The Nation Newspaper

Category: Investors

  • Great Nigeria Insurance lists shares on NASD

    Great Nigeria Insurance(GNI) Plc has listed its shares on the NASD OTC Securities Exchange Plc, opening up another window for trading on the shares of the insurance company after it delisted from the Nigerian Stock Exchange (NSE).

    The NSE had, in January, this year, delisted the share capital of GNI, ending more than 13 years of public quotation and listing on the main board of the equities market.

    The delisting was sequel to the   GNI’s request, which had opted to revert to a private unquoted company.The company was listed on the NSE in October 2005.

    Authorities at the NASD – the over-the-counter platform for trading in unlisted securities, confirmed that the shares of GNI have been listed on the platform and shareholders of the insurance company can start dematerialisation and trading on their shares.

    NASD assured that it would continue to lend GNI its support in always creating liquidity, one of the grounds that GNI had cited for the delisting from the NSE. GNI had however also struggled to meet the stringent corporate governance practices at the NSE, often sanctioned for failure to comply with  the rules.

    Inaugurated in July 2013, NASD is registered by the Securities & Exchange Commission (SEC) as a Self-Regulatory Organisation (SRO). The NASD OTC provides the platform for trading of a broad range of instruments over-the-counter, including equities, bonds and securities not listed on the NSE.

    GNI joined other companies on the NASD included Dufil Prima Foods Plc, the manufacturer of Indomie Noodles; Friesland Campina Wamco Nigeria Plc, manufacturer of Peak Milk brand; and Fan Milk Plc, popular manufacturer of Fan Yoghurts, NIPCO Plc, Air Liquide Nigeria Plc Industrial & General Insurance Plc, Central Securities Clearing System Plc, the clearing and depository arm of the Nigerian Stock Exchange; Nigeria Mortgage Refinance Company, Jaiz Bank Plc, the Islamic bank; Acorn Petroleum Plc, Arm Life Plc, Afriland Properties Plc, BGL Plc, Consolidated Breweries Plc and Food Concepts Plc.

    Others included Geo-Fluids Plc, Golden Capital Plc, Niger Delta Exploration & Production Plc, Partnership Investment Company Plc, Resourcery Plc, Riggs Ventures West Africa Plc, Swap Technologies & Telecomms Plc, Vital Products Plc, Fumman Agric Products Industries Plc, Free Range Farm Plc, FAMAD Plc, AG Mortgage Bank, Trustbond Mortgage Bank Plc, Mass Telecom Innovation (MTI ) and Providus Bank.

    In a statement on the delisting, the board of GNI had noted that it would shield it from any enforcement that might arise as a result of the outstanding free float deficiency at the NSE.

    The board also noted that over the last five years, there had been little or no trading activity on the shares held by the minority shareholders, pointing out that shareholders were not benefiting from the continued listing as they were not getting any exit opportunity and their investments had been locked up and they found it difficult to dispose of their shareholding.

    The board added that the company had neither benefited from the continuing listing at NSE as its shares continue to trade at a significant discount to the intrinsic value.

    The board of directors said the delisting would afford the company opportunity to further an imminent corporate restructuring exercise to take advantage of emerging opportunities, noting that the company might consider re-listing on the NSE in the future if the market conditions are favourable.

  • Lasaco seeks N11.1b new equity funds in private placement

    The Board of Directors of Lasaco Assurance Plc has called for consideration of a proposal for special capital raising as insurers scurry to raise funds to meet the deadline for new minimum capital requirements.

    Lasaco plans to raise about N11.1 billion in new equity funds through the issuance of 9.25 billion ordinary shares of 50 kobo each at N1.20 per share. The company will issue the shares through special or private placement, which implies that the shares may be offered to strategic investors.

    Shareholders of the insurance company are scheduled to meet at its Annual General Meeting (AGM) in Lagos next month to approve special resolutions authorising the board to undertake the private or special placement.

    Lasaco also plans to undertake reconstruction of its existing issued shares of 7.334 billion ordinary shares of 50 kobo each, on a ratio of one new share for every four ordinary shares previously held.

    Shareholders are also expected to consider and approve that the company’s reconstructed ordinary shares totaling 1.83 billion be revalued in accordance with the ratio of reconstruction and be listed on the Nigerian Stock Exchange (NSE), subject to appropriate regulatory consents.

    Read Also: LASACO donates N10m to Lagos Trust Fund

    The meeting is also expected to authorise the board to transfer  N2.749 billion representing the surplus nominal value of the reconstructed shares into the share reserve account and form part of the shareholders’ funds of the company.

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

    The minimum paid-up share capital of a life insurance company was increased from N2 billion to N8 billion, non-life insurance from N3 billion to N10 billion, composite insurance from N5 billion to N18 billion while re-insurance companies were directed to raise their capital base from N10 billion to N20 billion. Insurance companies are required to comply fully with the new minimum capital base by June 30, 2020.

  • NSE lifts suspension on Deap Capital Management

    Authorities at the Nigerian Stock Exchange (NSE) have lifted suspension clamped on Deap Capital Management and Trust Plc, after nearly 10 months of disallowing trading in the shares of the company for breach of corporate governance rules.

    The NSE had on November 1, 2018 suspended trading on Deap Capital Management and five other companies for failing to adhere to best corporate governance and extant post-listing requirements that make it mandatory for quoted companies to submit their financial statements within stipulated timelines.

    Post-listing rules at the NSE require quoted companies to submit their audited earnings reports, not later than 90 calendar days after the expiration of the period. The rules also require quoted companies to submit interim report not later than 30 calendar days after the end of the relevant period.

