The Nation Newspaper

Category: Equities

  • Investors turn to oil, financial stocks as equities lose N114b

    Financial services and oil and gas stocks were the few exceptions to the widespread decline that pervaded the Nigerian stock market last week as investors weighed the third-quarter earnings of quoted companies.

    The benchmark index for the Nigerian stock market, the All Share Index (ASI), indicated a week-on-week negative return of -1.10 per cent, equivalent to a loss of N114 billion. The ASI-a value-based common index that tracks prices of all quoted equities at the Nigerian Stock Exchange (NSE), closed below its psychological base of 30,000 points at 29,834.21 points compared with its week’s opening index of 30,165.22 points.

    Aggregate market value of all quoted equities also dropped from its week’s opening value of N10.367 trillion to close at N10.253 trillion, representing a loss of N114 billion or 1.10 per cent. With 39 decliners to 29 advancers, the negative market position was driven by widespread losses as well as losses recorded by highly capitalised stocks. A total of 122 equities closed flat, highlighting the lack of activities in several stocks, most of which have stagnated at nominal prices for more than 12 months.

    The negative return last week further built up the negative average year-to-date return at the stock market to -13.92 per cent. The National Bureau of Statistics (NBS) during the week announced increase in inflation rate to 9.4 per cent in September, the eighth increase in the past nine months, leaving investors in a no-win position. Inflation-adjusted return thus closed the week at -23.32 per cent.

    Turnover fell below recent weekly average as investors maintained a tight trading position. Total turnover stood at 949.68 million shares worth N10.28 billion in 14,833 deals last week as against a total of 1.39 billion shares valued at N12.17 billion traded in 14,821 deals two weeks ago. Financial services sector remained the most active with a turnover of 577.298 million shares valued at N4.87 billion in 8,006 deals, representing 60.79 per cent and 47.41 per cent of the total equity turnover volume and value respectively.

    The trio of Capital Oil Plc, United Bank for Africa Plc and Guaranty Trust Bank Plc were the three most active stocks with a joint turnover of 370.170 million shares worth N2.386 billion in 2,042 deals, representing 38.98 per cent and 23.21 per cent of the total equity turnover volume and value respectively.

    Banking, insurance and oil and gas stocks were the contrarian stocks last week as good earnings report by the United Bank for Africa (UBA) highlighted possible strong recovery in the financial services sector. The NSE Oil and Gas Index recorded the highest gain of 3.75 per cent, riding on the back of strong gain by Forte Oil, which tempered third-quarter earnings failed to halt rising demand. The NSE Insurance Index rose by 2.81 per cent while the NSE Banking Index returned modest gain of 0.67 per cent during the week.

    All other group indices followed the negative overall market position. The NSE Premium Index, which tracks the trio of Dangote Cement, FBN Holdings and Zenith Bank International, recorded the highest loss of 2.09 per cent. The NSE 30 Index, which tracks the 30 most capitalised companies on the NSE, declined by 0.90 per cent. Both the NSE Premium Index and NSE 30 Index substantially influenced the negative close of the market, with the two indices mirroring more than three-quarters of the total market capitalisation. The NSE Main-Board Index dropped by 0.57 per cent. The NSE Consumer Goods Index declined by 1.73 per cent. The NSE Industrial Goods Index lost 1.45 per cent. The NSE Pension Index, which tracks a group of 40 stocks adjudged suitable for pension investments, dropped by 0.45 per cent while the NSE Lotus Islamic Index, which tracks stocks that comply with Islamic investment guidelines, returned -0.42 per cent last week.

    Transcorp Hotels, which reported negative third quarter earnings, led the losers, dropping by 9.58 per cent to close at N6.42. Access Bank trailed with a drop of 9.23 per cent to close at N4.72. Learn Africa declined by 8.70 per cent to 84 kobo. Unity Bank dropped by 7.41 per cent to close at N1.50 while Honeywell Flour Mills lost 7.27 per cent to close at N2.55 per share.

    On the upside, Okomu Oil Palm recorded the highest gain, in percentage terms, of 24.32 per cent to close at N35.63. Nascon Allied Industries followed with a gain of 10.90 per cent to close at N7.73. AXAMansard Insurance rallied 10.74 per cent to close at N2.68. Forte Oil rose by 9.81 per cent to close at N280 while Zenith Bank International grew by 7.42 per cent to close at N17.51.

