The Nation Newspaper

Category: Money

  • Barclays sees headwinds for South African bonds as losses mount

    South African bonds, enduring the longest monthly losing streak in two years, have some way to fall before enticing buyers, according to Barclays Plc.

    The debt lost 0.9 percent in May, the fourth straight month of declines, according to Bank of America Merrill Lynch indexes. Yields on benchmark South African securities have climbed 119 basis points to 8.23 percent since hitting a 20-month low in January, and may have to rise as high as 8.5 percent to compensate investors for the risks, said Barclays strategist Michael Keenan.

    New taxes on gasoline, government wage increases above the inflation rate, a weak rand and the prospect of higher electricity tariffs are fueling inflation in South Africa at a time when the Federal Reserve is preparing to raise borrowing costs, drawing money to dollar assets. A looming credit rating review by Fitch Ratings and a hawkish central bank are adding to the headwinds for South African debt.

    “I wouldn’t be rushing out and buying bonds,” Keenan said by phone from Johannesburg on May 28. “Bonds remain vulnerable to mounting domestic and U.S. policy rate-hike fears.”

    While the central bank has kept its benchmark repurchase rate unchanged at 5.75 per cent since July to support the economy, rising gasoline, electricity and food costs are putting pressure on prices. An application by Eskom Holdings SOC Ltd. to raise electricity tariffs by as much as 25 percent could add 0.5 percentage points to inflation over the next year, according to central bank Governor Lesetja Kganyago.

    Inflation jumped to 4.5 percent in April and the central bank forecasts it will peak at 6.8 percent in the first quarter of next year, also spurred by a weak rand that’s boosting import costs and rising food prices. The five-year break-even rate, which measures expectations for consumer-price growth, climbed 25 basis points in May to 6.57 percent, the highest since July.

    Forward-rate agreements starting in six months, used to speculate on borrowing costs, show investors expect 62 basis points of interest rate increases this year, 22 basis points more than at the start of May.

    “I would really look for serious pull-backs to start adding again,” Abri du Plessis, a portfolio manager at Cape Town-based Gryphon Asset Management Ltd., which oversees the equivalent of about $330 million, said by phone on May 28. “This pullback is only maybe the beginning. I can see it going to 8.50 on the bond side.”

    Foreign-investor purchases of South African bonds dwindled to 128 million rand ($10 million) in May from 15.2 billion rand in April as the Fed moves closer raising interest rates. Economists forecast the Federal Reserve will increase borrowing costs in September.

  • Taking cash-less banking to greater heights

    Taking cash-less banking to greater heights

    Telecoms technology and banking services are creating a new growth in the financial services sector via mobile money. This payment module has grown beyond its initial concept and is expected to bridge the gap between the banked and unbanked, writes COLLINS NWEZE.

    The dream of getting financial services to the nooks and crannies of the country is being realised by banks, the Central Bank of Nigeria (CBN), telecoms operators and the Nigeria Communications Commission (NCC) via money.

    That vision, many analysts said, would be driven by mobile money. This refers to payment services operated under financial regulation and performed from or via a mobile device.

    Mobile money system refers to the various components required to deliver mobile money to the banking and non-banking community. The providers of these services and solutions are required to operate within the defined regulatory framework specified in this document and any other regulation/guideline issued by the CBN.

    The CBN is responsible for defining and monitoring the mobile money systems in Nigeria.

    With mobile money, instead of paying with cash, cheque, or credit cards, a  consumer can use a mobile phone to pay for many goods and services.

    In 2008, the global market for various mobile payments was projected to reach more than $600 billion by 2013. In developing countries, including Nigeria, mobile payment solutions are deployed as a means of extending financial services to the unbanked or under-banked. These groups constitute about 50 per cent of the world’s population, according to Financial Access’ Report.

    Analysts insist that financial exclusion persists because of the inaccessibility of the unbanked mostly people in the lower strata of the economy, by the financial services providers.

    The unbanked are often far removed from the centre of commerce, which tends to lower their participation in economic transactions.

    Thus, a combination of low demand for financial services and prohibitive costs without commensurate returns dissuades financial services providers such as banks, insurance, and pension administrators from establishing its presence in these locations.

