By Taofik Salako, Capital Market Editor

Nigerian capital market authorities have emphasised the need for capital market operators to embrace derivatives by adopting best practices in development and trading of derivative products.

At a workshop on the legal and regulatory requirements of derivatives trading for capital market operators yesterday in Lagos, capital market regulators said the development of the derivatives market would further expand the investment horizon at the Nigerian market.

The workshop, which held at the Nigerian Stock Exchange (NSE), was organised in collaboration with the Securities and Exchange Commission (SEC) to guide market participants to properly interpret the approved Exchange traded derivative rules and recently released SEC’s derivatives and clearing rules, as well as address concerns on the on-boarding process.

Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr. Oscar Onyema, said the introduction of Exchange- trade derivatives on the Nigerian market was aimed at broadening the options available to support efficient implementation of risk management and investment strategies across diverse asset classes and financial instruments.

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“We are working tirelessly to ensure that our Derivatives market remains aligned with International Organisation of Securities Commission (IOSCO) principles by facilitating access to recognised and licensed derivative products, world class market surveillance technology, effective trading rules as well as appropriate risk management and clearing facilities,” Onyema said.

Head of Department, Registration, Exchanges, Market Infrastructures and Innovation, Securities and Exchange Commission (SEC), Mr. Emomotimi Agama noted that the NSE and SEC have provided the platform and requisite rules to guide activities in the derivatives market.

“It is, therefore, the responsibility of capital market operators to work with us to galvanise activities within this market segment.

Furthermore, interested dealing members or clearing houses must build strong capacity to deliver on investor education, proper legal frameworks, effective risk management procedures, and advanced reporting standards to engage in Derivatives Trading for the safety & security of investors,” Agama said.

In providing guidance on the legal framework guiding derivatives trading, Mr. Michael Dugeri, Senior Associate at Austen Peters emphasized the importance of market integrity, financial integrity and investors’ protection.

As part of its commitment to building required infrastructures for derivatives market in Nigeria, the Exchange also announced a partnership with Central Securities Clearing System Plc (CSCS) to launch NG Clear, a world class central clearing counterparty (CCP) entity.

The establishment of this CCP entity meets EMIR standards in Nigeria and is in line with G20 program to reform global financial regulation.

By Taofik Salako, Capital Market Editor

RT Briscoe (Nigeria) Plc is finalising arrangements to raise new capital to pay its burgeoning debts and improve working capital as the automobile company struggles to stave off insolvency.

In a regulatory filing at the Nigerian Stock Exchange (NSE), the board of the company stated that it was finalising arrangements for an open-ended actively managed fund to raise funds from the capital market.

The net proceeds of the fund raising will be used to settle existing liabilities and increase working capital. The board believes that the new capital raising plan would lead to reduction and streamlining of the company’s current liabilities.

In the filing signed by Managing Director, RT Briscoe (Nigeria) Plc, the board noted that the new capital raising was also incidental to the recent appointment of a receiver for the company by the Asset Management Corporation of Nigeria (AMCON) to facilitate the repayment of some of the company’s bank debts.

According to the company, the receivership was designed to allow for unfettered business operations of the company under existing board and management, including the fulfilment of all pre-receivership contractual obligations.

The company assured all stakeholders that the current developments would not jeopardise the progress of the company as it continues to work for a brighter future.

RT Briscoe has struggled with declining sales, mounting debts, high finance costs and continuing negative bottom-line in recent years with external auditors expressing concerns over the going concern status and ability of the company to meet its continuous financial obligations.

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Auditors had warned there could be material uncertainty on the future survival of RT Briscoe as the company technically lacks the ability to meet emerging financial obligations and working capital and its continuing survival depends on its bankers.

Key extracts of the audited report and accounts of RT Briscoe for the year ended December 31, 2018 showed that the company  recorded a net loss of N2.29 billion in 2018 as against N3.16 billion in 2017.

Loss before tax also stood at N2.17 billion in 2018 compared with N3.14 billion. Gross profit had dropped from N971.46 million in 2017 to N1.46 billion in 2018. However, turnover rose from N4.38 billion in 2017 to N5.18 billion in 2018.

Incorporated in 1957 and listed on the Nigerian Stock Exchange in 1974, RT Briscoe (Nigeria) has evolved overtime from a truck-engine importer to become Nigeria’s most visible automobile company.