    Not less than 83 per cent of quoted companies use the 12-month Gregorian calendar year as their business year. The business year thus terminates on December 31. While March 31 is usually the deadline for submission of annual report for companies with Gregorian calendar business year, the deadline for the quarterly report is a month after the quarter.

    The NSE stated that the lifting of suspension was due to the submission of outstanding financial statements by Deap Capital Management.

  • Will bearish capital market rebound in September?

    Nigerian investors continue to wriggle in losses as the bears hold tight to the equities market. For the third consecutive month, the market closed negative in August, setting the third quarter almost on a certain negative close like the previous two quarters. Capital Market Editor, Taofik Salako, examines the performance of the market and the prospect for a rebound

    The bears are everywhere and the best of fund managers know it. Analysis of collective investment schemes (CIS) showed that the net asset value (NAV) of equities-based funds had depreciated by more than 20 per cent over the past 12 months. NAV is determined by subtracting total liabilities of a fund from its total assets. The NAV can further be divided by the total number of units of the fund to determine the unit price, which provides the effective bid and offer prices for a fund. This simply implies that a divesting investor may suffer not less than 20 per cent loss in the value of his investment. Collective investment schemes, otherwise known as mutual funds, are joint investment vehicles through which investors pool funds and invest in chosen basket of securities, usually under a professional management, with a view to optimising returns and reduce risks. With economy of scale that allows for diversification and good spread, extensive research capability, technologies, experience and full-time dedicated management, mutual funds are often seen to be more resistant to the vagaries of the market. But when the bears decide on a rage, no one is safe, either a scratch or a bite, the depth of the wound depends on the position during the attack and immediate response. In a rage, the best managers fight to come out with a scratch than a cut. Nigeria’s largest equities-based mutual fund, and unarguably one of the best-managed funds, had depreciated by more than 26 per cent over the past 12 months.

     Bears’ fangs

    For the third consecutive month, pricing at the Nigerian equities market closed August 2019 in the red. With average depreciation of 0.69 per cent in August, net capital depreciation over the past eight months rose to 12.42 per cent, equivalent to a net loss of N1.46 trillion. The All Share Index (ASI) – the common value-based index that tracks share prices at the Nigerian Stock Exchange (NSE), closed August at 27,525.81 points compared with 27,718.26 points recorded as July’s closing index. The ASI had opened 2019 at 31,430.50 points, 17.81 per cent down from its 2018’s opening index of 38,243.19 points. The market had recorded average decline of 7.50 per cent in July. Aggregate market value of all quoted equities August at N13.391 trillion as against N13.507 trillion recorded at the beginning of August. It had opened the year at N11.721 trillion. However, the seeming appreciation in the year-to-date performance of aggregate market value of all quoted equities was due to the unabsorbed boost from the recent listing of telecommunication companies- MTN Nigeria Communications Plc and Airtel Africa Plc.  Based on market values, both the ASI and market capitalisation are correlated indices and without new listing or delisting, usually move simultaneously in the same direction. But the ASI is weighted, and as such adjusted for effect of new listing while the market capitalisation is a straight-line summation of share prices and issued shares. Thus, where the ASI and market capitalisation differ, the ASI is widely regarded as the true representation of the market condition.

    Sectoral indices underlined the widespread depreciation in share prices across the sectors and stocks’ groups. Strikingly, investors with heavy exposure to a sector might have suffered greater losses than the average benchmark index, which decline was moderated by large number of dormant stocks. Sectoral indices, by design, are representative indices for the sectors or stocks’ groups they seek to represent and are usually made up of the most liquid and largest stocks within the sector or group. The NSE 30 Index, which tracks the 30 largest companies at the NSE, posted a negative return of -23.25 per cent within the eight-month period. The NSE Corporate Governance Index-which tracks some of the best-managed companies, also indicated average depreciation of 23.58 per cent.  The NSE Pension Index, which tracks a group of stocks adjudged as safe for investment of risk-averse pension funds, ended the eight-month period with average decline of 23.34 per cent. The NSE Lotus Islamic Index, which measures pricing trend within the group of stocks that comply with ethical requirements of Islamic finance, posted average loss of 22.25 per cent.

    No safe haven

    From banking to insurance to consumer goods, industrial goods and oil and gas sector, investors were reeling in double-digit losses. The NSE Banking Index-which tracks the most influential and liquid banking sector, indicated average return of -19.49 per cent. The NSE Insurance Index-which tracks the populous but largely inactive insurance sector, posted average return of -15.52 per cent. Investors in oil and gas sector were the worst-hit with the NSE Oil and Gas Index closing the eight-month period with average depreciation of 34.35 per cent. In the purchasing-power-prone consumer goods sector, investors had lost an average of 29.74 per cent. The NSE Industrial Goods Index showed the highest resistance with average return of -11.85 per cent, the only sectoral index to outperform the benchmark index.

    With inflation rate at 11.08 per cent and the benchmark lending rate-Monetary Policy Rate, at 13.50 per cent, most investors have lost more than one-thirds of their portfolios when adjusted for dividends, scrips, inflation and cost of capital. Stock-by-stock analysis showed most stocks with large losses. For instance, FBN Holdings had lost 40.3 per cent of its market value during the eight-month period. Oil major, Total Nigeria lost 50.7 per cent. Leading brewers- Nigerian Breweries and Guinness Nigeria depreciated by 40.1 per cent and 42.5 per cent respectively. Largest conglomerate, UAC of Nigeria had declined by 48.7 per cent while PZ Cussons Nigeria’s share price halved by 52.2 per cent.

    The continuing depreciation has raised concerns about a repeat of the consecutive bearishness that had gripped the market between 2014 and 2016. The equities market had suffered average decline of 17.81 per cent in 2018. Aggregate market value of all quoted equities on the Nigerian Stock Exchange (NSE) closed 2016 at N9.247 trillion as against N13.226 trillion recorded at the start of trading in 2014, representing a net capital loss of N3.98 trillion.

