By Stephán Engelbrecht, Fund Management



The world is entering an unprecedented time and there is no historical playbook for what happens next. While not our base case, calamity risk is increasing (mass infections across South Africa [SA], with dire economic consequences), and nobody knows how to quantify this risk. We have many requests from clients asking for investment opportunities in this crash and we are happy to share our fundamental views. However, investors in any equities must bear in mind that, in the shorter term, cheap shares can get even cheaper and wild swings are likely. Our views are based on a 12-to 24-month timeline, with a base case scenario of the world normalising during this time period. So, risks have to be taken into account and any investment in equities should be considered in this context. Shares only become this cheap when risks are extremely high.



In times of extreme market volatility (and corrections), it is often unnecessary for investors to look far down the quality curve to find attractive opportunities that will generate significant returns in future. This is oftentimes the correct strategy as those economic uncertainties causing market volatility can have far more dire consequences for lower-quality businesses. This can make a company look inexpensive on the surface, but the upside might be limited as the business first has to struggle through an earnings trough, or raise equity to shore up its balance sheet which will, in turn, dilute current shareholder returns.



However, sometimes it is worth taking the risk. During market corrections, fundamentals are often ignored, and some market participants will sell a share at any price. It is at these prices where, we believe, the risk-return profile is so attractive that these counters deserve a small allocation in a diversified portfolio. These calculated risks may just turn out to be some of the best performers in an investor’s portfolio.



With that as background, we have scoured the SA market for some very exciting investment opportunities. We concede that these opportunities do come with some risks, whether it be debt, currency, regulation, liquidity or, in some cases, a combination of these factors, associated with them. Nevertheless, we believe that, at current valuation levels, the investor is more than compensated for such risks. So, put your hard hat on and prepare for some volatility although, at the end of the day, we are confident that a portfolio of these shares will reward investors handsomely.



MTN Group



If one were to draw up a list of countries where it is notoriously difficult to do business, and that also have extremely volatile regulatory and economic environments, the chances are that a large number of these nations will be among the 21 countries in which MTN operates. Initially, with major global mobile operators reluctant to enter these markets and regulations being fairly light, these countries held the appeal of attractive emerging market (EM) growth potential, with limited competition, for MTN. While this worked well in the beginning, over recent years MTN has appeared to stumble from one exogenous shock to the next – wars, extreme currency volatility, sanctions, exorbitant regulatory penalties and various lawsuits – but the company has weathered all these setbacks. MTN’s vulnerability to these exogenous events means that it is typically sold off, particularly aggressively during periods of risk aversion. This time around, the market sell-off was amplified by the collapse in the oil price, to which a number of MTN’s markets are vulnerable (especially Nigeria). With MTN’s share price falling below R40, the counter has now declined &gt;85% from its 2014 peak and it is currently trading at levels last seen in 2005.



In an industry where scale is critical, the significance of MTN being a top-two market share operator across all the markets in which it operates should not be underestimated. Where the telecommunications sector globally has largely been consigned by investors to the status of an ex-growth utility, MTN stands apart for several reasons. First, many of the Group’s markets still have further opportunities to increase penetration of mobile telecommunications and the potential to migrate those users to smart devices and drive data adoption. Second, while most developed market (DM) operators are confined to the provision of commoditised voice and data services, MTN is capitalising on opportunities to also add digital and mobile financial services.



Although MTN CEO, Rob Shuter has announced that he will be leaving the company at the end of his contract in one year’s time, he assembled a very competent management team during his tenure. Shuter has set the Group on a self-correction course. This includes the disposal of non-core assets, with proceeds being used to pay down debt (R14bn in sales were raised in the first year, with guidance of a further R25bn to be realised over the next few years) and paying particular attention to turning around some of the Group’s underperforming business units.



Since many of MTN’s new revenue streams do not require significant capital investment and are delivered through over-the-top platforms already in place, it has enabled the company to provide guidance of low double-digit revenue growth, margin expansion and relatively flat capital expenditure over the next 3-5 years. With the strong double-digit growth in free cash generation that this guidance implies, MTN is targeting annual dividend growth of 10%-20%.



