The Nation Newspaper

Category: Equities

  • Profit-taking depresses equities as index slips by 0.12%

    Profit-taking depresses equities as index slips by 0.12%

    Investors retreated from bargain-hunting and refocused on locking in gains from recent bullish rally, building up sell pressures that overwhelmed demand and reversed the overall market position to negative.

    In a tight market situation with nearly a tit-for-tat pricing scenario, 26 stocks recorded price depreciation while 24 stocks appreciated. However, losses recorded by several highly capitalised stocks such as Zenith Bank, Nigerian Breweries, Flour Mills of Nigeria, Oando and Lafarge Cement Wapco Nigeria coloured the overall market position negative.

    All key indices at the Nigerian Stock Exchange (NSE) closed yesterday on the downside, reflecting the shift in demand to supply as investors rebalanced their portfolios. The main index for the stock market, the All Share Index (ASI), indicated a day-on-day return of -0.12 per cent, depressing the average year-to-date return to -5.71 per cent. The ASI closed at 38,969.26 points as against its opening index of 39,017.66 points.

    Aggregate market value of all quoted equities dropped from N12.533 trillion to N12.517 trillion. Mobil Oil Nigeria led the losers with a drop of N4.95 to close at N120.05. Flour Mills of Nigeria followed with a loss of N1.31 to close at N68.49. Zenith Bank dipped by 85 kobo to N21.25. Oando slipped by 84 kobo to close at N16.04. Nigerian Breweries lost 55 kobo to close at N150.85. Lafarge Wapco dropped by 50 kobo to N108. Diamond Bank lost 31 kobo to close at N6.03. University Press declined by 30 kobo to N3.67 while Vitafoam and Livestock Feeds lost 21 kobo and 14 kobo to close at N4.03 and N3.09 respectively.

    The level of activities at the stock market also slowed down with declines in volume, value and number of deals. Aggregate turnover stood at 256.93 million shares worth N3.72 billion in 4,184 deals, representing 11.7 per cent, 13.6 per cent and 1.6 per cent decline in volume, value and deals respectively.

    Banking stocks remained the dominant stocks, in terms of trading, with banks occupying the top five most active stocks’ list. Ecobank Transnational Incorporated (ETI) was the most active stock with a turnover of 31.61 million shares worth N410.88 million in 100 deals. Zenith Bank followed with a turnover of 29.07 million shares worth N631.6 million in 267 deals. Skye Bank placed third with 22.36 million shares valued at N76.73 million in 156 deals.

    Altogether, financial services stocks accounted for 210.63 million shares valued at N1.99 billion in 2,515 deals.

    Meanwhile, Forte Oil led the contrarian stocks with a gain of N11.40 to close at N122.70. Nestle Nigeria followed with a gain of N2.90 to close at N1, 185. Cadbury Nigeria added N2.25 to close at N77. Guinness Nigeria rallied N2 to close at N190. UAC of Nigeria gathered N1.92 to close at N59. CAP rose by N1.79 to close at N37.75. Presco gained N1 to close at N42. Cement Company of Northern Nigeria chalked up 45 kobo to close at N9.48. National Salt Company of Nigeria added 40 kobo to close at N11.90 while ETI rose by 25 kobo to close at N13.10 per share.

  • Global Sukuk market looks promising in 2014, says S & P

    Standard & Poor’s Ratings Services (S & P) has predicted a positive outlook for the non-interest debt market in 2014.

    The global rating agency in its review of the Sukuk market stated that the long-term prospects for the industry remain promising as regulators continue to build and strengthen their frameworks to minimize barriers in the market and deepen liquidity.

    The report noted the fledging Sukuk market in Nigeria with the debut issuance of Sukuk by Osun State in 2013.

    According to the report, the small-$62 million, Nigerian sharia-compliant bond issued by Osun State in October 2013 may signal the start of a fresh source of Sukuk. Senegal’s plan to issue a $200 million sukuk in the first quarter of 2014 to fund infrastructure projects is drawing on support from the Islamic Development Bank.

    “We believe that the use of Islamic finance could help Africa pay for multibillion dollars’ worth of infrastructure projects a year and help fund countries’ fiscal deficits. African nations are also looking to diversify their funding sources and gain access to a pool of wealthy investors from the Middle East—investors who can only invest in sharia-compliant products. In 2012, for instance, Sudan sold $160 million worth of sukuk while Gambia has been issuing short-term sukuk over the past few years,” the report noted.