It had in recent years embarked on expansive diversification, which has seen addition of several emergent business lines to the dominant motors business.

RT Briscoe Group now consists of RT Briscoe, the automobile-dealing parent company; Briscoe Property Limited, its real estate subsidiary, Suites Resorts Limited, a leisure company that it acquired in 2012 and CAWS Technical Nigeria Limited, a wholly-owned subsidiary trading in industrial equipment.

RT Briscoe is owned by more than 43,000 Nigerian individual and institutional investors with only two major shareholders holding substantial shareholdings above five per cent.

By Taofik Salako, Capital Market Editor

The Nigerian stock market outlook remains cautious and investors should focus on accumulating quality stocks with potential to return good returns in the long-term.

Investment banking group, FSDH Merchant Bank Group, in its latest macroeconomic outlook released yesterday, advised investors to select stocks on the basis of attractive valuation, good fundamentals and potential for good return in the long-term.

Analysts at FSDH noted that while stocks are cheap at the Nigerian equities market, the short-term earnings outlook is poor while the financial markets remain volatile in the near term.

The report noted that the equity market could reap from the excess liquidity in the fixed income markets while stable oil price, improved economic growth figures could instill confidence in the market in 2020.

According to analysts, the significant drop in interest rates especially for short term securities could lead to some traction in the equity space. This factor will also limit foreign portfolio investments inflows (FPIs) in 2020 relative to 2019, although FPIs will continue to dominate total inflows relative to foreign direct investments (FDIs).

The report pointed several issues of ad-hoc and inconsistent policies, insecurity and poor infrastructure will limit the inflow of FDIs in 2020.

Analysts at FSDH predicted real GDP growth of 2.5 per cent, inflation rate of 11.9 per cent, average exchange rate of N370 per Dollar, average external reserves of $37 billion, Monetary Policy Rate of 14.0 per cent and private investment-GDP ratio of 25 per cent for 2020.

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“We expect external reserves to average $37 billion in the year. Slower FPI inflows would persist particularly in the early parts of the year, given the low interest rate environment. But, we believe that FPIs will continue to dominate total inflows in 2020,” FSDH stated.

Analysts at FSDH believed that the Central Bank of Nigeria (CBN) will continue to intervene in the foreign exchange market to ensure exchange rate stability, adding that with rising inflation and imminent inflation pressures following the land border closure and value added tax (VAT) increase, there may be a tight monetary environment in 2020.

According to analysts, to mop-up excess liquidity, the CBN and the Monetary Policy Committee (MPC) will adopt several monetary policy tools in 2020. In the first MPC meeting in January, the CBN increased CRR to 27.5 per cent, which is estimated to mop up an estimated N900 billion from the system.

The report indicated a positive outlook, in terms of finance for the real sector, noting that loan-to-deposit ratio and the open market operation policies of the CBN will result in increased lending to businesses and liquidity across markets in the year.

It added the implementation of the exemption of small businesses with turnover less than N25 million from companies income tax (CIT) by the new Finance Act will reduce burden on some small and medium enterprises while further stimulating their growth.

“Overall, the  underlying weak macroeconomic conditions will continue to cast a shadow on the performance of the financial markets and combined with policy uncertainty this is likely to feed into continued volatility,” FSDH stated.

By Taofik Salako, Capital Market Editor

Consolidated Hallmark Insurance Plc plans to raise about N1.06 billion in new equity funds from existing shareholders as the insurance company seeks to increase its minimum capital base ahead of regulatory deadline.

Regulatory filing obtained yesterday indicated that Consolidated Hallmark Insurance plans to raise new capital through a rights issue of 2.03 billion ordinary shares of 50 kobo each at 52 kobo per share.

As traditionally with rights issue, the new shares to be offered for sale will be pre-allotted to shareholders on the basis of one new ordinary share of 50 kobo each for every four ordinary shares of 50 kobo each held as at the close of business yesterday, Monday, February 03.

The board of the insurance company has already applied for regulatory approval for the rights issue, preparatory to the opening of application list for the new capital raising. The net proceeds of the N1.056 billion rights issue will be used to beef up the capital base of the insurance company.

The National Insurance Commission (NAICOM) had in May 2019 released new capital requirements for insurance businesses with a 13-month compliance period for operators to shore up their minimum capital base to the required level.