Even at the bottom of the dividend guidance range, the prospective dividend yield is 15%, while the price as a multiple of expected earnings in 12 months’ time is 5x. No doubt, Brent Crude oil at below $30/bbl poses risk in the short term of foreign exchange availability and currency devaluation in Nigeria (MTN’s largest profit generator in FY19, accounting for c. 40% of group EBITDA). However, we are mindful of the oil industry saying, “the best cure for low oil prices, is low oil prices” and it is unlikely that the current situation will be sustained long term. At current levels, we believe there is now enough of a margin of safety in MTN’s share price to compensate for the risks it presents, with the potential for a strong recovery as current headwinds abate.



Investec



Over the past four decades, Stephen Koseff and Bernard Kantor created an institution. Built on the foundation of entrepreneurship and being agile and nimble to service its customers, the distinctive zebra logo became one of the most widely recognised symbols in SA financial markets.



In the early 2000s, Investec started to expand offshore with the UK being a key target market. Unfortunately, the UK’s highly competitive banking environment, ever more draconian and complex regulation and a global financial crisis (GFC) that hit just as Investec started to expand aggressively in the UK, made the experience far more lacklustre than the firm’s local successes. However, the company stayed the course, and, over time, Investec has built a strong UK presence.



Nevertheless, the UK remains a considerable drag on the Group’s profitability and ROE. Since the disastrous acquisition of Kensington in 2007 and the harsher regulatory environment post the 2008 GFC, Investec’s UK division has struggled to achieve a ROE greater than its cost of capital. This has resulted in Investec rightfully trading at a discount to its book value for significant periods since the GFC.



This discount to book value reached extremely low levels during the current sell-off, trading at close to 0.3x book. In addition, it coincides with some real positive changes taking root at Investec. The old guard has moved on and the new management team have taken decisive steps to improve the profitability of the bank.



Management unbundled the asset management division to make the structure less complex, committed to improving the cost-to-income ratio in the UK and promised that there were no sacrosanct segments of the business that will not be cut in the event of underperformance. We are still at the initial stages of the new regime and it will be interesting to see whether management can indeed improve the UK division’s ROE.



Although we acknowledge that Investec is not the highest-quality bank in the world and its earnings growth and ROE profile are far more volatile than its SA peers, we believe that the current share price provides an opportunity to enter at depressed multiples that more than sufficiently reflect the lower quality. And, the investor may yet benefit from an improvement in operating metrics as the new management team start their work.



Redefine



In recent years, many SA (and global) conservative investors squirrelled their savings away in property shares to earn an attractive, growing income. This bubble burst over the last few months and even the highest quality property companies have seen their value decimated. Selected YTD (to 25 March) declines among local property counters include Growthpoint (-45%), Redefine (-74%), Resilient (-46%), Nepi Rockcastle (-40%), Vukile (-63%), Attacq (-58%) and Hyprop (-60%). This follows already steep share price drops across the board in 2019.



The dire economic outlook for SA had already impacted Redefine’s share price hard when the novel coronavirus (COVID-19) hit and the whole property sector is now in crisis. These are unprecedented times and the world has changed in the last few weeks. Some tenants (especially in the retail sector) will earn little or no turnover for some time, and we have no doubt that they will want to renegotiate rentals with landlords. Some smaller tenants will go bankrupt. It is clear to us that the property sector will be reset after panic around the virus has subsided. Thus, the fate of many property companies is largely dependent on SA banks, who have very strong balance sheets and who, we believe, will be very co-operative in working with these companies to navigate the way through the current crisis. Although loan-to-value (LTV) ratio levels are all stated in the debt covenants for property companies, we think that the credit providers’ focus will turn from LTV ratios to interest cover, cash flow and sustainability. It is not in the interests of the banks to “pull the plug” on some of their biggest clients. We expect Redefine to work its way through this scenario together with the banks, with “reset” value emerging.



Management have acknowledged that they have no idea where rentals will settle, and they will largely depend on the health of the economy and the tenant. About 30% of retail turnover is from “safe” companies such as food retailers, cellphone companies and banks. Many office tenants will remain robust and industrial/logistics rentals will depend on tenant quality. So, it is not a disaster across the board, but months of hard negotiations will follow.



