The Nation Newspaper

Category: Business

  • ‘Insecurity has not affected trading’

    Managing Director Multi-Trex Integrated Foods Plc Mr Dimeji Owofemi has said the insecurity situation in the country has not affected trading.

    Rather, it has helped to strengthen the marketing chain, especially in the Southwest.

    Owofemi spoke at the launch of the company’s new product called “Moor Instant Chocolate Drink on along Lagos-Ibadan Expressway.

    He said despite the insecurity in the northern, trade within the region hadn’t stopped.

    According to him, “Vehicles still travel from the north to Lagos daily to lift fuel and convey goods from the state to the region. So, I do not see the reason anyone will say it has placed barrier on trade.”

    He added that the farmers in the northern were also interested in exchanging their produce into cash.

    “As this continues, it has led to the expansion of the market chain to give more people the opportunity to operate within the system. And it hasn’t affected the introduction of new product into the market.

    “Daily new brands are introduced into the market and they all find their way to the parts of the country that we all brand as place with high level of insecurity,” he further said.

    He noted that the level of security would increase when youths realised the importance of their hands as a tool for the development of the country.”

    He added: “hundreds of youths while they were growing up weren’t exposed to how they can make use of their hands to produce materials that will benefit the society.

    “And to address this, our company has trained hundreds of pupils from 43 different schools on how to use their hands effectively to produce different products with cocoa.”

    Speaking on the new product, Owofemi said the company discovered that many chocolate brands in the market do not have enough cocoa, adding: “This is what the product has come to offer in the market.”

    He noted that the product has 20 per cent cocoa, which gives it an edge over other brands.

  • CBN lists recapitalisation options for mortgage banks

    The Central Bank of Nigeria (CBN) has outlined the options for recapitalisation available to Primary Mort-gage Banks (PMBs).

    CBN Director, Other Financial Institutions Department (OFISD), O.A. Fabamwo, said PMBs could raise funds from the capital market, right issue, private placement, public offer, business combination, mergers and acquisition to enable them meet the recapitalisation deadline of April 30, 2013.

    He said it was important to remind directors and shareholders of the options to meet the prescribed capital requirements of N5 billion for National PMBs and N2.5 billion for State PMBs and the documentation requirements to obtain regulatory approval for each option.

    He, advised the banks to conduct due diligence and seek professional legal and financial advice. However, the PMBs that may choose to undertake rights issue, private placement, or public offer, are advised to complete the process and submit the documentary requirements for verification on or before March 31, 2013.

    This, he said, is to allow enough time for the capital verification exercise and subsequent correction of any discrepancy and/or submission of any additional evidence that may be required, to ensure that the capital is verified, confirmed and approved before the stipulated deadline.

    Also, the PMBs that may choose the business combination option would have to comply with the requirements of the Banks and Other financial Institutions Act (BOFIA), Companies and Allied Matters Act (CAMA), 1990 and the Investment and Securities Act (ISA), 2007.

    They are also to obtain regulatory approvals of the Securities and Exchange Commission (SEC) and the CBN, hold statutorily required meetings and obtain orders of the courts, where necessary.

    “These timelines are for guidance only. PMBs are strongly advised to conclude the processes even before the recommended timelines,” he said.

  • MfBs record N5.8b loss

    • CBN urged to extend Dec. 31 recapitalisation deadline

    A microfinance banks recorded a loss of N5.8 billion last year, the Central Bank of Nigeria (CBN) has said.

    Speaking at a forum organised by the National Association of Microfinance Banks (NAMBs) in Lagos, a senior staff member of Other Financial Institutions Department, (OFID), CBN, Mr David Adelana, said despite the loss, the banks are determined to improve and engender economic growth.

    He said: “Based on the CBN’s report, the microfinance institutions have significantly reduced their losses from N11 billion in 2010 to N5.8 billion in 2011. This is, in spite of various odds in the sub-sector and the economy in particular.”

    He said the apex bank introduced the Know Your Customer (KYC) policy to mitigate risks in the industry, advising the banks to apply stricter measures to safeguard depositors’ funds.

    He said certain commercial banks contend with a lot of dormant accounts because their owners are not bothered.

    “First Bank and Union Bank are having many dormant accounts. “The reason is because people that opened these accounts do not come back to operate them. This is one of the reasons behind the introduction of KYC guidelines. It is now left for banks to put in place customer due diligence in place to control risks,” he added.

