The Nation Newspaper

Category: Investors

  • UBA, GTBank, others meet over dividend payment

    The boards of directors of United Bank for Africa (UBA) Plc, Guaranty Trust Bank (GTBank) Plc, Zenith Bank Plc, Continental Reinsurance and many other quoted companies have scheduled meetings later this month to approve the audited financial statement and accounts for the year ended December 31, 2017. The meetings will, among others, consider dividend recommendation to be made to shareholders.

    In separate regulatory filings, the companies indicated that their directors would be meeting to review and approve the earnings report and accounts for the 2017 business year, preparatory to sending the accounts for release to the investing public at the Nigerian Stock Exchange (NSE).

    Financial services companies including banks and insurance companies are statutorily required to submit approved audited results to their primary regulators for clearance before release to the NSE and the investing public.

    Under the enhanced listing rules at the NSE which took effect on January 1, 2017, quoted companies are expected to submit their annual audited account to the Exchange not later than 90 calendar days after the relevant year end, and published same in at least two national daily newspapers not later than 21 calendar days before the date of the annual general meeting. They are also required to post same on their websites with the web address disclosed in the newspaper publications. Also, an electronic copy of the publication shall be filed with the Exchange on the same day as the publication.

    The board of directors of UBA has scheduled its meeting for Monday, January 29, 2018, where the board will consider the financial statements for 2017 and also proposals for final dividend for the 2017 financial year. UBA had earlier paid an interim dividend of 20 kobo per share, after the audit of its 2017 half-year results.

    Also, the board of directors of Continental Reinsurance has scheduled to meet on Wednesday, January 31, 2018 in Lagos. Company Secretary, Continental Reinsurance Plc, Abimbola  Falana, in a statement, confirmed that the meeting would discussed dividend payment.

    The board of Pharma-Deko will also be meeting on Friday, January 26, 2018 to discuss dividend payment.

    UBA had declared a final dividend of 55 kobo per share, in addition to an interim dividend of 20 kobo for the 2016 business year. With the bank’s improved performance in 2017, market analysts expected the bank to increase its payout, an expectation that has seen bullish trading on the stock. UBA’s share price rose by 129 per cent in 2017 while it has performed above average so far in 2018 with average year-to-date return of 18 per cent at the opening of the stock market on Monday.

    As a mark of its sound corporate governance and in line with NSE Rule Book and the Amendments to the Listing Rules, UBA had announced commencement of its closed period on Friday, January 12, 2018, implying that directors, persons discharging managerial responsibility, employees with sensitive information, advisers and consultants of the bank and their connected persons may not directly or indirectly deal in the securities of the bank until 24 hours after the publication of its audited full year reports and accounts for 2017.

    Key extracts of the interim report and accounts of UBA for the nine-month period ended September 30, 2017 showed that gross earnings rose by 26 per cent while pre and post tax profits grew by 33.2 per cent and 23 per cent respectively.

    UBA’s gross earnings rose to N333.9 billion in third quarter 2017 as against N265.5 billion reported in corresponding period of 2016. Group’s operating income stood at N236.9 billion in 2017 compared with N183.3 billion recorded in the corresponding period of 2016, representing a 29.3 percent growth.  Profit before tax jumped to N78.3 billion in 2017 as against N58.8 billion recorded in the similar period of 2016. Profit after tax grew from N49.5 billion in 2016 to N60.9 billion in 2017.

    The balance sheet showed that while the group closed the third quarter with total assets of N3.77 trillion, a year-to-date growth of 7.6 per cent, the bank prudently grew net loans to N1.6 trillion, a 6.0 per cent year-to-date growth in the loan book. Group’s shareholders’ fund grew by 13.3 per cent to N507.6 billion in 2017 while the annualized return on average equity stood at 18 per cent.

    Key extracts of the interim report and accounts of GTB for the nine-month period ended September 30, 2017 showed that profit before tax rose to N150.03 billion in 2017 as against N137.99 billion recorded in comparable period of 2016. Profit after tax also increased from N117.08 billion in third quarter 2016 to N125.58 billion in third quarter 2017. Earnings per share thus increased from N4.14 in 2016 to N4.44 in 2017. However, gross earnings dropped from N329.28 billion in third quarter 2016 to N309.91 billion in third quarter 2017. The decline in the top-line was mainly due to depressed non-interest and other incomes. Interest income had grown from N181.91 billion to N248.27 billion.

    The balance sheet size expanded to N3.2 trillion by September 2017 compared with N3.12 trillion recorded at the beginning of this year. Deposits from customers declined marginally from N1.99 trillion to N1.9 trillion. Shareholders’ funds meanwhile increased from N496.06 billion to N571.62 billion.

