The Nation Newspaper

Category: Business

  • Fed Govt plans $1.1b Euro bond

    Fed Govt plans $1.1b Euro bond

    • Seeks Senate’s approval for $200m loan

    The Federal Government is set to issue $1billion Euro Bond as well as $100 million Diaspora Bond.

    The government is also seeking Senate’s approval to borrow additional $200 million to fund pipeline projects.

    These are contained in a letter President Goodluck Jonathan wrote to the Senate.

    The letter entitled: Amendment to the 2012-2014 Medium Term External Borrowing Plan, was dated November 7, 2012, and read on the floor by Senate President, David Mark, yesterday.

    The letter is coming few weeks after the Presidency sought the approval of the Upper House to borrow $7.9 billion for pipeline projects.

    President Jonathan said the $1billion Euro Bond is in “continuance of the programme initiated under the administration of President Umaru Musa Yar’Adua as well as a $100million Diaspora Bond.”

    He explained that $200 million out of the $500 million would be expended on provision of water supply, while $300 million would be swapped with the proposed guarantees for the power sector in the draft borrowing plan.

    The letter reads in part: “I wish to refer to my earlier letter in respect of the above subject and to inform you of two amendments to the 2012-2014 Medium Term External Borrowing Plan.

    “First, we would like to include a $200million water supply project being planned for Rivers State.

    “This project would be financed by the African Development Bank and shall provide potable water supply to residents of Rivers State.

    “Secondly, the Federal Government is currently developing a low-income housing finance facility to support the provision of affordable homes for Nigerians.

    “This scheme will be financed using a $300million credit facility from the World Bank. We would like to swap this new $300million facility with the proposed guarantees for the power sector in the draft borrowing plan, thereby ensuring that we do not increase the overall size of loans proposed in the external borrowing plan.

  • CBN retains 12% interest rate

    CBN retains 12% interest rate

    The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has once again decided to maintain the current policy stance, by retaining the Monetary Policy Rate (MPR) at 12 per cent with a corridor of +/- 200 basis points around the midpoint.

    Addressing reporters in Abuja yesterday at the end of the its meeting, the Governor of the CBN, Sanusi Lamido Sanusi, said the committee also decided to retain the Cash Reserve Ratio (CRR) at 12.0 per cent and the Liquidity Ratio at 30 per cent.

    He explained that the Committee was faced with three choices: namely increase in rates in response to the up tick in headline and food inflation; a reduction in rates in view of declining core inflation and Gross Domestic Growth (GDP), and retaining current monetary policy stance in view of conflicting price signals and global uncertainties.

    He said: “The Committee considered and rejected option one, as being potentially pro-cyclical considering the structural nature of recent inflationary pressures. While acknowledging the merit of the arguments in favour of option two. It was also rejected as likely to send wrong signals of a premature termination of an appropriately tight monetary stance.”

    The Committee resolved to retain the MPR which determines the rate at which banks lend to their customers, he added.

    The Committee decried the conflicting price signals coming from the latest inflation numbers from the National Bureau of Statistics, with headline and food inflation trending upwards, while core inflation rate continued to moderate for the fourth consecutive month.

    This development according to the Committee, “has created uncertainty as to the appropriate policy stance at this time. However, since the factors underpinning the inflationary pressures were mainly structural, a monetary response may not be appropriate at this time,” Sanusi stated.

  • Govt to remove barriers on intra-African trade

    Nigeria has taken steps to remove tariff and non-tariff barriers within the continent to encourage regional integration and increase Intra- African Trade, the Minister of Trade and Investment, Olusegun Aganga has said.

    Aganga, who was represented by the Minister of State for Trade and Investment, Dr. Samuel Ortom, stated this during the African Industrialisation Day (AID), in Abuja, with the theme, Accelerating industrialisation for boosting intra African trade.

    He said: “The African Industrialisation Day is a special day set aside by the Conference of African Ministers of Industry (CAMI) under the aegis of the African Union Commission (AUC), to focus on specific strategies of African countries to stimulate industrial development and draw attention to the progress and challenges of relevant stakeholders on the policy direction of the government towards a sustainable Industrial sector development.”

    He explained that effective regional integration in Africa would also enhance trade within the continent and attract investment into the manufacturing sector.

  • CBN to sponsor SOS children for five years

    The Central Bank of Nigeria(CBN) has promised to sponsor the children of the SOS Children’s Village in the next five years.

    CBN Governor, Sanusi Lamido Sanusi, disclosed this at the inauguration of the CBN House at the SOS Children’s Village Gwagwalada, Abuja.

    He said the apex bank has “a long standing commitment to humanitarian support and educational development, which is carried out without prejudice to race, creed, gender or religion.”

    The CBN governor promised to finance the water project for the SOS Children Village as his own contribution to orphans.

    Sanusi said: “Children are our future and we must do all in our power to prepare them for that future”.

    He assured the children of the CBN’s support, and urged them to face their studies seriously, and be of good behaviour.

    He reminded them that they would be judged by what they become tomorrow not where they are today.

    Earlier, the National Director of the SOS Children’s Village Mr. Eghosa Erhumwunse disclosed that 17 million children are orphaned and vulnerable worldwide.

    He used the opportunity offered by the event to appeal to the public to support the village to salvage the situation.

    He lamented that the village, which caters for many children were suffering the lack of potable water, caused by the absence of a water treatment plant for its borehole.

    He appealed to the government to assist the village by providing pipe-borne water channel to the village from the water board, the construction and equipping of a school library, school funding and subsidy for children in the community.

  • FirstBank’s shareholders to get double dividends

    Shareholders of First Bank of Nigeria (FBN) Plc would receive double dividends from the bank’s strong operational earnings and net proceeds from the lender’s divestment from its share registration business.