    However, mobile technology and innovations in the financial services industry, coupled with the phenomenal growth in telecoms’ subscriber numbers, have altered this situation.

    However, financial services providers continue to leverage the reach of telecoms networks to provide mobile money services to otherwise inaccessible locations.

    The spate of agreements on mobile money services among financial institutions and telecoms networks, MTN and Diamond Bank, UBA and Airtel, Stanbic IBTC Bank, FirstBank, Ecobank and Globacom, will, doubtless, ramp up the synergy that should lead to further growth in mobile money.

     

    NIBSS Network

    The CBN insists that Mobile Money Operators (MMO) are required to, henceforth, connect to the Nigeria Interbank Settlement System (NIBSS) otherwise called the National Central Switch (NCS) to ensure ease of communication for schemes in the system.

    In a guideline for the sector, the apex bank said a scheme operator can either be a bank or a licensed corporate organisation.

    It said the NIBSS is responsible for connecting the various players in the financial system using various players, such as banks, MMOs, non-banking financial institutions, payment terminal providers, card acquirers, government institutions and their customers to send, receive and process funds, documents and other instruments electronically through its platform.

    The apex bank said MMOs are the lead initiators for the mobile scheme and shall be responsible for ensuring that the various solutions and services within an approved mobile payment scheme meets the entire regulatory requirements as defined in this framework and as may be specified from time to time.

    The regulator said the MMOs shall be ccountable to the CBN and the end users. The CBN recognises that, with the evolution of the mobile money system, spin-off services would be identified by MMOs, which can be outsourced to entities with specialised skills and resources to support such services in a more efficient and effective manner. The service providers may employ the infrastructures of the MMOs to provide services to the end users.

    “The MMOs shall provide a detailed payments management process that covers the entire solution delivery, from user registration and management, Agent recruitment and management, Consumer protection/dispute resolution procedures, Risk management process to transaction settlement. These processes shall cover the scope of the value chain across all the participants in the mobile money ecosystem,” it said.

     

    The M-Pesa example

    The poster boy of the successful integration of the rural/informal populace into banking system via mobile money services is usually Kenya. M-PESA, Kenya’s mobile money system, has been hugely popular and successful in that country. It has over 40,000 agents and 17 million users (“equivalent to more than two-thirds of the country’s adult population, conducting more than two million transactions daily.

    In 2010, Kenya had just 840 bank branches and 1,510 ATMs to serve a population of 47 million. M-PESA, with its 40,000 agents, helped to plug the supply hole and provide access to financial services to ordinary Kenyans.

    Micro finance institutions piggybacked on M-PESA to penetrate remote areas quickly without increase in costs.

    In other countries, some financial institutions seemed to have found the right mix to ensure the successful deployment of mobile money. Standard Bank (parent bank of Nigeria’s Stanbic IBTC Bank), for instance, has been successful with mobile money in Uganda, Tanzania, and South Africa.

     

    Bank-led model

    The bank-led mobile money model adopted by Nigeria may be slightly different from Kenya’s telecoms-driven model but the underlying peculiarities are broadly similar.

    Access, costs, lower economic activities, and partnerships are common threads. The lessons of M-PESA are not lost though as mobile operators like MTN Nigeria is beginning to play more significant roles in mobile money.

     

    CBN Vs telco-led model

    The CBN said it avoided the implementation of the telco-led model in the mobile money operation to have control of monetary policy operations. The policy, it said will also enable it minimise risks and ensure that the offering of financial services are driven by organisations it licensed.

    In new guidelines, the CBN said the telco-led model, where the lead initiator is Mobile Network Operator (MNO), shall not be operational in the country. The apex bank said the overriding vision of achieving a nationally utilised and internationally recognised payments system necessitates strategies to bring informal payment transactions into the formal system.

    This framework has identified two models for the implementation of mobile money services namely; Bank Led – Financial Institution(s) and/or its Consortium as Lead Initiator and Non-Bank Led- A corporate organisation licensed by the CBN as Lead Initiator.

    “The CBN recognises the importance of Mobile Network Operator (MNOs) in the operations of mobile money and appreciates the criticality of the infrastructure they provide,” it said.

