The Nation Newspaper

Category: Capital Market

  • Nigerian stocks lift top billionaires’ fortunes to $23.9b

    Nigerian stocks lift top billionaires’ fortunes to $23.9b

     

     

    Impressive gains by Nigerian stocks lifted the fortunes and global ranking of Nigerian billionaires in 2020. In a year ravaged by COVID-19  pandemic, latest ranking by Forbes showed that three Nigerian dominated the African billionaires’ list.

    President, Dangote Group, Alhaji Aliko Dangote remains Africa’s richest person with a net worth of $12.1 billion. Dangote’s wealth came mainly from its cement and sugar businesses, which are all quoted on the Nigerian Stock Exchange (NSE). Dr. Mike Adenuga, owner of Globacom and majority core investor in Conoil Plc, occupied the fifth position with networth of $6.5 billion. Alhaji Abdul Samad Rabiu, the majority core investors in BUA Cement Plc, followed in the sixth position with a networth of N5.5 billion.

    The total networth of $23.9 billion by the three Nigerian billionaires was the largest concentration by any country within the top 10 list.

    Dangote’s Dangote Cement, Dangote Sugar Refinery and NASCON Allied Industries; Adenuga’s Conoil and Rabiu’s BUA Cement are all quoted on the NSE, which posted a world-leading return off 50.03 per cent in 2020.

    Globally, Elon Musk of Tesla became the world’s richest person, overtaking Jeff Bezos of Amazon due to surging share price of Tesla.

    According to Forbes, Africa’s 18 billionaires are worth an average $4.1 billion, 12 per cent more than a year ago, driven in part by Nigeria’s surging stock market with Aliko Dangote retaining his place as the continent’s richest at $12.1billion, up by $2 billion from last year’s list thanks to a roughly 30 per cent rise in the share price of Dangote Cement, by far his most valuable asset.

    “The biggest gainer in Africa this year is another Nigerian cement and manufacturing tycoon, Abdul Samad Rabiu of BUA Group. Remarkably, shares of his BUA Cement PLC, which listed on the Nigeria Stock Exchange in January 2020, have doubled in value in the past year. That pushed Rabiu’s fortune up by an extraordinary 77%, to $5.5 billion,” Forbes stated.

    Unlike last year, there are no women from Africa on this year’s list with Forbes calculating that the fortune of Folorunsho Alakija of Nigeria, who owns an oil exploration company, dropped below $1 billion due to lower oil prices.

    “The 18 billionaires from Africa hail from seven different countries. South Africa and Egypt each have five billionaires, followed by Nigeria with three and Morocco with two. Altogether they are worth $73.8 billion, slightly more than the $73.4 billion aggregate worth of the 20 billionaires on last year’s list of Africa’s richest people,” Forbes stated.

    On the method of selection, Forbes explained that its list tracks the wealth of African billionaires who reside in Africa or have their primary business there, thus excluding Sudanese-born billionaire Mo Ibrahim, who is a United Kingdom citizen and billionaire London resident Mohamed Al-Fayed, an Egyptian citizen. However, Strive Masiyiwa, a citizen of Zimbabwe and a London resident, appears on the list due to his telecom holdings in Africa.

    “We calculated net worths using stock prices and currency exchange rates from the close of business on Friday, January 8, 2021. To value privately held businesses, we start with estimates of revenues or profits and apply prevailing price-to-sale or price-to-earnings ratios for similar public companies. Some list members grow richer or poorer within weeks-or days-of our measurement date,” Forbes stated.

    The Forbes yearly list of billionaires is the world’s most comprehensive billionaires ranking in the world and is calculated based on net worth using stock prices and currency exchange rates from the close of business on Friday, January 8, 2021.

    To value privately held businesses, Forbes starts with estimates of revenues or profits and apply prevailing price-to-sale or price-to-earnings ratios for similar public companies. Some list members grow richer or poorer within weeks-or days-of Forbes measurement date.

     

  • Investors shift to low-priced stocks amid profit-taking

    Investors shift to low-priced stocks amid profit-taking

    By Taofik Salako, Deputy Group Business Editor

     

    Nigerian investors appear to be showing greater consideration for low-priced stocks, otherwise known as penny stocks, as several investors sought to unlock gains in mid and large-cap stocks.

    Penny stocks, named because of their relatively low prices, usually around 100 kobo mark, have dominated transactions in recent trading sessions, with increased demand pushing several penny stocks atop activities and pricing charts.

    Trading data at the weekend showed that three low-priced stocks were the three most active stocks last week, accounting for 36.9 per cent of the total turnover volume. The three most active stocks- Transnational Corporation of Nigeria (Transcorp), Living Trust Mortgage Bank Plc and Japaul Gold and Ventures Plc accounted for 1.582 billion shares worth N1.564 billion in 2,726 deals, representing 36.9 per cent and 6.02 per cent of the total equity turnover volume and value respectively.

    Total turnover for the week stood at 4.288 billion shares worth N25.989 billion in 32,849 deals as against a total of 3.447 billion shares valued at N32.725 billion traded in 30,327 deals two weeks ago. The financial services sector however remained atop activity chart with 2.607 billion shares valued at N12.454 billion traded in 15,128 deals; thus contributing 60.81 per cent and 47.92 per cent of the total equity turnover volume and value. The conglomerates sector followed with 813.813 million shares worth N1.561 billion in 2,417 deals while oil and gas sector placed third with a turnover of 212.126 million shares worth N821.978 million in 2,726 deals.

