Category: Equities

Managing Director and Head of Strategy, EFG Hermes, Mr Simon Kitchen has called for major policy shifts was to further catalyse the development of the Nigerian stock market. 

He said that in order to improve the global attractiveness of the Nigerian stocks, there must be changes to some fiscal and monetary policies.

According to him, these changes include adoption of a unified exchange rate as well as increased credibility of fiscal and monetary policies. 

Reviewing the stock market, Kitchen advised investors to shop for dividend yields in bluechip stocks that offered strong dividend growth.

Kitchen spoke at a virtual event to review and preview the stock market. The event was organised by Nigerian Exchange (NGX) in collaboration with EFG Hermes.

A review of the market showed that growth stocks rose 41.63 per cent in 2022 to emerge as the best performing index on the NGX. 

Following the NGX Growth Board Index, the NGX Oil and Gas Index rose by 34.05 per cent, driven by sustained high oil prices and demand in the downstream oil sector boosting corporate earnings. The NGX Main Board Index placed third with a 33.18 per cent increase buoyed by the listing of BUA Foods Plc and the pioneer power sector listing of Geregu Power Plc which both added over N1 trillion in market capitalisation to the Exchange.

Chief Executive Officer, Nigerian Exchange (NGX), Mr Temi Popoola said the stock market performance was driven by improved domestic  investor sentiment and strong corporate earnings.

According  to him, total turnover of trades in 2022 improved by 27 per cent from N916 billion in 2021 to N1.16 trillion in 2022, with market participation heavily skewed to the domestic investors. 

He pointed out that along with other factors, 2022 performance signalled a good year for the Exchange despite global macroeconomic headwinds.

He noted that in the area of strategic partnerships, the NGX would be forging more with development finance institutions, banks, both local and international to further develop the market. 

“We aim to do more on trading where we improve data dissemination to attract a larger investor base, especially from the retail side. We will be using listings as a vehicle for meeting strategic aspirations as the new dispensation comes in through increased advocacy and engagements.” Popoola said.

He added that the Exchange would be increasingly focused on sustainability. 

“NGX sees sustainability as not just important but also a profitable frontier of its business and work is ongoing on developing a framework for certifications in carbon credits trading, pending regulatory approval,” Popoola said.

Contrary to projections in many quarters, Nigeria’s economic performance will likely improve this year with improved government revenue and major reforms heralding economic stability and growth.

This was the conclusion of leading stockbrokers who yesterday in Lagos x-rayed Nigerian economy, the state of the capital market last year and outlook in the year.

 They agreed that despite the headwinds and uncertainties associated with the economy, they said the overall outlook for the Nigerian economy and the capital market remains positive.

They however called on the incoming government to undertake bold reforms and further consolidate fiscal and monetary policies in order to address structural inefficiencies in the economy and free up synergistic growth.

They noted that the Nigerian economy is going through a tough period with headwinds, including imported inflation, huge debt service-to-revenue ratio, high exchanges rates, forex scarcity, devaluation of currency, budget deficit of N12 trillion in 2023, removal of fuel subsidy on petroleum price, insecurity  and uncertainty about the outcome of the upcoming presidential election, among others.

They spoke during the conversation organised by Chartered Institute of Stockbrokers (CIS) on “The Nigerian Economic Review of 2022 and Outlook for 2023”.

The experts assured the public that the economy had strong potential to bounce back this year.

President, Association of Capital Market Academics, Prof. Uche Uwaleke, said contrary to projections in several quarters, government’s fiscal position is likely to improve in the year because of improvement in crude oil revenue from increase in crude oil production, assuming crude oil price does not disappoint and incidence of oil theft continues to go down.

“Savings from fuel subsidy removal will increase  in government revenue. Implementation  of Finance Act 2022  and  unification of exchange rates will boost economic growth and development ,”  Uwaleke said.

Chairman, Research and Technical of CIS, Mr Ayodeji Ebo said that expected higher crude oil would increase government revenue in the year.