    What enraged the bears?

    Most analysts agreed that the stock market performance had been weakened by macroeconomic uncertainties, political risks, insecurity and cash crunch at the domestic level. With foreign portfolio investors accounting for nearly half of transactions at the Nigerian stock market, the tense global economic outlook, trade disagreements among major economies, decline in crude oil price and attractive yields in less-risky economies compounded the Nigerian market situation. Total transactions by foreign portfolio investors in the Nigerian stock market had declined by 36.53 per cent within the first seven months of this year, just as foreign portfolio outflows continued to outpace inflows.

    Managing Director, APT Securities and Funds Limited, Mallam Kasimu Kurfi, said foreign investors were unnerved by lack of clear economic policies in the wake of the political transition and the intervening period for the emergence of the economic team and direction of the government.

    He noted that the decline in August was most likely exacerbated by sell pressure from the domestic investors, who were selling to raise funds ahead of the resumption of schools.

    According to him, with the depression in the real estate sector, equities appear to be the only easily available ways of raising money for most investors.

    Managing Director, Network Capital, Mr Oluropo Dada said investors took flight to money market instruments to stave away risks despite the underlying attractions of grossly undervalued shares.

    “The economy was full of uncertainties, the political climate was volatile, insecurity and unrest and many more challenges contributed to the poor performance. Companies were not sure of what government policy would be, there were no definite business-oriented policies that could have helped the market,” Chairman, Ibadan Zone Shareholders Association (IBZA), Mr Eric Akinduro, said.

    He said the negative trend might continue for a while because the economy has not shown any serious positive sign.

    While commending the government for the success of its foreign exchange management, Akinduro said government needs to do more to create enabling environment for companies to operate and deliver better results, which could stimulate the market.

    FSDH Merchant Bank stated that declining crude oil price and fear of a possible global recession had negative impacts on the stock market. Analysts however noted that the depreciation has created good opportunities for investors, especially in stocks with strong fundamentals.

    Afrinvest Securities stated that weak macroeconomic environment has continued to cast a shadow on investor sentiment.

    “The bearish streak is expected to continue in the absence of any economy stimulus that would reverse the negative sentiment in the market,” Afrinvest Securities stated.

    A question of when

    But there is almost a consensus on the inherent value in Nigerian equities in the medium to long-term and many analysts believed that the market might have seen its worst and on the path to recovery.

    “We reiterate our view that the blend of a compelling valuation story and positive macroeconomic environment should propel the market in the medium term. However, we advise investors to tread the cautious trading path in the short term,” Cordros Securities stated.

    Kurfi said the market was set on recovery citing that the lower subscription to the last government’s bond auction was indicative of a shift from the debt market to the equities market by investors seeking to lock into undervalued shares.

    “The market performance in August was better and it is likely to do better in September than August,” Kurfi said. He added that the emerging clarity on economic management leadership and policy direction would stimulate investors’ sentiment, pointing out that the national call to foreign investors by President Muhammadu Buhari at the Japan’s African conference could help to boost flagging foreign investments.

    Chief Executive Officer, Sofunix Investment and Communications, Mr. Sola Oni said the stock market was ripe with attractive investment opportunities for discerning investors.

    “This is actually the best time to buy shares because the companies which are trading below intrinsic values are in full operations and waxing stronger for enhanced returns to shareholders,” Oni said.

    He noted that declining purchasing power had moderated the performance of the stock market as the bulk of Nigeria’s large retail investors fall within the lower range of the purchasing power rank.

    The Association of Securities Dealing Houses of Nigeria (ASHON) meanwhile called for a cohesive and sustainable approach to market development through appropriate policies by relevant stakeholders.       Chairman, Association of Securities Dealing Houses of Nigeria (ASHON), Chief Patrick Ezeagu said there was need to deepen the capital market in order to increase its absorptive capacity. One of the ways to deepen the market, according to him, is a policy direction that enables pension fund administrators (PFAs) to increase their investments in the equities market. The largest chunks of Nigeria’s N5 trillion pension assets are locked in government’s bills and bonds. A recent breakdown indicated that only 12 percent of pension funds were invested in equities while 70 percent were held in Federal Government’s bonds and Treasury Bills. Ezeagu noted that the assets held by PFAs largely have long term tenor, which can be invested in the equities market to create a more stable domestic investors’ base and enhance liquidity at the market.

    He also cautioned government against policies that could undermine the competitiveness of the Nigerian market citing the recent move to reintroduce Value Added Tax (VAT) to the capital market.

    “We believe that the conditions that necessitated the waiver of VAT on capital market transactions are still prevalent, its reintroduction will definitely set the market backwards in terms of reviving investor confidence,” Ezeagu said.

    With the equities market closing the first trading session in September with a modest gain of 0.14 per cent or N19 billion, has the recovery started? That’s too close to call. Most agree the recovery and the return to the eye-popping bullish rally is certain, but the imminence remains in the air.

  • Nsia Insurance partners multichoice on Dstv Thanks

    NSIA Insurance is in partnership with Multichoice on the DSTV THANKS Programme, to reward loyal DSTV subscribers with 10 per cent discount on four identified products.

    The products are NSIA Comprehensive Motor Insurance, NSIA Motor Insurance- Third Party Fire & Theft, NSIA Householder Insurance and NSIA Personal Accident Cover.

    To partake in this reward programme and qualify for NSIA Insurance discounted products, customers must be on any of the DSTV packages; Family, Access, Compact, Compact+ and Premium; stay connected and pay for subscription on time.