    MfBs have called on CBN to extend the recapitalisation deadline by one year. The operators said the December 31, deadline is not feasible because of the poor state of the sub-sector, urging the banking watchdog to extend the deadline for recapitalisation to December 2013.

    Reacting to the CBN’s circular entitled: “No deadline extension for Microfinance Banks and Primary Mortgage Institutions” dated December 20, 2012, the Chairman, NAMBs, Southwest Region, Mr Olufemi Babajide, said the banks had no choice but to seek an extension of the deadline. Babajide said though some banks have agreed to merge operations to get the capital base of N20 million, N100 million and N2 billion, they are still facing liquidity problems.

    He said operators were making efforts to get the required capital and further escape CBN’s hammer.

    “It is not that the banks are not taking the recapitalisation issue seriously. Since 2011, when the CBN imposed a multi-phase and flexible capital regime on operators, efforts are being made to ensure that operators recapitalised based on their capacities. However, liquidity squeeze has stalled the ambition of the operators to recapitalise and play at either local, state and national level as contained in the recapitalisation guidelines set for the banks,” he said.

    The association’s former National President, Mr Mathias Umeh, said recapitalisation is germane to the growth of the sub-sector. He said operators still have more time to shore up their capital base for growth. He said strategies on how to meet the capital base have been evolving among the operators since last year.

    He advised operators to double their efforts to recapitalise their operations, in case CBN extends the deadline.

    He said mergers and acquisition process continues in the sub-sector, stressing that the bigger banks are entering into agreements with the smaller ones to form bigger and stronger institutions.

  • Standard Alliance records 23% growth in premium

    Standard Alliance Insurance Plc has recorded a 23 per cent rise in its gross premium.

    Presenting the operational results for the year to the shareholders in Lagos, the Chairman, Alhaji Aliyu Yahaya Sa’ad, said the company’s gross premium moved from N3.883 billion recorded in 2010 to N4.765 billion by the end of 2011 business year, giving a growth rate of 23 per cent.

    Reviewing the results, he said the net premium earned, moved from N3.514 billion in 2010 to N4.160 billion in 2011, giving a positive difference of N646.598 million or 18 per cent increase.

    Similarly, the firm’s underwriting profit grew by 56 per cent or N974.729 million, having moved from N1.754 billion recorded in 2010 to N2.728 billion by the end of 2011 operations.

    The investment income rose from N49.250 million in 2010 to N171.116 million in 2011, an increase of N121.866 million or 247 per cent growth.

    He told stakeholders that the underwriting firm recorded a profit of N319.095 million, up from a loss position of N8.462 billion recorded in 2010, giving a 104 per cent growth.

    But the company’s claims payment level dropped by 29 per cent as only N535.848 million was paid within the reviewed period as against N758.348 million paid in 2010.

  • Analysts project 32% return on equities’

    The equity market could close with a year-to-date return of 32.05 per cent despite cash demand for the Yuletide and long holidays that tend to strain people financially, analysts have said.

    The stock market closed on the eve of the Christmas with a year-to-date return of 31.91 per cent.

    Analysts at FSDH Securities said they expected the market to round off within the remaining three trading days before the end of 2012 to close the year at 32.05 per cent.

    “We remain positive about the outlook of the equities market in the next few weeks. We expect the NSE All Share Index to close the year in the region of 32.05 per cent year to date. As a result of the festivity we expect intermittent upside coupled with profit taking to persist for the remainder of 2012,” FSDH stated in latest market review.

    The latest forecast followed the trend of optimism that has continued to trail equities, which are set to record their best performance in five years.

    Investment advisors at Cowry Asset Management Limited, FSDH Securities Limited and GTI Capital Limited among others had said the stock market would neutralise intermittent profit-taking dips and expected increase in demand for cash by the year end with upswings from bargain hunting and portfolio rebalancing as investors await full year returns of quoted companies.

    Analysts had stated that with the significant capital appreciation that delivered about N1.4 trillion capital gains in the third quarter, the market would witness a mix of bargainhuntingand profit-taking in the remaining months, with the thin-edge going to the upside by the end of the period.

    Analysts at Cowry Asset said the releaseof companies’thirdquarter results particularlyfrombanks and the continued influx of foreign portfolio investorsmay possibly push theASI beyonditscurrentposition.