    On the non-common equity market, a total of 3,740 units of Exchange Traded Products (ETPs) valued at N2.035 million were traded in 19 deals compared with a total of 3,180 units valued at N1.150 million traded in 18 deals two weeks ago. Also, a deal was struck for 1,000 units of Federal Government Bonds valued at N1.165 million last week as against two deals struck for a total of 29,472 units valued at N30.711 million in the previous week.

    Analysts at FSDH Securities said they expected the market to gain some traction from third quarter earnings. Several companies are expected to undertake final review and board approval of their third-quarter earnings this week. Approved earnings reports must be released immediately to the NSE for onward dissemination to the investing public, according to extant listing rules at the Exchange.

     

     

  • Analysts predict mixed performance as investors await Q3 earnings

    Large Nigerian banks are expected to post reasonable and steady earnings but most fast moving consumer goods companies and several other financial companies could remain under pressure from sluggish top-line and rising operating expenses in the third quarter.

    As nine-month earnings reports of quoted companies started to trickle in, analysts at FBN Capital said there would be little surprises from the earnings.

    Analysts noted that banks have guided to a slower second half as a reflection of the impact of the worsening macro environment and as such, earnings and margins in the industry will emerge stable.

    Analysts said banks’ profit before provisions and operating expenses, a proxy for revenue growth, might slow down from an average of 18.4 per cent year-on-year in second quarter of 2015 to 13.0 per cent year-on-year in third quarter.

    The preview pointed out that a major contributor to the revenue growth slowdown is the muted loan growth expectations for the sector. After delivering slightly over 25 per cent per annum over the last two years in average loan growth, the previewed banks are expected to post nine per cent loan growth in 2015, much of that having already been achieved in first half.

    “We expect margins to remain stable. Non-interest income continues to be squeezed by the impact of regulatory headwinds. The significant narrowing of growth from the revenue to the profit before tax line is explained by our expectations that asset quality in particular will worsen in second half; it has been defiantly resilience across the board, with most banks reporting non-performing loans (NPL) ratios below five per cent in first half. All the banks we cover guide to their NPL ratios being below five per cent by the end of the year. We believe this guidance is optimistic. However, we do not foresee a meltdown scenario with NPL ratios shooting up to 10 per cent in the near term,” FBN Capital stated.

    The preview noted that while the near term outlook is subdued, there is a good expectation that there would be a growing bifurcation between the larger banks and the tier 2 banks, with the larger banks expected to post decent third quarter results, with profit before tax growth averaging 18 per cent.

    According to analysts, the third quarter results would confirm the position that scale advantages are helping larger banks to gain market share.

    In the non-financial fast-moving consumer goods (FMCG) sector, analysts said the subdued trends witnessed in the first half would persist into the second half of the year as the challenges faced by the consumer companies are not expected to cease in the near term.

    Militating factors against the FMCG stocks included headwinds such as weak demand on the back of a squeeze on household wallets, foreign exchange pressures and insecurity in the North-East. The Naira has depreciated by around 22 per cent against US dollar over the last 12 months.

    Manufacturing firms are however expected to draw on softer raw material prices including sugar, barley palm oil and maize to mitigate macroeconomic headwinds.

    The report indicated that while FMCGs’ third quarter reports may be generally low, many companies including UAC of Nigeria and Unilever Nigeria could record strong bottom-line performance. Analysts generally expected FMCGs’ average third quarter sales and EPS growth of around four per cent and 19 per cent year-on-year.

    According to analysts, Unilever Nigeria and UAC of Nigeria (UACN) are expected to record average growth of 69 per cent in profit before tax in the third quarter. While Unilever Nigeria’s profit before tax growth estimate is primarily due to base effects as operating expenses levels were significant in 2014, UACN’s profit before tax growth forecast is on back of expected improved operating efficiencies and rental income from its investment in UPDC REIT, a new income line in 2015.

     

  • UBA grows net profit by 44% in Q3

    UBA grows net profit by 44% in Q3

    United Bank for Africa (UBA) Plc blazed the trails as the first financial institution to submit its third quarter results, with the nine-month earnings showing strong growths in the top-line and the bottom-line.

    Key highlights of the nine-month results for the period ended September 30 this year showed that net profit rose by 44 per cent while gross earnings grew by 17 per cent. Net operating income rose by 21 per cent while non-performing loans remained low at 2.1 per cent.