“Goods account balance is expected to recover in 2022 due to higher crude oil prices. In 2023, the goods account is expected to benefit from reduced forex  outflow on petroleum motor spirit ( PMS importation, following the coming onstream of Dangote Refinery and promotion of non-oil export.

“Increase spread of working-class Nigerians in the diaspora is expected to continue supporting the strong performance of the transfers account, especially, the remittance component. Political stability post-2022 and more market-oriented policies of the new administration are expected to drive a steady recovery in portfolio inflows over the medium term. An optimal growth rate for Nigeria is between 5.0 per cent and 7.0 per cent per annum,”   Ebo said.

President, Chartered Institute of Stockbrokers (CIS)  Mr Oluwole Adeosun, explained that the Nigerian economy would experience growth during the year.

He listed many achievements of the Institute in the review period and stated that the institute shall pursue its advocacy roles with renewed vigour

“In 2023, we shall be working to increase the number of Nigerian universities offering Post-Graduate and Bachelor’s degree courses in securities and investment and  capital market studies. We shall be pursuing more vigorously, activities to promote capital market literacy across the entire geo-political zones of Nigeria.

“In  furtherance of our ‘Catch Them Young campaign’, we shall make deliberate efforts to penetrate the university campuses more rigorously and effectively. The CIS Academy will work even harder to bring affordable world class training to our members, in emerging areas like derivatives, etc,” Adeosun said.

Nigerian equities were bullish yesterday as the Central Bank of Nigeria (CBN) began a two-day meeting to review economic outlook and appropriate monetary stance.

Benchmark index at the Nigerian Exchange (NGX) indicated average return of 0.12 per cent, equivalent to net capital gain of N34 billion.

The Monetary Policy Committee (MPC) of the CBN yesterday started a two-day meeting during which it will decide to reduce, increase or leave the benchmark interest rate, the Monetary Policy Rate (MPR) unchanged. Nearly all analysts agreed the choice before the apex bank is to either hold or increase rate, with most analysts tilting towards a rate hike.

The All Share Index (ASI)- the common, value-based index that tracks all share prices at the Exchange, rose by 63.01 points or 0.12 per cent to close at 52,657.69 points as against its opening index of 52,594.68 points.

Aggregate market value of all quoted equities rose from its opening value of N28.647 trillion to close at at N28.681 trillion.

With 18 gainers to 13 losers, th positive overall market position was driven largely by widespread positive sentiment across the sectors.

John Holt recorded the highest price gain of 9.38 per cent to close at N1.05 per share. Secure Electronic Technology followed with a gain 9.09 per cent to close at 24 kobo. Chams rose by 7.69 per cent to close at 28 kobo per share. Geregu Power went up by 6.92 per cent to close at N148.40  while Associated Bus Company rallied 6.90 per cent to close at 31 kobo per share.

On the negative side, Cornerstone Insurance led the losers with a drop of 10 per cent to close at 54 kobo per share. Computer Warehouse Group (CWG) followed with a decline of 9.62 per cent to close at 94 kobo. Japaul Gold & Ventures declined by 6.67 per cent to close at 28 kobo. Unity Bank declined by 5.17 per cent  to close at 55 kobo while Courteville Business Solutions dipped by 4.00 per cent to close at 48 kobo  per share.

The momentum of activities however slowed down with turnover dropping 67.61 per cent to 143.736 million shares valued at N1.776 billion in 4,078 deals.  FBN Holdings (FBNH)  topped the activity chart with 19.656 million shares valued at N229.718 million. Chams followed with 11.218 million shares worth N3.11 million. Guaranty Trust Holding Company (GTCO) traded 10.990 million shares valued at N264.993 million. Transnational Corporation of Nigeria (Transcorp) traded 10.574 million shares valued at N12.814 million while Sterling Bank transacted 10.201 million shares worth N15.933 million.