  • Stock Exchange tightens regulation with new structure

    The Nigerian Stock Exchange (NSE) has promoted Ms Tinuade Awe to the  newly created office of Executive Director, Regulation as part of efforts to strengthen regulatory framework and surveillance at the stock market.

    Awe was, prior to her new appointment, the General Manager, Legal and Regulation Division of the Exchange, in which role she had also served as General Counsel of the Exchange. Her new appointment has already been approved by the Securities and Exchange Commission (SEC), Nigeria’s apex capital market regulator. The appointment took effect from January 1.

    As Executive Director, Regulation in the NSE’s revised organisational structure, Awe has oversight functions over broker dealer regulation, listings regulation, market surveillance and investigations and regulatory technology while the rules and interpretation and disciplinary units of the Exchange will also report directly to her.

    Nigerian Stock Exchange (NSE)President, Mr. Abimbola Ogunbanjo, said the Exchange was confident that Awe would continue to exert her influence and leadership  attributes in her new role for the betterment of the market and its stakeholders.

    “I am very proud that the National Council has recognised Tinuade for the exemplary role she has played in transforming the Legal and Regulatory landscape of the Exchange and would like to warmly congratulate her on her elevation as Executive Director, Regulation. Tinuade’s  passion, energy and commitment to driving and executing on the Exchange’s transformation agenda has no doubt been instrumental in  revolutionising the Exchange,” Ogunbanjo said.

    NSE Chief Executive Officer, Mr. Oscar Onyema, noted that as the Exchange restructures and repositions for the fourth industrial revolution, Awe’s well deserved promotion is indicative of the great career advancement opportunities that exist at the NSE.

    “I congratulate her and look forward to working with her in this new function to build a globally competitive self-regulatory organisation,” Onyema said.

    Awe reiterated her commitment to continuing to provide quality service to the Exchange and its ecosystem by engendering an improved compliance culture based on substantial engagement as well as deployment of appropriate enforcement mechanisms.

    She added that she will also continue to promote full embracement and further deployment of technology to serve regulatory purposes while also furthering regulatory remit through key relationships with other regulators.

    Awe is a consummate professional with varied professional experiences garnered across three continents.  She has an LL.B degree from the Obafemi Awolowo University, graduating as the Best Female Student in the Faculty of Law.  She finished at the Nigerian Law School with First Class Honours, graduating as Best Overall Student. She also holds LL.M  from the Harvard Law School, where she was a Landon H. Gammon Fellow, as well as The London School of Economics and Political Science (LSE), where she graduated with merit.  At the LSE, she was a British Council Scholar.  She is admitted to both the Nigerian and New York Bars.

    She had served as Secretary to the Council of the Exchange from January 2011 to October 2015.  Awe became affiliated with the Exchange in a consulting capacity in August 2010 and joined the Exchange in August 2012.  She has been a member of the Executive Committee of the Exchange since August 2012.

  • Coronation Securities, Stanbic IBTC, Capital Asset lead OTC market

    Coronation Securities Limited, Stanbic IBTC Stockbrokers Limited and Capital Asset Limited led participating institutions at the NASD OTC Securities Exchange in 2017-the over-the-counter market for trading in securities of unlisted public limited liability companies. There are also more than 137 registered traders of participating institutions at the market.

    A full-year report on activities at the NASD OTC indicated that Coronation Securities, a subsidiary of Coronation Merchant Bank, led participating institutions, in terms of value of trades, with a turnover of N428.31 million. This represented 9.9 per cent of the total value traded at the OTC market.

    Stanbic IBTC Stockbrokers, a member of the Stanbic IBTC Holdings Plc, followed with 8.1 per cent of the total value trade with the exchange of N353.48 million while Capital Asset Limited accounted for N331.46 million or 7.6 per cent of the total value traded by participating institutions at the OTC market during the year ended December 31, 2017.

    Other leading participating institutions for the year included Greenwich Securities Limited, Chapel Hill Denham Securities, Anchoria Investment & Securities Limited, Apel Asset Limited, TRW Stockbrokers Limited and Readings Investments Limited.

    Altogether, the top 10 participating institutions account for 59 per cent of total value of transactions on the OTC market in 2017.

    In terms of volume, Apel Assets Limited ranked first by volume of shares traded on the OTC market. Apel Assets facilitated transactions of 360.62 million shares, representing 37.5 per cent of transactions in the period. Greenwich Securities Limited followed with 162.67 million shares or 16.9 per cent while Stanbic IBTC Stockbrokers Limited ranked third with 102.54 million shares or 10.7 per cent.

    Other top performing participating institutions by volume traded include Tyndale Securities Limited, Rencap Securities (Nigeria) Limited, Finmal Finance Services Limited, Calyx Securities Limited, ICON Stockbrokers Limited, TRW Stockbrokers Limited and Traders Trust & Investment Company Limited.