    The CBN said a robust payments system is vital for effective monetary policy implementation and the promotion of economic efficiency. “The introduction of mobile telephony in Nigeria, its rapid growth and adoption and the identification of person to person payments as a practical strategy for financial inclusion, has made it imperative to adopt the mobile channel as a means of driving financial inclusion of the unbanked,” it said.

    Chief Excutive Officer (CEO), MTN Nigeria, Michael Ikpoki, said the network would focus on meeting the significant market demand for financial services and mobile content with an expected positive impact on data revenue.

    “The success of Diamond Y’ello Account and other basic mobile money services is expected to lead to the adoption of more sophisticated mobile payment solutions such as bulk mobile payment designed for corporate organisations. This service makes it easier for organisations to send money in bulk to their suppliers, employees or other business partners without the beneficiaries necessarily having to own a bank account,” he said.

    Mobile money providers are also expected not be shy to adapt and replicate what works in other places but continue to innovate and develop bespoke products and services to excite consumers and boost conversion rate.

     

    Benefits to consumers

    Some of the benefits to the consumer include security, convenience, accessibility, speed and ease of transaction, competitive charges, access to quality advisory services, and integrity of transactions; the customer literally carries his bank in his pocket or bag wherever he goes.

    Other not-so-obvious benefits, which are nonetheless important, are better cash flow management, enhanced financial planning, and inculcation of sustainable savings habit, which boost financial security and comfort in retirement.

    “Mobile payments, which I perform on my phone, help to reduce my travelling costs,” a farmer in the rural area who uses mobile payment services said.

    Mobile money also has the potential to galvanise economic activities, leading to higher socio-economic development, lower cost of transactions and reduction of cash handling costs, among other benefits.

     

    Role of regulators

    CBN Director, Payment Systems Unit, ‘Dipo Fatokun, said apex bank believes that mobile money and agent framework is the frontier of cashless boom.

    “Mobile money is the next thing expected to transform CBN’s cash-less policy. The apex bank believes that such initiative will aid both telecommunications and banking industries to further serve Nigerians better,” he said.

    Nigeria’s telecoms subscriber base, put at 131 million as of September, last year by the Nigerian Communications Commission (NCC) should play a major role in bringing the unbanked into the formal banking system.

    With over 50 per cent of Nigeria’s unbanked adult population, mobile banking could be the catalyst that will help quicken the adoption of banking services by this critical segment of the population.

    Offshore portfolio managers appear to be similarly persuaded and they are already positioning to take advantage of the expected growth in mobile money.

    For instance, Carlyle Group, a United States-based global alternative asset manager with $203 billion of assets under management across 129 funds and 141 fund of funds vehicles, recently acquired a $147 million (about N27 billion) minority stake in Diamond Bank, partly on the strength that the bank’s new mobile banking service “will help rapidly boost the lender’s customers and profits.”

    Also strengthening mobile money is the Nigerian Deposit Insurance Commission (NDIC’s) extension of deposit insurance cover of up to N500,000 to mobile money account holders.

     

  • British bank payments system set for review

    The “Big Four” British banks at the heart of the £75 trillion a year payments system face a major shake-up after the regulator launched a full-blown review into their charges and the limited choices on offer.

    Barclays, HSBC, Lloyds and Royal Bank of   Scotland are the main owners of systems such as BACS and Chaps and the major ATM networks which smaller challenger banks must use to move their clients’ money around the UK. This includes provision of the all-key sort codes which are at the heart of identifying banks and branches.

    The review will also cover the rapidly growing, digital-payments sector which includes businesses like PayPal and Monitise.

    The move comes just months after Hannah Nixon was appointed as the UK’s first Payment Systems Regulator.

    At the regulator’s launch in April, she said: “Our approach will bring change to the industry, injecting competition and innovation where it is needed most, and will put the interests of the people and businesses that use payment systems front and centre.

    “True, long-lasting change will be difficult, but we have the powers and the people to make it happen.”

    Today she launched her first inquiry, which will cover the supply of indirect access to the payment system. This will investigate how easy or difficult it is for the Big Four’s competitors to access the payments system, the charges made, transparency about such access, the quality of technology and the demand for potential alternatives to the current set up.