    Benchmark pricing indices showed marginal depreciation during the week, driven largely by losses in the highly influential banking and industrial goods sectors. The All Share Index (ASI)- a value-based common index that tracks all share prices at the Nigerian Stock Exchange (NSE) showed average decline of 0.42 per cent, equivalent to net capital depreciation of N81 billion.

    The ASI closed weekend at 41,001.99 points as against its opening index of 41,176.14 points for the week. Aggregate market value of all quoted equities rose from the week’s opening value of N21.530 trillion to close at N21.449 trillion. This moderated the average year-to-date return so far this year to 1.82 per cent.

    Many analysts, however, remained optimistic on positive pricing trend as investors take positions ahead of the release of the audited report and accounts and dividends for the 2020 business year.

    Analysts at Cordros Group said they expected investors’ attention to be centered on the outcome of the first Monetary Policy Committee (MPC) meeting of the year.

    “We believe consensus expectation for a HOLD decision if confirmed will engender positive market performance as investors cherry-pick stocks with attractive dividend yields amid negative real returns in the fixed income market. However, we advise investors to take positions in only fundamentally justified stocks as the fragility of the macroeconomic environment remains a significant headwind for corporate earnings,” Cordros stated.

    Pricing trend analysis showed widespread profit-taking transactions across the sectors with all sectoral indices closing negative. The NSE Banking Index led with a drop of 1.33 per cent. The NSE Insurance Index declined by 0.80 per cent. The NSE Industrial Goods Index dipped by 0.51 per cent. The NSE Consumer Goods Index depreciated by 0.09 per cent while the NSE Oil & Gas Index slipped by 0.13 per cent.

    “In the coming week, we anticipate a positive performance as investors seek bargain hunting opportunities,” Afrinvest Securities stated in a preview of trading for this week.

    With more advancers than decliners, the negative price performance last week was driven mainly by losses recorded by large-cap stocks. There were 53 gainers against 29 losers last week as against 60 gainers and 19 losers recorded in the previous week. Champion Breweries recorded the highest gain, in percentage term, of 44.4 per cent to close at N1.95. Trans Nationwide Express followed with a gain of 37.5 per cent to close at N1.10 while NCR Nigeria added 32.2 per cent to close at N3.12. On the negative side, Japaul led the losers with a drop of 37.5 per cent to close at 95 kobo. AXA Mansard Insurance followed with a loss of 20 per cent to close at N1.28 while MRS Oil Nigeria declined by 18.55 per cent to close at N11.20 per share.

     

  • Stock Exchange to list shares for trading

    Stock Exchange to list shares for trading

    By Taofik Salako, Deputy Group Business Editor

    Plans are underway for the listing of ordinary shares of the holding group for the Nigerian Stock Exchange (NSE) and its emergent subsidiaries for public trading at the stock market.

    The listing of the shares is expected to be the climax of the ongoing demutualisation (conversion ), which is expected to close in the third quarter.

    Sources said the shares of the six decade-old Exchange will be made available for public trading this year, noting that the timeline of activities will run smoothly with the receipt of all major regulatory approvals.

    According to the sources, the listing may be done by way of introduction, a process that allows the scheme shares from the demutualisation of the Exchange to be listed for public trading without initial public offering (IPO).

    Under demutualisation, NSE, as a non-profit, member-owned mutual company, limited by guarantee is converting to a public limited liability company with issued share capital and shareholders.

    A non-operating holding company, the Nigerian Exchange Group (NGX Group) Plc has been created as the parent company for the NSE and its operating structures. NGX Group has three operating subsidiaries – Nigerian Exchange Limited (NGX), the operating exchange; NGX Regulation Limited (NGX REGCO), the independent regulatory arm; and NGX Real Estate Limited (NGX RELCO), the real estate company – forming the group. All the four entities have been duly registered at the Corporate Affairs Commission (CAC).

    According to the plan, the emergent holding group, Nigerian Exchange Group Plc, will list its entire issued share capital of 2.0 billion ordinary shares of 50 kobo each by way of introduction on the Nigerian Exchange Limited, which will take over the trading function of the NSE.

    Read Also: Nigerian stocks buck global downtrend with N552b gain

    Under the rules at the Exchange, immediate post-demutualisation shareholders of the emergent holding group may need to make initial shares available to create liquidity in the stock. Listing by introduction is a listing method for companies that desire to list its primary share capital on the Exchange, without prior public issuance.

    As part of the process, the council of the NSE recently announced the chief executives of the emerging companies after the conversion of the NSE.

    The incumbent Chief Executive Officer of NSE, Mr Oscar Onyema, will lead the Nigerian Exchange Group Plc as Group Chief Executive Officer. Temi Popoola, a Chartered Financial Analyst (CFA) and Chief Executive Officer, West Africa, Renaissance Capital, will lead Nigerian Exchange Limited as Chief Executive Officer. Incumbent Executive Director at NSE, Tinuade Awe, will be the Chief Executive Officer of NGX Regulation Limited.