    The top 10 participating institutions accounted for 92 per cent of the total volume of shares traded at the OTC market in 2017. The report also showed that Apel Assets accounted for the largest number of deals with 241 deals, representing 8.69 per cent of the total number of deals for the year.

    Inaugurated in July 2013, NASD OTC Securities Exchange 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 Nigerian Stock Exchange (NSE).

    Many leading companies are listed on the NASD OTC including world leaders like 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 are listed.

    Other companies listed on the NASD OTC included NIPCO Plc, Air Liquide Nigeria Plc Industrial & General Insurance Plc, Central Securities Clearing System Plc, the clearing and depository arm of the NSE; 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.

  • FSDH Merchant Bank predicts robust income

    Companies will make higher profit and consumers will earn more money in 2018, leading investment banker-FSDH Merchant Bank Limited, has said.

    In its latest preview and research report, FSDH Merchant Bank stated that business profit and consumer income will grow higher in 2018 than in the last three years.

    The wholesale banker stated that its analysis of the recent data from the Central Bank of Nigeria (CBN) on the business and consumer expectations confirms the position on higher corporate profit and consumer income.

    The surveys that the CBN conducted in December 2017 had shown that the expectations of firms and consumers about the next 12 months improved from previous months.

    According to FSDH, the improvement in the business expectations should drive business expansion and increase the employment of labour. This, in turn, will increase the consumers’ purchasing power. On the other hand, the increase in consumer expectations will increase spending which will have positive impact on businesses.

    FSDH noted that the interrelationship between the two economic agents-business and consumer, will drive business profit and consumer income

    The latest Purchasing Managers’ Index (PMI) report published for the month of December 2017 by the CBN had shown improved business activities in both the manufacturing and non-manufacturing sectors. At 59.3 and 62.1 points, the Composite Manufacturing PMI and Composite Non-Manufacturing PMI respectively attained the highest levels since January 2015.

    “The impact of the expected growth in the business profit and consumer income is positive to the financial market. We expect it to drive equity market investments and position corporates to access long-term capital needed for expansion. Banks should also be more favourable to extend credit to both businesses and individuals, leading to a growth in the National Disposable Income,” FSDH stated.

    The investment banker added that the recent drop in the yields on the Nigerian Treasury Bills (NTBs) should also lower the borrowing cost for the business sector, which should also boost production activities and increase profits.

    FSDH also expected improved debt issues by companies as they respond positively to decline in cost of borrowing.

  • Analysts pick UBA, Access Bank, five others as stocks to watch

    Investors looking for high returns on investment should consider a diversified portfolio of leading companies in the banking, healthcare, consumer goods, financial services and industrial goods sectors.

    Analysts at GTI Securities said seven companies including United Bank for Africa (UBA), Access Bank, United Capital, Fidson Healthcare, Flour Mills of Nigeria, Dangote Cement, Lafarge Africa and Zenith Bank should be on investors’ watch list.

    GTI Securities, which stocks to watch had successfully achieved 95 per cent of indicated targets, premised its analysis on corporate earnings and market information.

    UBA had recorded a well-rounded performance in the third quarter of 2017 as growing market share and improving efficiency led to significant improvements in gross earnings and profitability.

    Key extracts of the interim report and accounts of UBA for the nine-month period ended September 30, 2017 showed that gross earnings rose by 26 per cent while pre and post tax profits grew by 33.2 per cent and 23 per cent respectively.

    UBA’s gross earnings rose to N333.9 billion in third quarter 2017 as against N265.5 billion reported in corresponding period of 2016. Group’s operating income stood at N236.9 billion in 2017 compared with N183.3 billion recorded in the corresponding period of 2016, representing a 29.3 percent growth.  Profit before tax jumped to N78.3 billion in 2017 as against N58.8 billion recorded in the similar period of 2016. Profit after tax grew from N49.5 billion in 2016 to N60.9 billion in 2017.

    The balance sheet showed that while the group closed the third quarter with total assets of N3.77 trillion, a year-to-date growth of 7.6 per cent, the bank prudently grew net loans to N1.6 trillion, a 6.0 per cent year-to-date growth in the loan book. Group’s shareholders’ fund grew by 13.3 per cent to N507.6 billion in 2017 while the annualised return on average equity stood at 18 per cent.

    Access Bank in December 2017 launched a new five-year plan that aims at making the bank Nigeria’s foremost bank in the next five years.

    The new plan is the latest in a series of transformative strategies that have resulted in sustained growth. From 2013 to November 2017, Access Bank has increased its total assets at a CAGR of 18 per cent and delivered shareholder returns of 90 per cent. The bank has also grown its customer base from 90,000 in 2002 to over 8.0 million in 2017 and in the same period opened 351 new branches.

    The new five-year strategy is expected to accelerate this growth story to position Access Bank as the leading Nigerian bank by 2022.