    Ms Nixon has powerful weapons in her armoury to enforce change if she finds the current system is not working or is unfair. She can single out specific banks, fine them, order changes, advise the Bank of England and Prudential Regulation Authority to make changes and even call for a full-blown Competition and Markets Authority inquiry.

    Ms Nixon warned: “Parliament has given us very strong powers. If firms do not step up to the mark we will use those powers to issue directions, impose fines and impose obligations that will force individual players to act differently.”

    She plans to publish an interim report by December or January next year with a final report due in April or May  of 2016.

  • Recapitalisation: MfBs’ funds hit N173b

    Recapitalisation: MfBs’ funds hit N173b

    Microfinance Banks (MfBs) paid-up capital  and shareholders’ funds have risen to N173.45 billion, the Central Bank of Nigeria (CBN) has said.

    Its Deputy Governor, Financial Sector Stability, Dr. Joseph Nnanna, made this known in the Financial Stability Report released at the weekend.

    He said the increase in capital was due to the recapitalisation of MfBs which upgraded from Unit to State MfBs and State to National MfBs.

    He said the funds increased by 13.48 per cent and 7.37 per cent to N82.44 billion and N91.01 billion  at the end of December last year, from N72.65 billion and N84.76 billion, at the of end of June, last year.

    He said the total deposit liabilities and net loans/advances also increased by 0.99 and 25.80 per cent to N145.83 billion and N162.91 billion, compared with N144.4 billion and N129.5 billion, as at last June.

    He explained that the improvement in the operations of MfBs was attributed to the impact of the CBN’s initiated Microfinance Certification Programme (MCP) for the boards and management of MfBs, and the growing acceptance of the microfinance banking model.

    Reserves, he said, however, decreased by N3.5 billion to N8.6 billion at the end of last December, from N12.1 billion at the end of last June, no thanks to increased loans.

    The bank chief said the apex bank collaborated with development partners and other stakeholders to establish a unified application (Core Banking System) for the MfB sub-sector.

    The proposed unified platform, and the Rural Financial Institutions (RUFIN) project for online rendition of electronic returns by MfBs, he added, is expected to facilitate accurate and prompt rendition of statutory returns.

    He said in the review period, 289 candidates completed the Microfinance Certification Programme (MCP), bringing the number of certified operators to 2,882 at last December.

    The certified operators are spread over 632 microfinance banks, representing 71.5 per cent of the sub-sector.

    The number of primary mortgage banks (PMBs) increased to 42  by December last year, from 40 at by last June, as two dormant PMBs were reactivated following their recapitalisation.

    “National PMBs remained at 10 at end of December 2014, while State PMBs increased to 32 from 30 at the end of June 2014,” he said.

    Nnnanna said the CBN extended the deadline, from last June 30 to last December 31, for some PMBs that are recapitalising. However, the total assets of PMBs decreased by 5.97 per cent to N389 billion at the end of last December, compared with N413.7 billion at the end of  last June.

    “However, their paid-up capital, deposit liabilities and loans/advances increased by 51.78, 35.33, and 22.18 per cent to N121.69 billion, N703.74 billion and N133.02 billion, at the end of December 2014. Aggregate reserves declined by 74.53 per cent, from N94.61 billion to N24.10 billion, while shareholders’ funds increased by 35.95 per cent, from N107.24 billion to N145.79 billion at end-June 2014,” he said.

    Continuing, he said: “There were 3,538 Other Financial Institutions (OFIs) in Nigeria at the end of December last year, compared with the 4,220 licensed institutions at the end of June last year, representing a decrease of 682 institutions (16 per cent).

    “The change was attributed to the net effect of the exit of 733 Bureaux De Change (BDCs) owing to their inability to meet the recapitalisation requirements, the licensing of 54 new OFIs (51 MfBs and three Finance Companies (FCs); and the revocation of two MfBs licences during the review period.

    “The total number comprised six Development Finance Institutions (DFIs), 42 Primary Mortgage Banks (PMBs), 903 Microfinance Banks (MfBs), 64 Finance Companies (FCs) and 2,523 Bureaux de Change (BDCs).”