    The Managing Director of NSIA Insurance, Mrs. Ebelechukwu Nwachukwu, in a statement,  said the company is excited to partner with DSTV on the initiative as they are always eager to reward their loyal customers for their patronage which aligns with the DSTV THANKS Program.

    She stated that they constantly explore partnerships ‘’to enhance the benefits that we offer our valued customers to cater for their needs’’.

    Head of Retail, Products and Research, Titi Shodeinde explained that NSIA Comprehensive Motor Insurance Plan is a product that has taken into consideration the Motor Insurance needs of the average/high net-worth subscriber and gives great value to them, depending on the band they fall in. This covers cost of repairs paid in the event of accidental damage, fire and theft to the vehicle. It also has a cover of up to N1, 000,000.00 paid in the event of damage to Third Party Property and Unlimited Liability in the event of Injury/Death of Third Party. Excess Buy back and tracking device on vehicles are covered free of charge on this plan

    “NSIA Motor Insurance- Third Party Fire & Theft Plan on the other hand is a product that covers against fire and theft as well as damage to third party vehicle or property. Up to N1, 000,000.00 is paid in the event of damage to Third Party Property and unlimited liability in the event of Injury/Death of Third Party.

    “NSIA Householder Insurance Plan provides cover for your home (building) and its contents in the event of loss or damage as a result of fire, explosion, lightning, earthquake, the impact of aircraft, vehicles or animals, theft or attempted theft, damage caused by riot and malicious persons, storm, personal liability for bodily injury to third Parties, buildings and household contents. NSIA Personal Accident Insurance Plan provides compensation in the event of injuries, death and disablement resulting from physical accidents. It also provides medical expenses for treatment of injuries. The cover provides a 24-hour worldwide protection.”

    She noted that they are also offering qualified and loyal DSTV subscribers additional benefits like unique NSIA Car fragrance, driving and safety tips, and birthday greetings.

  • Investors fly to safety as mutual funds rise by 22.8% to N798.04b

    Investors are seeking safety of principal investment and guaranteed returns as collective investment schemes grow, Capital Market Editor, Taofik Salako reports.

    Total net asset value of all registered mutual funds in Nigeria rose over a one-year period by 22.8 per cent as investors showed preference for less risky fixed-income funds.

    Mutual funds, otherwise known as collective investment schemes (CIS), are joint investment vehicles through which investors can pool funds and invest in chosen basket of securities with a view to optimising returns and reduce risks.

    Latest official data obtained from Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC) yesterday indicated that total net asset value (NAV) of all registered mutual funds rose from N649.775 billion on August 3, 2018 to close at N798.04 billion on August 2, 2019, representing an increase of N148.265 billion or 22.822 per cent.

    NAV is determined by subtracting total liabilities of a fund from its total assets. The NAV can further be divided by the total number of units of the fund to determine the unit price.

    A mutual fund is usually categorised by the class of assets that forms the primary focus of its investments. Thus, there are equity funds, money market funds, bond funds, real estate funds, ethical funds and balanced funds among others.

    The reports showed that the increase in NAV was driven by increase in number of mutual funds as well as appreciation in some segments. Total number of mutual funds rose 7.9 per cent from 76 mutual funds by August 03, 2018 to 82 mutual funds by August 02, 2019.

    A breakdown of the funds showed strong preference for portfolios that invest generally in fixed-income securities, especially short-term securities. While the number of equities-based funds increased by two as against one addition to money market funds, the value and percentage of money market funds rose considerably over the period while the value of equities-funds declined during the period.

    Money market funds, which invest mainly in money market instruments such as treasury bills, remained the largest group of mutual funds, underlining the paradigm shift since the stock market crash displaced equities as most-preferred portfolio. The NAV of money market funds rose from N494.92 billion to N602.64 billion while the number of money market funds increased from 18 funds to 19 funds.

    Conversely, the NAV of equities-based funds dropped from N13.467 billion to N10.613 billion despite increase in number of equities-based funds from 10 funds to 12 funds. Mixed funds-which include allocations of some funds to equities alongside other fixed-income assets, also showed a similar pattern, dropping from N25.70 billion in 2018 to N23.51 billion in 2019. Ethical funds-which include funds that do not invest in alcohols, cigarette, firearms and sometimes, in the case of Islamic ethical funds, in interest-based businesses, also dropped from N5.48 billion to N4.716 billion.

    Other non-equities funds largely followed the pattern of money market funds. Fixed income funds-which invest in fixed-income assets, rose from N51.737 billion to N86.497 billion. Bonds funds- named because they invest solely on sovereign and other approved bonds, doubled from N11.209 billion to N24.533 billion. This underlined the significant flight to government’s sovereign bonds, by several fund managers.  Real estate funds- which invest in real estate assets, declined from N47.26 billion to N45.53 billion, reflecting the slowdown in the real estate industry.

    Stanbic IBTC Asset Management Limited (SIAML) remains the largest investment management firm in Nigeria with its funds dominating major segments of the market. Stanbic IBTC Money Market Fund remains the largest CIS rising from N244.34 billion to N277.65 billion. FBN Money Market Fund, being managed by FBN Capital Asset Management Limited, also retains its second position, growing from N136.93 billion to N165.4 billion. ARM Money Market Fund, being managed by Asset & Resources Management Company Limited, also retains its ranking as the third largest CIS, rising from N48.49 billion to N66.43 billion. In further illustration of the flight to safety and depreciation in the value of equities, Stanbic IBTC Nigerian Equity Fund, Nigeria’s largest equities-based fund, also being managed by Stanbic IBTC Asset Management Limited (SIAML), dropped from N6.526 billion by August 03, 2018 to N4.806 billion by August 02, 2019, a decrease of N1.72 billion over the 12-month period.