    The new strategy has six strategic levers including digitally led, retail banking growth and consolidation in wholesale markets, customer focused, analytics-driven, with robust risk management, strong global collaboration in key gateway markets and the creation of a universal payments gateway.

  • Shareholders hail nullification of FRCN’s rule on audit committee’s chairmanship

    Shareholders have praised a judgement of the Federal High Court that overturned a rule by the Financial Reporting Council of Nigeria (FRCN) that required any person attesting as audit committee’s chairman to be a professional member of a Nigerian accounting body.

    In 2015, the FRCN had issued and published its Rule 2(c) which required “any person attesting as chairman of audit committee to annual report statement, accounts, financial report, return, and other documents of a financial nature, shall be a professional member of an accounting body established by act of National Assembly”.

    However, public companies that could not provide a professionally qualified accountant as their audit committee chairman were required to apply for a waiver before their annual accounts can be approved. FRCN collects a fee for the issuance of the waiver.

    Shareholders under the aegis of Independent Shareholders Association of Nigeria (ISAN) had challenged the FRCN’s Rule 2(c) at the Federal High Court presided over by Justice A O Faji in Suit No FHC/L/ CS/1026/16.

    Delivering judgement, the court granted three declarations that the FRCN has no power under the Financial Reporting Council of Nigeria Act to make any rule stipulating a qualification for membership or headship of audit committees of companies incorporated under the Companies and Allied Matters Act.

    The court also held that FRCN has no power under the Financial Reporting Council of Nigeria Act to prescribe any standard of financial reporting or any other standard that requires of any company incorporated under the Companies and Allied Matters Act anything that is inconsistent with or that modifies in any respect any provision of the Companies and Allied Matters Act.

    The court declared that the FRCN is bound to exercise its functions in accordance with any law in force in the country and therefore may not prescribe any standard or make any other prescription which is inconsistent with any other law made by the National Assembly.

    With these declarations, the court ordered the setting aside of the publication purporting to be rules made by or in the name of the FRCN (copy of which is attached to the affidavit in support of this summons) or in particular rule 2(c) thereof wherein is stated that “any person attesting, as chairman of Audit committee, to annual report, financial statements, accounts, financial report, returns and other documents of a financial nature, shall be a professional member of an accounting body established by Act of National Assembly.

    The court also set aside any other directive of the FRCN to companies incorporated under the CAMA published on the website of the FRCN or by any other means on the qualification for membership, headship or composition of an audit committee.

    Justice Faji pointed out that CAMA makes no provision for qualification of chairman of the audit committee, noting that apart from section 359(4) which prescribes those who can be members of the committee, there is no other qualification.

    “In so far as the rule (Rule 2c) therefore seeks to introduce a qualification that is outside the powers of the defendant. The defendant is not a law making body and cannot by its own rules (or subsidiary legislation at best) seek or attempt to amend a law of the National Assembly. Declarations ‘1’- ‘3’therefore succeed” Justice Faji ruled.

    National Coordinator, Independent Shareholders Association of Nigeria (ISAN), Mr. Adeniyi  Adebisi, said the ruling has vindicated the position of the shareholders and further emboldened them to play active roles in the regulation of the capital market.

    According to him, ISAN had considered the Rule 2(c) of the FRCN as an anomaly because it was against the letters and spirit of the Companies and Allied Matters Act (CAMA) section 359. The association engaged the Executive Secretary of the FRCN on a number of occasions to reverse itself regarding the said rule, but it refused to do so.

    “It is worthy of note that regulators generally have succeeded in intimidating the regulated to the extent that they are prepared to accept anything offered to them  in the guise of regulation without as much as a protest. This is because they are afraid of being victimised in one way or the other for challenging the regulators.

  • N50b new capital to accelerate growth, says Union Bank

    Union Bank of Nigeria (UBN) Plc anticipates improved performance in its business as it begins to deploy about N50 billion new capital raised recently from its shareholders.

    Chief Executive Officer, Union Bank of Nigeria (UBN) Plc, Mr. Emeka Emuwa, said the net proceeds from the rights issue, which was oversubscribed by 20 per cent, would accelerate the pace of doing business as the fund will be deployed across identified business areas.

    He said the success of the recent rights issue has once again demonstrated shareholders’ confidence and support for the bank’s short to medium term strategic priorities.

    According to him, the support of the shareholders has been critical to the rebuilding and transformation of Union Bank over the past five years.

    “Having successfully raised the required capital, we will accelerate the pace of doing business in 2018 as we begin to deploy this fresh capital across identified business areas which will increase our capacity to serve customers better while also delivering returns to our investors in the short to medium term,” Emuwa said.

    He added that the new capital will also ensure the bank maintains a strong buffer above regulatory capital adequacy requirements as it drives towards its vision to be Nigeria’s most trusted and reliable banking partner.