    They noted that the expectations of final approval of the new Pension Fund InvestmentGuideline could trigger mild market rallies as PensionFund Administratorsre balance their port folio store flect new threshold.

    Investment advisors at FSDH said the macroeconomic developments in Nigeria and initiatives in the equities market should further drive the equities performance in the remaining period of the year.

    “Our expectation is hinged on the premise that most companies results released up till date have shown improved performances with wide margins against previous years. Albeit there are some challenges which may adversely impact the market, we are of the opinion that the equities market will close year 2012 remarkably better than it recorded in the last five years,” FSDH stated.

    Analysts said they expected the ASI to achieve a growth rate of 25.46 per cent in the second half of the year, thus nudging the full-year return to 32.05 per cent.

    Following the review and expectations of the financial market in the next one year, investment advisors at FSDH were bullish on equities and recommended portfolio allocation of 30 per cent, 10 per cent, 20 per cent, 20 per cent and 20 per cent in favour of equities, fund placement, treasury bills, mutual funds and bonds respectively.

    Looking beyond 2012, analysts at FSDH said their model portfolio should deliver a return of 16.17 per cent within the next one year given the prevailing macroeconomic situations.

    “An equity portfolio that invests in our carefully selected stocks, following the fund allocation and abiding by both entry and exit prices, should be able to record a return of 19.88 per cent. Meanwhile, the return on individual stocks is made up of both capital appreciation and dividend payments,” analysts advised.

     

  • Stockbrokers may embrace bailout package

    MANY debt-pressed stockbrokers appeared to have no choice in resolving their debts and and illiquidity outside the forbearance package announced by the Finance Minister Dr Ngozi Okonjo-Iweala despite the stringent terms attached to the forbearance package.

    A major market operator, who craved anonymity, said brokers can only reject the Federal Government’s package if there is a better option.

    Already, there are indications that about 20 per cent of the 84 stock broking firms, which have been listed as beneficiaries of the package, might reject the offer.

    Earlier, President of the Association of Stock brokering Houses of Nigeria (ASHON) Mr Emeka Madubike said the decision of the Asset Management Corporation of Nigeria (AMCON) is wise, adding that it would allow brokers to be treated equally.

    He said brokers, who are represented by AMCON, could only allow for a better negotiation of equal conditions instead of having the banks to deal with individuals which might give room for double standard.

    His words: “The conditions are stringent but not too stringent and some stockbroking firms will be taking it. We have met and have decided that the conditions are okay, though some stockbrokers will not be taking the offer, majority will be taking it.

    “However, the most important thing for us is that the government is finally recognising the importance of the capital market to the economy and they are looking our way”, he said.

    The Chief Executive of AMCON Mr Mustapha Chike-Obi last week confirmed that some brokers would reject the government’s bailout package.

    According to him, there has been feedback that many of the stockbroking firms would reject the forbearance package due to the stringent rules that comes with the package, adding that some of the stockbroking firms believe they would not comply with the rules.

    Chike-Obi has said the corporation wiould send letters to each of the 84 stockbroking firms informing them of the offer and giving them a timeframe to ether take or reject the forbearance package.

    The Finance Minister recently announced a bail-out package for 84 stockbroking firms affected by margin loans, which may run up to N22 billion.

    One of the conditions set for the brokers is that they would not consult for any firm for three years.

    However, some brokers said though the conditions were stringent, some of them would still go ahead to take the package.

  • NSE: Retail bonding trading to boost market liquidity

    The Nigerian Stock Exchange (NSE) will get more liquidity as retail bond trading begins in the first quarter of 2013, operators have said.

    They said the development, coming months after the introduction of the market makers, would enhance the liquidity position of the market.

    According to the operators, the mood of the market has been upbeat following speculations that the Exchange will soon set the tone for the take-off of retail bond trading on its platform early next year.

    Speaking to The Nation, the Managing Director, BGL Securities Limited, Mr Sunday Adebola, said the appointment of Stanbic/IBTC as the government’s stockbroking firm has elicited more confidence in the market.

    He said investors and stockbroking were looking forward to the day bond trading would start at the retail market, adding that the trading platform has been configured to meet this needs.

    He said: “The market is excited about the issue for various reasons. First, operators have a strong confidence in Stanbic/IBTC because of its pedigrees in the country and beyond. Secondly, the bank has strong liquidity position and as such, would not find it difficult to inject enough cash for trading on bonds. Thirdly, the idea will compliment the efforts of market makers that have been trying their best to inject liquidity into the system.”

