The Nation Newspaper

Category: Capital Market

  • Winning the headwinds

    Winning the headwinds

    The capital market rides the bulls in 2020. Through the roughshod of the global crude oil slump, COVID-19 pandemic, tough macroeconomics and domestic recessions marked with galloping prices and unrests, the capital market shows reverent resilience and fills the gaps with positives in a year marked with global and national anxieties. Deputy Group Business Editor/Capital Market Editor, Taofik Salako, reports

     

    Nigerian equities closed weekend with net capital gain of N1.04 trillion for the week.The benchmark index showed average gain of 5.42 per cent for the week. This pushed the average year-to-date return so far in 2020 to 44.55 per cent, ahead of 42.3 per cent in 2017.

    When adjusted on the basis of the benchmark index, the average return of 44.55 per cent implies net capital gain of N5.77 trillion so far in 2020. As it was in 2017 when Nigerian equities’ return led the comparative global equities’ returns, most indicators point to another world-leading return in the year, with expectations that a symbolic Santa Claus rally will push the benchmark index higher.

    Santa Claus rally is the tendency for stock prices to go up in the last week of the year mostly in anticipation of expected positioning for dividends by the first month of the New Year.

    With a quarter-to-date return of 27.09 per cent and month-to-date return of 10.72 per cent, the Nigerian stock market has defied the cash squeeze associated with economic recession, benefitting from the rate crash at the fixed-income market.

     

    World-ranking return

    Through the lockdowns and disruptions occasioned by COVID-19 pandemic, and later the unrests due to protests against police highhandedness, the stock market braved the odds of hyperinflation and economic recession to sustain and build up attractive return since the second quarter. While a steep decline of 18.75 per cent in March 2020 had driven the first quarter to a negative return of -20.7 per cent or net loss of N2.68 trillion, the market recovered in the second quarter with positive average return of 14.12 per cent or net capital gains of N1.656 trillion. It continued its rally with average return of 9.61 per cent or net capital gains of N1.23 trillion in third quarter 2020.

    The All Share Index (ASI)- the common value-based benchmark index that tracks all share prices at the Nigerian Stock Exchange (NSE), closed weekend at 38,800.01 points. It had opened the year at 26,842.07 points. Aggregate market value of all quoted equities at the NSE crossed the N20 trillion mark to close weekend at N20.279 trillion. It had opened the year at N12.958 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.

    The recovery at the stock market was against the background of negative performance in recent years. After posting a world-ranking return of 42.3 per cent in 2017, the market had reversed to negative in 2018 with average full-year return of -17.81 per cent.  In 2019, investors suffered net loss of about N1.71 trillion with negative average return of -14.60 per cent. Prior to 2017, the stock market had been on a losing streak since 2014. Investors lost N1.75 trillion in 2014 and followed this with another loss of N1.63 trillion in 2015. Against the general expectation that political transition and new government will quicken a rebound, equities closed 2016 with a net capital loss of N604 billion.

     

    Above inflation

    With inflation rate at 14.89 per cent, yield or coupon or interest rate at the fixed-income market ranging from less than one per cent to a little above one per cent for one-year instrument to some seven per cent yearly coupon for two decades and a half instrument, Nigerian equities are the most attractive instrument and the only positive-yielding assets in 2020, even when adjusted for inflation and cost of capital.

    The secondary market performance also reflected on the primary market. Nigerian governments and companies raised more than N2.2 trillion in new capital from the capital market in 2020, with the market providing readily available financial buffers against global economic disruptions and adverse impact of COVID-19 pandemic. Official data indicated that the capital market provided critical funding in debts and equities to governments and companies.

    A breakdown of the fund-raising entities showed five broad categories- Federal Government, state governments, quoted companies, fund management finds and special purpose vehicles (SPVs). The Federal Government, which sustained a monthly savings bond issuance alongside mid to long-term general bond issuances, dominated the capital raising.

    The issuers or fund-raising entities included sovereign issuances by the Federal Government of Nigeria, sub-national issuances by the Ondo State Government, debts and equities raising by several quoted companies including Dangote Cement, Flour Mills of Nigeria, Consolidated Hallmark Insurance, Coronation Insurance, formerly Wapic Insurance, International Breweries and Golden Guinea Breweries. Other corporate issuers included Abbey Mortgage Bank, C & I Leasing, UACN Property Development Company (UPDC), United Capital, AIICO Insurance, Red Star Express and Interswitch Africa One. Investment management companies such as ARM Investment Managers and Meristem Wealth Management also launched new collective investment schemes.

    The market particularly provided innovative finance through SPVs to support key infrastructural development and corporate restructuring. These included issuances such as Axxela Funding 1, LAPO MFB SPV, FBNQ MB Funding SPV and Primero BRT Securitisation SPV.