    Group gross earnings rose to N247.21 billion in third quarter this year as against N210.72 billion recorded in comparable period of last year. Net interest income had risen from N81.96 billion to N102.12 billion. Net operating income also rose from N136.04 billion to N162.03 billion. Profit before tax grew by 35 per cent from N42.54 billion to N57.37 billion. After taxes, net profit rose by 44 per cent from N33.63 billion to N48.56 billion.

    The cost to income ratio remained within management’s guidance of 65 per cent, compared to 68.7 per cent in the corresponding period of last year, as it continued to focus on improving operational efficiencies to deliver superior return to its shareholders. It closed the third quarter with total assets of N2.87 trillion, loan book of N1.01 trillion and a deposit base of N2.18 trillion.

    Its Group Managing Director,  Mr. Phillips Oduoza, attributed the bank’s performance to enhanced balance sheet efficiency and improving extraction of value from the bank’s channels, noting that the bank has been able to maintain its discipline on how, where and with whom it does business, as reflected in its earnings and asset quality.

    “We have continued to sustain our financial performance in 2015, leveraging our unique pan-African platform and the strength of our committed work force in gaining competitive edge in the market place,” Oduoza said.

    Its Group Chief Financial Officer, Ugo Nwaghodoh said that the bank’s entrepreneurial persistence continues to yield results as the group increasingly extracts synergy opportunities across its African network.

    “Our business in Africa, excluding Nigeria, contributed a quarter of our profit after tax in the period; a resounding benefit of our geographic diversification,”  Nwaghodoh said.

    He pointed out that the group’s balance sheet remains strong, with a 20 per cent capital adequacy ratio and 49 per cent liquidity ratio, adding that the lender will continue to balance the quest for earnings and growth, with the best sustainability principles.

  • Stock Exchange appoints financial advisers for demutualisation

    The Nigerian Stock Exchange (NSE) yesterday announced the appointment of a consortium of Rand Merchant Bank (RMB) and Chapel Hill Denham (CHD) as financial advisers on the proposed demutualisation of the Exchange.

    Chief Executive Officer, Nigerian Stock Exchange, Mr. Oscar Onyema,  said the appointment affirms the Exchange’s commitment to achieving its demutualisation in a methodical and transparent fashion.

    “This step is pivotal to a professional and successful conversion of the Exchange from a member-owned mutual organization to shareholder-owned public limited liability company that aligns with global best practices,” Onyema said.

    He reiterated the commitment of the Exchange to ensuring that the interests of all members are protected in the demutualisation exercise.

    He outlined that the management of the Exchange has implemented a number of initiatives to strengthen and improve governance adding that the demutualisation process will contribute to the sustenance and enhancement of governance at the Exchange.

    Onyema said the NSE employed a very rigorous and extensive selection process, commencing with a request for proposal (RFP) process on March 11, 2014, which invited qualified financial consortia to submit expressions of interest (EOI).  As part of the EOI, potential financial advisors (FAs) were required to express their interests as a consortium of one international and one Nigerian investment bank, where at least one party of the consortium had participated in the demutualization of a securities exchange as lead adviser.

    According to him, the qualifying consortia were sent the RFP and 13 proposals were received by deadline date. These proposals were reviewed extensively and scored based on technical and financial considerations by NSE. After a round of presentations, only three consortia progressed to the final stage which was aimed at picking the most competent consortium and extracting the best value for NSE.

    Chief executive officer, Rand Merchant Bank Nigeria and Regional Head for West Africa, Mr. Michael Larbie, said the bank was delighted to be assisting the NSE with the demutualisation.

  • Meristem launches naira trading platform

    Meristem Securities Limited has launched a new trading platform, MeriFX, which is adjudged as Nigeria’s first naira multi derivative assets platform. With the new trading platform, investor can now trade forex, commodities, indices and equities all from one trading account in Naira.

    Speaking at the event, Managing Director,  Meristem Stockbrockers Ltd, Mrs. Gbadunola Sokunbi, noted that MeriFX offers investors the chance to trade the world’s most popular financial markets at their fingertips.

    “But the catch is that you are not really trading (buying or selling) anything that you can own, but merely engaging in something called ‘spread betting’. Unlike stocks whereby you own a piece of a company when you buy, when you spread bet, you are only speculating on the price movements of thousands of global financial markets including indices, shares, currencies, commodities and more,” Sokunbi said.

    She explained that any trader could now use spread bets to speculate on price movements irrespective of whether the markets are rising or falling such that if one goes long or buy, one’s profits will rise in line with any increase in that price and if one goes short or sell, one’s profits will rise in line with any fall. Similarly, if one goes long on the price and the underlying stock price falls, one will incur losses.