    According to the scheme of arrangement for the conversion, the post-demutualisation shareholders’ base will consist of 255 institutional shareholders and 177 individual shareholders.

    The post-demutualisation shareholding arrangement was arrived at by converting the existing dealing members of the Exchange to institutional shareholders and ordinary members to individual shareholders.

    Shareholdings will be on equal basis in the immediate conversion period with each institutional shareholder holding 6.01 million ordinary shares of 50 kobo each while each individual shareholder will hold 2.44 million ordinary shares of 50 kobo each.

    Thus, each institutional shareholder will hold 0.3 per cent equity stake while each individual shareholder will hold 0.1 per cent equity stake, in line with the current membership-share conversion ratio of 78 per cent for dealing members and 22 per cent for ordinary members.

    The NSE will transit into a non-operating holding company with an authorised share capital of 2.5 billion ordinary shares. About 2.0 billion ordinary shares of 50 kobo each are expected to be issued in the immediate period of the conversion.

    The NSE will transfer its securities  exchange  licence and other assets necessarily required to carry out the securities exchange function; which will   include human   resources,   securities   exchange   function related contracts, the  trading facilities  comprising of the  trading floors, work stations, telephones and other office equipment such as cabinets and others, quotation board,  stock  price  electronic  display  device,  stock  printers,  inquiry display equipment and other assets to Nigerian Exchange Limited pursuant to the scheme.

    According to the scheme, the demutualised NEG will take off with authorised share capital of N1.25 billion comprising of 2.50 billion ordinary shares of 50 kobo each, which will be registered with the Corporate Affairs Commission. The NEG will subsequently set aside 2.0 billion ordinary shares of 50 kobo each as issued share capital, which will be registered with the SEC.

    A total of 40.08 million ordinary shares, representing 2.0 per cent of the proposed issued shares of NEG will be set aside for allotment to parties that may lay claims to entitlement to shares in the demutualised Exchange.

    This was pursuant to the provisions of the Demutualisation Act 2018. The apportionment of 2.0 per cent as the claims review shares is based on an analysis of the probable quantum of shares that would be required to settle each claim. However, each claimant will be expected to provide irrefutable evidence of membership or circumstance that confers such claim of ownership.

    However, in the event the claims review shares are insufficient to satisfy successful claims, additional shares will be allotted from the demutualised Exchange’s authorised share capital.

    A total of 1.96 billion ordinary shares, representing 98 per cent of the issued shares, the balance of the issued shares following the reservation of the claims review shares, will be apportioned between dealing and ordinary members on the basis of a ratio of 78:22, respectively.

    With the approval of the scheme, all assets, liabilities and undertakings including real property and intellectual property rights of the NSE- with the exception of the securities exchange licence and all assets and appurtenances in relation to the securities trading business of the NSE – shall be retained by NEG.

  • Nigerian stocks buck global downtrend with N552b gain

    Nigerian stocks buck global downtrend with N552b gain

    By Taofik Salako, Deputy Group Business Editor

    Nigerian equities played the contrarian amid global stock market decline as sustained bargain-hunting ahead of the earnings season roused Nigerian shares to a net capital gain of N552 billion at the weekend.

    Benchmark indices for Nigerian equities showed average return of 2.63 per cent at the weekend, indicating net capital appreciation of about N552 billion. The all-week rally pushed average year-to-date return for Nigerian equities to 2.25 per cent, building on 50.03 per cent posted as full-year return for 2020.

    A review of global stock markets showed a negative trend, with Nigeria recording the second highest positive return among tracked advanced, frontier and emerging markets, trailing Egypt, which posted 4.6 per cent.

    In the advanced markets, benchmark indices in United States (US) closed negative amid transition tension. The S & P 500 Index dropped by 1.5 per cent, NASDAQ Index declined by 1.7 per cent while the Dow Jones Industrial Average (DJIA) fell by 0.3 per cent. In United Kingdom, the FTSE All Share Index declined by 2.2 per cent as COVID-19 pandemic continued to force economic closure. In Europe, Germany’s XETRA DAX Index declined by 1.9 per cent while France’s CAC 40 Index dipped by 2.1 per cent. China’s Shanghai Composite Index slipped by 0.1 per cent. Brazil’s Ibovespa Index dropped by  three per cent.

    Meanwhile, African equities appeared to be the toasts of investors with most stocks closing on the upside. Egypt’s EGX 30 Index indicated average return of 4.6 per cent, followed by Nigeria with 2.6 per cent. South Africa’s FTSE/JSE All Share Index inched up by 0.05 per cent. Kenya’s NSE 20 Index appreciated by 1.2 per cent. Ghana’s GSE Composite Index rose by 1.0 per cent while Morocco’s Casablanca MASI Index posted average gain of 1.5 per cent.

    Most Asian and Middle East markets also closed positive. Hong Kong’s Hang Seng Index appreciated by 2.5 per cent. Japan’s Nikkei 225 Index also rose by 1.4 per cent. Qatar’s DSM 20 Index rose by 2.2 per cent. UAE’s ADX General index appreciated by two per cent. Saudi Arabia’s Tadawul ASI Index rose by 1.8 per cent.