    With a drop of 17.81 per cent in 2018, the continuing decline at the equities market had implied average decline of 29.62 per cent over the19-month period ended July 31, 2019. This implied that average investors who had invested over the period had lost almost a third of their portfolios, altogether implying a loss of about N4 trillion for the entire market.

    Investors in Nigerian equities had lost N1.38 trillion over the past seven months of 2019 as the onset of the first half earnings season failed to sustain expected recovery at the stock market. Nigerian equities suffered their worst depreciation so far this year in July 2019, dropping by an average of 7.50 per cent, valued at about N990.45 billion.

    The steep decline in July worsened the average year-to-date return, which had closed first half at -4.66 per cent, to -11.81 per cent, equivalent to net capital depreciation of N1.38 trillion for the seven-month period ended July 31, 2019.

    Nigerian equities had traded mostly on the negative this year, declining in five out of the seven past months. The market also closed both the first and second quarters on the downside and most analysts remained cautious about the outlook for the third quarter.

    The All Share Index (ASI) – the main value-based index that tracks share prices at the Nigerian Stock Exchange (NSE), closed July at 27,718.26 points as against its month’s opening index of 29,966.87 points, June’s closing index. The ASI had opened 2019 at 31,430.50 points, 17.81 per cent down from its 2018’s opening index of 38,243.19 points. It had however rallied a world-leading gain of 42.30 per cent in 2017.

    The Nigerian Stock Exchange (NSE) recently launched its new trading platform for mutual fund as part of efforts to boost investors’ participation in CIS. About five per cent of investors in the Nigerian capital market engage in mutual funds, a paltry fraction that underlines the tendency of most retail investors to invest in the market directly.

    Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr Oscar Onyema, said the launch of the NSE distribution and trading platform for mutual funds would not only provide an opportunity for the 256 brokers in the market to distribute to existing 13.9 million investors’ accounts in CSCS but also attract new investors that may be interested in gaining exposure to the capital markets through mutual funds.

    He said the new platform will enhance visibility for listed funds and promote financial inclusion, while stimulating retail investor participation in the market.

    “This distribution platform is a new channel for accessing mutual funds which are listed on the NSE. This restates our commitment to provide market operators, issuers, fund managers and investors with a reliable, efficient and an adaptable platform to create a more transparent, liquid and accessible market in line with global best practices,” Onyema said.

    According to him, the platform will facilitate electronic transactions with seamless connection between NSE, CSCS, fund managers and brokers as investors have the benefit of a single view of their mutual fund investment while being able to invest with multiple fund managers through a single broker.

    He noted that in recent years, there has been significant increase in the number of mutual funds in Nigeria, an indication of the growing interest in collective investment schemes.

    Managing Director, Central Securities Clearing System (CSCS) Plc, Mr. Haruna Jalo-Waziri, said the new platform marked another milestone for the Nigerian capital market as it will serve as a step towards improving the level of financial inclusion in Nigeria by giving investors varieties of investment products.

    According to him, as part of its commitment to providing far-reaching benefits to the capital market, CSCS has proactively invested in technology that would enable us provides seamless post-trade services to a wide range of financial instruments including collective investment schemes.

    “Additionally, fund managers can now augment their product distribution strength using the brokerage communities’ network. We believe this will also contribute towards increasing secondary market participation whilst growing funds under management for Asset managers”, Jalo-Waziri said.

    President, Fund Managers Association of Nigeria (FMAN), Mr. Dayo Obisan, noted that one of the initiatives in the FMAN five-year road map was to develop and implement a nationwide distribution and trading platform for mutual funds.

    Chairman, Association of Stockbroking Houses of Nigeria (ASHON), Chief Patrick Ezeagu, said stockbroking firms were delighted to have been a part of the development and emergence of the new trading platform.

    According to him, the new platform was directed at reawakening the small savers in order to take advantage of investing through mutual fund and to have the synergistic benefit of a better return in the market.

    “The memorandum trading platform will facilitate the ease of doing business in trading and distribution of mutual funds, it will inspire small savers thereby promoting financial inclusion which is an important focus of our members. We congratulate everyone that contributed to the success of this initiative and encourage all operators to embrace this new aspect of deepening of our market which is a formidable incursion into an erstwhile grey sector,” Ezeagu said.

  • Stocks open at new low amid continuing decline

    Equities are dropping to their lowest share prices in recent history, but attractive valuation and strong fundamentals raise hope of a rebound, Capital Market Editor Taofik Salako reports

    THE Nigerian stock market reopens today with most stocks at their lowest prices, as half-year earnings and comparatively attractive valuations failed to halt the decline in share prices. The stock market has posted negative returns in five out of the seven past months and it is heading to another negative close as investors remain ambivalent about the short-term outlook for quoted equities.

    Checks yesterday indicated that most major stocks across most sectors have fallen to their lowest prices in a year, compounding the tenuous market situation at the equities market where more than a quarter of listed stocks are either at nominal value or are stagnant over a long period.

    They include the highly capitalised industrial goods sector, the most liquid and influential banking sector, the populous but highly illiquid insurance sector, government-favoured agriculture sector, the popular oil and gas sector, the half-hearted services sector and the household consumer goods sector, among others.

    The price depreciation at the Nigerian Stock Exchange (NSE) was headlined by the country’s largest quoted company, Dangote Cement, which opens today at one-year low of N165. Nigeria’s two largest financial institutions, Guaranty Trust Bank (GTB) and Zenith Bank International, open at low prices of N26.50 and N16.35 respectively. Newly listed telecoms giant third largest quoted company, Airtel Africa, is trading at a low price of N323.50 while downstream major, Total Nigeria, has fallen to a new low of N114.80.