However, for investors, LTV ratios will remain a key metric and something which Redefine will have to address. At its last results presentation (FY19), Redefine had an LTV ratio of 43%. To highlight the spiral, if we assume the company had R100 of book value and R43 of debt – that 43% LTV is only just within its debt covenants. If the book value is written down by 25%, the LTV ratio goes up to 57%! Asset sales are usually a partial solution, but this looks increasingly unachievable. Withholding dividend payments becomes the next, and most likely, scenario. If a company can generate an 8% yield on book value (we are assuming no tax payable, which may be contentious), ploughing this back into debt repayments (as opposed to dividends), with a two-year dividend holiday, can reduce the LTV ratio from 57% to 41% – back into the covenant zone. We note that Redefine has already announced a delay in its interim dividend payment.



A big issue with withholding dividends is taxation. REIT (Real estate investment trust) legislation allows companies designated as such, to not pay tax and to distribute income to shareholders who receive the distribution as taxable income. If REITs do not distribute 75% of their income, then the current rules say they must pay tax on their income. We believe the property sector is in the process of negotiating with Treasury in an attempt to waive this rule – at least for a once-off time period.



We conclude that in a base-case scenario, the adjusted book value will be well below current book values, but higher than the share prices. We calculate that Redefine is fundamentally worth 50%-100% more than its current share price (unless Armageddon prevails!). But there is a high risk of shareholders not getting dividends for one, or even two, years. The share price is factoring in a far worse scenario than our base case. But investors should focus on the balance sheet and track closely the progress the firm makes in degearing.



There is a long road ahead, but we believe that, in the end, we will look back at this as a great opportunity to buy the share.



Northam Platinum



The platinum group metals (PGM) miners were the talking point of 2019. After being priced for bankruptcy in 2018, the price of the PGM basket recovered in 2019 resulting in the share prices of these miners rallying by 250% or more. The higher basket price helped these miners reduce their leverage with some of the mining companies going into a net cash position. It was a remarkable turnaround and highlighted just how cyclical the fortunes of these businesses are. Which begs the question, do you want to buy into such a cyclical industry in these uncertain times?



It is a fair question, and the answer very much depends on the risk tolerance of the investor. The reason why we are comfortable with a small position in Northam is due to the precarious demand-supply balance which the industry faced going into the COVID-19 crisis.



Prior to 2019, the threat of electric vehicles (EVs) caused the PGM basket price to remain below the breakeven price for mining companies and they battled to survive. Capital expenditure was cut across the board, with mining firms struggling to pay for maintenance capex, not to even mention expansionary capex.



Then, in 2019, the combination of a greater focus on carbon emission worldwide, the more enhanced testing after the VW scandal and the lack of R&amp;D in combustion engines over the preceding few years forced vehicle manufacturers to just add more and more PGMs in their respective catalytic converters as emission standards became more onerous. With the costs of PGMs &nbsp;a small fraction of the total vehicle production cost, they had the luxury to do this. Demand for these metals surged and the miners were not in a position to increase supply. This caused PGM prices to rally, with rhodium and palladium hitting all-time highs.



In our view, this situation will not change in the short- to medium-term, despite the COVID-19 outbreak and the subsequent decline in global vehicle sales. We expect demand to remain strong due to higher emission standards. Importantly, the threat of EVs, which are expected to be close to 50% of global vehicle sales by 2030, will prevent PGM miners from investing in new mines, thus keeping a constraint on the supply response.



Northam is one of the few PGM miners that will see strong volume growth over the next few years. Due to some tough decisions taken by management during the lean years, the company was able to shore up its balance sheet and it continued to invest in operations. As a result, we expect Northam’s annual production volumes to increase from c. 600k ounces this year to 1mn ounces over the next few years. Northam’s mines are also of a very high quality, operating at very low operating costs due to mechanisation. Trading at very attractive valuations and offering significant earnings (at spot PGM prices) and production growth, Northam is a high-quality operator in a very cyclical industry.