    The minimum trade size on MeriFX is $200 or N40, 000.

    Analysing the unique features of the platform, the guest speaker, Mr. Mathew Smith of FINSA Europe Ltd, noted that the platform provides inexperienced traders a place to test the waters with the MeriFX demo account, which is a dummy of the real platform. This, he said, safeguards inexperienced traders from running into ditches in the real process.

    Meristem Securities Limited  last year inaugurated an online stock trading platform aimed at fostering market participation.

    According to the firm, the platform, called Meritrade, serve as a virtual stockbroking platform, helping users to always trade stocks on the Nigerian Stock Exchange from anywhere in the world through their computers or mobile phones.

     

  • Global securities regulators move to reinforce market regulation

    The board,  International Organisation of Securities Commissions (IOSCO) at the weekend, met in Toronto  to reinforce its position as the key global reference point for financial services and markets regulation.

    The board’s discussion during the two-day meeting focused on three sets of activities in key priority areas as identified in the IOSCO 2020 Strategic Direction, including identifying and responding through guidance to global market risks; providing assistance to IOSCO members and supporting the G20 efforts to promote stability in the global financial system.

    IOSCO is the leading international policy forum for securities regulators and is recognised as the global standard setter for securities regulation. The organisation’s membership regulates more than 95 per cent of the world’s securities markets in more than 115 jurisdictions. Nigeria is a key member of IOSCO and it sits on the board of the organisation.

    The meeting was preceded by a discussion among board members on recent market developments, including recent market volatility and increased leverage, particularly in growth and emerging markets

    This was followed by a round table discussion with industry representatives on improving small and medium scale enterprises’ access to market-based finance.

    As part of its efforts to identify and respond to emerging risks, the board discussed progress  in IOSCO’s work on asset management and agreed to publish a report on liquidity risk management in collective investment schemes.

    It further decided to conduct work on enhancing collection of data about asset management activity and considered developing guidance on liquidity risk management beyond its 2013 principles including on stress testing

    The board discussed its work in other key areas, including the risks posed by market conduct, cyber resilience and audit quality, discussed progressing recommendations in the recently published report on cross border regulation and endorsed work to provide further guidance to financial benchmark administrators and crowd funding. Corporate governance and IOSCO’s possible contribution to international integrated reporting were also discussed.

    On assisting IOSCO members in building capacity and co-operating to develop, supervise and enforce laws in their jurisdiction, the board agreed to proceed with the launch of a Global Certificate Programme designed specifically for securities regulators.

    IOSCO also discussed fostering greater cooperation and exchange of information among regulators for enforcement purposes through the enhancement of the current IOSCO Multilateral Memorandum of Understanding on cooperation and the exchange of information.

  • UK, Nigeria to partner on non-interest finance

    UK, Nigeria to partner on non-interest finance

    Nigeria and United Kingdom would work together to develop the enormous potential of non-interest finance in Nigeria.

    At a round table between the Securities and Exchange Commission (SEC) and a United Kingdom delegation led by the Lord Mayor of London, Alderman Alan Yarrow, in Abuja, the parties agreed to collaborate on the development of the non-interest segment of the Nigerian capital market.

    SEC said it plans to grow non-interest capital market products to 25 per cent of the overall market capitalisation.

    Director-General, Securities and Exchange Commission (SEC), Mr. Mounir Gwarzo, was represented at the meeting by Mr. Zakawanu Garuba, Executive Commissioner, Corporate Services.

    Garuba said SEC wants to build a strong regulatory regime for non-interest products, encourage stakeholders in the non-interest capital market and ensure the emergence of Nigeria as a prominent non-interest capital market hub both at the regional level and globally.

    He added that SEC was considering modalities for setting up a Sharia Advisory Council as a body of experts to advise on non-interest product applications.

    He noted that to boost liquidity of non-interest products, SEC  is working with a committee to support the FMDQ platform to enable secondary market trading of the products while it is also engaging the Central Bank of Nigeria (CBN) to obtain liquidity status for non-interest products, especially the sukuk.

    “Our goal is to boost non-interest capital market product innovation so that the segment can be at least a quarter of the overall market capitalisation. Nigeria has more than 80 million Muslims compared to Malaysia’s total population of 30 million. In addition, Nigeria has a larger economy than Malaysia’s, being the largest economy in Africa,” Garuba said.