Analysts at United Capital Plc said the equities market appeared to be heading towards a breather and thus there could be more profit-taking transactions in the sessions ahead.

“Nevertheless, we view this as an opportunity to buy attractive stocks on dips as we retain the view that depressed interest rate levels will sustain the fuel for an equity market uptrend in first quarter, 2023” United capital stated.

Nigeria’s premier and largest non-interest bank, Jaiz Bank Plc has projected gross earnings of N9.78 billion for the first three months of this year.

In its latest forecast, the management of the bank indicated that the bank would sustain impressive profit margins while driving top-line performance.

The three-month forecast for the period ending March 31, 2023 estimated that pre and post tax profits would be N1.40 billion and N1.26 billion respectively. This implies a pre-tax profit margin of 14.3 per cent and net profit margin of 12.9 per cent, within the top-bracket of the industry margins.

The forecast came as the board of directors of the bank prepares to release the full-year earnings report for the 2023 business year.

Interim report for the third quarter 2022 had shown that the bank sustained double-digit growths across key performance indicators with total assets of the leading alternative finance institution rising to N325.06 billion.

Key extracts of the interim report and accounts of Jaiz Bank for the nine-month period ended September 30, 2022 had shown that the bank’s total income rose by 23 per cent from N13.03 billion in third quarter 2021 to N16.03 billion in third quarter 2022. With the inflationary trend, total expenses increased from N9.76 billion to N12.12 billion.

Profit before tax thus rose by 19.6 per cent from N3.27 billion in third quarter 2021 to N3.91 billion in third quarter 2022. After taxes, net profit grew by 14.4 per cent to N3.33 billion in third quarter 2022 as against N2.91 billion in comparable period of 2021.

The balance sheet of the non-interest bank also emerged stronger with appreciable growths in customers’ deposits. Total assets rose by 16.4 per cent to N325.06 billion by September 2022 as against N279.28 billion recorded at the end of the year ended December 31, 2021. Customers’ deposits rose from N111.56 billion in December 2021 to N118.11 billion in September 2022.

Managing Director, Jaiz Bank Plc, Dr. Sirajo Salisu, has assured that the bank would build on its enviable pedigree as it seeks to consolidate its leadership in the non-interest financial services industry.

Salisu, who took over in a seamless transition from Mr. Hassan Usman, whose tenure ended after retirement on October 15, last year, said the growth trajectory of the bank would remain upward.

 “As we look ahead into the next phase of our bank, we will continually show our best, and meet the challenges of our world so that we can build a future in which we thrive together,” Salisu said.

Salisu, a former executive director at the bank, assured all stakeholders of his commitment to building on the achievements of the bank over the past 10 years.

Jaiz Bank has already secured shareholders’ approvals to raise not less than N150 billion in new capital through Sukuk issuance and to implement a holding company structure that will see the bank engaging in other ancillary financial services.

Jaiz Bank’s planned N150 billion Sukuk will be the largest non-interest bond issuance in the Nigerian capital market.

Shareholders have also mandated the board of directors to take all necessary steps and transactions that would enable the bank to achieve its short to long-term growth objectives as well as greater competitiveness. These steps and transactions may include acquisitions, new investments, restructuring; expansion, capital raising and other business arrangements that enhance the bank’s growth trajectory.

Nigerian Exchange Limited (NGX) has partnered with the International Finance Corporation (IFC) to conduct research on gender-based violence and harassment (GBVH) in Nigerian workplaces.

The study is being conducted as part of the Nigeria2Equal initiative, which aims to address GBVH in the private sector and provide evidence-based recommendations for prevention.

The research will focus on several key areas, including the development of a business case for creating respectful workplaces, the estimation of the cost of GBVH to participating businesses in Nigeria, and an understanding of employee perceptions and experiences of the current level of GBVH. It will also identify best practices offered by businesses, government bodies, and the community, as well as inform the design of GBVH policy and training for Nigerian companies, based on existing IFC respectful workplace tools.