Alviva Holdings



Alviva Holdings is not an exciting company! But it is one of the Africa’s largest providers of information and communication technology (ICT) products and services. The Group has three business segments – ICT Distribution, which imports ICT hardware and software and sells it into sub-Saharan Africa via resellers, Services and Solutions, which provides system integration and ICT solution services, and Financial Services, which provides leasing finance to small-, medium- and micro-sized enterprises (SMMEs) for their ICT products.



The risks to this business are real. It is difficult to see Alviva continuing to operate in the same verticals and products as it is currently working, in five years’ time. This is due to the ever-changing industry in which it operates. For example, cloud storage and processing will, likely, fundamentally change the role ICT service providers play in the lives of their customers. To survive, ICT service providers will have to adapt their business models quickly and also ensure that they have a balance sheet strong enough to absorb any shocks.



We believe that Alviva has both these traits. It has a very experienced and conservative management team, which have navigated through some very turbulent times in the past and we maintain that management should be able to continue to do so in future. In addition, management have also been conserving cash. Over the past few years, they have adopted a very conservative dividend policy, paying out only 10% of earnings in dividends.



At our last engagement with management, they conceded that the operating environment is very tough at the moment, adding that they were very disappointed in the company’s performance but that it should improve in the second half. Management have guided that they will first look to retire around R400mn in preference shares, after which they will engage with shareholders regarding potential share buybacks. Admittedly, this was before the COVID-19 outbreak.



However, Alviva’s valuation is ridiculous – it is currently trading at a historic PE ratio of c. 2x and a normalised free cash flow yield of 50% (and we believe that we are being conservative here), so the risk-reward profile for investors is very much skewed to the upside. Liquidity is a concern and we highlight that investors should be patient if investing in this counter.

Our top share picks for the brave investor: Finding opportunities in times of adversity

ABUJA (Reuters) &#8211; Nigeria is looking at reducing its budget by 1.5 trillion naira ($4.90 billion) as the global spread of the coronavirus takes a massive toll on Africa’s largest economy and one of the continent’s biggest oil producers, the finance minister said on Wednesday. 



Roughly 90% of the Nigerian government’s foreign exchange earnings come from sales of oil, prices of which have taken a beating amid lower Chinese demand and a price war between Saudi Arabia and Russia. 



Finance Minister Zainab Ahmed last week said the 2020 budget would have to be cut. The spending plan, which was calculated assuming crude production of 2.18 million barrels a day at a price of $57 per barrel, was passed in December. 



“We are working on a worst-case scenario of an oil benchmark of $30 per barrel and a production of 2.1 million (barrels a day),” Ahmed told reporters at a briefing after a regular Cabinet meeting. 



International benchmark Brent crude on Wednesday reached a 16-year low of about $25 a barrel, dragged down by concerns about the impact of the coronavirus on the global economy, a collapse in oil demand and a supply glut. [O/R] 



Nigeria is still struggling to shake off a 2016 recession, which was caused by the oil price collapse of late 2014, with economic growth currently at around 2%. 



The West African country, which has deep trade ties with China, has also felt the impact of the coronavirus due to disrupted supply chains. 



($1 = 306.0000 naira) 



(Reporting by Felix Onuah; Writing by Paul Carsten; Editing by Alexis Akwagyiram and Leslie Adler)



This article was first published on Reuters Africa <a href="https://af.reuters.com/article/investingNews/idAFKBN2160YK-OZABS">https://af.reuters.com/article/investingNews/idAFKBN2160YK-OZABS</a> and is republished with its permission.

Nigeria eyes $4.9 bln budget cut amid coronavirus

ABUJA (Reuters) &#8211; Nigeria will postpone all non-critical government spending and wait for better market conditions for a planned $3.3 billion eurobond offering due to the turmoil caused by the coronavirus pandemic, the finance minister said on Monday.



Minister Zainab Ahmed told journalists in Abuja that Africa’s largest economy will prioritize “major capital expenditures.” 



“Any expenditures that are not critical we must defer to do it at a later time when things become more normal,” she said. 



An oil price crash caused by the toxic mix of a coronavirus-induced slump in demand and the collapse of a supply-cutting deal between OPEC and other oil producers such as Russia, has forced Nigeria to revise its budget and alter its spending plans. 



The 10.59 trillion naira ($34.6 billion) budget included a benchmark of oil prices at $57 per barrel. On Monday, Brent crude slumped to roughly $30 per barrel. 