     

    Landmark transactions

    There were also many landmark transactions during the period. Nigeria’s largest quoted company and Sub-Saharan Africa’s largest cement company, Dangote Cement floated its maiden bond, a N100 billion bond, the largest single corporate bond issue in the Nigerian capital market. The utilisation of the fund was symbolic of the general support of the market to corporates. Dangote Cement indicated it would apply the net proceeds of the bond to refinance existing short-term debt previously applied towards cement expansion projects, working capital and general corporate purposes. Dangote Cement also kickstarted its share buyback programme, another major initiative for the market. Also, International Breweries, the Nigerian subsidiary of Anheuser-Busch InBev (AB InBev), raised N164.39 billion through a rights issue, reported to be the largest right issue and a major indirect capital injection by a foreign investor in a Nigerian company. The fast-growing Nigerian alternative finance and the collective investment markets were also deepened during the year with the launch of the nation’s first designated mutual fund for Sukuk. Sukuks are non-interest, alternative finance bonds, mainly based on the concept of Islamic finance, and they invest in assets or projects. The NSE also formally activate its new listing platform known as ‘growth board’, creating a new window of supports for small and medium enterprises (SMEs).

    The figures also underlined major changes and resilience of the regulatory, infrastructural and general framework of the capital market. The market started the year with the introduction of a special insurance cover to mitigate operational risks that may arise from infractions by capital market operators and their products and services. This special comprehensive insurance provides coverage for investors who have suffered pecuniary losses as stipulated in Section 198 of the Investment and Securities Act 2007 (ISA).

     

    A virtual market

    With the national economic lockdowns occasioned by coronavirus, and later the unrests that led to shutdown of major economic centres, the capital market leveraged on its cutting-edge technology to sustain uninterrupted year-long trading. The stock exchanges transited to full remote trading, with all stockbrokers and investors trading real time online from the conveniences of their locations.

    The regulatory functions and other ancillary market activities, including investors’ relations, also adapted to the virtual “new normal” with regulatory filings, complaints, circulars, meetings, presentations and consultations remotely conducted through existing or new channels. Given the dominant influence of COVID-19 pandemic in global and Nigerian economic themes in 2020, the ability of the Nigerian market to sustain unbroken activities is a major highlight of the year. The tech-driven adaptation also saw the onset of virtual general meetings by shareholders of quoted companies.

    The launch of online public offering platform earlier this month also strengthened Nigeria’s leadership, in terms of infrastructure, in African capital markets.

    The first of such initiative in Africa, the launch of 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 Nigerian public offers through the web and mobile (USSD), from anywhere in the world. The portal is expected to significantly transform the primary market segment of the capital market, 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.

    Besides, the demutualisation of the NSE and the demonopolisation of the market reached a crescendo in 2020 with the approvals for the conversion of the NSE to a share-based public limited liability company and the creation of more capital market infrastructure entities. Nigeria’s second depository, FMDQ Depository Limited, a member of FMDQ Group, successfully onboarded two corporate and government bonds worth N200 billion to its platform to formally launch active operations in 2020. FMDQ Depository was licensed by SEC in June 2019. Demutualisation, which was first approved by members of the NSE in 2017, crossed major hurdles and reached its final stage in 2020, signaling the impending transition of the 60 years old Exchange. With this, the NSE will change from a non-profit, member-owned mutual company limited by guarantee to a public limited liability company with issued share capital and shareholders. After the approval of the scheme of arrangement for the conversion in March 2020, the Federal High Court sanctioned the scheme in May 2020, setting up the process for the final review and approval by Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC) and corporate entities’ regulator, Corporate Affairs Commission (CAC). Both SEC and CAC had earlier given preliminary “No Objection” to the conversion documents and processes.

    Under the approved scheme of arrangement, the NSE will transit into a holding company, Nigerian Exchange Group (NEG) Plc, which will be the parent company for the Nigerian Exchange Limited, the successor that will carry on the securities trading business of the Exchange, and other subsidiaries. Shareholders will own shares in NEG Plc while NEG will own the main company and other subsidiaries.

    There were also major changes in the leadership of the market. After several years without a substantive management, the Federal Government in 2020 reconstituted the substantive management of SEC with the appointment of Mr. Lamido Yuguda as Director-General.

    The Chartered Institute of Stockbrokers (CIS), the main body of operators in the capital market, also appointed Mr Olatunde Amolegbe, as its President and Chairman of Governing Board.

    The death of Albert Okumagba, a former president of CIS, diminished the rank of astute Nigerian investment bankers but it also brought a reminder of the vicissitudes of the market and its self-protective regulatory system with zero tolerance for infractions.

    While foreign portfolio investors (FPIs), riled by foreign exchange (forex) management, continued to show less enthusiasm for the Nigerian market, domestic investors appeared to be filling the gap, albeit slowly. The negative FPIs, increase in transaction costs due to changes in government policies, the controversial plan of the Federal Government to expropriate unclaimed dividends, estimated at about N200 billion and delisting of some companies were the shortfalls of the market during the period. Overall, 2020 is the year of the bulls.

