The Nigerian Stock Exchange (NSE) has approved application by Law Union & Rock Insurance seeking voluntary delisting of its shares from the main board of the Exchange.

The voluntary delisting is part of ongoing acquisition of Law Union by Anglophone West Africa private equity firm, Verod Capital Management.

Verod has offered N5.3 billion for the acquisition of the entire share capital of Law Union in a major bid that may signal the opening up of mergers and acquisitions in the Nigerian insurance industry.

The board of Law Union had confirmed that it received a binding offer from Verod Capital seeking to acquire the entire 4.296 billion ordinary shares of 50 kobo each of Law Union at N1.23 per share. The offer thus valued Law Union at N5.28 billion.

The offer price of N1.23 per share represented a premium of 208 per cent on the 60-day volume weighted average share price and 140 per cent on Law Union’s closing share price on February 26, 2020.

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The approval of the NSE is one of the regulatory approvals needed to consummate the transaction. The transaction is still subject to the approval of National Insurance Commission (NAICOM), Securities and Exchange Commission (SEC) and the Federal Competition and Consumer Protection Commission (FCCPC).

Verod Capital focuses on investing equity and equity-linked capital in growth companies across various consumer-driven sectors in Nigeria, especially the insurance sector.

Insurance companies are in a hot race to raise new equity capital to meet new minimum capital requirements for various insurance functions as directed by NAICOM. NAICOM had in May 2019 released new capital requirements for insurance businesses with a 13-month compliance period for 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.

By Collins Nweze

FirstBank of Nigeria Limited has announced its partnership with Lagos State Employment Trust Fund (LSETF) in a matching fund scheme.

The scheme aims to cushion the impact of COVID-19 pandemic on low-cost private schools by ensuring lending at an attractive interest rate. The loan is meant for working capital and asset finance to enable schools resuscitate their practice, acquire needed materials, upgrade their facilities, as well as pay staff salaries to bounce back, especially after the lockdown.

The programme will provide access to finance where participating schools can each be availed up to N5 million as well as capacity development, business and financial advisory. There will be monitoring and evaluation to ensure prompt loan repayment.

To enjoy this funding opportunity, applications will be submitted via the LSETF portal for screening while successful applicants will be passed on to FirstBank for the loan appraisal and disbursement process.

This scheme promotes entrepreneurship in Lagos State, which is in tandem with the vision of LSETF to create employment and entrepreneurship opportunities for Lagos residents. It has provisions for Micro Enterprises (ME) and Small and Medium Enterprises (SMEs) across the 57 LCDAs in the 20 LGAs in the state.

Chief Executive Officer, FirstBank of Nigeria Limited, Adesola Adeduntan, said: “The commitment by the Lagos State Government – including this partnership – to enable schools is quite commendable as this will mitigate the challenges caused by the lockdown on the education sector following the COVID-19 pandemic.”

“With the single-digit funding targeted at about 2,000 low-cost private schools in the State, we are delighted at this opportunity to demonstrate our commitment to the development of education in Lagos State, thereby contributing our quota to further the mandate of the Lagos State Government – in partnership with LSETF – on economic growth, enhanced opportunities for employment and bridging societal gaps in education,” he concluded.

Commenting on the Eduloan programme, Chairperson, Board of Trustees, Lagos State Employment Trust Fund (LSETF), Mrs Bola Adesola, stated that; “According to the NESG the Education Sector remains a growth area for job creation and a report on job creation by the NBS states that the Education Sector is one of the top 5 sectors that created over 59m jobs in 2019. This fact is buttressed by the data collected by LSETF in previous loan programmes. The objective of the LSETF-FirstEdu loan is to create employment, improve the quality of education for our youth by providing access to affordable finance to low-cost private schools and vocational training centres.

“We are confident that this intervention fund, which is complemented by our free professional and institutional support structures, will ensure that the education ecosystem in Lagos State will witness an improvement in the overall learning outcomes for our children, while positively impacting on the Lagos local economy through wealth and job creation.,” she stated.

By Taofik Salako, Deputy Group Business Editor

The International Organisation of Securities Commissions (IOSCO) has published final guidance for countries to address potential conflicts of interest and associated conduct risks market intermediaries may face during the debt capital raising process.

IOSCO’s membership regulates more than 95 per cent of the world’s securities markets in more than 115 jurisdictions. Nigeria is a member of IOSCO.

The guidance sought to address some specific concerns observed by certain regulators during the COVID-19 crisis that may affect the integrity of the capital raising process.

IOSCO noted that conflicts of interest and associated conduct risks could weaken investor confidence and undermine debt capital markets as an effective vehicle for issuers to raise funding.

According to the global regulatory body, the final report on conflicts of interest and associated conduct risks during the debt capital raising process will help regulators to identify and address the risks.

The report also explored the potential benefits and risks of Blockchain technology in addressing conflicts of interest in the debt capital raising process.

The report described the key stages of the debt raising process and identifies where the role of intermediaries might give rise to conflicts of interest.

The guidance comprises of nine measures that address potential issues when issuers are preparing to raise debt finance, including such things as the use of risk management transactions, the quality of information available to investors, and the allocations process.

The consultation report on the guidance comprised eight measures published in December 2019 prior to the start of the COVID 19 pandemic. The final report included an additional ninth measure that addresses specific concerns that emerged from the crisis. It seeks to address the potentially problematic conduct of lenders that may opportunistically leverage their role during debt capital raising to pressure corporate clients into awarding them future mandates.