    He outlined that to harness this potential, SEC had set up an industry-wide Committee of experts last year to produce a 10-year master plan on non-interest capital market product and their recommendations have been incorporated into the broader capital market master plan which the Commission has started to implement.

    “There have been many successful examples of market development through implementation of master plans and we are confident that our own master plan objectives will be achieved as well over the next decade,” Garuba said.

    Alderman Alan Yarrow pledged the United Kingdom’s government support stressing that two things were universally agreed that Islamic finance will be massive and it’s here to stay.

    “There is a huge opportunity to offer Islamic finance as an alternative investment and finance model for both Muslims and non Muslims alike,” Yarrow said.

    He said Nigerian Stock Exchange (NSE) has a crucial role to play since it is the second largest Exchange in sub-Saharan Africa, noting that as the gateway to African markets, the whole of Africa, to some extent, relies on Nigeria.

    According to him, the UK is prepared to help Nigeria from looking at Nigeria’s legal framework, to helping to up the skills of Nigeria’s young, dynamic and ambitious population.

    “London has the expertise, the variety and the capacity to help. And most of all, we offer the willingness and we stand ready to do our bit,” Yarrow said.

    He noted that there is already a thriving partnership between the Exchanges and an excellent pipeline of Nigerian Businesses listing in London.

    He called on members of the Nigerian capital and financial derivatives markets to freely engage their UK counterparts and businesses in all areas including Islamic Finance, Legal services or education, training and qualifications, assuring that the UK government and other stakeholders would be willing to help in whatever way they can.

     

  • Pension funds to provide long-term funds for capital market

    Pension funds would provide long-term funds that will enable the capital market to support Nigerian companies and governments in actualisation of their plans.

    Director-General, Nigerian Pension Commission (Pencom), Mrs Chinelo Amazu-Ahonu made this commitment during her visit to the Nigerian Stock Exchange (NSE).

    She said the Commission would work with the Nigerian Stock Exchange to grow the Nigerian capital market by deepening the existing partnership with a view to putting necessary measure in place in order to give institutional investors the needed comfort to remain in the equities market on a long term basis.

    “The reform that has been on going in the NSE is the kind of thing that PENCOM is looking for because we are institutional investors and because of the nature of funds we hold which idly belonging to the retirement service account holders, and the primary mandate of PENCOM is to establish and ensure that liabilities and pension retirement benefits are paid as and at when due, this is the crux of all investments we do,” Mrs Amazu-Ahonu said.

    According to her, the pension industry required an enabling environment to participate maximally in its effort to help move the market forward.

    “Now, the relationship we are establishing with the NSE is such that will enable us meet our initial mandate, while also playing an active part in the local development of the NSE because investment in equities for institutional investors is long term in nature. We are not portfolio investors, we are in for long term and I am happy that the management of the NSE is creating that platform to enable us fulfil that mandate,” she said.

    Mrs Amazu-Ahonu, while fielding questions from journalists  on state governments that are yet to be part of the initiative, she explained that the Commission recorded increased commitment from state government to sign up into the system at the just concluded world summit, noting that they also pledged to ensure that all the people working in the state level have this payment made to them.

    She added that pension has ensured that part of the regulations stipulates that a state PSA cannot invest in state bond that is not fully implementing the contributing system.

    “In terms of compliance, you must know it is an ongoing job. The state is slightly different, you have to pass their own law and then make it in conformity with Pension reform of last year and it is not just the state even in the private sector and companies everywhere. And part of our job is to ensure and follow up to see that RSA retirement savings account is fully funded. We have seen an upsurge in that and the future looks bright,” Mrs Amazu-Ahonu said.

     

  • Nigeria and its capital market: conjoined, waiting for the momentum

    Nigeria and its capital market: conjoined, waiting for the momentum

    For stakeholders in the Nigerian capital market, the annual independence anniversary, and related periodic celebration, is a double celebration-as patriots to commemorate the attainment of independence and as market men to celebrate the historic formal formation of the Nigerian stock market. As Nigeria’s founding fathers finalised independence talks in 1960, the founding fathers of the Nigerian capital markets also wrapped up the historic Memorandum and Articles of Association that established the then Lagos Stock Exchange (LSE) in 1960.

    So, in remembering the historic October 1, 1960 independence celebration, Nigeria not only celebrates its attainment of nationhood as self-determining sovereignty, but also the formation of its capital market; the bedrock and barometer for economic prosperity of its people. As a nation, Nigeria has come a long way in the past 55 years; through teething post-independence years to the interregnum of civil and military rules, to a harrowing civil war, religious crisis, oil boom to sapping austerity, all through to the current democratic dispensation and its myriads of socio-economic and political challenges. As a nation, Nigeria has defied the odds and in spite of rancorous distractions, it remains intent on attainment of the true sovereignty that comes with a peaceful nation and happy nationals.