     

     

     

     

  • Nigeria deepens alternative finance with maiden Sukuk fund

    Nigeria deepens alternative finance with maiden Sukuk fund

    By Taofik Salako, Deputy Group Business Editor

     

    The Nigerian alternative finance and the collective investment markets at the weekend recorded another landmark with the launching of the nation’s first designated mutual fund for Sukuk. Sukuks are non-interest, alternative finance bonds, mainly based on the concept of Islamic finance, and invest in assets or projects.

    United Capital Asset Management Limited, a member of United Capital Plc, at the weekend unveiled Nigeria’s maiden Sukuk fund with the launch of its United Capital Sukuk Fund. The company is raising N1 billion as initial target size of the open-ended mutual fund, which implies that investors can continue to buy into the fund as they desire at any time.

    Minimum subscription to the United Capital Sukuk Fund is 10,000 units at N1 per unit with subsequent subscriptions in multiples of 5,000 units at N1 per unit. This implies minimum initial investment of N10,000 and subsequently in additions of N5,000. Minimum holding period for the fund is 180 days while purchases made after the initial public offering (IPO) will be subject to a lock-in period of 30 days.

    The fund will invest in Nigeria’s sovereign Sukuks, sub-national Sukuks issued by state governments, Sukuk issued by companies and a bit of other Shariah-compliant contracts.

    Nigeria has a growing market for Sukuk issuance. The Federal Government has already issued three Sukuks, all oversubscribed, while Osun State has also issued a sub-national Sukuk. The Federal Government and many other states have also expressed interest in new Sukuk issuances.

    Group Chief Executive Officer, United Capital Plc, Mr. Peter Ashade, said the launch of United Capital Sukuk Fund underpinned the innovativeness of the investment group and its commitment to creating additional products for its teeming customers.

    “It is a step in the right direction. We will continue to develop products that will meet the diverse flavours of our clients,” Ashade said.

    Group Executive Director, United Capital Plc, Mr Sunny Anene, said the group will bring to bear on the fund its wealth of experience as the leading fund manager in Nigeria with assets under management of $400 million.

    He assured that the management of the fund will be in line with its guidelines on permissible investments as approved by the Securities and Exchange Commission (SEC).

    Regional Director, Northern Region, United Capital, Mahmoud Shuaib, assured subscribers that the Sukuk fund will not be invested in businesses or instruments disallowed by the Shariah.

    Citing data showing ethical funds like Sukuk funds outperforming other general funds, Shuaib said investors in the Sukuk fund stand dual broad advantages of maintaining their beliefs and earning competitive returns on their investments.

    He noted that the Sukuk fund is opened to all investors who share the investment philosophy and desirous of competitive returns, irrespective of religious affiliations.

    He assured that the company has taken adequate measures and assemble credible professional parties to protect the fund in line with its investment objectives, adding that its Shariah Advisory Board will screen investments to ensure they comply with the fund’s guidelines.

    Managing Director, United Capital Asset Management Limited, Mrs Odiri Oginni said the open-ended nature of the fund provides seamless opportunity for investors with easy entry and exit.

    She said the fund provides investors with several advantages including protection through the professional management, competitive returns, economy of scale that comes from pooling resources and diversification of portfolio among others.

    Fund Manager, United Capital, Mr. Kayode Tinuoye, said while the initial target size of the Sukuk fund is N1 billion, the open-ended nature of the fund allows it to scale up to the full extent of the requests of the investing public.

    He pointed out that the Sukuk fund offers exciting returns on investment compared with existing comparative returns with average return on investment expected at 6.8 per cent in 2020 and expected to grow to 6.9 per cent in 2021 and 7.3 per cent by 2023.

    Shariah Adviser, United Capital Sukuk Fund, Attahiru Maccido, said the outlook for Islamic finance in Nigeria is enormous with the Nigeria growing faster than other jurisdictions.

    He noted that with the recent review of the pension investment guidelines by the National Pension Commission (Pencom), non-interest instruments are now part of the multi=structured and diversified assets management provided for the investment guidelines.

    He reiterated that the Sukuk fund is available for all investors irrespective of their leanings, assuring that the fund will keep faith with its investment objectives.

    Managing Director, EAC Trustees, Mr. Olubusayo Adeniyi, who represents the trustees to the fund, commended United Capital for blazing the trail noting that EAC Trustees is excited to be part of the historic fund.

    He assured that the trustees, alongside other professional parties, will support the fund management team to ensure that the fund realises its objectives.

    Nigeria’s N150 billion third sovereign Sukuk issuance had recorded oversubscription of N519.12 billion, sustaining a trend of oversubscription that started with the maiden issuance 2017. The Federal Government had in June 2020 issued a N150 billion seven-year Ijarah Sukuk due June 2027 with approximate rental of 11.200 per cent per annum.

    The Federal Government had in September 2017 floated its first sovereign Sukuk, a N100 billion seven-year issue with a rental rate of 16.47 per cent. It was oversubscribed by 5.8 per cent. Government followed in 2018 N100 billion seven-year tenored Sukuk Al Ijarah (Lease) with annual rental rate of 15.743 per cent. It was also oversubscribed.