    Union Bank’s recent rights issue exceeded its capital raising target by 20.33 per cent as majority core investors and minority shareholders jostled for additional shares and oversubscribed their provisionally allotted shares.

    Union Bank had floated the rights issue to raise N49.745 billion from existing shareholders by offering 12.133 billion ordinary shares of 50 kobo each at N4.10 per share. The rights issue had been pre-allotted on the basis of five new ordinary shares of 50 kobo each for every seven ordinary shares held as at the close of business on Monday August 21, 2017.

    Allotment results approved by the Securities and Exchange Commission (SEC) showed that Union Bank raised N59.87 billion as shareholders submitted 4,313 applications for 14.6 billion ordinary shares. The bank has however decided to retain its target of N49.745 billion and to return the excess monies to shareholders.

    The breakdown of the allotment showed that 98.4 per cent of the shareholders accepted their rights in full with 52.03 per cent also applying for additional shares.

    Emuwa had earlier outlined that the net proceeds of the rights issue to be used as working capital will be deployed to key growth sectors of the economy and Federal Government’s priorities including agriculture, manufacturing, solid minerals, services –health and education, construction and real estate and oil and gas.

  • New way to receive sale’s proceeds

    New way to receive sale’s proceeds

    The stock market is preparing to make a major change in the payment for net proceeds of shares sales under a new system that links investors’bank accounts to their investment accounts. As capital market stakeholders conclude the plan for the full implementation of the Direct Cash Settlement (DCS) system, Capital Market Editor Taofik Salako examines the implications of the transition.

    For nearly six decades, the stock market has traded under a stockbroker-mediated payment system. It appears simple and hassle-free. Every investor makes payment to his stockbroker for purchase of shares and conversely, the investor issues sale order to her stockbroker, who sells and remits the net proceeds of the shares sale to the investor, after removing the stockbroker’s commission and other regulatory charges.

    The full fiduciary function rests on the stockbroker. It has held on for the 56 years of formal trading at the stock market, as the market moved from its humble beginning of 19 securities at the commencement of trading in 1961, a year after the establishment in 1960, to become a multi-trillion naira market with more than 240 securities and market capitalisation of more than N23 trillion.

    The stockbroker-mediated system allows for flexibility and it brings into consideration the mutual understanding and trust developed over the years between the stockbroker and its client. While the stock market operates a T+3 cycle that settles each transaction in four days-trading day and three working days, investors have been known to order simultaneously immediate sale of stock and the immediate use of such net proceeds for purchase of another stock.

    Investors have been known to demand and receive payments of shares sale ahead of the completion of the settlement cycle under special consideration that thrives on the mutuality between the stockbroker and its client. These are possible because investors, at times, also keep their proceeds with the stockbroker through delayed pick-up of cheques and shares deposit. It has been a mutually beneficial system with many informal flexibilities, known to the formal authorities in practice, yet unwritten. The most important rule to the market is that shares sale or buy must be on the order of the investor and payment must be made on his order, on demand.

     

    A new payment system

    But this is set to change. Under a new payment system known as Direct Cash Settlement (DCS), the stock market will transit from the current stockbroker-mediated payment system under which proceeds of shares sales are remitted to the stockbroker for onward remittance to the investor to a new system under which payment will be made directly to the investor’s account.

    The DCS will become the mandatory payment process for the stock market as against the current stockbroker-mediated payment system. However, any investor may apply for specific or continuing remittance of his net proceeds to his stockbroker. While no specific date has been fixed for the mandatory conversion to DCS, a committee has been working to fine-tune arrangements for the launch of the new payment system.

    With the DCS, all investors will have to provide their bank accounts to the Central Securities Clearing System (CSCS) Plc – the clearing and settlement gateway of the market, for direct remittance of the net proceeds of their transactions.

    Under the rules for the DCS, stockbrokers are mandated to provide their clients’ bank account details to the CSCS, being the agent of the Exchange for the clearing and settlement of all securities traded on the Automated Trading System (ATS) of the Nigerian Stock Exchange (NSE). Settlement of each trade carried out on the ATS shall then be done by direct payment into the client’s account as provided to the CSCS. Any broker-dealer that fails to notify and provide the account details of an investor within three working days will be liable to a fine of N250, 000 in addition to any other penalty which the Exchange may impose.

    As part of the new rules, where a client provides its broker-dealer firm with a written mandate to purchase securities with proceeds from the sale of other securities any payment attributable to the sale shall be made into the account of the broker-dealer firm provided the client gives its consent in that regard. Every broker-dealer is also expected to take all reasonable steps to ensure that all details of direct settlement originate from the actual client through confirmation of the client’s details in relations to particulars contained in the ‘Know Your Client’ (KYC) provisions.