    Also, Russia’s RTS Index and India’s BSE Sens Index rallied average return of 0.5 per cent each. With gains across the developing markets, the MSCI EM Index, which tracks emerging markets, closed weekend with average return of one per cent while the MSCI FM Index, which tracks frontier markets, appreciated by 0.7 per cent.

    Nigeria’s benchmark index, the All Share Index (ASI) of Nigerian Stock Exchange (NSE) rose through a five-day rally from its opening index of 40,120.22 points to close weekend at 41,176.14 points. Aggregate market value of all quoted equities rose from the week’s opening value of N20.978 trillion to close weekend at N21.530 trillion.

    With more than three advancers for every decliner, all sectoral indices at the NSE closed positive, underlining the widespread bargain-hunting driving share pricing. The NSE 30 Index, which tracks the 30 largest stocks, posted average gain of 2.80 per cent. The NSE Insurance Index posted the highest return of 17.48 per cent. The NSE Oil and Gas Index followed with a gain of 7.25 per cent. The NSE Consumer Goods Index rose by 3.11 per cent. The NSE Banking Index appreciated by 2.55 per cent. The NSE Industrial Goods Index rose by 2.84 per cent. The NSE Pension Index, which tracks stocks specially screened in line with pension funds investment guidelines, posted average return of 3.58 per cent while the NSE Lotus Islamic Index, which tracks ethical stocks in compliance with Shari’ah, rallied by 2.65 per cent.

    Most analysts expected the rally at the Nigerian stock market to continue as investors take positions ahead of the release of the audited report and accounts and dividends for the immediate past business year.

    More than three-quarters of quoted companies use the Gregorian calendar ending December 31 as business year, thus are expected to submit their full-year report not later than March 31, 2021 in line with the market rules that require quoted companies to submit their audited financial statement not later than 90 days after the end of the business year.

    “In the short term, we expect the bulls to retain dominance in the market given positioning for full-year 2020 dividends amid negative real returns in the fixed income market even as we do not rule out intermittent profit-taking,” Cordros Securities stated in a review at the weekend.

    Analysts at Cordros Securities, however, advised investors to take positions in only fundamentally justified stocks as the weak macro environment remains a significant headwind for corporate earnings.

    “We believe the bullish momentum would be sustained in the coming week due to positive sentiments, although we may see some profit-taking activities,” Afrinvest Securities stated.

    The momentum of activities also improved at the NSE with total turnover rising to 3.447 billion shares worth N32.725 billion in 30,327 deals at the weekend, compared with a total of 3.394 billion shares valued at N19.867 billion traded in 26,808 deals two weeks ago.

    The financial services sector remained the most active with a turnover of 1.714 billion shares valued at N13.352 billion traded in 15,102 deals; thus contributing 49.74 per cent and 40.80 per cent to the total equity turnover volume and value respectively. The construction and real estate sector followed with 768.131 million shares worth N4.203 billion in 430 deals while conglomerates sector placed third with a turnover of 279.799 million shares worth N578.694 million in 1,199 deals.

    Low-priced stocks dominated both activities and pricing charts. UPDC Real Estate Investment Trust, Mutual Benefits Assurance Plc and Transnational Corporation of Nigeria Plc were the most active stocks, with a joint turnover of 1.224 billion shares worth N4.459 billion in 929 deals, contributing 35.52 per cent and 13.63 per cent to the total equity turnover volume and value respectively.

    Also, a total of 413,509 units of Exchange Traded Products (ETPs) valued at N2.454 billion were traded in 42 deals compared with a total of 196,294 units valued at N816.553 million traded in 38 deals penultimate week.

    At the secondary debt market, a total of 11,420 bond units valued at N12.325 million were traded in 17 deals compared with a total of 10,051 units valued at N12.591 million traded in 27 deals two weeks ago.

    There were 60 gainers against 19 losers last week compared with 50 gainers and 21 losers recorded in the previous week. Japaul Gold and Ventures, rising on the back of new business portfolio, led the gainers, in percentage terms, with a gain of 56.70 per cent to close at N1.52. Mutual Benefits Assurance followed with a gain of 50 per cent to close at 42 kobo while Royal Exchange appreciated by 47.83 per cent to close at 34 kobo per share.

    On the negative side, Cutix recorded the highest loss of 12.92 per cent to close at N2.09. Daar Communications followed with a drop of 10 per cent to close at 27 kobo while Chellarams dropped by 9.96 per cent to close at N2.26 per share.

  • CBN releases framework to boost e-payment adoption

    CBN releases framework to boost e-payment adoption

    By Collins Nweze

    The Central Bank of Nigeria (CBN) has released the Framework for Regulatory Sandbox Operations that would promote seamless adoption of electronic payment across the country.

    The new framework will also ensure the safety and stability of the financial system, among other benefits.

    It is also to promote the use and adoption of e-payments and foster innovation in the payments system.

    The new framework would equally increase the potential for innovative business models that advance financial inclusion.

    The apex bank explained that it came up with the structure to ensure new and more flexible ways of engaging with the banking industry.

    This, it said, is in view of increasing consumer appetite for payment solutions and emerging disruptive technology in the financial services space.

    It said the structure would enable the bank stay abreast of innovations while promoting a safe, reliable and efficient payments system to foster innovation without compromising on the delivery of its mandate.