    S & P stated that while Malaysia is already benefitting from a broad sukuk investor base and liquid debt market, the increased interest from issuers, notably in the Middle East and Asia, in tapping the Malaysian ringgit and US dollar market should spur growth over the next few years as Malaysia cements its leading position in the industry.

    After a slowdown in 2013 when sukuk volumes declining by 13 per cent, S & P anticipated that the sukuk industry will expand again in 2014, partly driven by corporate and infrastructure issuers in the Gulf.

    “What’s more, total issuance will exceed $100 billion for the third year in a row if yields remain attractive for issuers. And, after weakening in 2013, we believe issuance could pick up again in Malaysia in 2014 as its investment program resumes,” S & P stated.

    The report noted that there could be double-digit growth in issuance by Gulf corporate and infrastructure entities, due in part to large infrastructure financing needs pointing out that increasing private issuance could signal a change in the sukuk market characteristics.

    According to the report, Sovereign sukuk could be slowly emerging as an alternative to fund growth in African countries.

    It however noted that there is need for a regulatory push to strengthen frameworks, lower barriers to entry, and deepen liquidity in the sukuk markets.

    “At the same time, we believe that global growth in sukuk issuance could be further supported through: stabilizing or improving investment projections in key markets such as Malaysia, meeting the high demand for infrastructure spending across the GCC, where we expect issuance to continue climbing at a double-digit pace in the next two years, supportive regulations in the UAE, and the use of sukuk for repurchase transactions with the Central Bank of West African States (BCEAO) and sovereign issuance, which could assist the development of sukuk markets in African countries looking to fund growth and diversify fiscal funding,” S & P stated.

    It added that refinancing activities could boost the sukuk market as a result of the stock of both Islamic and conventional financings maturing in 2014, estimating that about $50 billion of sukuk will mature in 2014.

    “Our economists are projecting relatively strong economic growth in key sukuk issuing countries including Malaysia, Saudi Arabia, and the UAE in 2014. That said, we expect Malaysia’s public investment program to continue to drive sukuk issuance throughout the year,” S & P noted.

    According to the report, sovereign and sovereign-related issuance, including corporate and infrastructure GREs, will continue to dominate the sukuk market in 2014, as it has in past years.

  • Mars to buy P&G pet food brands for $2.9b

    Mars Inc, the closely held maker of M&M’s candies and Uncle Ben’s rice, agreed to buy three Procter & Gamble Company pet-food brands for $2.9 billion, cementing its lead in the industry.

    The transaction, which excludes the brands’ businesses in some markets, mainly in Europe, will be completed in the second half of the year, the companies stated yesterday in a statement.

    The acquisition gives Mars the Iams, Eukanuba and Natura lines to add to its Pedigree, Whiskas and Royal Canin brands. McLean, Virginia-based Mars was the largest global pet-food seller in 2012, with 23.4 per cent of the market, compared with 23.1 per cent for Purina owner Nestle SA (NESN), according to researcher Euromonitor International.

    “It gives them size in a potentially attractive market,” Ali Dibadj, an analyst at Sanford C. Bernstein & Co. in New York, said in an interview. “They just have to decide to invest back in the business.”

    P&G said it will restate its results to reduce fiscal 2013 earnings per share by 3 cents and cut 2014 earnings by 4 cents. The sale won’t affect P&G’s forecast for profit growth in its fiscal 2014, which runs through June, and won’t have a material effect on fiscal 2015 results. Cash from the sale will be used for general corporate purposes, the company said.

    Mars Inc, based in McLean, Virginia, is the closely held maker of M&Ms candies and Uncle Ben’s rice. P&G, based in Cincinnati, rose 0.2 percent to $81.49 at the close in New York. The shares are little changed this year.

    Bloomberg reported that AG Lafley, who returned as P&G’s chief executive officer last year, has been working to cut costs and evaluate the company’s units for potential divestitures. Analysts and investors considered Iams, which P&G bought in 1999, a natural candidate. The business hasn’t been a good one for P&G, said Dibadj, who recommends buying P&G shares.

