In this edition of West Africa in Focus, we highlight Mali’s ongoing political crisis and how its lawmakers are siding with the military, despite pressure from ECOWAS. Meanwhile, Côte d'Ivoire has begun exploring 5G, but the commercial rollout is still far away for the entire continent.
We also look at the West African countries selected by the World Health Organization to receive vaccine manufacturing technology. This is significant, given the lack of vaccine equity during the Covid-19 pandemic, with Africa receiving just 6% of the total supply of vaccines. And Nigeria’s fuel scarcity continued this week, with new problems arising in the form of power outages. In our Lagos office, we are literally feeling the heat and expect this to cause further difficulties for people and businesses.
Finally, we highlight how West African fashion brands are embracing sustainable practices, but fast fashion still dominates.
MTN launches 5G trials in Côte d'Ivoire
MTN Côte d'Ivoire has launched 5G trails in Abidjan and will extend its tests to nine more locations within the state. Following the trials, the country’s communications ministry expects 5G to be operational by January 2023.
Apart from Côte d'Ivoire, Nigeria, Togo, Mali and Senegal have made the most progress in embracing 5G, compared with other West African countries. We maintain our view that the 5G rollout across West Africa (and Africa as a whole) will remain slow, due to the challenges with spectrum allocation and pricing, the high capital intensity involved and a lack of market readiness – as 4G coverage and uptake remain low.
Mali’s 5-year transition plan is a direct snub to ECOWAS
Mali’s lawmakers have approved a democratic transition plan that allows the military junta to rule for up to five years. This comes as a surprise, given the heavy sanctions imposed by ECOWAS on Mali (closure of borders, no access to ECOWAS banks, and the suspension of all non-essential commercial and financial transactions) for failing to hold a general election this month.
Although Mali’s political situation is getting out of hand (with French troops exiting and Russia coming on board), we do not envisage further harsh responses from ECOWAS. The sanctions are already biting hard: Mali has defaulted on cUS$93mn-worth of interest and principal payments, with defaults on future payments expected. Prices of goods are also reportedly climbing, which should become more apparent in the February inflation figures.
WHO drafts two West African countries for vaccine manufacturing
The World Health Organization (WHO) has selected the first six African countries to receive the technology needed to produce mRNA vaccines (which prove effective against Covid, examples being the Moderna and Pfizer-BioNTech vaccines). The countries include Egypt, Kenya, Nigeria, Senegal, South Africa and Tunisia. However, the WHO has not announced which African Pharma companies will get to manufacture the vaccines (except for Biovac in South Africa).
This move should improve local production of vaccines, which is practically non-existent in Africa (<1% of total vaccines are produced locally), due to the high costs of setting up vaccine manufacturing hubs, the extensive clinical research involved and the general dependence on the ‘fill and finish’ mode – these countries currently only fill vials and package vaccines produced by Big Pharma.
Nigeria faces power outages and fuel scarcity
When I sat down to write this report in my home, the temperature in Lagos was 33°C. Normally, I would have put on the air conditioning, or, at the least, my electric fan. However, I faced three problems: 1) there had been no electricity for over 15 hours (and counting); 2) I had no petrol with which to fuel my generator, given the unbelievable queues at filling stations; and 3) the battery of my inverter had died.
According to several of Nigeria’s electricity distribution companies, the poor power supply can be attributed to the low output from generating companies. As for fuel scarcity, we have previously mentioned how 170mn litres of imported, adulterated petrol had to be recalled from petrol stations, creating a severe shortage.
So, will Nigeria ever have 24/7 power supply? Not anytime soon. The entire electricity value chain is in need of a miracle cure: daily electricity generation hovers around 5,000MW (for a country with c200mn people) versus 13,000MW installed capacity, with distribution and transmission losses averaging 50% and 7%, respectively.
West Africa fashion's sustainability revolution
Recently, Togo held its annual Female International Fashion Festival. Several designers presented dresses made via 'upcycling', to raise awareness of the environmental harm the textile and apparel industry causes in the country. Dakar's 19th fashion week in December followed the same theme, with several designers using waste plastic and other recycled materials to create pieces.
The trend of awareness is positive; however, West Africa's homegrown fashion industry is unable to meet domestic demand. Moreover, domestically produced fashion is priced at a significant premium to cheap, imported clothing from Asia and second-hand clothes from the West. With 40% of Africa's population living below the US$1.90-a-day poverty line, fast fashion will still dominate, despite its dangerous impact on the environment through carbon emissions and waste.
Our latest West Africa research
2021 was a record-breaking year for fintechs. 2022 might even be better, with Nigeria’s Flutterwave becoming Africa’s most valuable unicorn.
Nigerian consumer companies are adopting 'sachetisation' as a way of catering to inflation-squeezed wallets. But this could be exacerbating the poverty trap and is terrible for ESG.
Nigeria's GTCO acquired Investment One's pension and asset management businesses. We still expect banking to be the major driver of earnings in the short term.
Our annual macro overview for Nigeria shows that the song remains the same. The growth outlook remains weak, absent structural reforms and currency flexibility, which look unlikely heading into an election year.
Upcoming Events
Gambia’s policy rate decision – today
We expect Gambia’s monetary policy committee (MPC) to raise rates today, from the current 10%. The country’s inflation rate has been climbing consistently for three months to 7.8% (January), above the central bank’s target of 5%. Asides from reining in inflation, the MPC would be looking to protect the dalasi (down 1.6% ytd) from global fund outflows.
Somalia will finally hold a presidential election – 25 February
Somalia is set to hold a presidential election tomorrow, delayed from 8 February due to a rift between the country’s president and prime minister on how the election should be conducted. Asides from the political instability issues, the country is suffering from militant attacks from the Al-Shabaab group and a severe drought, further worsening its economic situation.
MTN Ghana's FY 21 results - 28 February
MTN Ghana (Scancom) was one of the best-performing stocks in Africa in 2021. One supporting factor was the general improvement in market sentiment as the economy bounced back from the 2020 Covid-induced plunge. But, in our view, the main reason is MTN Ghana's solid fundamentals and strong growth prospects, driven by data and fintech revenue growth.
Nigeria’s Q4 21 terms of trade report – 8 March
Q4 21 trade figures are expected to show that Nigeria still has a trade deficit (NGN3tn for Q3 21). The rise in energy prices and increased domestic activities will exert pressure on the import bill for petroleum products and manufactured goods (both account for c73% of total imports). While Nigeria’s weak crude oil production will negatively impact exports (crude oil accounts for c77% of total exports).
Markets
Nigeria’s all-share index gained 0.2% wow, much lower than the 1.2% gain last week (ytd gain now 10.5%). Interestingly, 46 stocks gained while 24 stocks lost, but a lot of the gains were recorded in small-cap and illiquid stocks. The major banking stocks saw only small price increases, such as UBA (+2%), GTCO (+2%), FBNH (+0.4%), ZENITH (+0.4%) and STANBIC (+0.3%), as investors had previously piled in because of incoming FY dividends. SEPLAT (-6%) also took a beating, as its high price offers little incentive for offshore investors to continue using it to repatriate capital.
From where we stand, the narrative on the outlook for Nigerian equities remains the same: FX restrictions will keep Nigeria off-limits for fresh capital from foreign investors, while locals will dominate. Also, several factors point to increased domestic yields towards H2, which might put a pin on local participation.