    “This framework, therefore, defines the establishment, rules and operations of a Regulatory Sandbox for the Nigerian Payments System to promote effective competition, embrace new technology, encourage financial inclusion and improve customer experience, with a view to engendering public confidence in the financial system,” it said.

    The bank explained also that the structure was to reduce time-to-market for innovative products, services, and business models.

    According to CBN, the framework will increase competition, widen consumers’ choice and lower costs.

    It also said it would ensure appropriate consumer protection safeguards in innovative products.

    The CBN said the structure would clearly define the roles and responsibilities of stakeholders and the operations of the Sandbox for the Nigerian Payments System industry.

    The apex bank added that the framework would ensure adequate provisions in regulations to create an enabling environment for innovation without compromising on safety for consumers and the overall payments system.

  • ‘Monetary policy will determine share prices’

    ‘Monetary policy will determine share prices’

    The performance of Nigerian stocks in the year will depend on the monetary policy direction of the Central Bank of Nigeria (CBN).

    In its 2021 outlook entitled: “Nigeria Economic Outlook 2021: A shot at recovery”, United Capital Plc stated that the decisions of the apex bank will largely determine share pricing trend at the Nigerian stock market. Nigerian equities had recorded full-year average return of 50.03 per cent in 2020.

    According to analysts at United Capital, in the year, sentiment for stocks depends on the direction of monetary policy, particularly in relation to the yield environment.

    “A sharp reversal of rates is likely to trigger a sell-off in the equities market considering that the current average market price-to-earnings valuation multiple of 15.2 times is considerably higher than the five-year historical average of 11.9 times. While we predict that the rate reversal, which appeared to have been triggered in December 2020, will become more apparent from second quarter 2020, the yield environment may not reverse to double digits until late 2021 or later,” United Capital stated.

    Accordingly, analysts said that domestic interest, fueled by dividend expectations, is likely to sustain the stock market rally in first quarter 2021, but in the absence of foreign demand, there will be a short-term bear market from second quarter to third quarter of 2021.

    On the national economy, analysts expected Nigeria’s Gross Domestic Product (GDP) growth to rebound by 1.7 per cent to two per cent, buoyed by increased economic activity and some improvements in the oil market.

    According to analysts, although the reopening of the borders in fourth quarter 2020 should ease pressures on food prices, other structural factors such as foreign exchange market illiquidity and potential increases in petrol price may keep general prices elevated.

    “As a result, we expect the headline inflation rate to peak at around 16 per cent before pulling back, if no further policy adjustment is made. Again, the high base effect of the headline inflation spike in third quarter and fourth quarter 2020 should moderate further increases in price levels. In response to rising inflation and in a bid to attract foreign portfolio investment (FPI) inflows to the market, we imagine that the CBN would begin to tighten its monetary policy stance at some point in second to third quarter of 2021,” United Capital stated.

    On the exchange rate, analysts expected a potential convergence of rates when the CBN begins full intervention at the Investors & Exporters (I & E) window.  As such, they anticipated that the parallel market will appreciate from N470/$ towards the NAFEX rate which has now been adjusted to N410/$.

    Analysts said they expected the global economy to take ‘a shot at recovery’, largely due to the announcement and approval of effective COVID-19 vaccines.

    According to analysts, the risks of re-emerging infections remain high, however, and much will depend on the speed, scale, and long-term effectiveness of vaccination. Away from the virus, the outcome of the recent US presidential election which will see Joe Biden replace President Trump from this Wednesday greatly reduces political risk. Also, a Joe Biden presidency is positive for global trade and efforts against climate change.

    Overall, global growth is projected by the IMF to rebound by 5.2 per cent in 2021, buoyed by recoveries in emerging markets, +6.0 per cent and advanced economies, +3.9 per cent. Recovery will be aided by bold economic stimulus packages and a massive accommodative policy stance by central banks. Similarly, oil prices are expected to continue northwards but may be stuck within the $45-$55/b range if demand fails to keep up with supply.

    In Sub-Saharan Africa (SSA), growth in the region will be driven by a few factors. Firstly, the capacity of SSA economies to keep the spread of the coronavirus pandemic at bay amid potential vaccination bottlenecks and financial distress will be a significant factor, as the region must avoid another round of unaffordable lockdowns.

    Secondly, the implementation of the AfCFTA trade agreement, now scheduled to begin from Jan- 2021 rather than Jul-2020, and the commitment of major economies such as Nigeria and South Africa to the success of the pact are key. Finally, fiscal policy operations, supported by access to more concessional financing, relief, and private financing amid bold policy reforms, will help bolster recovery.

    Overall, slower than required recovery in key markets, notably South Africa, Nigeria and Angola, will drag SSA growth in 2021. The IMF expects regional growth to rebound to 3.1 per cent in 2021 but insists that many SSA countries will not return to 2019 output levels until 2022–24.

     

     

     

  • Capital Markets: Entering new growth phase

    Capital Markets: Entering new growth phase

    The capital market braced through the COVID-19 pandemic to a world-leading performance in 2020. Capital Market Editor/Deputy Group Business Editor, TAOFIK SALAKO, reports that 2021 will also be an equally exciting year for the market as it transits into newness on many fronts.