    “I wish they’d never bought this thing,” he said yesterday. “They’re unraveling some of their mistakes, and this potentially was one.”

    While Mars didn’t want the brands’ European business, it has an option to buy operations in remaining markets in Asia and Africa, said Paul Fox, a P&G spokesman.

    “We will actively pursue the sale of our pet-care business in Europe,” Fox said. He declined to say whether the company has received interest in the units or whether it already is in talks with potential suitors.

    A sale may help P&G as the stronger dollar weighs on international revenue at the same time that it’s working to regain market share in key categories. The company in January lowered its forecast for profit and sales growth this year because of currency exchange-rate fluctuations and policy changes in Venezuela. That move followed second-quarter earnings that topped analysts’ estimates.

    Lafley’s second tenure came with high expectations. In his first round as CEO, he oversaw the $57 billion acquisition of Gillette Co., expanded P&G’s overseas presence and presided over the introduction of successful new products, such as the Swiffer cleaner.

    “It’s good to see that he’s being active,” Jack Russo, an analyst at Edward Jones & Co. in St. Louis, said of the pet-food sale. “This company is so big, sometimes the best way to grow it is to shrink it first.”

     

  • NSE’s index rally to 39,000 points as investors earn N44b

    The bullish r ally at the Nigerian stock market continued yesterday as gains by fast moving consumer goods companies and banking stocks spurred the market’s benchmark index beyond 39,000 points.

    After a momentary pause on Monday, the bulls regained the control of the market situation on Tuesday and built on the momentum yesterday. The benchmark index at the Nigerian Stock Exchange (NSE), the All Share Index (ASI) had grown by 0.99 per cent last week. It rose by 0.66 per cent on Tuesday and added 0.35 per cent yesterday.

    Aggregate market value of all quoted companies increased by N44 billion to close at N12.533 trillion as against its opening value of N12.489 trillion. The ASI also trended upward from 38,881.76 points to 39,017.66 points.

    With 27 gainers to 26 losers, the market situation was driven primarily by the substantial gains recorded by several highly capitalised stocks in the fast moving consumer goods and banking sectors. Nestle Nigeria topped the gainers’ list with a gain of N22.10 to close at N1, 182.10. Forte Oil followed with addition of N5.10 to close at N111.30. UAC of Nigeria rose by N2.71 to close at N57.08. Cadbury Nigeria added N2.25 to close at N74.75. Presco garnered 90 kobo to close at N41. Dangote Sugar Refinery rose by 69 kobo to N9.89. Lafarge Cement Wapco Nigeria chalked up 57 kobo to close at N108.50. Stanbic IBTC Holdings gained 45 kobo to close at N20.45. Zenith Bank rose by 35 kobo to N22.10 while National Salt Company of Nigeria added 19 kobo to close at N11.50.

    The banking sub-sector remained the driver of activities at the Exchange. The trio of FBN Holdings, Access Bank and Zenith Bank were the most active stocks just as financial services stocks contributed about 83 per cent of aggregate turnover volume.

    FBN Holdings recorded a turnover of 61.31 million shares worth N760.03 million in 425 deals. Access Bank followed with a turnover of 47.76 million shares valued at N353.52 million in 164 deals. Zenith Bank placed third with 46.78 million shares worth N1.03 billion in 289 deals.

    Financial services sector accounted for 241.01 million shares valued at N2.64 billion in 2,392 deals. Aggregate turnover stood at 290.97 million valued at N4.31 billion in 4,253 deals.

    On the downside, Total Nigeria topped the losers’ list with a loss of N9.07 to close at N172.38. Guinness Nigeria dropped by N6.99 to close at N188. Julius Berger Nigeria declined by N2.35 to close at N68.50. Nigerian Breweries lost 60 kobo to close at N151.40. Cement Company of Northern Nigeria (CCNN) slipped by 47 kobo to close at N9.03. University Press dropped by 41 kobo to close at N3.97. Dangote Flour Mills lost 32 kobo to close at N8.18. Computer Warehouse Group declined by 29 kobo to close at N5.56. Berger Paints dropped by 24 kobo to N8.76 while PZ Cussons Nigeria lost 18 kobo to close at N32 per share.

  • Warburg Pincus eyes African investments

    Warburg Pincus LLC, the private-equity firm managing about $37 billion in assets, is considering investments in Africa and the Middle East as capital starts to flow back into emerging markets.