Ahmed also said the virus-induced market turmoil would impact external borrowing, including for the eurobond it planned to issue to partly fund its 2020 budget deficit. 



“We are not going out immediately because the market indication is not in favour of external borrowing at this time. Even if we get the approvals we will defer it and watch the market and go out only when the timing is right.” 



Borrowing costs for many riskier emerging markets have risen sharply in recent days, with all of Nigeria’s dollar-bonds now yielding between 12%-14% compared with yields of less than 3% on shorter-dated issues in mid-February. 



Last month, the Debt Management Office said it expected to appoint advisers for the eurobond issue through an open competitive bid process and expected to complete an approval process for the sale swiftly. 



 ($1 = 306.0000 naira) 



(Reporting by Camillus Eboh, additional reporting by Karin Strohecker in London, writing by Libby George, editing by Hugh Lawson)



This article was first published on Reuters Africa <a href="https://af.reuters.com/article/investingNews/idAFKBN214196-OZABS">https://af.reuters.com/article/investingNews/idAFKBN214196-OZABS</a> and is republished with its permission.

Nigeria to delay non-critical spending, defer Eurobond sale

Key Points



<ul class="wp-block-list"><li>The combination of an unfolding price war between oil production giants Russia and Saudi Arabia and concern over a potential demand shock from the global coronavirus pandemic have hammered oil prices in recent weeks.</li></ul>



Demand for oil will likely be negative in 2020, adding further downward pressure to plummeting prices, according to BP CFO Brian Gilvary.



Around the time of its earnings report in early February, the energy giant anticipated that demand would weaken by around 300,000 to 500,000 barrels a day.



But on Monday, Gilvary told CNBC’s “Squawk Box Europe”: “If you ask me that question today, it is more like flat demand year-on-year, maybe even negative demand &#8211; we will probably likely see negative demand this year.”



Negative demand for a particular product exists when consumers dislike it to the extent that they would be prepared to pay more than the price of the product in order to avoid having to buy it.



The combination of an <a href="https://www.cnbc.com/2020/03/12/oil-the-losers-of-the-price-war-between-saudi-arabia-and-russia.html">unfolding price war between oil production giants Russia and Saudi Arabia</a> and concern over a potential demand shock from the <a href="https://www.cnbc.com/2020/03/16/coronavirus-live-updates-italy-death-toll-jumps.html">global coronavirus pandemic</a> have hammered oil prices in recent weeks.



International benchmark <a href="https://www.cnbc.com/quotes/?symbol=@LCO.2">Brent crude</a> was trading down 9.3% at around $30.70 per barrel on Monday afternoon while <a href="https://www.cnbc.com/quotes/?symbol=@CL.1">U.S. West Texas Intermediate</a> (WTI) dipped below $30 a barrel to $29.50, down 6.8%. So far this year, Brent and WTI are down 53.8% and 52% respectively.



The tension between OPEC kingpin Saudi Arabia and non-OPEC leader Russia arose after a recent breakdown in negotiations over oil production cuts in response to the outbreak. Riyadh subsequently vowed to ramp up production at sharply discounted prices for April.



Gilvary suggested that activity beyond this year would depend on what “the new normal” becomes for businesses.



“We have got a demand side shock and then you also have the combined issue of a significant amount of oil now coming on the market in April, so the direction of the oil price can only go in one direction, and that is down,” he said.



Gilvary said that at present, BP was starting from a “much stronger financial position” in terms of costs and capital flexibility than when Brent prices fell to $28 per barrel in 2016.



“In our targets for 2021, we had the company balanced at around $40 per barrel Brent, which was the key five-year target we put in place four years ago. We are on track for that,” Gilvary said, adding that BP’s capital was currently running at around $15 billion and could be taken down by up to 20% this year if necessary.



This article was first published on CNBC <a href="https://www.cnbc.com/2020/03/16/as-oil-prices-tank-bp-cfo-warns-demand-could-be-negative-in-2020.html">https://www.cnbc.com/2020/03/16/as-oil-prices-tank-bp-cfo-warns-demand-could-be-negative-in-2020.html</a> and is republished with its permission.