While the guidance focuses on traditional corporate bonds, it may prove useful to IOSCO members considering raising capital through other types of debt securities. The guidance is the second part of a two-stage project on conflicts of interest in capital raising. The first stage focused on the equity capital raising process with the final report Conflicts of interest and associated conduct risks during the equity capital raising process published in September 2018.

By Taofik Salako, Deputy Group Business Editor

The Nigerian Stock Exchange (NSE) has listed the N10 billion bond issued by United Capital Plc, paving the way for bondholders to trade on their investments.

The N10 billion Five-Year 12.5 per cent Senior Unsecured Fixed Rate Series I Bond Due 2025 was issued on May 28, this year and will be due for maturity on May 28, 2025.

The Series 1 Bond was issued under the company’s N50 billion medium-term debt programme, which was registered with the Securities and Exchange Commission (SEC). The bond was oversubscribed by 24 per cent.

United Capital had in May 2020 set a new record as with its first bond issuance, the first issuing house to issue a corporate bond in the history of the Nigerian capital market.

Group Chief Executive Officer, United Capital Plc, Peter Ashade said the bond issuance solidified the company’s performance record as a formidable ally in the investment banking industry.

“With an oversubscription by 24 per cent investor orders, we believe this milestone accentuates the confidence in our Institution, and its ability to diversify our corporate funding sources, provide innovative financial solutions and our unwavering commitment to our esteemed clients,” Ashade said.

Managing Director, Investment Banking, United Capital Plc, Babatunde Obaniyi, said the bond issuance added to the impressive portfolio of innovative and landmark transactions that the company had structured.

According to him, the bond issuance again highlighted the company’s capabilities in the successful execution of novel debt capital market transactions.

He noted that as a joint issuing house and book runner on the deal, the company advised on the transaction structure, securing regulatory approvals and marketing strategy for the bonds including market timing, investor road show and crafting an appropriate and compelling business case for the issuance.

“The transaction, which has a tenor of five years, recorded a 124 per cent subscription, with huge commitments from a diversified institutional investors base including Pension Fund Administrators and other players in the financial service space. This very strong outcome further affirms buy-side investors’ confidence in United Capital Plc, and a testament to the leading role United Capital continues to play in the financial services space,” Obaniyi said.

By Taofik Salako, Deputy Group Business Editor

Nigeria’s foreign exchange reserves suffered its first decline in recent weeks at the weekend as dreary global crude oil prices, dollar recovery and domestic pressure on the controlled exchange rate heightened fears of further depreciation in naira.

Nigeria’s foreign exchange (forex) reserves dropped by $47.33 million to close weekend at $35.77 billion. Crude oil price declined by 4.4 per cent from $43.68bbl to $41.74bbl amid fears upsurge in COVID-19 cases might trigger a new wave of economic lockdowns.

Senior Research Analyst, FXTM, Lukman Otunuga, said oil prices would likely remain stuck around the $40 regions in the near term, especially If another round of possible lockdowns hit oil demand.

He noted that oil prices have continued to be heavily influenced by demand-side factors and the state of the global economy.

“Looking at the technicals, WTI Crude is under pressure on the daily charts. If prices are unable to break away from the sticky $40 regions, the next key point of interest remains around $38. A weekly close above $41.50 could pave a path towards $43,” Otunuga said.

He noted that a steady rebound by dollar may put pressure on naira and further exacerbated foreign-currency denominated portion of Nigeria’s public debt stocks.

“In times of uncertainty, everyone wants a juicy piece of the world’s most liquid currency. As coronavirus cases rise in Europe and other parts of the world, the flight to safety is likely to boost appetite for the dollar. This is bad news for many emerging markets currencies, especially those with high dollar-denominated debt,” Otunuga said.

Analysts at Cordros Group said the naira might depreciate further in the medium-to-long term citing widening current account position, currency mispricing, which could induce speculative attacks on the naira, and the resumption of forex sales to the Bureau de Change (BDC) segment, which should place an additional layer of pressure on the reserves.

The CBN has offered more than $200 million to the BDC segment since the resumption of forex sales to the segment. The CBN last week sold $100 million through the Secondary Market Intervention Sales (SMIS) Wholesale Window to boost liquidity levels and maintain stability in all segments of the market.

The naira closed flat across the official forex windows but suffered a marginal decline at the parallel market. At the Investors and Exporters (I & E) window, naira closed at N386.00 per dollar while CBN’s spot rate also closed at N379.00 per dollar. At the parallel market, naira depreciated to N467.00 per dollar. Meanwhile, turnover at the I & E window dropped by 57.1 per cent to $348.8 million at the weekend, compared with $812.8 million recorded in the previous week.

“In the coming week, we expect naira to remain within a similar band across the different forex segments,” Afrinvest Securities stated.

Many analysts expected the naira to depreciate further, especially as dollar rebounded in the global market.

Analysts at Financial Derivatives Company (FDC) said the 100 basis points cut in Monetary Policy Rate last week amid rising inflation may worsen Nigeria’s currency management situation.

According to analysts, the imbalance could heighten the risk of capital flight, which will further increase the pace of external reserves depletion.

They added that Nigeria as an import- dependent economy stands the risk of higher import prices due to a stronger dollar.

“This will negatively impact the country’s balance of trade and terms of trade levels. The CBN’s ability to support the naira is undermined and hence we could experience some exchange rate volatility,” FDC stated.