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The minimum paid-up share capital of a life insurance company was increased from N2 billion to N8 billion, non-life insurance from N3 billion to N10 billion, composite insurance from N5 billion to N18 billion while re-insurance companies were directed to raise their capital base from N10 billion to N20 billion.

Managing Director, Consolidated Hallmark Insurance Plc, Mr Eddie Efekoha had outlined that raising new equity funds from existing shareholders was part of efforts to meet the new minimum capital base for the company’s non-life general insurance business.

Efekoha noted that Consolidated Hallmark Insurance has about N6.1 billion capital base at its last audited account, falling short of the new minimum capital base of N10 billion by N3.9 billion.

According to him, the company’s first line of action is to float a rights issue, which will give existing shareholders opportunity to increase their shareholdings at a lower offer price than a public offer.

He noted that the additional capital will not only help the company to meet the new minimum capital base but it will also help to accelerate the company’s growth and further secure its leadership in the industry.

He added that the company might also consider undertaking a public offer, private placement and merger and acquisitions.

“Be rest assured that the management and board are working tirelessly to meet up with the recapitalisation directive,” Efekoha said.

By Taofik Salako Capital Market Editor

Infinity Trust Mortgage Bank (ITMB) Plc recorded considerable growths in the top-line and bottom-line in 2019 as net profit rose by 28 per cent to N419.7 million.

Key extracts of the unaudited financial statement for the period ended December 31, 2019 showed that gross earnings rose from N1.0 billion in 2018 to N1.38 billion in 2019. Net interest income had risen from N625 million to N886.8 million. Profit before tax increased from N366.76 million to N441.79 million.

After taxes, net profit rose from N327.2 million to N419.7 million. Earnings per share thus improved from 6.84 kobo in 2018 to 9.06 kobo in 2019. The board of the mortgage bank has not decided the dividend payable for the 2019 business year. ITMB had paid a dividend per share of 3.0 kobo for the 2018 business year.

Managing Director, Infinity Trust Mortgage Bank (ITMB) Plc, Dr. Olabanjo Obaleye, had during an interactive session at the Nigerian Stock Exchange (NSE) assured that the mortgage bank would continue to maintain profitability despite the harsh business environment.

He said the key drivers of the bank’s growth has been its strong brand presence, increased customer confidence, marketing efforts, strong risk management and expenditure control.

According to him, the bank has experienced unequivocal growth through the public and private housing initiatives supported with efficient risk management framework.

“The bank will also seek to continuously enhance earnings, profits, and returns to shareholders as well as pursue expansion and growth,” Obaleye said.

He said the bank has articulated and instituted liquidity and information technology contingency plans, capital management plans and dividend policies to guide against business disruptions and depletion of capital.

He enjoined the investing public to invest in the bank as it is set to redefine the face of mortgage banking in Nigeria.

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He noted that the bank has performed excellently since its listing on the stock exchange in 2013 as the bank has increased its number of shareholders, attained national primary mortgage bank status and opened its Lagos regional office.

“We have received strong industry and regulatory ratings, and many industry and international awards. The bank also added two independent directors and became shareholders with Nigeria Mortgage Refinance Company and Mortgage Warehouse Funding Limited. The bank has held its annual general meeting consistently,” Obaleye said.

According to him, during the period, ITMB has recorded reasonable growth in its key business fundamentals with total assets, loans and investments rising by 51 per cent, 285 per cent and 10,000 per cent respectively.

He pointed out that deposits and shareholders’ funds had grown by 122 per cent and 9.0 per cent respectively while gross earnings crossed the N1 billion mark in 2018.

He said the bank is constantly exploring ways to enhance its operations through digital initiatives while working to ensure that its non-performing loans remain below 5.0 per cent.

“We believe that we need to be technology-driven and that is why we are exploring available options by joining the NIBSS platform to improve customer service, drive revenue and promote corporate goodwill.

We have also implemented end-to-end monitoring in a bid to increase the number and quality of risk assets which will translate to higher earnings for the bank,” Obaleye said.

By Taofik Salako Capital Market Editor

Royal Exchange Plc recorded a net loss of N215.34 million in the immediate past business year as the insurance-led investment group struggled with continuing slowdown in general business performance.

At the end of its emergency board meeting, the board of directors of Royal Exchange approved the 12-month financial statement for the period ended December 31, 2019 showing declines in the top-line and the bottom-line.