     

    THE capital market was the silver lining in the economy clobbered by foreign exchange crisis, hyperinflation, lockdowns, disruptions and recession. Amid the COVID-19 pandemic and the intense disruptions to economies and corporate plans, the Nigerian capital market remained open for business throughout 2020 and posted several landmarks.

    Benchmark indices at the Nigerian Stock Exchange (NSE) showed average full-year return of 50.03 per cent in 2020, equivalent to net capital gain of N6.483 trillion. The recent highest return was 42.3 per cent recorded in 2017.

    The All Share Index (ASI)- the value-based common index that tracks all share prices at the NSE closed 2020 at 40,270.72 points, 50.03 per cent above 26,842.07 points recorded as opening index for the year. Aggregate market value of all quoted equities at the NSE rose to N21.057 trillion as against N12.958 trillion recorded as opening value for the year, an increase of N8.1 trillion.

    The additional increase in value of market capitalisation, above the ASI percentage change, was due to additional or supplementary listing of shares during the year.  Other landmarks included the launch of Nigeria’s biggest corporate bond and the largest foreign-driven shareholders’ recapitalisation of a quoted company.

    The new business year is on many fronts a year of momentum for the capital market. While the secondary market, with its thrills and shrills of gains and losses, will continue to signpost the market at a glance, more profound institutional and regulatory changes will define the market in 2021. The first major change is the full demutualisation of the 60 years old NSE. Demutualisation, the conversion from a mutual, member-owned non-profit status to a profit-making, shareholders-owned, public limited liability company, is arguably the biggest change at the NSE in more than three decades and probably the final metamorphosis of the NSE.

    Established as the Lagos Stock Exchange on September 15, 1960 under the provisions of the Companies Ordinance 1922, with a share capital of £5,000 divided into 500 ordinary shares of £10 each, the name of the exchange was changed from Lagos Stock Exchange to Nigerian Stock Exchange on December 15, 1977.

    With the enactment of the Companies and Allied Matters Act (CAMA) 1990 and prohibition of companies limited by guarantee from being registered with a share capital; the NSE was re-registered on December 18, 1990 as a company limited by guarantee and the then existing share capital of N20,000 was cancelled and the equity rights of the initial subscribers extinguished. The demutualisation of the NSE is expected to be completed this year with the listing of the shares of the emergent holding company listed for public trading around the second half of the year. The new year already started with major announcements on incorporation of subsidiaries, leadership and complaints management.

    The demutualisation of the NSE is expected to further open up the competitive landscape at the stock market, with the NSE being able to drive major growth agenda while other trading platforms and exchanges riding on the ‘sense of emotional detachment’ to close gaps and foster a more competitive market with various privately-owned platforms for issuance and listing.

    The automation of the capital market is also expected to reach its crescendo this year. The launch of online public offering platform, the first of such initiative in Africa, brings the primary issuance processes to par with the secondary market processes, with enormous prospects for the depth and liquidity of the entire capital market. The global virtual public offerings subscription’s platform, known as X-PO by the NSE, will allow investors to conveniently subscribe and make payments for public offers through the web and mobile (USSD), from anywhere in the world. This innovation is expected to berth more innovations with other exchanges and stakeholders offering similar versions. As it was with the launch and proliferation of secondary market’s online trading platforms, the electronic offering (e-offer) is expected to significantly transform the primary market segment, removing the hassle of physical completion and submission of public offering applications forms, visiting bank for payment, delay in offering and allotment period and overall cost of issuance. The launch of e-offering is also expected to provide impetus for pending major initial public offerings (IPOs).  Regulations and market exigencies are also expected to culminate in many technological tie-ups including in the areas of identity management, trading and settlement, filing, investors’ relations and dividend payment. The passage into law of the bill establishing government-promoted Unclaimed Dividend Trust Fund, while it may be meddlesome and insensitive at first sight, is expected to rouse the market to remove the rep tape, corrupt practices and disconnections that have fuelled unclaimed dividend, and dampen popular participation in the market.

    The secondary market performance will depend on the same factors that propelled major recovery in 2020, but at a slower pace in 2021. Foreign exchange, inflation, naira depreciation and corporate earnings will determine the direction of the stock market. Against the background of the whooping 50.03 per cent return in 2020, many analysts see a moderate positive performance in 2021. But the market is full of surprises, as it did in 2020.

    “Our prognosis for the stock market in 2021 is that domestic interest, fueled by dividend expectations, is likely to sustain the market rally in first quarter 2021. However, in the absence of foreign demand, we see a short-term bear market from second quarter to third quarter 2021,” United Capital stated.

    In what may have a major impact on the pool of expertise at the capital market, the Chartered Institute of Stockbrokers (CIS) will commence the implementation of a new syllabus as well as new membership rule in line with existing realities in Nigeria and globally. It is also expected to see a major push for the passage of the Chartered Institute of Securities and Investments (CISI) bill, which aims at deepening professionalism across various functions in the market under a single process of certification and standardisation.

    At the emerging segment of alternative securities, Eagle Global Markets (EGM), which provides resources for trading in Bitcoin, Ethereum, Litecoin, Ripple and other kinds of Cryptocurrency (CFDs), stated that it expects stronger regulation and improved performance for crypto in 2021. Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC), which is focusing on fintech and other alternative securities to protect investors in uncharted territory, is expected to further concretise its rules on derived and alternative securities.