    “We are looking beyond the core euro-zone markets into the rapidly growing emerging markets around Europe for investment opportunities,” Joseph Schull, head of Warburg Pincus in Europe, said in an interview. “Africa is the next big frontier in private equity and we are spending an increasing amount of time investigating opportunities in that region.”

    Investors are seeking out acquisition opportunities in less-developed markets in the Middle East and Africa as economic growth accelerates and financial markets recover from the credit crisis. Money is also returning to emerging markets, with exchange-traded funds attracting $1.4 billion in the first three days of April, as countries take steps to stabilize their economies, according to data compiled by Bloomberg.

    Standard Chartered Plc, the London-based bank present in Africa for more than 150 years, said in February it’s investing more money in private-equity deals there than in any other region in which it operates. Robert Diamond’s Atlas Mara Co-Nvest Ltd. this month agreed to buy a stake in state-owned Development Bank of Rwanda, while KKR & Co. is competing with Abraaj Group to buy a stake in Saudi Arabian restaurant business Kudu, two people familiar with the deal said in September.

    Bloomberg reported that New York-based Warburg Pincus made its first investment in the Middle East today, agreeing to acquire a controlling stake in Mercator, a Dubai aviation software-solutions company owned by Emirates’ Dnata unit. Mercator provides services to airlines including United Airlines Inc. (UAL) and British Airways Plc, the two companies said in a joint statement today, without disclosing financial details of the transaction.

    “This is a growth equity investment for Warburg, our first in the Middle East, and there is no debt involved in the transaction,” Schull said. “This business can be a multiple of its current size.”

    Warburg Pincus expects to double or triple its initial investment in Mercator in the coming years and is also exploring add-on acquisitions to expand the business, Schull said, without identifying potential targets. Mercator has more than 125 airline clients in 80 countries.

    Warburg Pincus, founded in 1966, owns stakes in more than 120 businesses and last year hired former U.S. Treasury secretary Timothy Geithner as its president. In 2013, it agreed to sell luxury retailer Neiman Marcus Inc. to an investor group for $6 billion, and sold eye-care company Bausch & Lomb Holdings Inc. to Valeant Pharmaceuticals International Inc. in an $8.7 billion deal. The company has more than $9 billion in emerging-market investments.

  • Investors dump Computer Warehouse Group over low yield

    Investors sent the bears after Computer Warehouse Group (CWG) yesterday as the information and communication technology (ICT) company announced a dividend recommendation of 8.0 kobo.

    CWG’s share price dropped by 4.96 per cent at the Nigerian Stock Exchange (NSE) as the news on the dividend recommendation filtered to the investing public. CWG lost 29 kobo to close at N5.56 per share. The overall market position had indicated a bullish market situation with average return of 0.35 per cent.

    Market analysts said the negative response to CWG’s dividend recommendation was due to the low return on investment, considering the listing and current market value of the stock. At today’s opening price of N5.56 per share, the dividend recommendation of 8.0 kobo represents a dividend yield of 1.43 per cent, a yield that is significantly lower than returns by other stocks with similar price range. Skye Bank and Sterling Bank, which trade at lower prices, carry dividend yields of between seven and nine per cent.

    An analyst noted that even if CWG had distributed its entire earnings per share of 24 kobo, it would still not compare favourably to other active stocks within the price range. At current market price, CWG’s earnings per share indicates earnings yield of 4.3 per cent.

    Meanwhile, audited report and accounts of CWG for the year ended December 31, 2013 showed that turnover rose from N18.76 billion in 2012 to N20.67 billion in 2013. Gross profit increased from N3.75 billion to N3.91 billion. Profit before tax rose to N618.46 million as against N339.23 million while profit after tax increased from N339.23 million to N612.85 million.

    CWG had late last year listed its entire share capital of 2.5 billion ordinary shares on the NSE. CWG was incorporated in February 2005 as a holding company for CWL Systems Limited, DCC Networks Limited and ExpertEdge Software Limited.

  • West African capital markets adopt integration protocols

    National authorities, capital market regulators and stock exchanges in the West African region have approved the guidelines, processes and procedures for the first phase of the integration of the region’s capital markets.