    He said the total assets of the sub-sector increased by 23.2 per cent to N1.69 trillion at the end of December, last year, from N1.37 trillion at the end of June, last year. The total paid-up capital, however, decreased by 0.36 per cent to N444.8 billion at the end of December, last year, from N446.4 billion at end-June, last year, while the total net loans/advances increased by 58.03 per cent to N1,048.5 billion at end December 2014, from N663.5 billion at end-June 2014.

    Total deposits decreased by 22.81 per cent to N357 billion as at last December, from N462.5 billion last June.

  • BVN cuts forex to $50,000

    The Bank Verification Number (BVN) initiative, when fully implemented, will help to curb arbitrage in the foreign exchange (FOREX) market and reduce the spending limit on the use of the naira denominated debit cards for transactions abroad, from $150,000 to $50,000 per person yearly. The daily cash withdrawal limit on the card was also fixed at $300 per person.

    Sterling Bank’s Executive Director Abubakar Suleiman, who disclosed this at an interactive session with reporters in Lagos, explained that with the BVN, each bank customer will have a unique identification, which will make it easy to prevent people from flouting the Central Bank of Nigeria (CBN)’s policy on the use of naira-denominated debit cards for transactions abroad.

    According to the Managing Director/Chief Executive Officer, Union Bank of Nigeria Plc, Mr. Emeka Emuwa, the decision was taken because of some cases of card abuse abroad which impacted exchange rate stability.

    The Union Bank boss had explained: “We did find that in a number of cases people were using the cards in a manner that they were not expected to use them and there have been cases of arbitrage. So, in order, to sustain stability, what was agreed by the committee was that the limit for the use of the naira debit cards would be reduced.”

    However, industry watchers argued that bank customers could attempt to circumvent this policy by opening several bank accounts and using the naira debit cards they will be given to make withdrawals above the limit.

    But, according to Suleiman, this will not be feasible when the BVN initiative is fully implemented, as each bank customer will have a BVN that will give him/her a unique identity that will be known to every player in the financial sector. Thus, when such a customer has reached the limit of his naira debit card spending abroad, he will not be able to use another card as the system will immediately recognise him.

    The BVN, which is an initiative of the CBN and the Bankers’ Committee, was launched on February 14, last year.  It is a unique identifier for each bank customer across the financial industry, making it possible to build and track customer financial history and activity. This will allow banks access to more reliable information that could inform decisions on customer loan and credit applications and other complex transactions.

    The initiative is expected to boost financial inclusion as those who have typically stayed away from mainstream banking due to low literacy levels will be able to open and access their bank accounts using their biometric information rather than traditional identification methods.

    To encourage enrolment for the BVN, the CBN had directed banks to  honour only transactions over N100 million from customers with BVN from March 2015. Such transactions,  the Central Bank said, include but not limited to, money transfers, loans, and contingencies.

    The CBN also urged bank customers to register for their BVN by this month, warning that any customer without a BVN would be deemed to have inadequate Know-Your-Customers by that date.

    The Managing Director, Nigeria Interbank Settlement System Plc (NIBSS), Mr. Ade Shonubi, said customers who have done the mandatory biometric registration at any bank branch would soon start collecting their BVN cards as the cards were already with the banks awaiting collection by customers.

    Shonubi said bank customers would not be charged for the cards.

    The NIBSS boss said: “We are giving the BVN cards out for free. The cost is borne by the Bankers’ Committee, which considers the whole biometric project very important. They have been bearing the cost; the cost of the cards, cost of almost everything else that has to do with the BVN.

    “I have got my BVN card. I would encourage bank customers to talk to their banks as well. They have been printing them and sending them to the banks to distribute to the branches where you have enrolled, you would be sent an SMS. For those that have given email address, it would be sent to their emails.”

    Indeed, investigations reveal that some banks have started giving the cards to their customers.

     

  • Greece mulls parallel currency alongside euro

    As Greece’s financial pli-ght worsens, an odd idea keeps popping up: a parallel currency alongside the euro that would circulate inside Greece and be used to pay for anything from taxes to food and clothing.

    Even German Finance Minister Wolfgang Schaeuble has said  Greece may need a parallel currency if talks with creditors fail, people familiar with his views told Bloomberg.