     

     

  • CBN defines chief compliance officers’ role in banks

    CBN defines chief compliance officers’ role in banks

    By Collins Nweze

     

    The Central Bank of Nigeria (CBN) has approved new requirement for the appointment of chief compliance officers (CCOs) by banks.

    In a letter entitled: “Re: Status of Chief Compliance Officers,” that was signed by its Director, Financial Policy and Regulation Department,Kevin Amugo, a copy of which was posted on its website, the apex bank said that merchant banks, regional banks-commercial and specialised, have been granted allowance to appoint CCOs on a grade not below an assistant general manager.

    But the CCOs, would, however, report directly to the Executive Compliance Officer (ECO) of the financial institutions who has sole responsibility for compliance matters in the bank.

    “Further to the circular Referenced FPR/DIR/GEN/CIR/06/004 of  September 28, 2016 on the appointment of ECO and CCO of deposit money banks, the CBN has after due consideration and presentations by stakeholders on the size, structure, operation and dynamics of classes of operators in the sectors, reviewed the requirements for the appointment of chief compliance officers,’’ the letter added.

    “Accordingly, merchant banks, regional banks-commercial and specialised are hereby granted dispensation to appoint CCOs on a grade not below an assistant general manager.

    “The CCOs, will however report directly to the ECO of the financial institutions who have sole responsibility for compliance matters in the bank. Meanwhile, the requirements and responsibilities of Executive Compliance Officers remain as earlier communicated in our circular of 28 September 2016.

    The CBN has also stated that the revised Code of Corporate Governance and Whistle blowing guidelines, issued in May 2014 and the guidelines for the development of a risk management framework for individual banks issued in July 2007, shall remain in force in the 2020/2021 fiscal years.

    They shall be continually reviewed in line with best practice. As part of initiatives to strengthen financial stability and reposition the OFI sub-sector for greater effectiveness in the financial sector landscape, CBN issued the Code of Corporate Governance for Other Financial Institutions . The Code is expected to enhance good governance practices, engender public confidence to attract investments and promote efficiency and transparency in the sub-sector.

    Banks shall continue to comply with the requirements of the Credit Risk Management System (CRMS).

     

  • Nigerian equities sustain rally with N137b gain

    Nigerian equities sustain rally with N137b gain

    After netting N2.35 trillion in capital gains in November, Nigerian equities at the weekend closed with net capital gain of N137 billion, sustaining a positive outlook that has seen Nigerian stocks as one of the most globally competitive assets in recent period.

    Benchmark indices at the Nigerian Stock Exchange (NSE) at the weekend showed average return of 0.72 per cent for the week, equivalent to net capital gains of about N137 billion. This nudged the average year-to-date return for equities to 30.91 per cent.

    The All Share Index (ASI)- the common value-based index that tracks all share prices at the NSE, closed weekend at 35,137.99 points as against 34,885.51 points recorded as the opening index for the week. Aggregate market value of all quoted equities at the Exchange also rose from its week’s opening value of N18.228 trillion to close at N18.365 trillion.

    With 22 advancers against 45 decliners, the positive overall market situation was driven largely by gains in the oil and gas and insurance sectors. The NSE Oil and Gas Index appreciated by 1.71 per cent while the NSE Insurance Index rose by 1.56 per cent. However, all other major indices closed negative. The NSE 30 Index, which tracks the 30 largest quoted companies, posted a negative return of -1.63 per cent. The influential NSE Banking Index dipped by -3.13 per cent. The NSE Consumer Goods Index depreciated by 2.78 per cent while the NSE Industrial Goods Index dropped by 2.21 per cent.

    Total turnover stood at 1.675 billion shares worth N25.425 billion in 23,650 deals last week in contrast with a total of 1.816 billion shares valued at N25.791 billion traded in 31,665 deals penultimate week.

    Banking stocks dominated the top activities chart, leading the financial services sector to a turnover of 1.206 billion shares valued at N12.064 billion in 13,534 deals; representing 72.0 per cent and 47.45 per cent of the total equity turnover volume and value respectively. The consumer goods sector followed with 102.368 million shares worth N3.616 billion in 3,511 deals while the natural resources sector placed third with a turnover of 86.626 million shares worth N17.492 million in 28 deals.

    Three first tier banks-Access Bank Plc, FBN Holding Plc and Zenith Bank Plc were the most active, jointly accounting for 475.819 million shares worth N6.144 billion in 4,900 deals, representing 28.41 per cent and 24.16 per cent of the total equity turnover volume and value respectively.

    At the Exchange Traded Products (ETPs) segment, a total of 543,655 units valued at N4.694 billion were traded last week in 36 deals compared with a total of 471,624 units valued at N4.224 billion traded in 88 deals two weeks ago.

    At the bond segment, a total of 3,198 units valued at N3.898 million were traded in 10 deals compared with a total of 9,697 units valued at N12.173 million traded in eight deals two weeks ago.