    “Any broker-dealer that trades in its client securities without receiving a mandate from its client or neglects to remit to its client the proceeds from trading in such client’s securities within three working days of receiving such, shall be liable for any penalties imposed under Article 148B for unauthorised sale of securities, in addition to any other penalty which the Exchange may impose,” the DCS rules stated. Besides, brokers are expected to improve their customer relations service and disclosures by being factual, plain and unambiguous in their presentations and agreements.

    GTI Capital Limited Chief Operating Officer, Mr. Hassan Kehinde said the transition might be a good development, but it is a double-edged blade that needs to be carefully handled. He noted that while the DCS may enhance investors’ confidence and forestall fraud and diversion of sales proceeds, it may also impinge on liquidity and subject the market to a prolonged slowdown.

     

    Foibles of the old order

    The fervour for the transition to DCS has been strengthened in recent period with the incidence of unauthorised sale of client’s shares and diversion of proceeds of shares sale. Last July, the NSE revoked the operating license and imposed a fine of N582.37 million on a stockbroking firm-Bytofel Securities and Investment Limited, for allegedly engaging in fraudulent activities in the stock market. Bytofel Securities was expelled for engaging in “unauthorised sales of clients’ shares and misappropriation of clients’ funds”.

    In another high-profile case last September, Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC), indicted Managing Director of Partnership Investment Company Plc and Partnership Securities Limited, Mr Victor Ogiemwonyi, for allegedly engaging in unauthorised sale of clients’ shares and diversion of sales proceeds among other infractions. Ogiemwonyi was banned from engaging in capital market activities and from holding directorship position in any public company in Nigeria. SEC also withdrew the operating licences of his companies.

    In one of the highpoints of the case against Ogiemwonyi, a former chief executive of Ecobank Transnational Incorporated (ETI) Plc, Mr Arnold Ekpe, an ally and client of Ogiemwonyi, had mandated his stockbroking firm, Partnership Securities Limited to sell his 96.08 million ordinary shares of ETI. Ogiemwonyi allegedly sold the shares but only remitted N300 million out of the total proceeds of N1.54 billion to Ekpe. The indictment of Ogiemwonyi changed the narration of unauthorised sales and diversion of proceeds from infractions of small-scale petty brokers to a larger scope of the market operators.

    A fellow and former council member of the Chartered Institute of Stockbrokers (CIS), former council member of the Nigerian Stock Exchange (NSE), former president of the Association of Issuing Houses of Nigeria (AIHN), member of the Capital Market Masterplan Implementation Committee and member of the board of the NASD Plc among others, Ogiemwonyi was one of the leaders of the market during his time. His company-Partnership Investment Company Plc was one of the few stockbroking-originated investment companies that were listed on the NASD Plc-the alternative over-the-counter (OTC) securities exchange for listing of public limited liability companies that are not listed on the NSE.

    In another landmark, SEC had recently, through the Economic and Financial Crimes Commission (EFCC) pursued and secured conviction of a stockbroker and former managing director of First Alstate Securities Limited, Mr Tajudeen Folaji, who was sentenced to seven years imprisonment by the Lagos State High Court over fraudulent sale of his client’s shares. The Lagos State High Court presided over by Justice Kudirat Jose found Folaji guilty of unauthorised sale of shares and stealing for fraudulently converting 31,886,200 shares of IPWA Plc  valued at N331.3 million belonging to an investor on April 3, 2008. The court also has imposed a N20 million fine on First Alstate Securities Limited where he was the managing director and dealing clerk.

    Besides, the court directed the EFCC to trace and liquidate properties belonging to the convict for restitution of the investor.

    Authorities at the capital market have so far this year revoked the operating licenses and expelled some 90 stockbrokers for various reasons. Capital market regulators traditionally apply the highest punishment of expulsion and revocation of license to serious offences that could undermine investors’ confidence, including fraud and inability to meet major operating requirements for the function. There are two major factors fuelling infractions at the stock market-greed and illiquidity. Whichever way, investors bear the brunt.

    “There are many structures put in place to safeguard investors and their investments. But we understand that the downtrend might be testing the honour of some few operators, my advice to members is to avoid sharp practices and operate with the highest level of professionalism, accountability, transparency and integrity. This would engender greater confidence and attract more investors to patronise the market,” President, Association of Stockbroking Houses of Nigeria (ASHON), Patrick Ezeagu,  said.

    But many have argued that infractions in the capital market are comparatively lower than other segment of the market, and these sharp practices are even on the decline. SEC indicated that level of infractions in the market has dropped by about 88 per cent over the past 18 months. The number of reported cases of infractions in the capital market had reduced from 291 in first quarter of last year to 36 in the third quarter of this year. The DCS will serve as a reinforcement for the market.