    One version of the idea calls the second currency a TAN, for tax anticipation note. Another calls it a grec, for government reimbursement exchange credit. There’s also the TCC, for tax credit certificate. In 2014, before becoming Greece’s finance minister, Yanis Varoufakis pitched European governments on the FT-coin, where FT stands for future taxes and coin refers to bitcoin.

    Details differ quite a bit, but the big idea is to free up euros to pay foreign debts and to juice economic growth by spreading more money around domestically. The money would be an IOU issued by the Greek government that could be passed from one person to another. The government could print a bunch of the new currency (or create electronic ledger entries if the currency is virtual) and spend it on whatever governments buy, including civil servants’ salaries. People would in theory be willing to accept the money because it could be used to pay taxes.

    Greece doesn’t have the option of monetary stimulus, because it doesn’t control its own money—the European Central Bank does. And it can’t run bigger deficits, because creditors won’t stand for it.

    But is this idea anything more than an intellectual exercise? Unfortunately for Greece, probably not.

    “No, it’s not a good idea, and no, it has no chance of happening,” said Jacob Funk Kierkegaard, a senior fellow at the Peterson Institute for International Economics. Introducing it, he said, “would surely aggravate the other Europeans as well as the ECB. It would politically aggravate the situation that Greece is in.” He called it “very primitive and naive, knee-jerk Keynesianism.”

    People would naturally be suspicious that the new currency would be funny money, and wouldn’t accept it on the same terms as euros, Kierkegaard said. Given Greece’s track record, they would tend to fear that the government would print too much of it, creating an oversupply that would degrade the currency’s value. And because the initial allotment would produce a smaller economic spurt than the government was counting on, the government would indeed be tempted to print more, Kierkegaard said.

    In February, Huw Pill and Themistoklis Fiotakis of Goldman Sachs International described the idea of a parallel currency as belonging to a “gray area” between fully staying in the euro zone and completely exiting.

    Backers of parallel-currency concepts say the idea can work. “The grec is emphatically not ‘funny money.’ It has a real, tangible value from day one,” Alan Harvey, senior economist at the Institute for Dynamic Economic Analysis (IDEA) in Seattle, wrote in a paper. It’s the ability to use the government-created alternative currency to pay taxes that guarantees its value, Harvey said in an interview. Ordinarily money is created through bank lending. “This is a different way of creating money,” he said.

    Parallel currencies are sometimes found in countries that impose controls on the inflow and outflow of money. Cuba has had a nonconvertible peso alongside a convertible CUC, although it’s phasing out the latter. Another twist is a local currency like Ithaca Hours, which is used to buy goods and services in the area of Ithaca, N.Y.

  • AFREXIM mulls $1b loan

    • May borrow in Renminbi

    The African Export-Import Bank (AFREXIM) is to raise over $1billion in bonds and loans in Renminbi, the Chinese currency, as trade with China rises.

    Bloomberg quoted Jean-Louis Ekra, president of the Cairo-based lender, as saying a Eurobond of between $400 million and $600 million might be sold this month.

    He spoke in Abidjan, Ivory Coast, where the bank opened its third regional office after Harare in Zimbabwe and Abuja.

    The firm will seek the loans from 35 banks later in the year, he said.

    “We want to help the regional economies grow by supporting the private sector. We plan to raise funds in the Chinese currency because of increasing trade between Africa and China,” he said.

    AFREXIM is considering borrowing in Chinese renminbi to take advantage of rising trade in Africa with China, which is the top trading partner of Africa’s five-largest economies, including South Africa, Nigeria and Angola. The lender, which started in 1993, is raising debt as borrowing costs on existing bonds drop to record lows and companies across sub-Saharan Africa issue Eurobonds to benefit from a global hunt for yield.

    Rates on AFREXIM’s $700 million of notes due July 2019 dropped 115 basis points, or 1.15 percentage points, this year to an all-time low of four percent last week.

    Companies in the world’s least-developed continent issued $2.8 billion of dollar-denominated debt in the year, the best start to a year since 2011, as investors take their search for returns further afield amid dwindling gains elsewhere. Interest in African debt is being driven partly by falling yields in other emerging markets, in turn spurred by record-low developed-nation interest rates.

     

  • S/A’s Deputy President sells assets

    South African Deputy President Cyril Ramaphosa has completed the sale of most of his business interests to a company led by MTN Group Ltd. Chairman Phuthuma Nhleko, creating a group with more than $730 million in assets.