    Tripple Gee and Company led the advancers, in percentage terms, with a gain of 20 per  cent to close at 66 kobo. Airtel Africa followed with a gain of 19.63 per cent to close at N640 while FTN Cocoa Processors placed third with a gain of 16 per cent to close at 29 kobo.

    On the negative side, Northern Nigeria Flour Mills led the losers with a drop of 18.7 per cent to close at N6.26. Consolidated Hallmark Insurance followed with a drop of 16.13 per cent to close at 26 kobo while Royal Exchange declined by 15.38 per cent to close at 22 kobo per share.

     

  • Ecobank Group’s customer deposits rises to N6.69tr in Q3

    Ecobank Group’s customer deposits rises to N6.69tr in Q3

    Ecobank Transnational Incorporated (Ecobank Group) grew its deposit base by double-digit in the third quarter as customer deposits rose by 13.01 per cent to N6.69 trillion in third quarter 2020.

    Key extracts of the interim report and accounts for the third quarter ended September 30, 2020 released at the Nigerian Stock Exchange (NSE) at the weekend showed appreciable growths in the balance sheet of the financial services holding group.

    Customer deposits rose to N6.69 trillion in third quarter 2020 as against N5.92 trillion in third quarter 2019. Total assets also rose from N8.62 trillion in 2019 to N9.43 trillion in 2020. Total equity improved to N708.62 billion as against N687.74 billion.

    The nine-month report showed that gross earnings stood at N613.15 billion in 2020 as against N610.87 billion in 2019. Revenue had grown by 9.1 per cent from N422.61 billion to N461.16 billion.

    However, despite the bank’s good showing in deposits from customers, revenue and gross earnings, profit was impacted by the provisioning of about N60.5 billion for goodwill for the acquisition of Oceanic Bank in 2011. Profit before tax and goodwill impairment closed third quarter 2020 at N 95.1 billion. Profit before and after tax stood at N34.5 billion and N10.28 billion respectively.

    The management of the bank stated that it was optimistic that with clean book in the aftermath of the full provisioning for Oceanic Bank, it will improve on its profitability by the year end.

     

     

  • Stock Exchange lifts suspension on FTN Cocoa Processors

    Stock Exchange lifts suspension on FTN Cocoa Processors

    Authorities at the Nigerian Stock Exchange (NSE) at the weekend lifted suspension clamped on FTN Cocoa Processors Plc, nearly three months after the Exchange disallowed trading in the shares of the agricultural company for breach of corporate governance rules.

    The NSE had on September 01, 2020 suspended trading on FTN and five other companies for failing to adhere to best corporate governance and extant post-listing requirements that make it mandatory for quoted companies to submit their financial statements within stipulated timelines.

    Post-listing rules at the NSE require quoted companies to submit their audited earnings reports not later than 90 calendar days after the expiration of the period. The rules also require quoted companies to submit interim report not later than 30 calendar days after the end of the relevant period.

    More than three-quarters of quoted companies use the 12-month Gregorian calendar year as their business year.

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    The business year thus terminates on December 31. While March 31 is usually the deadline for submission of annual report for companies with Gregorian calendar business year, the deadline for the quarterly report is a month after the quarter.

    In a regulatory notice at the weekend, the NSE stated it lifted the suspension after FTN had submitted outstanding financial statements, which led to the suspension.

    FTN had submitted two reports for the half-year and third quarter of 2020. The six-month report for the half year ended June 30, 2020 showed that turnover dropped by 42 per cent to N217.27 million in June 2020 as against N373.52 million in June 2019. Loss stood at N189.12 million in 2020 as against N243.54 million in 2019.

    The nine-month report for the period ended September 30, 2020 showed that turnover dropped by 55 per cent from N501.97 million in third quarter 2019 to N227.26 million in third quarter 2020. Loss stood at N351.72 million in 2020 as against N354.48 million in 2019.

     

     

  • Nestlé mops up more Nigerian shares

    Nestlé mops up more Nigerian shares

    World’s largest food company, Nestlé S.A at the weekend continued its direct secondary market purchase of shares of its Nigerian subsidiary, Nestle Nigeria Plc, in a move to increase the majority equity stake.

    Regulatory documents at the weekend showed that Nestle acquired additional 17,937 ordinary shares of kobo each at an average price of N1,390 per share. Nestle S.A has so far this month spent nearly half a billion naira, acquiring additional shares in Nestle Nigeria, bringing total value of acquisition in over the past few months to more than N1.5 billion.

    Insider-related documents showed that Nestle S.A. had two weeks ago acquired 102,690 ordinary shares of 50 kobo each in Nestle Nigeria. It had earlier this month bought 214,924 ordinary shares of 50 kobo each. Both deals were struck at N1,400 per share.

    Nestle S.A had in August 2020 started direct secondary market purchase of additional equities in Nestle Nigeria, acquiring 636,384 ordinary shares of 50 kobo each at N1,174.67 per share in the first transaction. The transaction had increased the Swiss multinational food and drink company’s majority shareholding in Nestle Nigeria by 0.08 per cent.