    Market-wide decline

    In the agriculture sector, nearly all stocks are at their lowest prices. Industry leaders, Okomu Oil Palm and Presco, are trading at new low prices of N52 and N44.80 respectively. They had traded as high as N85 and N75 per share respectively. FTN Cocoa processors is stuck at 20 kobo while Livestock Feeds is at a low price of 41 kobo. Real estate’s flagship company, UACN Property Development Company is trading at one-year low of N1.12.

    In the foreign-dominated breweries segment, industry leaders, Nigerian Breweries and Guinness Nigeria, open today at low prices of N50 and N41.40 respectively. International Breweries is trading at a low price of N12.

    In the insurance sector, its negative outlook raises concerns about the prospects of recapitalisation. Most insurance stocks, including Cornerstone Insurance; Guinea Insurance; NEM Insurance; Niger Insurance; Sovereign Trust Insurance; Standard Alliance Insurance; Sunu Assurances; Unic Diversified Holdings; Universal Insurance; Veritas Kapital Assurance and Goldlink Insurance, among others, are trading below nominal values at 20 kobo per share. Law Union and Rock Insurance opens at one-year low of 39 kobo.

    The National Insurance Commission (NAICOM) in May 2019 released new capital requirements for insurance businesses with a 13-month compliance period for operators to shore up their minimum capital base to the required level. The minimum paid-up share capital of life insurance company was increased from N2 billion to N8 billion, non-life insurance from N3billion to N10 billion, composite insurance from N5billion to N18 billion, while re-insurance companies were directed to raise their capital base from N10billion to N20 billion.

    In the information and communications technology sector, most stocks are at their lowest prices, including Courteville Business Solutions, 20 kobo; Tripple Gee and Company, 70 kobo and E-Tranzact International, trading at a low N2.38. The steep decline in share price has been one of the major constraints against E-Tranzact’s new capital raising. E-Tranzact had, in December 2018, received shareholders’ approval to raise additional capital of up to N7billion.

    In the oil and gas sector, hitherto stable stocks are dropping to new lows. Total Nigeria headlined the losses with a new low of share price of N114.80, 100 per cent decline from its high price of N223 during the period. MRS Oil and Gas is trading at N20.85. Eterna opens at a low N2.60. Japaul Oil and Maritime Services have remained stuck at 20 kobo, while impressive half-year earnings failed to lift Conoil, which opens today at a low of N17.65.

    Most stocks in the services, healthcare and others are at their lows, including United Capital, which opens at N1.90; Morison Industries, 50 kobo; Afromedia, 41 kobo; RT Briscoe, 29 kobo; Tantalisers, 20 kobo; Transcorp Hotels, N5.40; DAAR Communications, 40 kobo and University Press, which is trading at a low N1.60 per share.

    Drumbeats

    Most analysts agreed that the stock market has been reflecting the tough macro-economic environment, especially the seeming lack of direction that had characterised the economy since the onset of political transition.

    President, Association of Securities Dealing Houses of Nigeria (ASHON), Chief Patrick Ezeagu, said the Nigerian economy has been significantly impacted by the actions or inactions of the political class, which in the immediate, have not inspired investors’ confidence in the market.

    “Till date, the government is yet to settle down after the election that took place in February to March this year with a plethora of court cases trailing it. In this kind of situation, most investors adopt a wait and see attitude. However, more enlightened and professionally guided investors continue to buy to reduce their cost profile in the hope that when the market rallies, they will be the first to recover and make handsome returns,” Ezeagu said.

    He noted that the steep decline at the equities market has not fully reflected the encouraging earnings performance of several quoted companies.

    Analysts at CardinalStone Limited said despite their attractive valuations, a reversal of fortunes for Nigeria equities is likely to depend on a decisive policy tweak to the current currency regime.

    “Since 2017, investors have priced in a forward premium over spot rates in the naira forward market, currently one-year forward priced at N400.0/$, indicating expectations of imminent naira devaluation. Until this dark cloud is erased, we see little or no legroom for significant equity market correction in the near-term,” CardinalStone stated.

    According to CardinalStone, Nigerian monetary policy direction remains largely unclear, with the monetary authorities leaving all its policy parameters unchanged in its late July meeting on the one hand, while implementing pro-growth administrative policies such as the increase in loan to deposit ratio requirement and reduction of the maximum amount banks can place on the Standing Deposit Facility (SDF) on the other.

    According to FSDH Merchant Bank, investors and fund managers were facing tough time deciding on investment decisions at the stock market as returns on financial assets continue to depreciate.

    FSDH said the assumption of immediate recovery at the equities market depends on availability of complementary fiscal policies that will de-risk the economy.

    Chief Executive Officer, Sofunix Investment and Communications, Mr. Sola Oni, said the low purchasing power of the average Nigerian investors is also negatively impacting the market as investors contend with array of needs, including financial obligations for children’s school fees and other domestic exigencies.

    When will bulls return?

    But most analysts agreed that equities may soon bottom out and start a sustained recovery. Analysts almost shared a consensus that the steep decline has created attractive opportunities for investors with long-term funds.

    “The equity market may recover from August. A number of companies have indicated that they will declare interim dividend for half-year results only waiting for regulatory approvals. In addition, we expect the various monetary policies the Central Bank of Nigeria (CBN) initiated to boost economic activity and lead to increased liquidity that can flow into the financial market,” FSDH stated in one of the most ambitious projections.

    Ezeagu said the performance of quoted companies has been very encouraging despite the odds and the market may be on the path to early recovery, adding that the market will regain its vibrancy and the laggards will rather be playing catch up“ as soon as the ministers are sworn in.

    FSDH urged investors, who have long-term funds, to take advantage of the imbalance in the share prices of some companies that have strong investment case in the equity market.