    Nhleko’s Pembani Group will merge with Shanduka Group, the Johannesburg-based companies said in a statement on Monday. Ramaphosa’s family trust had a 30 percent stake in Shanduka, which he founded in 2001 after quitting government when he failed to become Nelson Mandela’s deputy president.

    “The group will have a portfolio value in excess of 9 billion rand ($734 million) which will give it significant scale, with liquidity to pursue value-creating opportunities in sub-Saharan Africa,” the companies said.

    Shanduka has stakes in 29 businesses, ranging from Standard Bank Group Ltd., Africa’s biggest lender, to mobile-phone company MTN and a coal-mining venture with Glencore Plc. Ramaphosa, whose remaining company shareholdings will be held in blind trusts, re-entered politics in 2012 when he became deputy president of the ruling African National Congress. He became the country’s deputy president last year.

    With a fortune of $550 million, Ramaphosa is South Africa’s richest black person after Patrice Motsepe, his brother-in-law, according to the Johannesburg-based Sunday Times newspaper. Nhleko is the fifth-richest black South African with assets of $142 million, according to the newspaper. He oversaw MTN’s development into Africa’s biggest mobile-phone operator.

  • May & Baker to raise new equity funds

    •Shareholders laud dividend payment

    May &Baker Nigeria Plc plans to raise new equity funds in the second half as the healthcare company rebounded with a profit before tax of N101.1 million in 2014.

    Chairman, May & Baker Nigeria Plc, Lt. General Theophilus Danjuma (rtd), said the company would raise new equity funds later this year to deleverage its balance sheet and consolidate the gains of its recent investments and profitability.

    Danjuma indicated that the company may opt for rights issue to compensate shareholders that had bore the burden of the company’s huge depreciation and interest financing, which depressed profit in the previous year.

    Shareholders had earlier in 2014 approved a resolution authorizing the board of the company to raise additional N3.2 billion through rights issue or private placements.

    Danjuma said the new equity issue was delayed to give investors opportunity to pick their rights in recognition of their supports for the company.

    “The company has not been able to consummate this offer on account of due considerations of timing and the readiness of our members to fully pay for their stakes. We are mindful of the sacrifices members have made in the past when the company was under pressure of constructing the plant in Ota and we realise that it will only be fair to open the offer when majority of us will be able to take our rights,” Danjuma said.

    He called on the shareholders to prepare to take up their Rights in the current financial year to enable the company raise more equity for its operations.

    Key extracts of the audited report and accounts for the year ended December 31, 2014 showed that the company’s profit before tax rose by 818 per cent from N11.4 million in 2013 to N101.1 million in 2014. Profit after tax stood at N63 million in 2014 as against net loss of N103 million in 2013. Turnover rose to N7 billion in 2014 as against N6.3 billion in 2013, representing a growth of 11 per cent.

    Danjuma, at the annual general meeting in Lagos, said the performance in 2014 reflected the gains of cost containment measures and efficient allocation of resources by the management, which drastically reduced the level of money paid by the company to service debt obligations.

    He however noted that the company continued to suffer high finance charges resulting from its dependence on bank and related loans, a trend the pharmaceutical giant has had to live with for several years now since it undertook the construction of its new pharmaceutical manufacturing  facility in Ota, Ogun State.

    He pointed out that the company paid a total of N600 million on finance charges in 2014, a 4.2 per cent reduction from the figure of N630 million paid for similar charges in 2013 noting that the huge interest expense could have added to the profit of the company and subsequently the dividends paid to shareholders if it was trading with its own funds.

    “I am optimistic that as soon as soon as we are able to recapitalise the business we shall take down the high financing cost which is currently taking substantial earnings off the company. This will put us in a stronger position to fully leverage our installed capacity, aggressively promote our existing brands, launch the new products and businesses in our pipeline and deliver better profits,” Danjuma said.

    Managing Director, May & Baker Nigeria, Mr. Nnamdi Okafor said steady progress is being made by the company in the areas product formulation, development and marketing.

    He said recent strategic efforts have helped to grow the business of the company in the last three years with consistent improvements in turnover.