     

    Automated ecosystem

    Hassan said the timing and the benefits of the DCS must be weighed carefully against inadvertent negative impact on liquidity at the stock market. The extent and impact of free flow of funds through simultaneous trading must be studied to determine the possible fallout from the somewhat cumbersome process of filing for exceptions under the DCS. Ezeagu said while market operators and regulators have been working on effective compliance and enforcement at the market, the DCS may be one of the ways to forestall infractions.

    “To investors, I strongly advise them to embrace the Direct Cash Settlement (DCS) which will enable sales proceed to settle into their bank accounts directly. They should not patronise quacks and always follow up on their mandates to their brokers to ensure quick and timely delivery on transactions,” Ezeagu said.

    Association for the Advancement of Rights of Nigerian Shareholders (AARNS) President, Dr Faruk Umar, said the DCS will not only help to forestall incidence of unauthorised sale and diversion, but safeguard shareholders’ monies from confiscation by banks or other agencies in case of loan recovery or other enforcement action against a broker-dealer.

    “The Direct Cash Settlement is a commendable initiative. We have lost money in the past through outright diversion or confiscation by bank; this should help to safeguard our money. It will also serves to authenticate ownership of shares since nobody can claim proceeds of share sale, unless through the direct cash settlement,” Umar said.

    The DCS fits into the increasing automated and direct-dealing ecosystem at the capital market. Capital market regulators are aggressively implementing several other initiatives aimed at removing extraneous influences in the transaction. The electronic dividend payment system (e-dividend) will ensure that dividends are paid directly into shareholders’ bank accounts. This is in addition to the dematerialisation of all share certificates, which converts all shareholdings into automated deposits under the CSCS, and the related electronic offer (e-offer) and electronic allotment (e-allotment) that ensure that new supplementary shares are directly credited to the investors’ CSCS accounts. A shareholder, Adeleke Abayomi, however noted the need for a more intensive public enlightenment on the DCS and other initiatives, giving the low level of awareness about capital market issues. For investors and operators, the success of the DCS may be mutually beneficial, since investors’ confidence has positive correlation with attractiveness and participation in the market.

  • NSE adds Sterling Bank, Skye Bank, others to most influential stocks’ groups

    THE Nigerian Stock Exchange (NSE) is expected to move  Sterling Bank Plc, Diamond Bank and three other stocks to the top index of 30 most capitalised stocks  in the forthcoming review of the stock market’s indices.

    The NSE is expected to review the six group indices that track performance of some groups of stocks at the stock market by the end of this month. These included the NSE 30 Index, which tracks the 30 most capitalised stocks; the NSE 50 Index, which tracks the top 50 stocks; the NSE Banking Index, which tracks banking subsector; the NSE Consumer Goods Index, which serves as benchmark index for the consumer goods stocks; the NSE Oil and Gas Index, which tracks the oil and gas sector; the NSE Industrial Index, which underscores the building materials and other industrial goods stocks; the NSE Insurance Index, that tracks insurance stocks , NSE Pension Index-which tracks stocks specially screened in line with pension investment and the NSE Lotus Islamic Index, which tracks select stocks adjudged to meet the stringent Islamic standards of ethical stocks.

    At the completion of the first stage of its year-end review, the NSE indicated that it will change five stocks within the NSE 30 Index. The five of Dangote Flour Mills Plc, Diamond Bank Plc, NASCON Allied Industries Plc, Cadbury Nigeria Plc and Sterling Bank Plc will replace 7Up Bottling Company, Oando, UACN, Julius Berger Nigeria Plc and Forte Oil Plc.

    Under the NSE Pension Index, the review will see the replacement of four companies-7Up Bottling Co Plc, Oando Plc, Conoil Plc and united Capital Plc with Honeywell Flour Mills Plc, International Breweries Plc, Continental Reinsurance Plc and Cement Co of Northern Nigeria Plc.

    Lafarge Africa and Nigerian Aviation Handling Company will be added to the ethical NSE Lotus Islamic Index, while 7Up Bottling Company Plc and GlaxoSmithKline Consumer Nigeria Plc will be removed from the ethical stocks’ list.

    In the influential NSE Banking Index, Skye Bank Plc and Unity Bank Plc will replace Wema Bank Plc and Sterling Bank Plc.

    The NSE Consumer Goods Index will include Northern Nigeria Flour Mills Plc, DN Tyre & Rubber Plc and Nigeria Enamelware Plc while 7Up Bottling Company Plc, Vitafoam Nigeria Plc and Champion Breweries Plc will be removed.

    Under the populous NSE Insurance Index, four companies-Equity Assurance Plc, Mutual Benefits Assurance Plc, Sovereign Trust Insurance Plc and Consolidated Hallmark Insurance Plc will be replaced with new entrants including Regency Alliance Insurance Plc, STACO Insurance Plc, Universal Insurance Plc and Standard Alliance Insurance Plc.