“We are committed to fostering a culture of respect and inclusion in the workplace and are honored to be part of this important initiative,” said Irene Robinson-Ayanwale, Divisional Head of Business Support Services and General Counsel at NGX. “Through this study, we will gain valuable insights into the causes and effects of GBVH, as well as the best practices for preventing it. We are confident that the findings will help us, and other organizations in the private sector, to create safer and more equitable workplaces for all.”

The research is also expected to inform the adoption and eventual implementation of the International Labour Organization (ILO) Convention 190 on how to address GBVH in the world of work, and provide recommendations for the private sector and relevant ecosystem stakeholders on how to address GBVH in the world of work. NGX has called on other organizations to join the research and actively participate in creating respectful workplaces. With the rising awareness of the issue of GBVH in the workplace, this research is expected to play a crucial role in developing solutions and best practices for addressing it in Nigeria.

The Central Bank of Nigeria (CBN) has awarded a Payments Service Holding Company License (PSHC) to Chams Holdings Plc.

The apex bank premised the license on the  major payment licenses within the company.

Group Managing Director (GMD), Chams Holdings Plc,  Mayowa Olaniyan stated that Chams HoldCo was granted the PSHC license on Friday, January 13th, 2023 by CBN and also renewed both Switching, and Mobile Money Operators (MMO) licenses for the subsidiaries.

According to her, the need for the PSHC license is to establish a business institution that will further increase the pivotal role of the company in the payment industry across Africa and ensure global relevance.

“Chams HoldCo has a primal focus of growing its consumer and digital payments solution as it expands other potential and current investments in the digital space.

“We have significantly improved the value of our assets at Chams HoldCo. Chamsswitch Limited, for example, has partnered with 3 major card schemes for card processing and has implemented two robust B2B products called Kardit and PelPay. This has tremendously increased its transactional payment volumes. Similarly, Chamsmobile Limited is one of the foremost MMOs in Nigeria, operating under the brand name Kegow,” Olaniyan said.

She reiterated Chams HoldCo’s efforts towards improving performance and increasing value for her investors.

She also hinted that other subsidiaries such as Card Centre Nigeria Limited (CCNL), has expanded its business and secured a major partnership deal which has led to the acquisition of substantial SIM card production businesses. Chamsaccess Limited has also been making tremendous waves as a major supplier of instant card issuance machines to the banks, and driving the development of new digital solutions, particularly under Argone and Pension Central brands.

“We are very grateful to the Central Bank of Nigeria for certifying and granting Chams such a prestigious payments license. I want to reaffirm our commitment towards continuously driving innovative FinTech solutions into the market, both in Nigeria and beyond, whilst increasing value for all our stakeholders,” Olaniyan said.

•’Buy more shares than fixed incomes’

Major companies across the key sectors of the Nigerian economy will sustain steady growths in 2023 and resultant results will drive the equities market to its fourth consecutive positive return.

Arthur Steven Asset Management (ASAM) Limited, a leading investment banking group, in its economic and financial market review and outlook, said equities remained the favoured portfolio in terms of returns given the prevailing global and national macroeconomic environments.

The report noted that the direction of macroeconomic variable will pay a crucial role in shaping the equities market and most of these tilted towards continuing positive run at the equities market.

Analysts at ASAM stated that they expected inflation to be on the uptick into the first quarter of 2023, with the Central Bank of Nigeria on the offensive against inflation.

They added that the unprecedent positive close by equities in 2022, which defied its historic pre-election cycle performance, would attract foreign portfolio investment.

The report projected that Nigeria’s GDP growth rate will slow down but remain positive.

“Considering our expectations about the economy, the equities market is expected to maintain positive outlook in 2023. Alhough the CBN is poised to maintain its aggressive policies against inflation, lessons learnt in 2022 show that investors are most likely to remain in the equities market given the yearnings for positive real returns which can only be delivered by the equities market, given the inflation rate at a staggering 17 year high of 21.47 per cent as at November 2022.