    In September, Nestle S.A also acquired additional shares worth about N287 million. A total of 229,697 ordinary shares of 50 kobo each were purchased at a premium of N1,249.65 per share.

    Market analysts said the premium pricing underscored the attractiveness of Nestle Nigeria to the majority core investor.

    Nigeria is a key market for Nestle where the stock and the brands have sustained decades of market leadership. Nigeria and the rest of other Sub-Saharan Africa (SSA) recorded double-digit growth in the first half, driven by real internal growth.

    Read Also: Nestlé continues Nigeria’s shares mop up

     

    Nestle’s half-year results for 2020 showed that SSA was the best-performing segment under the groups’ Asia, Oceania and sub-Saharan Africa (AOA) zone.

    “We expect full-year organic sales growth between 2.0 per cent and 3.0 per cent. The underlying trading operating profit margin is expected to improve. Underlying earnings per share in constant currency and capital efficiency are expected to increase. This guidance is based on our current knowledge of COVID-19 developments and assumes no material deterioration versus present conditions,” Nestle SA stated in the group’s six-month report.

    Key extracts of the interim report and accounts of Nestle Nigeria for the half year ended June 30, 2020 showed that turnover was steady at N141 billion in first half 2020 as against N141.9 billion in comparable period of 2019. Profit after tax stood at N21.8 billion in first half 2020.

    Managing Director, Nestlé Nigeria Plc, Mauricio Alarcon, said the results illustrated the resilience of the company.

    According to him, amidst the on-going COVID-19 pandemic, Nestlé Nigeria has delivered consistent results in terms of revenue while exchange rate variations and increase in the price of some key materials have affected profitability.

    “While it is still early to assess the impact of this crisis, we are fully confident in our people’s agility and deep commitment to overcome challenges and continue to deliver value for our shareholders and for society. Going forward, we will remain focused on three key priorities which include safeguarding the health and wellbeing of our people, ensuring business continuity to meet consumer needs and supporting our communities,’’ Mauricio said.

     

     

     

  • NSE launches ‘growth board’ with four companies

    NSE launches ‘growth board’ with four companies

    The Nigerian Stock Exchange (NSE) will today formally activate its new listing platform known as ‘growth board’ with the migration of four eligible companies to the new board. The four eligible companies that will be pioneers on the new board include of Chellarams Plc , LivingTrust Mortgage Bank Plc, McNichols Plc and The Initiates Plc.

    The new listing window allows small and medium companies with track records of stable operations, growth and minimum corporate governance to list their shares and raise capital through the Nigerian capital market.

    The new board is also expected to support the small and medium enterprises (SMEs) with direct access to capital and support services from the capital market. Nigeria Bureau of Statistics (NBS) indicates that SMEs account for nearly half of Gross Domestic Product (GDP) and more than three-quarters of employment.

    Besides reduction in costs of listing and compliance requirements, the NSE, in collaboration with various strategic business partners and value added service providers, will provide support services aimed at creating competitive edge for companies on the board. These support services include pre-listing diagnostics; institutional services such as audit services, financial advisory, legal advisory, corporate strategic advisory; investor relations; analyst coverage, corporate access and corporate governance and customised trainings.

    For a company to be listed on the growth board, it must be a duly incorporated public limited liability company with at least two years of operations, audited financial statements in line with the International Financial Reporting Standards (IFRS) and must have grown its revenue by a minimum of 20 per cent cumulatively in its last two years of operations.

    Also, all companies to be listed on the growth board must undertake that their promoters or directors shall retain a minimum of 50 per cent of their shares for a minimum period of 12 months from date of their listing, and that the directors or promoters shall not directly or indirectly sell or offer to sell such securities during that 12-month period.

    The framework meanwhile provides alternative requirements for listing for each segment. Under the entry segment, a new business may be considered for listing if it can provide evidence of investment in it by a core investor or a strong technical partner that has a minimum of two years’ operating track record, or a majority shareholder who is either a High Net Worth Individual (HNI) or is a director of a listed company. Under Nigerian rules, HNI is an individual with net worth of more than N100 million.

    Besides, companies heading for the entry segment must have market capitalisation of not less than N50 million, a minimum of 10 per cent of its shares available or to be available to minority retail investors and at least 25 shareholders.

    Under the standard segment, a new business may be considered for listing if it that can provide evidence of a core investor or a strong technical partner who has a minimum of four years’ operating track record, or a majority shareholder who is a HNI. The company must also have a minimum market capitalisation of N500 million, at least 15 per cent of its shares must be held or will be held by minority retail shareholders and it must have a minimum of 51 shareholders.

    Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr Oscar Onyema, explained that the board was designed to offer relaxed entry criteria as well as less stringent ongoing listing requirements and allows for greater accessibility to capital flows, global visibility and credibility through corporate disclosures.

    He said the growth board also restructured current market segments to better meet needs along company’s entire lifecycle of entry segment – for companies with a market capitalization from N50 million and standard market for institutions with a market capitalization from N500 million.