    According to him, the market is waiting to attract more liquidity from bond trading since many of the market markets have not been able to live up to expectations.

    “Judging from the pulse of the market, expectations are high on the issue of starting bond trading( retail) next year. We are expecting NSE to provide the modus operandi for the commencement of bond trading soon. We are really waiting,” he said.

    Also, a market analyst, Mr Tayo Bello, said the market will record more growth when more flexible and high-yielding instruments, such as bonds are introduced into the market.

    Bello said this would boost market operations throughthe provision of funds.

  • NAICOM’s proposed ‘no premium, no policy’ excites insurers

    The insurance community is excited over the plan of the National Insurance Commission (NAICOM) to implement the ‘No premium No policy’ from Monday.

    To insurers, the proposal was a right step in the right direction.

    It was taken to reposition the industry and make it contribute to the development of the economy.

    The Managing Director, Royal Exchange Prudential Life, Mr Wale Banmore, said the implementation of the policy will have effects on the insured, the insurer, as well as on the economy.

    On the insured, he said when the insurance firm collects premium on time and invests same, when it is time to pay claims, the insurer will not have any reason to drag its feet. He said, “for instance if someone insures a car for N1 million on the first day of a month and pays just N100, 000 and on the tenth day of that same month the claim becomes due, the insurance company will not have any option but to pay the insured the N1 million irrespective of the fact that the insured paid just N100,000 premium 10 days ago. The insurer must pay the N1million. So the insurance companies need the premium from the insured as early as possible to pool together and invest so as to be able to carry the risks.”

    On insurance firms, he said they are all over the world thrive on putting the little amount of premium paid by the community (the insured) together, and investing same. The policy when fully operational will affect the insurers positively, he said, adding that in the instance of governments that normally pay in areas, he said they will have no option than to adjust.

    He said.“The law is that you must pay before cover is granted. All over the world, insurance covers are only extended after premium has been made. It is only in Africa, we always try a way around an issue that will not take us anywhere. The government is the biggest consumer of insurance products but the insurance industry is determined to implement the policy because this is the right way to do it.”

    Also, the Managing Director of Union Assurance Limited, Mr Godwin Ejembi Odah, said it is not that the government does not pay premium, it is only that it takes time. They don’t pay as at when due but the government does pay.

    “The government takes time in everything. For instance, the budget that is the basis for everything does not usually become operative immediately because of the process that it goes through. The National Assembly has to approve budgets before they can become operational, that is why government takes time before paying premium but it does pay.

    “But we hope that there will be changes because the era of extending insurance cover on credit is over.” He said when insurance companies get their premium on time, invest same and run their businesses profitably, they will be able to pay dividend to their shareholders and the economy will be the better for it.

    Commissioner of Insurance, Fola Daniel, said as from January 1, 2013, all insurance covers shall only be provided on a strict, ‘no premium no cover’ basis to all who seek such cover, be they governments or otherwise. He said the day premium is paid is the day cover is provided, “no cover on credit anymore,” he stated.

    The Commissioner said “any insurer who grants cover without having premium in advance, or premium receipt notification from the relevant insurance broker, shall be liable to a penalty of N500, 000 for each cover so granted, and in addition, may have his licence suspended.

    He said: “Irrespective of the period of insurance, insurers shall ensure that at any point, they have received directly or indirectly, through the insurance broker the full premium in advance for cover being granted.”

    Daniel observed part of the reasons insurance firms are unable to settle claims promptly could be attributed to the delay, or non-payment of premium by the insured.

    According to him, “most insurance firms make huge provisions for outstanding premiums in their books annually, which invariably affects their bottom-line and thus, their ability to settle claims as and at when due to the insured, make profit, pay dividend to shareholders and attract investments to enable growth”.

    He noted that the situation is unhealthy and dangerous to the insurance industry and unless it is halted, it is capable of driving the industry into extinction.

    Daniel accused government at all levels as the major culprit as far as insurance on credit is concerned. We have noticed that budgetary provisions for insurance of government assets and properties are either inadequate or in most cases not made at all.”

    “Besides, where the provisions are made, payments of premium to insurance companies are either delayed for months or the funds redeployed to meet other needs by ministries, departments and agencies of government which is in clear breach of Section 50 (1) of the Insurance Act 2003.” From now January 1,2013, no insurance cover shall be extended government or any other person without adequate premium paid.