    “While 2020 taught us that nothing is guaranteed, many analysts are predicting an optimistic run for the markets in 2021,” EGM stated.

    The Lagos Commodities and Futures Exchange (LCFE) is also expected to commence trading operations this year, opening up new investment channel and further diversifying the capital market. LCFE plans to trade on agricultural commodities, solid minerals, currencies and oil and gas.

    With the markets becoming more dynamic and resilient, 2021 may not be measured in terms of high-end double-digit return, but it surely looks more positive for the long-term growth and development of the capital markets.

     

     

     

  • NCDC closes stock market with charges on COVID-19 protocols

    NCDC closes stock market with charges on COVID-19 protocols

    Our Reporter

    The Director-General, Nigeria Centre for Disease Control (NCDC), Dr. Chikwe Ihekeazwu, sounded the digital closing gong for the last trading in 2020 with a charge to Nigerians to observe COVID-19 protocols.

    At the last trading session, equities rallied N397 billion in net capital gains in contrarian trading that defied COVID-19 lockdowns and disruptions. Average return during the session stood at 1.92 per cent.

    Aggregate market value of all quoted equities at the Nigerian Stock Exchange (NSE) rose from its opening value of N20.660 trillion to close at N21.057 trillion. The All Share Index (ASI)- the benchmark value index, also rose from its opening index of 39,512.31 points to close at 40,270.72 points.

    Ihekeazwu said the NCDC was extremely proud and grateful to the NSE for the honour to close the market for 2020 noting that the country has been faced by a common challenge which has facilitated a strong collaboration between the NCDC and NSE as well as the organised private sector.

    According to him, the NSE has been truly supportive of the measures put in place by the Presidential Task Force on COVID-19 and the NCDC, encouraging members of the capital market community to adhere to necessary guidelines.

    He noted that the lives that had been lost to the pandemic should push Nigerian and all stakeholders to be more responsible in the new year.

    “We would like to take this opportunity to remind Nigerians to wear face masks, maintain, physical distancing, avoid mass gatherings and wash their hands frequently even as we move closer to the finish line,” Ihekeazwu said.

    Divisional Head, Shared Services, Nigerian Stock Exchange (NSE), Mr. Bola Adeeko, pointed out that the year 2020 has been an eventful year for the Nigerian capital market and specifically for the NSE.

    According to him, despite the economic impact of COVID-19, the market has remained resilient in providing stakeholders a platform to raise capital and invest.

    “Despite the pandemic, the market capitalization of all securities listed on the Exchange increased to N38.5 trillion as at 31 December 2020 from N25.89 trillion at the end of 2019. The NSE All Share Index crossed the N21 trillion mark with a YTD return of 50.03 per cent. We have also continued to provide a platform to support listed companies in meeting their strategic business objectives as demonstrated in the over N1 trillion raised by governments and corporates across various asset classes year to date,” Adeeko said.

    He outlined that as a responsible corporate citizen, the Exchange has continued to support the fight against COVID-19, having devoted the sum of N100 million to the fight against COVID-19, with N60 million donated to the Capital Market Support Committee for COVID (CMSCC) and the balance N40 million devoted to the ‘Masks for All Nigerians’ campaign.

    He said the invitation to the NCDC to perform the ceremonial closing of the market was to further amplify the efforts of the NCDC to educate Nigerians on how they can navigate the COVID-19 pandemic, in the light of the resurgence.

    “We thank Dr. Ihekeazwu for his exemplary leadership and reiterate the support of the Exchange to promote collective action in this fight,” Adeeko said.

  • Shareholders shun Prestige Assurance’s N6.82b offer

    Shareholders shun Prestige Assurance’s N6.82b offer

    By Taofik Salako

     

    Major shareholders of Prestige Assurance Plc renounced their rights and refused to fully take up the shares pre-allotted to them in the quest by the insurance company to raise N6.82 billion in new equity funds.

    Prestige Assurance had, in August 2020, offered 13.636 billion ordinary shares of 50 kobo each to existing shareholders at a par value of 50 kobo. The rights were pre-allotted on the basis of 38 new ordinary shares for every 15 ordinary shares held as at January 31, 2020.

    As at the time of the offer, the New India Assurance Company Limited, Mumbai, the precursor and founder of Prestige Assurance, held 69.50 per cent majority equity stake in the Nigerian subsidiary while Leadway Assurance Company, an unlisted Nigerian insurance company, also held 11.47 per cent equity stake.  This implied about 80.97 per cent equity stakes within the two major shareho0lders.

    Market analysts had expected that the traditional support of major shareholders for recapitalisation would enable the insurance company to meet its target, especially with the new shares offered at par value.

    Regulatory filing, however, indicated that the rights issue recorded a subscription level of 50.54 per cent, with the company being able to raise about N3.45 billion out of its target of N6.82 billion.

    Shareholders picked up 6.89 billion ordinary shares of 50 kobo each at 50 kobo per share, out of the 13.636 billion ordinary shares of 50 kobo each offered to investors.

    The rights issue process was completed yesterday with the listing of the new issued shares of 6.89 billion ordinary shares of 50 kobo each at the Nigerian Stock Exchange (NSE).