    The adoption of many resolutions on the capital market integration paved ways for the take-off of the first phase of the integration. At the 4th ordinary meeting of the West African Capital Markets Integration Council (WACMIC) in Abidjan, Cote D’Ivoire, chief executives of capital market regulators and stock exchanges in Nigeria, Ghana, Sierra Leone, Benin, Burkina Faso, Cote d’Ivoire, Guinea, Mali, Niger, Senegal and Togo agreed on the framework for the first phase of the capital market integration. Also at the meeting were the central banks of Guinea and Liberia, ECOWAS Commission and West African Monetary Institute (WAMI).

    The meeting reviewed the recommendations that would enable dealing firms in member states to trade securities and settle in markets other than theirs through local dealing firms in those markets by means of Sponsored Access.

    Members subsequently passed a resolution for the adoption of the sponsored access framework and related agreements to be approved by all member regulators, signaling the commencement of the integration of capital markets in West Africa.

    The sponsored access phase is the first phase of the region’s capital market integration and it is expected to take off in April, this year. Under this phase, brokers within the member countries can trade securities and settle in markets other than theirs, through local brokers in the other member jurisdictions. The interrelationship between the brokers will be guided by memoranda of understanding (MOU), which is duly recognised by each regulator in each WACMI member jurisdiction.

    All national authorities and stock exchanges at the meeting also agreed to ensure that the appropriate processes and systems are put in place in the respective jurisdictions to facilitate the implementation of the sponsored access, thus enabling jurisdictions to launch as they complete their processes and obtain all the requisite approvals.

    The meeting also agreed on the guidelines and procedures for approving applications under the sponsored access framework.

    Besides, the meeting deliberated on the importance of harmonised listing requirements and minimum standards of corporate governance within the region to facilitate the second and third phases of the integration.

    In a communiqué issued after the meeting, members recognized the importance of not only harmonizing minimum listing requirements to ensure that they are at par with international best practices, but also aligning corporate governance standards of listed entities with the Organisation for Economic Cooperation and Development (OECD) principles. To this end, jurisdictions will set minimum requirements which will be enforceable by the regulators.

    The meeting also adopted the guidelines for the issuance of common passports for capital market operators to trade across the region while urging countries without training and certification institutes to immediately come up with some form of acceptable regime for qualifying and admitting brokers in the short term with a view to developing a curriculum for training their operators.

    The “Common passport” is the legal and regulatory framework approved and adopted by WACMIC to allow capital market operators to operate outside their jurisdictions. A “Common Passport” empowers market regulators to mutually recognise an operator registered outside their market and extend them the same rights, privileges and obligations as one of their own.

    The meeting also the need to have a body responsible for ensuring that all training and certifying institutes within the region maintain a harmonized curricula and standardized examination.

  • Analysts say Seplat’s $500m IPO expensive, risky

    Analysts at Morgan Capital Group have expressed concerns over what they described as possible risks and overvaluation of the $500 million initial public offering (IPO) of SEPLAT Petroleum Development Company Plc.

    An equity research made available by Morgan Capital at the weekend indicated that Seplat’s IPO pricing range might be overvalued by more than 200 per cent and there are many inherent risks. The report however noted that Seplat is a good company.

    SEPLAT had commenced the book building for its IPO with indicative price range of N535 and N700. However, the final price will be determined by the bid prices. The minimum order for individual investors is set at 25,000 shares, implying minimum investment of N13.375 million and N17.500 million at the indicative price range of N535 and N700. Also, the minimum order for institutional investors is set at 85,000 shares, which implies minimum application size of N45.475 million and N59.50 million at the bottom and ceiling prices.

    The initial offer size is expected to raise gross proceeds of approximately $500 million, equivalent to £300.9 million and N82.5 billion. SEPLAT plans to list its ordinary shares on the London Stock Exchange (LSE) and Nigerian Stock Exchange (NSE) after the IPO. With this, and based on the mid-point of the price range, SEPLAT’s implied market capitalisation upon listing would be about £1,200.9 million, equivalent to $ 1,995.5 million and N329.5 billion.

    Morgan Capital stated that it undertook a fundamental valuation of SEPLAT and got a target price of N173.25, after the investment banking firm has factored tax and earnings risks.