    The rebalanced NSE Industrial Index will have Grief Nigeria Plc and Austin Laz & Company Plc in exchange for Portland Paints & Products Nigeria Plc and DN Meyer Plc while the NSE Oil and Gas Index will have Japaul Oil & Maritime Services Plc and Eterna Plc as replacement for Oando Plc and MRS Oil Nigeria Plc.

  • UACN to close application for N15.4b rights issue Friday

    Nigeria’s largest and oldest conglomerate, UAC of Nigeria (UACN) Plc is scheduled to close the application list for its ongoing N15.4 billion rights issue this Friday, giving shareholders some 48 hours to pick their rights.

    UACN is raising N15.36 billion through a rights issue of 960.43 million ordinary shares of 50 kobo each at N16 per share. The new shares have been pre-allotted to existing shareholders on the basis of one new share for every two shares held as at the close of business on Thursday October 19, 2017.

    The application list for the rights issue opened on November 15, 2017 and it is scheduled to close on Friday December 22, 2017. There are indications the conglomerate may not extend the offer period.

    After deduction of the estimated issue costs and expenses of N333.91 million, representing 2.2 per cent of the gross issue proceeds, the net issue proceeds is about N15.033 billion.

    A breakdown of the utilisation of the net proceeds indicated that the largest chunk of the net proceeds of N15.03 billion will be invested in the Plateau State-based subsidiary-Grand Cereals Limited.

    The board noted that due to increasing cost of raw materials and the planned investment by Grand Cereals Limited into the agricultural value chain, it has identified the need for equity injection into the subsidiary.

    The planned N7 billion rights issue of Grand Cereals will be subscribed to by UACN to the extent of its 64.9 per cent holding in addition to any unsubscribed units. The total amount of proceeds to be used for this investment is approximately N5 billion.

    Also, to further support Grand Cereals Limited’s expansion plans into the agricultural value chain, the board has identified the need for a shareholder loan of N3.5 billion to the subsidiary. However, the planned shareholder loan will be provided on commercial terms to Grand Cereals Limited and upon repayment at a future date will be deployed in the food and agro-processing categories of the group to enhance shareholder value.

    About N4.8 billion will also be used to support the working capital of both the Grand Cereals Limited and Livestock Feeds Plc by part-financing inventory procurement during harvest season of grains and oil seeds. About N2.8 billion will be used for Grand Cereals Limited while N1.2 billion will be devoted to Livestock Feeds.

    According to the conglomerate, the harvest season of grains and oil seeds usually starts in the last quarter of every year when the financial institutions typically adopt tight credit policies to achieve their audited balance sheet goals. The availability of the required funds in a timely manner at that particular time is a competitive imperative. The raw materials will be utilised in the course of the year by the two subsidiaries. Also, the transaction between UACN and the agro-processing subsidiaries will be on commercial terms and at arm’s length.

    The conglomerate has also indicated that it would consider new acquisitions and mergers to further optimise the values of its existing businesses and take advantage of emerging opportunities in other sectors.

    In a circular outlining the operational philosophy of the conglomerate and the purposes of the ongoing new capital raising, the board of directors of the conglomerate stated that it would “continue to explore merger and acquisition opportunities relevant to it businesses”.

    The board of the conglomerate indicated it has earmarked N2.5 billion from the net proceeds of the ongoing rights issue for “product innovation and growth investment in existing markets and adjacent categories”.

    According to the board, it is conscious of the fact that the recent economic downturn presents an opportunity for product innovation and growth investment in existing markets and adjacent categories.

    “Management has been mandated to explore such value-optimising opportunities for investment consideration. The sum of N2.5 billion has been earmarked for this endeavour,” the company stated.

    Nigeria’s oldest surviving business, UACN started business in Nigeria in 1879, well ahead of the 1914 amalgamation that created the current Nigerian nation. With 10 subsidiaries in key sectors of the Nigerian economy, the UACN Group consists of several active companies spreading through manufacturing, services, logistics and real estate sectors of the Nigerian economy. These include four quoted subsidiaries-CAP Plc, UACN Property Development Company (UPDC) Plc, Livestock Feeds and Portland Paints and Products Nigeria Plc; in addition to the parent company, UACN. UPDC Real Estate Investment Trust, which is also quoted on the NSE, is a subsidiary of UPDC.

    UACN acquired Livestock Feeds and Portland Paints in 2013. Other members of the group included UAC Foods Limited, UAC Restaurants Limited, MDS Logistics Plc, Warm Spring Waters Nigeria Limited, Grand Cereals Limited, and Unico CPFA Limited. Listed in 1974, UACN is owned by some 185,000 shareholders. No shareholder holds five per cent and above other than Stanbic Nominees Nigeria, which hold 17.86 per cent equity stake.