    According to him, the segmentation of the boards also provides alternative options for interested investors to participate in each company’s growth journey.

    He pointed out that the new board was pivotal to efforts in catering to a segment of the economy that hitherto has been neglected and perceived as a high risk and low reward venture by most service providers especially in relation to access to capital from financial institutions.

    He noted that the traditional role of the Exchange as an enabler of capital flow from areas of surplus to deficit holds good promise for its capability to support SMEs, as access to capital is the prime challenge faced by companies that are active in the SME sector.

    “The growth board aims to encourage companies with high growth potential to seize the opportunity of raising long term capital and promote liquidity in the trading of their shares. The board also presents as an avenue for companies in their growth phase to leverage the NSEs platform and varied products and services to achieve their long term business objectives,” Onyema said.

     

  • Nigerian equities recover with N390 billion gain

    Nigerian equities recover with N390 billion gain

    By Taofik Salako, Deputy Group Business Editor

     

    Nigerian equities rode on the back of global optimism and domestic bargain-hunting to close weekend with net capital gain of N390 billion, regaining the upswing after profit-taking transactions ended eight weeks of consecutive price appreciation.

    Benchmark indices for the Nigerian equities market at the weekend indicated average return of 2.19 per cent for the week, equivalent to net capital gain of N390 billion. The average performance of the Nigerian stocks was generally within the top level of global rally, as investors reacted positively to straightening political transition in the United States of America (USA) and improving hopes of COVID-19 vaccines.

    Key global trackers showed a generally positive sentiment across the markets. In USA, Dow Jones Industrial Average (DJIA) rose by 2.1 per cent. United Kingdom’s FTSE 100 posted modest gain of 0.2 per cent. Japan’s Nikkei 225 recorded average gain of 4.4 per cent while China’s SSE Index appreciated by 0.7 per cent. The MSCI EM Index- which tracks emerging markets, indicated average return of 1.1 per cent while its twin indicator, MSCI FM Index- which tracks Nigeria and other frontier markets, rose by 1.2 per cent.

    The All Share Index (ASI)- the common value-based index that tracks all share prices at the Nigerian Stock Exchange (NSE) closed weekend at 34,885.51 points as against the week’s opening index of 34,136.82 points. Aggregate market value of all quoted equities at the NSE also rose correspondingly from the week’s opening value of N17.838 trillion to close weekend at N18.228 trillion.

    The rally nudged the average year-to-date return to 29.97 per cent, effectively putting equities as positive inflation-adjusted assets.

    With 27 advancers to 43 decliners, sectoral price analysis still showed considerable underlying profit-taking across the sectors. The positive overall market position was driven largely by gains in the large-cap cement and industrial goods sector. The NSE Industrial Goods Index rose by 4.4 per cent. The NSE 30 Index- which tracks 30 largest companies, including major cement companies in the industrial goods sector, rose by 1.31 per cent. This partly reflected the decline suffered by the influential banking sector, which posted negative average return of -1.31 per cent. The NSE Consumer Goods Index also dropped by 0.50 per cent. Meanwhile, the NSE Oil and Gas Index appreciated by 0.64 per cent while the NSE Insurance Index rose by 0.28 per cent.

    The momentum of activities however slowed down as total turnover dropped to 1.816 billion shares worth N25.791 billion in 31,665 deals last week as against a total of 11.400 billion shares valued at N35.892 billion traded in 39,265deals two weeks ago.

    The traditionally most active financial services sector remained atop activity chart with 1.274 billion shares valued at N14.710 billion in 18,392 deals; representing 70.15 per cent and 57.04 per cent of the total equity turnover volume and value respectively. The conglomerates sector occupied a distant second with 217.170 million shares worth N231.809 million in 1,226 deals while the consumer goods sector placed third with a turnover of 113.760 million shares worth N2.598 billion in 4,568 deals.

    The three most active stocks were Zenith Bank, Transnational Corporation of Nigeria and Access Bank, accounting for 649.529 million shares worth N8.104 billion in 6,395 deals, 35.76 per cent and 31.42 per cent of the total equity turnover volume and value respectively.

    At the exchange traded products (ETPs) segment, a total of 471,624 units valued at N4.224 billion were traded in 88 deals compared with a total of 21,455 units valued at N174.674 million traded in 15 deals two weeks ago.

    At the debt market, a total of 9,697 bond units valued at N12.173 million were traded in eight deals compared with a total of 11,014 bond units valued at N15.257 million traded in 15 deals penultimate week.

    Pricing trend analysis showed that UPDC Real Estate Investment Trust recorded the highest gain, in percentage terms, of 32.53 per cent. Neimeth International Pharmaceuticals followed with a gain of 12.03 per cent while NCR (Nigeria) rose by 10 per cent. On the negative side, Japaul Oil & Maritime Services, which had to issue a clarification to exaggerated diversification plan, led the losers with a 11.11 per cent drop. Honeywell Flour Mill dropped by 10.83 per cent while Custodian Investment declined by 10 per cent.