    According to the report, while SEPLAT made 65 per cent tax provision in 2011 and 63 per cent tax provision in 2012, it reported a tax credit of $93 million in 2013. The exclusion of tax provision consequently boosted the profit recorded in 2013.

    SEPLAT in the prospectus indicated that with effect from January 1, 2013, the company was granted the pioneer tax status incentive by the Nigerian Investment Promotion Commission (NIPC) for a five-year period. For the period the incentive applies, the company is exempt from petroleum profits tax on crude oil profits, corporate income tax on natural gas profits and education tax of two per cent.

    “We do not see the justification for the NIPC to grant pioneer tax status incentive to SEPLAT for acquiring already existing assets that the previous owners were already paying the Petroleum Profit Tax (PPT) on, before the sale to Seplat, except there is a newly developed ingenious technology for mining crude oil that is yet to be disclosed to the public,” Morgan Group stated.

    Analysts noted that if NIPC sets this precedence, it will give rise to similar claims from other companies who have acquired similar assets and the already fast depleting Federation account will bear the brunt of the largesse. The list of potential litigants includes other upstream players who will see this as unfair advantage and even state governments whose allocation will suffer as a result of this leakage.

    The report underlined a caveat in the IPO Prospectus which notes that “there can be no assurances that current or future governments will not revoke these tax incentives prior to the end of the five-year period or seek to recover taxes waived under the scheme from the company and or Newton Energy in the future”.

    Morgan Capital also cautioned that there is a strong likelihood for potential litigation, considering that SEPLAT was granted a tax waiver which puts them at an advantage among their peers citing the 400 per cent increase in profit after tax rise in 2013.

    According to the report, the likelihood that other players who have invested in assets similar to that of SEPLAT and even stakeholders, like state governments whose allocations are dwindling and Nigerian citizens, may contest this waiver is very high.

    Analysts said any litigation or possible revocation of the waiver will lead to massive sell down on the shares as most investors will seek to exit their positions even before any ruling is made.

    The equity report also noted that while the absence of cash flow and profit forecasts in the SEPLAT prospectus may be within the ambit of waivers by the Securities and Exchange Commission (SEC) and NSE, it may diminish the ability of analysts to project future earnings of the company.

    “We have placed a sell rating on the shares of SEPLAT because we consider it over priced, given the inherent tax waiver issue and the uncertainty of the cash flow. We think this is a play on tax which may not be sustainable, since government can always revoke and or recover any previously waived taxes, even as already disclosed in the Prospectus. We however see SEPLAT as a good company and a fair price of N173.25 is in our opinion, achievable on the floor of the NSE in the coming months,” Morgan Capital added.

  • FBN Holdings, others seal $170m financing deal for gas assets

    CBN Holdings and Ecobank Nigeria Limited have provided $170 million to Seven Energy International Limited towards the energy group’s acquisition of the gas assets and entire issued share capital of the East Horizon Gas Company (EHGC) Limited.

    The multi-party financing deal will provide Seven Energy’s wholly-owned subsidiary-Accugas Limited, with part of the funds to complete its $250 million acquisition of the entire issued share capital of the East Horizon Gas Company.

    FBN Holdings participated in the financing deal through its subsidiaries-FBN Bank (UK) Limited and FBN Capital Limited. The $170 million medium-term acquisition finance facility were being financed by FBN Bank (UK) Limited and Ecobank Nigeria Limited.

    FBN Capital Limited acted as structuring bank, sole initial mandated lead arranger, financial modelling bank and global facility coordinator. Aluko& Oyebode acted as lenders legal counsel, Royal HaskoningDHV Nederland BV represented the lenders on environmental and technical due diligence matters while UUBO and Addleshaw Goddard acted as the borrower’s local and international legal counsels respectively.

    EHGC was established by Oando Plc with the intention of constructing and operating an 18-inch, 128 km gas pipeline that connects with the Obigbo-Alscon pipeline at Ukanafun to supply gas to an industrial offtaker located in Mfamosing, Cross River State, and to meet the needs of other industrial users in the Calabar region.

    Seven Energy stated that its acquisition of EHGC is in line with its strategic plans to expand its gas infrastructure assets in the south east Niger Delta. Through its assets and subsidiary, Accugas, Seven Energy has a number of infrastructure projects in the region, including a gas processing facility at the Uquo Field and a gas pipeline network, which will have the capability to supply gas in the Port Harcourt, Aba and Calabar areas.