Key extracts of the report showed that the top-line dropped from N15.86 billion in 2018 to N14.89 billion in 2019. As against pre-tax profit of N326.87 million in 2018, pre-tax loss stood at N158.22 million in 2019.

After taxes, net loss increased from N156.18 million to N215.34 million in 2019. Loss per share thus increased from 3 kobo in 2018 to 4 kobo in 2019.

The Nation had reported that the directors of the insurance-led investment group were having an emergency meeting on the accounts.

Under the rules at the Nigerian Stock Exchange (NSE), Royal Exchange is required to submit its audited financial statement and accounts, not later than 90 calendar days after the expiration of its business year.

The deadline for submission is thus March 30, 2020. The early submission of the accounts to the Exchange places Royal Exchange among the early filers, generally used by the NSE as an indication of good corporate governance.

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An investment fund set up by the German government recently acquired 39.25 per cent in Royal Exchange General Insurance Company (REGIC) Limited, a subsidiary of Royal Exchange.

The investment fund- InsuResilience Investment Fund (IIF) was set up for the German government by KfW and managed by Swiss-based Impact Investment Manager BlueOrchard Finance Limited.

The proceeds of the acquisition would help REGIC to spur growth by increasing its risk capital and supporting its underwriting capacity in agriculture, thus extending its outreach to low income farmers.

Based in Luxembourg, IIF was set up by KfW, the German Development Bank, on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ).

The objective of IIF is to contribute to adaptation to climate change by improving access to and the use of insurance in developing countries.

By Taofik Salako Capital Market Editor

Shareholders of Greif Nigeria Plc have approved the sale of the company’s major properties and delisting of the company from the Nigerian Stock Exchange (NSE).

At the extraordinary general meeting in Lagos, shareholders approved three resolutions empowering the board of directors of the company to sell major real estate assets and delist its shares from the NSE.

Shareholders mandated the board to sell the company’s land and buildings known and designated as “the Factory at No.1 Alapata Road, Apapa, Lagos and the two Residential Houses as No. 3/5 Barracks Road, Apapa, Lagos” at a price and upon such terms and conditions negotiated and determined by the directors.

The meeting also empowered the board to take such steps or actions and to do all things as may be necessary to give full effect to the delisting and sale of the properties.

Directors of Greif Nigeria had met at the company’s head office in Lagos and decided to call an EGM to consider the sale of the designated company’s properties in Apapa, Lagos and the delisting of the company’s shares from the NSE.

The board of Greif Nigeria had in April 2019 suspended operations of the company as the packaging company continued to wriggle in losses.

The board had resolved that the company should stop receiving new orders from customers and also stop production for an indefinite period.

The board stated that it took the decision because the company recorded a loss of more than N260 million in 2018 and the loss had also continued in the first quarter of the 2019 business year.

According to the board, efforts made to win back key customer and also get price increase from the customers were yet to yield positive result.

“It had, therefore, been resolved that the company stop receiving new orders from customers and also stop production for an indefinite period,” the company stated in a regulatory filing signed by its Managing Director, Mr David Onabajo.

Greif Nigeria had suffered a major contraction in its business in 2018 as the packaging company struggled with significant decline in sales.

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Key extracts of the audited report and accounts of Greif Nigeria for the year ended October 31, 2018 showed that sales dropped by 62 per cent from N1.405 billion in 2017 to N534.611 million in 2018. As against modest profit of N77.55 million in 2017, the company posted pre-tax loss of N245.23 million in 2018. After taxes, net loss rose to N262.59 million in 2018 as against net profit of N49.42 million recorded in 2017. Earnings per share consequently declined from N1.16 in 2017 to a loss per share of N6.16 in 2018.

Greif Nigeria had forewarned investors that the immediate past business year was a very challenging year for the company.

The company had stated that economic and competitive environment in the steel drum and packaging sector gave rise to a very tough situation for its business, which resulted in the closure of two of its branches during the 2018 financial year.

Greif Nigeria could not meet the timeline for the filing of its 2018 audited financial statements for the year ended October 31, 2018 on the due date of January 29, 2019 because it had to carefully scrutinise the operations during the year.

The company stated that the delay of its financial statements was due to the fact that the external auditors had to exercise due diligence on the financial statements during the audit exercise to ensure all tax related issues were resolved, and make certain that the results reflect the actual position of business operations for the year, as well as conform with all relevant statutory requirements.