    Managing Director, Royal Exchange Life, Wale Banmore, said the policy will succeed and that corporate bodies were making calls to inquire on payments for their policies.

    Banmore said before the policy was announced, most of them will not make any enquiry until about the second quarter of the year.

    He said he was optimistic the policy will succeed.

  • CBN’s policy triggers investment in TBs, bonds

    Central Bank of Nigeria(CBN) tight liquidity measures in the past 12 months would result in in-flow of funds to the banking industry, experts have said.

    They argued that CBN’s decision to continue tightening liquidity via raising the Monetary Policy Rate (MPR) would help in changing investors’ decision, and in moving funds from one segment of the financial market to another.

    According to them, the banking sector would benefit greatly as investors abandon the capital market for less risks and high yielding instruments such as Treasury Bills (TBs).

    Speaking on the issue, the Managing Director, Investment Banking, BGL Securities, Mr Wale Oluwo, said the decision to maintain MPR at 12 per cent will further depress the capital market because investors would abandon stocks for a safer financial instruments.

    Oluwo said the development would make fund managers and banks to continue to invest in safe government instruments such as TBs and bonds where they can make cheap and double digit returns without taking any risks.

    He said though banks would be making money from the two fixed-income instruments, they would nevertheless be able to provide money to the private sector of the economy. He said the apex bank plans to leave MPR at 12 per cent would hike the lending rates, thereby hindering private sector operators to access credit for growth.

    Accordingly, funds will not get to the private sector and their financial performance would continue to dwindle, further depressing the prices of their shares on the exchange. Individuals and households will also not have access to funds which will make the Nigerian economy to continue shrinking,” he said.

    Also, the Chief Executive Officer, Lambert Trust and Investment, Mr David Adonri, said: “The implication of the retention of MPR at 12 percent for the capital market is that the fixed income market will continue to maintain its dominant position.”

    He added that prevailing high interest rate on bank borrowing and increasing public borrowing will continue to crowd out the real sector and the equities market.

    The Vice Chairman, Anchoria Investments and Securities Limited, Dr Olusola Dada, said the outlook in the fixed-income market remains positive in view of the regulatory stands on certain financial matters.

    Dada said the stock market thrives on liquidity coming mainly from the private sector, adding that inability of the sector to access credit for investment purpose would have far reaching effects on the capital market.

    He said once private sector operators are unable to access the lending window available to them, they capital market runs the risk of getting liquidity for growth. He said investors now preferred treasury bills and bonds option where they would on average get some earnings to share.

    “I think the money market rates are now more appealing to some investors since they are sure of getting returns on investments. To some people, it is safer to put their money in fixed accounts, or invest in TBs for better yields. If CBN continues with its liquidity tightening measures by way of retaining MPR or increasing it further, the better for banks among other investors in fixed income securities. Conversely, the situation portends danger for capital market operators,” he said.

  • Statistics Bureau projects rate cut

    As the global economy continues to slide, the scope for rate cut by the Central Bank of Nigeria (CBN) has widened and should be expected in 2013, the Nigeria Bureau of Statistics (NBS) has said.

    The agency said the rise in inflation from 11.7 per cent in October to 12.3 per cent year-on-year last month was informed by a flood-related temporary rise in food prices. However, with the worst of this now seemingly over, inflation should begin to ease again in the coming months, which will open up the possibility of monetary easing next year.

    The NBS said the continued weakness in world demand expected in 2013 will ease pressure on global commodity prices.

    It explained that given policymakers’ concerns over fresh spikes in global food prices, the CBN is likely to remain in wait and see mode for a while longer. The CBN kept rate at 12 per cent unchanged at the last Monetary Policy Committee meeting. “Our expectation is that as the global economy continues to slow, we think there is scope for rate cuts in 2013,” it said.

    The MPR, the benchmark rate by which the CBN determines interest rate, has remained at 12 per cent since October 2011 when it was increased from 9.25 representing 275 basis points raise. Beside, the CBN was advised to sustain its efforts at finding other innovative ways to unlock the credit market and stimulate the economy.

    NBS said that on a year-on-year basis, the relative increase in the headline index in November was as a result of higher prices in both the food and core indices. The core sub-index has deviated from its trend over the previous months, increasing to 13.1 per cent, while food prices continue to indicate lagged effects of the floods which occurred from July to mid-October, as well as other demand and supply conditions.