    Managing director, FBN Capital Limited, Kayode Akinkugbe, said the deal demonstrated FBN Holdings commitment to financing growth and development of the Nigerian oil and gas sector.

    “FBN Holdings Group feels a strong sense of responsibility towards fostering growth in the power; gas pipeline and oil and gas sectors and we will continue to deploy our extensive debt arranging experience and structuring expertise in executing robust transactions in record time,” Akinkugbe said.

    Director and Head Debt Solutions, FBN Capital Limited, Patrick Mgbenwelu, added that FBN Capital remained committed to further strengthening and supporting Seven Energy in realising its various financing goals and objectives.

    Commenting on the transaction, Chief Executive Officer, Seven Energy International Limited, Phillip Ihenacho, said the financing deal was a landmark transaction as it will enable the company to expand its midstream operations in Nigeria.

    “It is a perfect fit to our strategy of investing in core midstream infrastructure assets in the south east region of the country. I would also like to thank the entire team for their achievement in bringing this important financing transaction to a close,” Ihenacho said.

    According to the him, in consolidating the gas infrastructure assets of Accugas and EHGC, Accugas aims to strengthen its distribution platform, increase efficiency and broaden its geographical reach, furthering Seven Energy’s intention to create a leading gas distribution business in Nigeria.

    Chief Financial Officer, Seven Energy International, Bruce Burrows commended the lenders-FBN Bank (UK) Limited and Ecobank Nigeria Limited, for their support and dedication to ensure that the completion of the EHGC acquisition process was in line with the sponsors’ timetable.

    He also noted FBN Capital’s role, particularly in working closely with Seven Energy, the lenders and the various independent consultants in concluding the transaction.

  • ‘Declining external reserves, tight liquidity’ll moderate equities’ returns’

    As Nigerian stock market moves to close the first quarter on the negative, leading investment banker and Managing Director, Cowry Asset Management Limited, Mr. Jonson Chukwu has said the Nigerian market would remain susceptible to the downtrend given the macroeconomic and monetary conditions.

    He said the continuing decline in Nigeria’s foreign reserves, the continuous monetary tightening view of the Central Bank of Nigeria (CBN), high cost of funds and the intense political environment would impact negatively on the performance of the equities’ market.

    In a lecture a lecture titled: ‘Investment instruments in Nigerian capital market: Risks and benefits’ delivered at a forum organised by Capital Market Correspondents Association of Nigeria (CAMCAN) in Lagos, Chukwu said the market’s outlook has been cautious because of the macroeconomic, monetary and political conditions.

    According to him, the stock market, which currently has a negative year-to-date return of 7.6 per cent, is facing both internal and external constraints especially with the beginning of the United States (US) tapering.

    He pointed out that external reserves remains a cardinal barometer for assessing the financial risk of an economy and it is a major gauge for foreign portfolio investors in either the equities sector or in the debt instruments.

    “The Nigerian external reserves currently stands at $38.07 billion from a high of $48.86 billion on the 2nd of May 2013. This represents a $10.79 billion or 22 per cent decline in 11 months. Some of the responsible factors include continued Naira defence, lackluster crude oil prices, decline in crude oil production and panic withdrawals by foreign portfolio investors,” Chukwu said.

    He noted that the CBN’s increase in deposit money banks’ Cash Reserve Requirement (CRR) on public funds has obviously curtailed banks’ investment potentials and ultimately their earnings capacity adding that the increase has triggered a cautious outlook on the banks’ equities.

    According to him, with leaner cash for lending, banks’ lending rates remains high at about 26 per cent which was a disincentive to real sector borrowing while non-bank companies have continued to face challenges as business activities are scuttled by non availability of funds.

    He noted that election fever has also increased uncertainty on equity investment.

    “The Nigerian political terrain has been intertwined with high powered rancor particularly between ruling People Democratic Party and the All Progressive Congress. The need for fund for political campaigns and the fear of post election crises mount a divestment pressure on some investors,” Chukwu said.

    He however noted that the Nigerian capital market remains attractive as one of the most robust emerging markets.

    “The Nigerian capital market as one of the emerging and frontier markets presents a lot of investment opportunities for discerning investors,” Chukwu said.