    According to the wholesale investment banker, although nobody knows exactly when the equity market will take a turn, but it is clear that the market is close to the bottom, adding that the historic performance of the equity market with average growth of 24,590 per cent over the past three decades.

    “Imagine that an investment of N100,000 in the equity market in 1985 recorded a return of 24,590 per cent as at December 2018. This means that the N100,000 increased to N24, 690,000 within 33 years without an additional capital. This was the performance of the NSE All Share Index (ASI) between 1985 and 2018. Not a bad growth at all. Meanwhile, there were some companies that recorded higher returns during this period than the NSE ASI,” FSDH stated.

    Oni said the depreciation presents opportunities for real investors.

    According to him, the steep decline should not be misinterpreted that the equity market is collapsing, as market fundamentals remain strong. The share prices will get to a rock bottom level that some institutional investors, who are busy with technical and fundamental analysis of the market, will begin to mop up. These investors will create a rally and there will be massive demand with associated effect of bullish trend.

    The bearish period, he said, separates speculators from real investors, pointing out that while speculators buy for immediate gain and at times, end as a costly gamble, real investors buy on the strength of medium and long time capital gain and other returns.

    Investors in Nigerian equities had lost N1.38 trillion over the past seven months. Nigerian equities suffered their worst depreciation so far this year in July, dropping by an average of 7.50 per cent, valued at about N990.45 billion.

    The steep decline in July worsened the average year-to-date return, which had closed first half at -4.66 per cent, to -11.81 per cent, equivalent to net capital depreciation of N1.38 trillion for the seven-month period.

    With a drop of 17.81 per cent in 2018, the decline at the equities market implied average decline of 29.62 per cent over the past 19 months. This implies that average investors who had invested over the period had lost almost a third of their portfolios, altogether implying a loss of about N4 trillion for the entire market.

    The ASI closed July at 27,718.26 points as against its month’s opening index of 29,966.87 points, June’s closing index. The ASI had opened 2019 at 31,430.50 points, 17.81 per cent down from its 2018’s opening index of 38,243.19 points. It had however rallied a world-leading gain of 42.30 per cent in 2017.

    The listing of Airtel Africa Plc during the month, however, boosted the total market capitalisation of all quoted equities. Aggregate market value of all quoted equities rose from its month’s opening value of N13.206 trillion to close July at N13.507 trillion. The NSE had listed a total of 3.8 billion shares of Airtel Africa at N363, adding N1.4 trillion to the equities market capitalisation.

    The unabsorbed impact of the listing of Nigeria’s largest telecommunication company, MTN Nigeria Communications Plc in May 2019, also coloured the market capitalisation with a resemblance of gain. The NSE had listed 20.35billion ordinary shares of MTN Nigeria at N90 per share, representing initial listing value of N1.83trillion. The new listing and subsequent rally moved the market capitalisation to a gain of N2.726 trillion in May 2019, one of the two months that ended positive. The other positive month was February 2019.

    With the MTN effect, aggregate market value of all quoted companies had closed first half at N13.206 trillion, implying a gain of N1.49 trillion during the first half. Market capitalisation of equities had opened 2019 at N11.721 trillion. It had opened 2018 at N13.609 trillion.

    Based on market values, both the ASI and market capitalisation are correlated indices and without new listing or delisting, usually move simultaneously in the same direction. But the ASI is weighted, and as such adjusted for effect of new listing while the market capitalisation is a straight-line summation of share prices and issued shares. Thus, where the ASI and market capitalisation differ, the ASI is widely regarded as the true representation of the market condition.

    Nigerian equities lost N326 billion in January 2019, with average decline of 1.82 per cent. The ASI and market value of equities had closed January 2019 at 30,557.20 and N11.395trillion respectively. In February 2019, investors in Nigerian equities netted N433billion in capital gains as the stock market staged a major recovery. Average return for the month stood at 3.80 per cent. The ASI and market value of quoted equities had closed February higher at 31,718.70 points and N11.828 trillion respectively. The market rounded off the first quarter with a net loss of N156 billion and average decline of 2.135 per cent in March 2019.

    The market suffered a major contraction in April as the bearishness defied earnings reports and dividend recommendations. Quoted equities lost N714 billion in April. The ASI dropped from April’s opening index of 31,041.42 points to close the month at 29,159.74 points, representing average month-on-month decline of 6.06 per cent. Aggregate market value of all quoted equities also dropped from the month’s opening value of N11.672 trillion to close at N10.958 trillion.

  • Investors await interim dividends of major banks

    Investors have stepped up demand for shares of the largest banks amidst expectations that the lenders will declare interim dividends on their half-year results.

    Four leading banks-Guaranty Trust Bank (GTB), Zenith Bank, United Bank for Africa (UBA) and Access Bank, have established a regular pattern of twice-a-year dividend payment, with interim dividend usually declared on first half reports. Stanbic IBTC Holdings had also declared interim dividend in recent period.

    Under the three-step final process for the release of dividend recommendations and audited reports, the board of directors meets to consider and approve the audited financial statements as well as dividend recommendation, then authorises the transmission of the signed reports to the primary regulator, in the case of financial institutions and other regulated entities and with the receipt of the approval of the primary regulator, transmits the dividend recommendation and audited report to the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) for announcement to the investing public.

    Already, the four leading banks have confirmed that they might declare interim dividend for the first half of 2019. In separate regulatory filings, the banks had indicated that their directors had met and deliberated on dividend payment. The boards of Zenith Bank, Access Bank and GTB had met last month to deliberate on the half-year 2019 results. Also included on the agenda was a consideration for interim dividend payment.

    UBA on Tuesday indicated that its board of directors will be meeting on August 22, 2019 to consider the audited financial statements for the half year ended June 30, 2019.