As oil prices tank, BP CFO warns demand could be negative in 2020

JOHANNESBURG (Reuters) &#8211; Shares in South African petrochemicals group Sasol surged nearly 30% on Friday as a recovery in oil prices sparked buying of the stock, which was pummelled in the previous session. 



Brent crude prices rose over 3% on Friday after falling more than 7% the day before, a drop which helped send Sasol shares to a 21-year low. 



“It does look like it was over down around 30 rand. Perhaps some opportunistic buyers are looking to get in at these low prices,” said Nilan Morar, trader at GT247. 



By 0808 GMT shares in Sasol were up 20.9% to 45.01 rand after hitting a high of 55.84 rand earlier in the session. 



(Reporting by Tanisha Heiberg; Editing by Jan Harvey)



This artcile was frst published on Reuters Africa <a href="https://af.reuters.com/article/investingNews/idAFKBN21010K-OZABS">https://af.reuters.com/article/investingNews/idAFKBN21010K-OZABS</a> and is republished with its permission.

Shares in Sasol jump nearly 30% as oil price recovery sparks buying

Key Points



<ul class="wp-block-list"><li>The International Monetary Fund (IMF) on Thursday said it will be working closely with the Nigerian authorities in the coming days to assess any vulnerabilities which may be exposed by the sharp decline in crude prices.</li></ul>



<ul class="wp-block-list"><li>Nigerian dollar bonds sank to record lows stocks on Thursday hit a new four-year low, as fears grow over the devaluation of the naira currency.</li></ul>



With oil prices plunging amid concerns over a <a href="https://www.cnbc.com/2020/03/12/oil-the-losers-of-the-price-war-between-saudi-arabia-and-russia.html">price war between Russia and Saudi Arabia</a>, and the coronavirus outbreak obliterating stock markets, Africa’s largest economy is in a precarious position.



The International Monetary Fund (IMF) on Thursday said it will be working closely with the Nigerian authorities in the coming days to assess any vulnerabilities which may be exposed by the sharp decline in crude prices, as Nigerian and Angolan dollar bonds sank to record lows.



Nigerian stocks on Thursday headed for their fifth straight day of losses to a new four-year low, and a fall in <a href="https://www.cnbc.com/quotes/?symbol=@LCO.2">oil prices</a> to just over $30 per barrel, rising external debt and a depreciating currency pose a threat to economic stability in the country of more than 190 million people. Nigeria is Africa’s largest economy in terms of GDP (gross domestic product).



While markedly lower oil prices will undoubtedly have broad adverse consequences for the Nigerian economy, the country is not quite as dependent on oil exports as the likes of Angola, which analysts expect to suffer a substantial blow this year.



<h2 class="wp-block-heading">Currency concerns</h2>



However, a prime concern for economists is Nigeria’s managed naira exchange rate, since even prior to the fallout from OPEC’s failure to reach an agreement with Russia on oil production cuts, the country’s foreign exchange reserves were in steady decline.



After the official exchange rate was devalued in 2016, foreign exchange reserves were approaching $25 billion, and the move failed to stop the slide of the parallel market exchange rate, which meant the Central Bank of Nigeria (CBN) was forced to act again the following year when the Nafex (Nigerian Autonomous Foreign Exchange Rate) was implemented. Reserves held just below $30 billion during this period.



“Extrapolating the trajectory observed thus far this year (the foreign exchange buffer shrunk by $2.3 billion during the first two months of 2020) suggests reserves could fall below the $30 billion mark by Q3 (the third quarter) and end the year just above $25 billion,” NKC African Economics Chief West Africa Economist Cobus de Hart said in a note earlier this week.



Capital Economics Senior Emerging Markets Economist John Ashbourne on Wednesday echoed this projection, suggesting that reserves will soon fall below the $30 billion mark, which Nigerian policymakers had identified as a key benchmark.



Ashbourne predicted that the naira will end the year down 8% to 400 NGN against the U.S. dollar. He added that in Nigeria’s case, a weaker currency will not provide a boost to competitiveness, since the country does not have significant non-oil exports or the “domestic manufacturing base needed to substitute for imported goods.”