    Like Nigeria, the Nigerian stock market has also come a long way. Established as Lagos Stock Exchange (LSE) in 1960, the Exchange started out as a private company limited by shares. Among those that signed the initial Memorandum and Articles of Association were Sir Odumegwu Ojukwu, Akintola Williams, C.T Bowring and John Holt Investment Company. Formal trading however commenced on June 5, 1961. It was renamed Nigerian Stock Exchange in December 1977 and was re-incorporated as a company limited by guarantee in December 1990.

     

    In the beginning

    At inception there were only four stocks listed at the Exchange including the Nigerian Tobacco Company (now British American Tobacco), John Holt Investment Company Limited Company (ordinary stock) John Holt Investment Company (preference stock) and the Nigerian Cement Limited. Market capitalisation was then N500 at the start of trading in 1961 and for several decades trading was done manually through a system known as the call-over system.  Under the call-over system, a clerk used a white chalk to indicate buyer and seller position. As more securities were listed and more operators entered the market, the system changed from a black board to a round table with the clerk shouting out and matching bidding and selling orders.

    From its humble beginning, the Nigerian stock market has grown to be the regional financial powerhouse, the second largest market in Africa, the most technologically advanced market on the continent and one of the leading global frontier emerging markets. In what was clearly indicative of its attainment, on the last day of September and eve of Nigeria’s 55th independence anniversary, aggregate market value of all quoted equities on the Nigerian Stock Exchange (NSE) rose by N135 billion to close at N10.729 trillion. The benchmark index for the stock market, the All Share Index (ASI), also rose by 1.27 per cent to close at  31,217.77 points. With 22 gainers to 26 losers, gains by leading stocks such as Nestle Nigeria, Dangote Cement, Guinness Nigeria and Lafarge Africa coloured the overall market position.  Turnover was above average with the exchange of 416.97 million shares valued at N5.24 billion in 3,608 deals. The trading session was illustrative enough what an average trading day is at the Exchange. With some 280 listed securities including equities, corporate bonds and debentures, national government bonds, sub-national and municipal bonds, mutual funds, derivatives and supranational stocks, the NSE now boasts of several large companies. Both Dangote Cement and Lafarge Africa are Africa’s largest cement companies. Dangote Cement, the Nigerian company, is Africa’s largest and most expansionary cement company. Lafarge Africa is the continental hub for the African operations of Lafarge Holcim, the world’s largest cement company. The position of the ASI is also noteworthy. A value-based common index that tracks prices of all quoted equities, the ASI was formulated on January 3, 1984 with Index at 100 points on that day. It had reached a peak of 66,371 points on March 5, 2008 when market capitalization also hit N15.67 trillion.

     

    Metamorphosis of the market

    The trading system has also changed over the decades. From the call-over system, the Exchange has moved with advanced technologies. The NSE launched its current trading engine in September 2013. The current trading engine known as X-Gen is a version of NASDAQ X-Stream developed by NASDAQ OMX System, a global financial services powerhouse. The trading platform is based on a number of leading technologies, including NASDAQ OMX’s XStream matching engine, and the NSE’s flexible and robust X-GEN Market Database, developed from scratch by the NSE and its technical partners. X-Gen has been described as the fastest trading engine in Africa. The Exchange this year upgraded the trading engine and the market’s FIX order management system (OMS) to enhance efficiency and functionality of the trading system. The Nation had reported that about seven new features were added to the X-Stream trading workstation and three major enhancements to the Order Management System (OMS).  The new features to the X-Gen included several windows that allow traders to track the underlining tempo of the market movement and also make clearer evaluation of the yield status of debt instruments. Besides, the changes also allow for greater flow of communication among stockbroking firms while trading. As against the call-over system, the OMS, which coordinates orders from scores of stockbrokers trading simultaneously from their remote or office locations and trading floors of the Exchange, has also been made more flexible to accommodate various orders.

    The new technology at the Exchange has further widened the scope and personalisation of trading with the emergence of several online trading portals by stockbrokers. The online stockbroking portal provides on-line, real time access to investors to personally execute their orders on the NSE. With as low as N1,000, retail investors can open stockbroking accounts and trade on these accounts. This would lead to increased investors’ participation in the capital market and enhanced transparency and confidence in the market. The portals provide investors with round-the-clock access to their portfolio and cash statements while investors can also place their orders within and outside the trading hours of the NSE. Besides, these portals come significant reduction in cost of investment with the removal of such costs as travelling and opportunity costs.