    According to him, despite increasing challenges in the economy, the company’s has steadily improved on its profitability as gross margins have consistently improved in the last three years

    He outlined other recent milestones by the company to include the certification of its pharmaceutical manufacturing facility by the World Health Organisation(WHO) on Good Manufacturing Practice (GMP), poting out that this achievement has opened the doors of the company to international business enquiries which will soon translate into huge revenue and profits.

    He noted that the recent celebration of 70 years of doing business in Nigeria by May & Baker is also creating additional confidence in stakeholders who see the pharmaceutical giant as a viable and sustainable business organisation.

    Shareholders of the company commended the return to profitability and the resumption of dividend payment. They unanimously approved the payment of a dividend per share of 5.0 kobo for the 2014 business year.

    President, Progressive Shareholders Association of Nigeria (PSAN), Mr. Bonifae Okezie, shareholders were that the company has returned to profit noting that with the modest dividend payment for the 2014 business year, the expectation is that it would improve to higher dividend in the years ahead.

    “Let me thank the board and management for a job well down. Though, the dividend of 5.0 kobo is small but if we look at where we were coming and the gigantic project that the company just completed, then we need to appreciate the management of the company. We hope that this will improve in the current financial year,” Okezie said.

    It will be recalled that the company got under pressure from financing charges and depreciation allowances as a result of its new  pharmaceutical manufacturing plant, which was financed largely by loans during the 2008-2009 capital market recession. Finance costs rose by 34.3 per cent to N630.71 million in 2013 compared with N469.63 million in 2012, while the company provided about N240 million annually in 2013  and 2014 out of its gross profit for the depreciation of the new pharmaceutical  facility with monthly depreciation average of N19.8 million. The year 2014 was the first full year of depreciation.

    May & Baker had raised her capacity to produce more products with the construction of the world class pharmaceutical centre known as the PharmaCentre located in Ota Ogun State. The facility has raised May & Baker’s production capacity by over 60 per cent. The PharmaCentre  is a mega investment in the pharmaceutical sector targeted at making Nigeria one of the leading producers of quality medicines in the world. It is one of the few Nigerian pharmaceutical facilities that were recently certified by the World Health Organisation (WHO) on Good Manufacturing Practice (GMP). The PharmaCentre is currently undergoing the process of WHO pre-qualification for its specific products.

     

  • Stockbrokers to engage government on investment education

    The Chartered Institute of Stockbrokers (CIS) would engage the new administration of President Muhammadu Buhari on the need to integrate capital market operations into the entrepreneurial schemes of various government agencies, especially the National Youth Corps Scheme (NYSC).

    The CIS stated that such investment education and empowerment would avail fresh graduates more comprehensive exposure to the capital market operations and provide them with necessary knowledge to take useful decisions.

    The Federal Government has institutionalized entrepreneurial training in the NYSC scheme to enable the fresh graduates develop a new capacity aside from their academic background. This is part of the strategy to promote self-employment for the youths by de-emphasizing dependence on white collar jobs

    Head, research and technical, Chartered Institute of Stockbrokers (CIS), Mr Arinze Nwobu, who led a team in continuation of the institute regular enlightenment programme for youths at the 2015 Lagos State NYSC orientation camp Batch B , said the fresh graduates can make a career in the capital market.

    According to him, many of the young graduates could make career in the capital market after their NYSC primary assignment as it will broaden their scope on the capital market operations. Already, CIS has been at the forefront of investor education for the NYSC members every quarter. Many of the fresh graduates lack in-depth information about opportunities provided by the capital market and how they can take advantage of such.

    Nwobu said that serving graduates who had passed through universities and polytechnics are eligible and qualified to explore the benefits and opportunities in the capital market and could later take up jobs as stockbrokers, securities analysts, investment bankers and portfolio managers who are currently the major players in the capital market.

    He therefore urged the Corp members to take advantage of the programmes of the institute by enrolling for the CIS professional examination while serving the Nation.

    While appreciating the CIS, State Coordinator, NYSC Lagos, Mr. Cyril Akhanemhe remarked that it was quite thoughtful of the Institute to have brought great opportunity for the Corp members.

    He urged the Corp members to take advantage of exploring the opportunities available to them during their service year.