“On performance expectations, firms into services will perform better than those into manufacturing as they have been faced with cost problem fueled by rising input prices. In general, we expect firms in the banking, telecoms and crop production sub-sectors to perform well as input cost will have little effect on their profitability.

“Furthermore, although industrial product is

consumer discretionary which often don’t do well in a high inflationary environment, the

capital expenditure of N5.35 trillion for 2023 will impact the profitability of the sector, more still, the N819.54 billion recently approve in December 2022 by the Senate will also impact the sector’s profitability.

“In addition, the increase in Nigeria oil production and the forecast that oil will

remain above $90/barrel in 2023 will have a positive impact on the revenue of exploration and production companies,” ASAM stated.

 Analysts noted the negative impact of the Russian-Ukraine war on growth globally, with high likelihood of the war being prolonged,  thus expectations  that growth will slow down in 2023.

According to analysts, although the Nigerian economy experienced sustained growth despite the rise in inflation, hike in interest rate and foreign exchange volatility, growth is already slowing down with the manufacturing sector experiencing negative growth already, thus growth will more likely slow down in 2023.

“In 2022, the fixed income market reacted positively to the interest hike. However as inflation remained on the uptick, positive real returns which the equities market could deliver became a priority for investors which caused yields to fall. With our expectations for an uptick in inflation we see investors underweighting fixed income securities in 2023,” the report stated.

•Advocates more support for Fintech companies

Wema Bank’s share price rose by 441.7 per cent in 2022.

A report by Nairametrics indicated that Wema Bank’s share price appreciated by 441.7 per cent. This helped it to close the 2022 year at N3.99, from the 72 kobp recorded at the end of 2021. The bank recorded 51 per cent increase in gross earnings in the first nine months of 2022 and a 31 per cent increase in post-tax profit. Investors rallied around the bank’s stocks despite a general downturn in most banking stocks during the year.

Similarly, Wema Bank declared a final dividend of 24 kobo per ordinary share to its shareholders in 2021.

This fuels speculation that increased profitability in 2022 could suggest a better dividend payout to shareholders. The Nigerian equity market rallied by 19.98 per cent in 2022, higher than the 6.07 per cent recorded in the previous year.

After many years of dividend freezes, the bank has resumed dividend payments to shareholders in the last three years. Wema has modernized its processes and has increasingly leveraged digital technologies to serve its customers, boosting efficiency and productivity in the process.

Additionally, the bank enjoyed a profitable year in terms of its financial performance and equity performance. Nairametrics ranked the bank as the best-performing commercial bank in the first half of 2022 based on metrics from its financial statements. Wema Bank also won the “Highest Dividend Yield” award at the Pearl Awards in 2022.

Meanwhile, Wema Bank Plc has called for more support for Fintech companies so Nigeria, like her peers, could optimally benefit from the possibilities that the Fintech industry offers. The bank made this call at The Fintech Summit (TFS) 2022 by Techpoint, which recently held in Lagos.

Speaking at the summit,  the bank’s Head of Data and Analytics, Olamide Jolaoso, said that the country needs many Fintech companies to come on board to meet the wide spectrum of Nigerians’ Fintech needs.

“Some people are of the view that there are already too many Fintech companies, especially start-ups in Nigeria, but I do not agree with them. We have a population of over 200 million people with varying financial needs and appetites that are yet to be satisfied by the existing Fintech service providers. We need more Fintech companies that solve many specific problems and not just a group of Fintech companies who are doing the same few things as we currently have,” he said.

He mentioned that Wema Bank has established itself as a dominant player in the Fintech space through the creation of ALAT, which has provided a platform for other Fintech companies to operate.

“Wema Bank created ALAT, the first fully digital bank in Nigeria, and on whose platform many Fintech companies run their operations. As an important player in that ecosystem, we see the need to grow the industry and create more opportunities for the upcoming players.”