    For most portals, signing on to the market is a simple process. New investors only need to fill account opening form and upload scanned passport photo, scanned utility bill that is not later than three months, scanned specimen signature, scanned mode of identification and their bank details. Additional features in most instances included display of balance in any currency of choice, online mandate, ability to specify expiry dates on orders, display of portfolio balance and portfolio analysis, statement of account, ability to view and download contract note in different formats, ability to view certificates and verification status, live streaming of stock market prices, live portfolio valuation, amendments or cancellation to undone transactions, graphs and charts and online real-time client information. On the average, to be eligible to trade on the portal, one needs only access to internet, a functioning e-mail address, any active bank account, a fair understanding of the workings of the stock market and a stockbroking account. So, while the main trading floor at the Customs-Street head office of the NSE symbolically represents the market, the market in actual sense now is the global space; through the nooks and crannies of the vast geographies of Nigeria and beyond.

     

    Catalyst for development

    More importantly, the capital market has helped to nurture the Nigerian economic growth, providing governments and companies with much-needed capital to foster growth and development. For instance, the Zamfara State recently raised N7 billion through a bond issue. The N7 billion Zamfara State Government Seven-Year Fixed Rate Development Bond was the first tranche under the N30 billion Zamfara State bond issuance programme. The net proceeds of the bond issue would enable the Zamfara State Government to deleverage and reposition its finances towards delivering further dividends of democracy to its citizens. More than N156 billion were raised in new equity funds by eight companies in the first three quarters of this year with current estimate that not less than six companies might raise some N160 billion in this last quarter alone. Beyond funding, the market instills longevity and corporate governance. Chams Plc is one of the wholly-owned indigenous companies that have been nurtured by the market.

    Sir Ademola Aladekomo, who founded Chams in 1985 and steered the company for 30 years as managing director, said the listing of the company enabled the directors to strengthen and adopt international best practices and good corporate governance structures, which proved to be of immense advantage to the company during its turbulent period. According to him, one of the major advantages of listing is the standardised requirements for reporting operational results and accounts, which ensure greater level of transparency and commitments to organisational goals. He recalled that because of the listing requirements; in 2010, 2011 and even 2012 when things are really tough and bad and the company was declaring results that were like a disgrace, the board and management had to faithfully keep with quarterly reporting all through the period. He noted that the company standardised its accounts department and made it highly independent, such that officials of the company would not be able to tamper with the official records.

    “If you are not messing around with your books, if you do not have anything to hide, if you want to be very transparent,  if you want to be held on to your projections, your budgeting performance by the public, then you should list. For us in Chams we decided to be opened, more because we do not have anything to hide. We believe that it is by exposing ourselves, by letting the whole world knows what we are doing that we can improve,” Aladekomo said.

    But the Nigerian capital market, like the Nigerian nation, is still beset with many challenges. The market has failed to fully optimize its potential. Comparatively, it remains shallow and monotonous. With foreign investors dominating transactions, there are less than four per cent of Nigeria’s 170 million population participating in the stock market and most major companies in the wealthy oil and gas, telecommunication and infrastructure sectors are not on the stock market. The absence of several major companies in key sectors of the economy undermines the role of the Exchange as a barometer for the economy. The NSE, which had set a target of $1 trillion capitalisation by 2016, earlier this year backed down on the target. The Oscar-Onyema led management of NSE had in 2010 set the target of $1 trillion market capitalization by 2016, equivalent to about N199 trillion at the prevailing exchange rate. The Exchange had premised its ambitious target on new listings, especially of the major oil and gas and telecommunication companies, which have so far failed to materialize. Onyema said the $1 trillion target has become unrealistic, citing the current market situation. “We no longer believe it is possible giving where we are today,” Onyema said about the $1 trillion target.

     

    Waiting for the momentum

    As Nigeria seeks a rebirth and consolidation of its national growth under the new government of President Muhammadu Buhari, who celebrated his first independence anniversary on Thursday October 1 with a nationwide broadcast, many have urged the government to consider incentives and possible fiscal and legislatives provisions that will ensure that major companies list their shares on the Nigerian stock market. Experts agreed on the need to promote listing on the NSE especially companies of national importance and large assets such as the telecommunication and oil and gas companies. Former president, Institute of Directors (IOD), Mrs Eniola Fadayomi, said government may need to consider a dual-approach of incentives and fiscal and legislative restrictions to ensure that companies list their shares on the stock exchange. According to her, a “carrot and stick” approach may be the best option given the state of Nigeria’s economic development as depending on incentives and voluntary compliance alone may not achieve the desired result.

