bullish.
October PMI reveals rebound in economic activities
Manufacturing PMI has remained below 50 index points for the past six consecutive months.
According to the Purchasing Managers Index (PMI) data released by the Central Bank of Nigeria (CBN) for the month of October, activity levels in the manufacturing and nonmanufacturing sectors strengthened even as readings remained below 50 index points. Specifically, the manufacturing PMI expanded to 49.4 in October from 46.9 in September, indicating slower contraction compared to the prior five months. Similarly, the nonmanufacturing PMI strengthened to 46.8 in October from 41.9 in September, halting two months of consecutive contraction in the index. That said, we note that Manufacturing PMI has remained below 50 index points for the past six consecutive months while NonManfacturing PMI has been below 50 index points for the past seven consecutive months.
Across the key indices in the manufacturing PMI, save for Supplier delivery time (-1.7) which recorded some deterioration, the remaining four indices in the manufacturing sector improved in October; Raw materials/WIP Inventory (+3.2), New orders (+4.8), Production level (+2.7) and Employment level (+1.9). We think the deterioration in Supplier delivery time reflects the impact of the nationwide unrest and peaceful protests on logistics and distribution channels of manufacturing firms. Furthermore, we note that while Employment
level and Raw material inventories improved in October, they remain below the 50-point mark which reflects weak labour employment and FX illiquidity challenges impacting ability to import critical raw materials. The data further revealed that, of the 14 surveyed subsectors in the manufacturing sector, six (compared to four in September) reported growth while 8 (compared to ten in September) contracted.
For non-manufacturing PMI, all four of the key metrics recorded improvement albeit they all remained below the 50-point mark. Across all the indices; Business Activity (+5.0), Level of new orders (+8.3), Employment level (+2.6) and Inventory level (+3.2) showed decent improvements. We think the decent recovery in Non-manufacturing PMI was driven by sustained recovery in activities of service-based organisations in the face of reduced covid19 restrictions.
CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.
Traders’ Voice: Trading during a curfew
The NSEASI finally crossed into positive territory YTD this month after suffering a major blow from the Covid-19 induced sell-off.
Excerpt from my dairy (21/10/2020)
“Hmm! How did we get here? What did I miss? How did we go from a historical peaceful protest to reports of
violence and looting? 2020, haven’t you done enough already? Oh lord, I know I don’t normally pray for
Nigeria, but please protect everyone stranded in Lekki. The night started on Twitter. Pictures of the cameras
being taken down was shared. Theories of conspiracy, the unsafe location and ‘get out of there’ tweets were being tweeted all at once, but no one saw this coming. I couldn’t believe it was daybreak when I looked outside the window as my eyes were still wide open and my heart still kept beating fast as if I had just come back from a morning jog. I took some time out, talked to some of my loved ones I couldn’t reach before and it gave me some level of comfort and ease. I decided I had to keep it cool and focus on work. Then it hit me like a ton of bricks. The first gunshot I heard this year. I heard it once, twice, thrice, and then I couldn’t keep count anymore.
Survival instincts set in; I shut all windows and doors and then the typical Nigerian in me came alive and I
started praying. I have never prayed so hard in years, even whilst executing clients’ trade orders. This will surely
be a day to remember.”
In spite of all the unrest and violence we all witnessed in most part of the country especially Lagos, the commercial hub of Nigeria, markets still witnessed a positive showing in the Bonds and Equities space WoW. This begets the question, “Is Nigeria’s financial market defying all rules of logic?”
Before I delve into this, we should let you all know that our heart is heavy and goes out to everyone who lost a
loved one or got injured during this traumatic period of unrest and also to all SMEs, corporate and government,
whose properties were vandalized and looted. I must say, it was extremely exhausting and heart-breaking to
watch people’s sweat go down the drain especially with how challenging this year has been already. Amidst the current unrest happening in our dear country, we would like to encourage everyone to keep staying safe and pray for our dear country.
Market defying logic…
The equities market managed to close in positive territory last week despite the insecurity and unrest seen in
the country. The Nigerian Stock Exchange All Share Index (NSEASI) advanced by 0.13% WoW to close at
28,697.06 points as it witnessed gains on three (3) out of five (5) trading days of the week. The NSEASI YtD
improved further, climbing up to 6.91% YTD from 6.77% YTD in the prior week. However, we saw weakness
in investors sentiment, as market breadth closed at 0.80x (vs. 1.52x recorded last week) as the market recorded
twenty-eight (28) advancers against thirty-five (35) decliners in the week. The hunt for yield (Particularly from
a dividend perspective) coupled with the unattractive fixed-income yields and fairly robust system liquidity
continues to provide support in the equities market as the dip witnessed in the middle of the trading week was
met with sizeable bargain hunting activities across most sectors of the market.
The Bond market also sustained its bullish momentum last week on the back of the liquidity improvement
coupled with the unmet bid at the monthly FGN bond auction. The Bond auction which held on October 21,
2020 (I know, right? I didn’t think it was going to hold too but I guess we still have a budget deficit to fund)
was relatively strong with a bid to cover of 5.24x as DMO sold NGN45 billion(as against NGN30 billion
offered) across the 15-Year and 25-Year papers, at stop rates of 4.97% and 6.00% respectively. Consequently,
yields declined by 69 basis points on average across the curve. By the way, speaking of defying the odds, did
you notice that even with everything happening the local sovereign bond yields remained lower than the
Nigerian Sovereign Eurobonds? (Not sure they teach this in school).
Three major hypothesis that have been confirmed this week are:
H1: Market liquidity has a significant impact on financial market performance in Nigeria
H2: Fundamentals may not necessarily impact financial markets as anticipated in Nigeria
H3: The market can stay irrational longer than you can stay liquid.
Nevertheless, we expect the impact of largely felt disruption and looting seen in the past week to put downward
pressure on the already depressed economy, with Lagos State alone estimating the cost of its damage to be
about a N1 trillion, although figures are yet to be confirmed (That is slightly above the entire state’s revised
budget at N920.469bn). As we continue to face economic challenges, with inflation on the rise, mounting
pressure on our reserves, weaker crude prices and declining FDIs and FPIs, the road to recovery seems more
distance than ever.
Where is the money?
The recent volatility seen across all dollar underlying assets coupled with the security crises-driven sell-off has
created entry point in the Nigeria Eurobond market which currently yield higher than the local FGN bonds.
The equities market has been on a rally this October 2020 as local investors resumed bargain-hunting as yields
remain depressed in the fixed income market. The NSEASI finally crossed into positive territory YTD this month
after suffering a major blow from the Covid-19 induced sell-off. NSEASI is currently up 6.91% YTD. We expect
the bullish trend to persist in coming weeks as investors will be looking to position themselves ahead of Q3
earnings as yields remain depressed in the fixed income market. Dividend yield remains the major play.