    The four-Access Bank, Guaranty Trust Bank, Zenith Bank and UBA were among the five most active stocks yesterday at the Nigerian Stock Exchange (NSE). Market analysts said investors were positioning for the first half results and interim dividends of the major banks.

    UBA had paid N6.84 billion to shareholders as interim dividend for the first half of last year, representing interim dividend per share of 20 kobo.

    Access Bank had also paid N7.23 billion to its shareholders as interim dividend for the first half of 2018, indicating interim dividend per share of 25 kobo, the same rate paid for first half of 2017.

    Zenith Bank Plc had distributed N9.42 billion to shareholders as interim dividend for the half-year ended June 30, 2018, representing interim dividend per share of 30 kobo, 20 per cent above 25 kobo paid as interim dividend for the first half of 2017. The bank had distributed N7.5 billion as interim dividend for the first half of 2017. GTB had also paid interim dividend per share of 30 kobo for the first half of last year.

    Post-listing rules at the NSE require quoted companies to submit interim or unaudited quarterly report not later than 30 calendar days after the end of the relevant period. Most quoted companies including all banks, major manufacturers, oil and gas companies, breweries and cement companies use the 12-month Gregorian calendar year as their business year.  The deadline for the six-month period ended June 30, 2019 is thus July 30, 2019.

    However, where a company chooses to audit its quarterly accounts, it shall be required to file such accounts not later than 60 calendar days after the relevant quarter.

    All the four leading banks also undertake audit of their half-year accounts. The deadline for the submission of their accounts is thus August 29, 2019.

  • Access Bank opens USSD channel to DiamondXtra

    Access Bank Plc has opened up its USSD channel –*901# to enable the instant opening of DiamondXtra accounts from mobile devices.

    The USSD channel option allows customers, and potential customers, to conveniently open a DiamondXtra account , confirm the number of tickets they have in a particular draw, and also find out the date for the draws from their mobile devices.

    Introducing the USSD channel account opening option, Executive Director, Retail Banking, Access Bank Plc, Victor Etuokwu  said the bank’s business model is all about its customers as its success can be directly attributed to their success.

    “We have helped millions of people save with DiamondXtra and have rewarded thousands over the last 10 years, with this year being the 11th edition. To encourage more people to save, we have digitalised the scheme to accommodate customers who are not able, for one reason or another, to go the branch to open a DiamondXtra account,” Etuokwu said.

    He explained that new customers can simply dial *901#, follow the prompts to open a DiamondXtra account and fund with a minimum of N5,000 to be one of the lucky winners.

    According to him, to join the winning train, all a customer needs to do is to save up if the customer is already a DiamondXtra customer, or open a DiamondXtra account with just N5,000 and save multiples of N5,000 to increase chances of winning.

    He outlined that the rewards for the quarterly draw include salary for life of N100,000 monthly for 20 years, education allowance of N100,000 monthly for five years, a N1 million rent, N1 million cash for six people and N500,000 cash for 15 persons.

    He added that 45 persons stand to win N100,000 each while 300 persons each are expected to win N50,000, N20,000 and N10,000. The bank will also award N20,000 as loyalty prizes to 45 persons.

    DiamondXtra is an interest yielding hybrid account which allows deposit of both cash and third party cheques. Hybrid means a combination of both savings and current account features.

  • E-tranzact records N30tr on 400m transactions

    E-tranzact International Plc, Nigeria’s premier financial technology company recorded about N30 trillion in 400 million transactions in 2018.

    Speaking at a media interactive session yesterday in Lagos, Group Managing Director, E-tranzact International Plc, Mr. Niyi Toluwalope said in spite of regulatory headwinds and turbulent operating environment, the volume of businesses in form of payment services carried out by E-tranzact was in excess of N30 trillion in value in over 400 million transactions at the end of 2018.

    He said the company, arguably one of Nigeria’s foremost financial technology companies (fintech), has set machinery in motion to continue to deliver optimum services to its growing subscriber base and prospective customers.

    He said the company is awaiting the nod of the regulators, including the Nigeria Stock Exchange (NSE) and the Nigeria Communications Commission (NCC) to continue the process of raising more than N7 billion from the capital market.

    Shareholders of E-Tranzact had in December 2018 authorised their board to raise additional capital of up to N7 billion “through the issuance of any form of equity instrument(s), whether by way of public offering, private placement, rights issue, offer for subscription or other methods they deem fit, with or without preferential allotments, either locally or internationally, at such dates and on such terms and conditions as shall be determined by the directors”.

    Shareholders also empowered the directors to consider as an alternative or addition issuance of convertible or non-convertible loans while also approving issuance of undersubscribed shares to interested investors as well as absorb excess subscriptions.

    E-Tranzact shareholders also increased the company’s authorised share capital from N2.1 billion or 4.2 billion ordinary shares of 50 kobo each to N9.1 billion or 18.2 billion ordinary shares of 50 kobo each.

    Toluwalope, who was in the company of other senior executives, including the Deputy Managing Director,  Hakeem Adeniji-Adele, Group Head, Legal, Eme Godwin, Henry David, Chief Technology Officer, said as one of the foremost payment system platforms in the country, the company was poised to liberalise the way payment transactions are carried out.

    The E-tranzact boss, who recalled that the company is 17 year old, stressed that it has pioneered a lot of innovation in the e-payment system which has changed the face of banking and financial services.

    Specifically, he said, the company pioneered the Unstructured Supplementary Service Data (USSD) code, a communications protocol used by GSM cellular telephones to communicate with the mobile network operator’s computers to drive e-payments, mobile banking, mobile money, and a host of others.

    While noting that the new management which came on board last June has since began a reorganisation, Toluwalope said the focus now is on improved structure and governance.