    She noted that national franchises such as national licences for telecommunication and other utilities as well as natural resources could be tied to listing at the stock market, providing compelling reason and incentives for companies to seek listing.

    Chief Consultant, ‘Biodun Adedipe & Associates, Dr. ‘Biodun Adedipe, said government should use incentives to drive listing on the stock market noting that people and companies behave in line with the economic maxim that people respond to incentives. He pointed out that the Indian government used deliberate incentives to woo companies and develop its information and communication technology sector.

    “The more transparent, accountable and equitable a system is, the more confidence it inspires in the current players and the more attractive it makes the market become to prospective investors. The Nigerian capital market has the potential for the kind of capital formation required to drive an economy the size of Nigeria’s and trigger the much desired inclusive growth,” Adedipe said.

    The supports from government would synchronize with ongoing initiatives under “Capital Market Master Plan”- a decade-long development plan being coordinated by the Securities and Exchange Commission (SEC) and other stakeholders. Director, general, Securities and Exchange Commission (SEC), Mr. Mounir Gwarzo, said seven major initiatives are expected to be fully implemented by the end of this year. These priority areas include dematerialization, e-dividends, direct cash settlement, reduction of transaction costs, unified licensing model across money and capital Markets, obtaining liquidity status for non-interest capital market products and strengthening market institutions by completing the recapitalization exercise. In all these, the market requires the support of the government including the repeal of certain inhibiting aspects of the Companies and Allied Matters Act (CAMA). At 55, Nigeria has come a long way, so also its capital market, but their conjoined potential remained underutilized, waiting for the momentum to take their places of pride within the global community. The shared history should bring it home to the new government that in solving Nigeria’s myriad of problems, the capital should receive better attention.

  • Red Star Express mulls new medium-term strategy

    The board and management of Red Star Express Plc are in the process of developing a new medium-term corporate strategy that will outline key basic corporate activities, objectives and expected results over the next five years.

    Chairman, Red Star Express Plc, Dr. Mohammed Koguna, who hinted about the new corporate plan, said the five-year medium term corporate growth plan would significantly drive the growth of the company.

    “We are very confident that our efforts and commitments will result to value additions for all stakeholders,” Koguna, who is also the largest single shareholder of the courier and logistics company, said.

    Red Star struggled between slow top-line and increasing operating expenses to end the immediate past year with modest decline in the bottom-line. Key extracts of the audited report and accounts for the year ended March 31, 2015 showed that turnover rose marginally by four per cent from N6.42 billion to N6.66 billion.  Profit before tax inched up by one per cent from N603.89 million to N611.06 million. Profit after tax however declined by five per cent from N403.63 million in 2014 to N383.64 million in 2015. While earnings per share dropped from 68 kobo to 65 kobo, the company retained its dividend per share of 35 kobo.

    Koguna said the performance of the company was affected by significant drop in government revenue and distortion in foreign exchange market, which led to depreciation in Naira, resulted in higher cost for the company’s international operations.

    He added that reduction in lending capacity of the banking sector and high cost of funding and the resultant reduction in real sector activities as well as pre and post election uncertainties affected the company’s performance.

    “With the establishment of newly elected government in May 2015, there are high expectations for better economic growth that will give room for the actualisation of strategic projects earmarked for the next financial year,” Koguna said.

    He expressed optimism that expected improvement in national infrastructure and resolution of the insecurity challenge in the North East of the country would support the company’s  performance in the years ahead.

    He said the company would continue to maintain high ethical standards as it seeks to build long-term values for all stakeholders.

    “Good governance and ethical conduct provide the foundation for everything we do at Red Star Express. They help us earn the trust, manage risks, foster sustainable growth, and build a resilient business,” Koguna said.

    He reiterated the commitment of the board and management to creating wealth for the shareholders of the company and all the stakeholders, pointing out that the company, through its Red Star Foundation, gave out 11 additional scholarships to students during the period.

    “The success of our business depends on earning the trust of our customers, our partners and our stakeholders. That’s why we place such importance on strong corporate governance and ethical conduct,” Koguna stated.