    Most analysts expected Nigerian equities to remain largely on the upside considering the low rates at the fixed-income market, foreign exchange entrapment, corporate earnings and attractive valuation.

    Analysts at Cordros Securities noted that with the recent decision of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to hold monetary policy parameters constant in furtherance of its growth objective, return-seeking investors will continue rotating their portfolio towards equities amid attractive dividend yields.

    “We expect market performance to be dominated by the bulls, as positioning by early birds in dividend-paying stocks ahead of full year 2020 dividend declarations should outweigh profit-taking activities. We reiterate the need for positioning in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings,” Cordros Securities stated.

    Analysts at Afrinvest Securities said this week might also see some profit-taking transactions, as investors might consider locking down recent capital gains.

     

  • Why equities are rising, by NSE

    Why equities are rising, by NSE

    Our Reporter

    The Nigerian Stock Exchange (NSE) has attributed the sustained jumpy appreciation in prices of Nigerian equities to smart thinking by investors hunting for improved returns and the general resilience of the Nigerian stock market.

    The NSE’s index circuit breaker was triggered last week’s Thursday after the benchmark All Share Index (ASI) rose beyond the 5.0 per cent threshold set for temporary halt of the market in the event of extremely volatile price changes. It was the first time the automatic index circuit breaker came on since introduction in 2016.

    The circuit breaker protocol was triggered at 12:55pm when the ASI increased from its opening index of 33,268.36 points to 34,959.39 points within barely three hours of trading. The market was halted for 30 minutes for investors to take a breath and assimilate the market dynamics. The market thereafter reopened at exactly 1:25 pm, with a 10-minute intraday auction session, before resuming continuous trading till the close of the day at 2:30 pm. The market thereafter closed with average gain of 6.23 per cent for Thursday.

    Speaking at the weekend, Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr. Oscar Onyema, said the sustained rally at the equities market demonstrates the opportunities that abound in the market for discerning investors.

    Onyema spoke at the 5th Data Workshop 2020 of the NSE, which was held virtually. The theme of the workshop was “Handling Shocks in the Capital Market: A Quantitative Risk Management Approach Using Market Data”.

    He noted that while Nigerian equities recorded negative performance in the first quarter of the year, with the ASI posting a quarterly return of -20.65 per cent in first quarter 2020, the market has seen an upswing since April 2020. The ASI closed weekend with average year-to-date return of 30.53 per cent.

    “This feat – particularly during the COVID-19 pandemic – can be attributed to smart investors bargain hunting and the release of positive year-end financial results of several listed companies, coupled with improved dividend declarations. It demonstrates the opportunities that abound in the market for discerning investors, even in a time of crisis, and underscores the importance of quality market data for investment decision-making,” Onyema said.

    The NSE pointed out that the Exchange has remained resilient even in the face of the COVID-19 pandemic with domestic investors continuing to show interest in the market. Total value of transactions executed by domestic investors on the NSE stood at N731 billion in the first eight months of 2020, as against N470.20 billion total foreign transactions during the same period. This showed that domestic investors outperformed transactions executed by foreign investors by N260.8 billion or 55.47 per cent.

    According to the Exchange, equities were also responding positively to macroeconomic policy changes such as the cut in Monetary Policy Rate (MPR) by 100 basis points from 12.5 per cent to 11.5 per cent by the Central Bank of Nigeria (CBN) in September 2020.

    “It has also been observed that investors are targeting Nigerian companies with strong fundamentals with the expectation that they will best overcome the onslaught of COVID-19 and be able to distribute dividends to shareholders. This is particularly important given the low-interest-rate and negative real yield environment,” NSE stated.

    The Exchange also pointed out the resilience and effective trading and regulatory systems at the market noting that the market has continued to provide a platform for companies to raise capital and for investors to meet their financial objectives despite restricted access and disruptions caused by COVID-19 pandemic and social unrests.

    According to the Exchange, trading has continued seamlessly during normal hours through the provision of remote trading access for stockbrokers through X-NET, FIX Protocol and Virtual Private Network (VPN).

    The Exchange added that it has also successfully transitioned many of its physical engagements to digital events including its flagship closing gong ceremony, facts behind the figures series, chief executive officer engagement sessions, trainings and workshops to further deepen engagement with capital market stakeholders.

    Meanwhile, experts who spoke during the market data webinar underscored the importance of data as a fundamental tool for making sound financial decisions.

    Speakers highlighted the importance of building financial and investment models that can be tested with real-life situations noting that unprecedented events of 2020 have proven that reliable real-time and historical data that can easily be understood and are invaluable in building successful investment models.

    Experts agreed that quality and accessible data is critical not only to dealing with the problems of today but in mitigating the crises of the future.

    NSE also highlighted its wide range of market data products and solutions across all asset classes including the NSE API, which ensures the dissemination of real-time data to stakeholders; FIX Order Management System, which allows trade information to be transmitted from anywhere to the Exchange; and the recently upgraded X-DataPortal, which serves as a consolidated, streamlined platform for market participants to access quality and timely data at an affordable rate.