Reuters reported Thursday afternoon that the naira was being quoted at 370 to the dollar on the over-the-counter spot market.



<h2 class="wp-block-heading">‘Severe adverse consequences’</h2>



Parliament recently green lighted President Muhammadu Buhari’s request for $22.7 billion in foreign borrowing, but while external debt accumulation would usually be expected to support reserves, de Hart suggested that the sharp fall in global oil prices could potentially “more than offset” the boost.



“Firstly, should Brent crude oil prices average roughly $40pb (per barrel) for the remainder of the year, it would reduce Nigeria’s goods export receipts by roughly $14 billion (as opposed to our February baseline for oil prices to average $62.4 billion in 2020) — this may also be a conservative estimate, as it does not take into account any adverse impact on non-oil exports,” he said in the note Monday.



What’s more, Nigeria may have difficulty accumulating external debt following the fall in oil prices and its impact on the macroeconomic outlook, while the jittery investment environment raises the risk of a capital flight, de Hart highlighted.



Having previously backed the authorities to ride out the storm and maintain its foreign exchange rate at current levels in the immediate future, NKC analysts now believe that the naira’s prospects have “deteriorated markedly” and remains set for a “sharp fall” this year if current conditions persist.



The CBN will again be faced with the choice of whether to let the Nafex buckle or continue to artificially prop it up.



“We believe the CBN will continue to provide support in the near term, with a more drastic adjustment more likely in Q3,” de Hart projected.



“If the Nafex is not permitted to buckle, then the black-market rate should, and this might hold more severe adverse consequences for an economy that is now facing a gloomier outlook on multiple fronts.”



This article was first published on CNBC <a href="https://www.cnbc.com/2020/03/13/africas-largest-economy-braces-for-big-hit-as-oil-prices-plummet.html">https://www.cnbc.com/2020/03/13/africas-largest-economy-braces-for-big-hit-as-oil-prices-plummet.html</a> and is republished with its permission.

Africa’s largest economy braces for big hit as oil prices plummet

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Oil Prices steadied today following a sharp dip from recession concerns. Brent currently trades down 13 cents to 59 dollars 35 cents. To discuss this and other stories making the rounds, Winston Osuchukwu, Co-founder of Trans-Sahara Incorporated joins CNBC Africa for more.

U.S 30-year treasury yield hit record low, backs fears of global recession

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Oil prices are down in early trade, as rising U.S crude inventories and weak economic data from China erased some of the sharp gains from Tuesday&#8217;s 4.7 per cent surge. To review the global oil markets and the impact on Nigeria&#8217;s oil and gas space, Rolake Akinkugbe-Filani, Senior Vice President and Head of Energy and Natural Resources at FBNQuest Merchant Bank joins CNBC Africa for more.

Oil prices continue to decline as U.S-China trade war deepens

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U.S oil producers have cut their production output by over half owing to storm in the Gulf of Mexico. This has pushed oil prices near a six-week high. Uchenna Minnis, Chief Market Analyst at Eagle Global Markets joins CNBC Africa for more.

brent crude oil

Our top share picks for the brave investor: Finding opportunities in times of adversity

Nigeria eyes $4.9 bln budget cut amid coronavirus

Nigeria to delay non-critical spending, defer Eurobond sale

As oil prices tank, BP CFO warns demand could be negative in 2020

Shares in Sasol jump nearly 30% as oil price recovery sparks buying

Africa’s largest economy braces for big hit as oil prices plummet

U.S 30-year treasury yield hit record low, backs fears of global recession

Oil prices continue to decline as U.S-China trade war deepens

Brent crude oil nears 6-week high

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brent crude oil

Our top share picks for the brave investor: Finding opportunities in times of adversity

Nigeria eyes $4.9 bln budget cut amid coronavirus

Nigeria to delay non-critical spending, defer Eurobond sale

As oil prices tank, BP CFO warns demand could be negative in 2020

Shares in Sasol jump nearly 30% as oil price recovery sparks buying

Africa’s largest economy braces for big hit as oil prices plummet

U.S 30-year treasury yield hit record low, backs fears of global recession

Oil prices continue to decline as U.S-China trade war deepens

Brent crude oil nears 6-week high

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