    With the listing of the 6.89 billion new shares, the total issued and fully paid up shares of Prestige Assurance increased from 6.36 billion to 13.253 billion ordinary shares of 50 kobo each.

    Shareholders of Prestige Assurance had created additional new 14 billion ordinary shares to create headroom for the new capital raising. The company increased its authorised share capital from N3 billion of 6.0 billion ordinary shares of 50 kobo each to N10 billion of 20 billion ordinary shares of 50 kobo each through the creation of additional 14 billion ordinary shares of 50 kobo each.

    Market analysts, however, noted that the undersubscription might have corrected Prestige Assurance’s free float deficiency. Prestige Assurance was 1.05 per cent below the regulatory minimum of 20 per cent for its listing on the main board of the Exchange.

    The National Insurance Commission (NAICOM) had in May 2019 released new capital requirements for insurance businesses, mandating operators to shore up their minimum capital base to the required level. The minimum paid-up share capital of a life insurance company was increased from N2 billion to N8 billion, non-life insurance from N3 billion to N10 billion, composite insurance from N5 billion to N18 billion while re-insurance companies were directed to raise their capital base from N10 billion to N20 billion.

     

  • Stock Exchange removes 17 companies from market indices

    Stock Exchange removes 17 companies from market indices

    By Taofik Salako, Deputy Group Business Editor

     

    The Nigerian Stock Exchange (NSE) has removed 17 companies from its market-gauging indices to ensure that the indices fully reflect the market situation and the underlying fundamentals they represent.

    At the end of the annual full-year market index review, the NSE removed 17 companies from seven indices while six remained unchanged. The Exchange also added 10 companies to replace some of the exited companies. The newly reconstituted indices take effect today.

    The reviewed indices included the NSE 30 Index, NSE Lotus Islamic Index, NSE Pension Index, Corporate Governance Index, Afrinvest Bank Value Index, Afrinvest Dividend Yield Index, Meristem Growth Index, Meristem Value Index; and the five Sectoral Indices of the Exchange – NSE Banking Index, NSE Insurance Index, NSE Industrial Index, NSE Consumer Goods Index and NSE Oil & Gas Index.

    The companies that were removed included Julius Berger Nigeria, Niger Insurance, MRS Oil Nigeria, PZ Cussons Nigeria, Dangote Sugar Refinery, FCMB Group, United Capital,  Africa Prudential, AIICO Insurance, BUA Cement, GlaxoSmithKline Consumer Nigeria, Okomu Oil, Wema Bank, Cadbury Nigeria, Dangote Cement, Fidelity Bank and UACN Property Development Company (UPDC).

    The removal and addition underscored the waning or growing influence of the stock, in the fundamental area or sector that a particular index tracks. Julius Berger Nigeria was replaced by Transnational Corporation of Nigeria in the NSE 30 Index, a value-based index that tracks the 30 largest companies, by capitalisation, on the Exchange. Niger Insurance was removed and replaced with Veritas Kapital Assurance and African Alliance Insurance in the NSE Insurance Index. Eterna replaced MRS Oil in the NSE Oil and Gas Index.

    Also, four companies – BUA Cement, GlaxoSmithKline Consumer Nigeria, Okomu Oil and Wema Bank, were removed from the Meristem Growth Index. These were placed with Access Bank, Cadbury Nigeria, Guaranty Trust Bank and Julius Berger Nigeria.

    In the Meristem Value Index, four companies were removed, including Cadbury Nigeria, Dangote Cement, Fidelity Bank and UACN Property Development Company (UPDC). These were replaced with Dangote Sugar Refinery and Total Nigeria.

    Five companies – Dangote Sugar Refinery, FCMB Group, United Capital, Africa Prudential, AIICO Insurance were also removed from Afrinvest Dividend Yield Index, which tracks companies with highest dividend yields. PZ Cussons Nigeria was removed from the NSE Lotus Islamic Index, which tracks stocks that comply with Islamic business rules.

    Meanwhile, six indices were unchanged, including NSE Consumer Goods Index, NSE Banking Index, NSE Industrial Goods Index, NSE Pension Index, NSE Corporate Governance Index and Afrinvest Bank Value Index.

    The NSE stated that the indices were developed to allow investors to follow market movements and properly manage investment portfolios.

    “Designed using the market capitalisation methodology, the indices are rebalanced on a semi-annual basis on the first business day in January and in July,” NSE stated.

    The NSE started publishing the NSE 30 Index in February 2009 with index values available from January 1, 2007. On July 1, 2008, the NSE developed five sectoral indices with a base value of 1,000 points, designed to provide investable benchmarks to capture the performance of specific sectors. The sectoral indices comprise the top 15 most capitalised and liquid companies in the insurance and consumer goods sectors; the top ten most capitalised and liquid companies in the banking and industrial goods sector; and the top seven most capitalised and liquid companies in the oil and gas sector.

    In July 2012, the NSE launched the NSE Lotus Islamic Index (NSE LII) which consists of companies whose business practices are in conformity with Shari’ah investment principles, with the aim of increasing the breadth of the market and creating an important benchmark for investments as the alternative ethical and noninterest investment space widened.

    The companies that appear on the Islamic index have been screened by Lotus Capital Halal Investment, in accordance with a methodology approved by an internationally recognised Shari’ah Advisory Board comprising of renowned Islamic scholars.