He informed that ALAT By Wema, a branchless and paperless bank, was created to drive transformation and redefine experiential banking in Nigeria’s banking sector.

“The platform has eliminated the stress of having to walk into a branch that prospective customers face anytime they want to open an account. ALAT by Wema offers them a seamless sign-up process using a mobile phone, PC or tablet. Since the release of this award-winning app, the bank’s customers, who have come on board the app, have been full of excitement as it helps them save more.”

Jolaoso noted that Fintech companies are already the core fabric of our daily lives, creating apps that help millions of Nigerians to save, transact, invest and do an insurance. He also made a case for more measured investments in the Fintech industry for the growth and sustainability of the sector.

The provisions of the Investments and Securities Bill recently passed by the House of Representatives is expected to inspire confidence in both local and foreign investors as they can be assured that the regulators have been sufficiently empowered to deal with malpractices that undermine confidence in the market.

 Chairman, House of Representatives Committee on Capital Markets and Institutions Hon. Babangida Ibrahim during said that foreign investors and market participants will also be attracted to the Nigerian market because they will have comfort in the fact that the Bill seeks to mirror standard investor-protective provisions and practices in advanced jurisdictions, which the foreign participants are already familiar with.

On the reason for the new Bill, the Lawmaker stated that the current enabling law for the Nigerian capital market, the Investments and Securities Act, No. 29 of 2007 (“ISA”) was signed into law by late President Umar Musa Yar’adua in June 2007 (15 and half years ago) before the global financial crisis of 2008/2009.

Global financial regulators he said, have made major changes in their regulatory instruments following the crisis to address some of the obvious gaps that contributed to the global economic disruption of the time, adding that such global shifts and other current trends in capital markets regulation have made it imperative to make major improvements to the Act to align our market with international standards.

According to him the Bill seeks to repeal the ISA and introduced new provisions that empowers the SEC to collaborate with other regulatory bodies in the financial sector to manage and mitigate systemic risks as it confers new investigative and enforcement powers on the apex regulator, SEC, to effectively regulate the Nigerian capital market. It introduces the framework for regulation of new products including financial and commodities derivatives and financial market infrastructures, which are expected to lead to increased activities, and thus, deepen the Nigerian capital market.

“The Bill introduces stiffer sanctions in the form of increased fines and jail terms, which are commensurate with the severity of offences, and also serve as deterrence to potential future offenders. For instance, a jail term of not less than 10 years has been provided to address the menace of Ponzi schemes and illegal investment schemes that have caused heartache for thousands of Nigerians who have been victims of such scams. Other offences such as market manipulation, insider trading, false statements in prospectuses etc. are also subject to severe punishment. 

“The Bill will ensure the diversification of the Nigerian economy away from a mono product oil economy through the strengthening of the Nigerian commodities ecosystem with the trading of warehouse receipts and commodities contracts on the Commodities Exchanges.

“The Bill also contains legal framework for registration and regulation of new types of critical market infrastructures such as central counterparties, which will be responsible for managing the risks emanating from transactions in derivatives and other financial instruments, thereby ensuring the safety and integrity of our markets and boosting investors’ confidence” he stated.

The Lawmaker disclosed that Federal Government agencies, Subnational, Supranational will be able to better access the capital market for both revenue bonds and project tied bonds as the Bill now contains adequate provisions that enable both corporates and governments to issue new instruments to develop the infrastructural requirements of the country.

According to him, “The bill will generally revitalize the Nigerian capital market, as it introduces regulation of new businesses, products and services that will deepen the market while equipping the apex regulator with appropriate powers to protect the market and enforce the provisions of the Bill.

“In every sense of the word, this bill is truly a market inspired Bill. Inputs were received from all segments of the Nigerian capital market – the Securities Exchanges, Commodities Exchanges, the Central Counterparties, Capital Market Operators and Trade Associations, Chartered Institute of Stockbrokers, Capital Market Professionals such as the Legal Practitioners as well as Shareholders Associations”.