    The prospects of expanded cash payouts complement other locked-in values in the restructuring of First Bank into a holding company as the bank concludes the final phase of the transition to holding company (holdco).

    As part of the restructuring into holdco, First Bank would divest from First Registrars through an offering process and distribute the net proceeds to shareholders.

    A top management source at the bank confirmed that the bank would include the net proceeds from the sale of First Registrars in the profit distribution for the period ending December 31, 2012.

    This implies that the bank might adopt a compound lump-sum distribution or special dividend distribution to transfer the net proceeds from the sale of First Registrars to shareholders. Under the compound lump-sum distribution, the net proceeds would be cumulated into operational earnings and distributed as a one single payment to shareholders while the net proceeds could be distributed separately as special dividend alongside normal operational cash dividend.

    There has been a spike in the use of special dividend to distribute earnings to shareholders as companies seek to beat high tax rate. Companies are paying special dividends at four times the pace of last year.

    From the end of September to mid-November, 59 companies in the Russell 3000 stock index declared a one-time cash payment to shareholders, up from about 15 in the year-earlier period, according to data compiled by Bloomberg.

    Interim report and accounts of First Bank for the third quarter ended September 30, 2012 showed that profit after tax rose by 48.5 per cent to N66.26 billion in 2012 as against N44.64 billion in comparable period of 2011. Gross earnings rose from N225.02 billion to N267.69 billion. Profit before tax also jumped from N51.02 billion to N75.72 billion.

    With the third quarter net profit, distributable earnings per share stood at N2.03 in third quarter 2012 as against N1.37 in corresponding period of 2011. At the same rate, probable operational full year earnings per share is estimated conservatively at – N2.71.

    Shareholders of FirstBank had recently approved the transition of the company into a holdco including the sale of First Registrars.

    The shareholders’ approval paved way for the submission of an application to delist FirstBank and list FBN Holdings. Under the transition arrangement, existing shareholders of First Bank will be migrated from First Bank to FBN Holdings. In line with this proposal, all ordinary shareholders of FirstBank as at the terminal date would be migrated to FBN Holdings through a share-for-share exchange between the shareholders of First Bank and FBN Holdings.

    First Bank’s shareholdings in each of the holdco subsidiaries and the associated investments will be transferred to FBN Holdings while the bank’s shareholdings in each of the investment banking and asset management businesses would be transferred to FBN Capital Limited, which in turn will be owned by FBN Holdings. The proposed restructuring will not alter the current beneficial shareholding structure of the FBN Group.

    Managing director, FBN Holdings Plc, Mr. Bello Maccido said the holdco was designed to enhance the group’s competitiveness, streamline and coordinate various operations across non-bank financial services, and further exploit opportunities for synergies between subsidiaries.

    According to him, the new structure would also align the ownership and operation of the bank’s subsidiaries with the overall strategy of creating an operating model that will profitably grow the group’s presence in the market for commercial banking and non-banking financial services in order to achieve the aspiration to be the dominant financial services group in Sub-Saharan Africa.

    He outlined that the banking group will align and cluster similar or overlapping businesses under four broad business groups including commercial banking, investment banking and asset management (ibam), insurance and other financial services.

    First Bank has 11 subsidiaries with operations across the financial services industry ranging from pension custodian, asset management, investment banking, insurance, and microfinance banking entities. The bank also holds investments in companies with international presence in the United Kingdom and France through its subsidiary FBN Bank (UK) Limited, in addition to representative offices in South Africa, China and Abu Dhabi, making it one of the most diversified financial services groups in Nigeria

  • Why Stanbic was picked to sell bonds, by govt

    Stanbic/IBTC was selected on merit as the government stockbroker to sell bonds in the retail market, the Debt Management Office (DMO) has said.

    Its Director, Market Development Department, Mrs Patience Oniha, told The Nation that the bank was selected out of the 17 institutions that applied for the job, after a rigorous screening.

    She said the bank’s strong position in the industry, performance in the stock market and capacity to maintain investors’confidence, among others, were some of the qualities that got it the job.

    She said: “We received 17 applications, following the placement of advertisements for the position of government’s stockbroker for retail bond trading. What we did was that we reviewed all the applicants’ vis-à-vis their ability to meet the requirements stated in the prospectus. In all these, the bank is the only institution that met the requirements.”

    Vice-Chairman, Anchoria Securities and Investments Limited,Dr Olusola Dada, said DMO’s decision to unveil the broker did not come as a surprise.

    Dada said the financial market operators, especially stockbrokers had been looking forward to the announcement, adding that the development has further buoyed confidence in the financial market.

    He said the management of the Nigerian Stock Exchange (NSE) last month ordered stockbroking firms wishing to engage in retail trading of bonds at the secondary market to provide a minimum shareholders’fund of N500 million.

    “The announcement has since generated interest in the market. You know that it is not every firm that trade in bonds, but the issue has elicited joy among some brokers who have the capacity to meet the threshold of N500million as directed by the NSE and, subsequently, play at the secondary end of the bond market. Before bonds were traded only on wholesales, but bonds would henceforth be trading on both wholesale and retail. This means that brokers can buy and sell bonds on behalf of the clients, after getting approval from NSE.” he said.

    Also, the Managing Director, BGL Securities Limited, Mr Sunday Adebola said the market had long expected the commencement of retail bond trading, adding that some brokers have shown interest on the issue.

    Adebola said the announcement did not come as a surprise because a meeting of capital market committee, the Securities and Exchange Commission (SEC) was held on the issue among others last month.

    He said DMO was not only represented at the meeting, but told  the participants that it was finalising the appointment of a  government stockbroker that would engage in retail bond trading.

    He said the market operators still need to meet the DMO on the frameworks for trading on retail segment of the bonds market.

    “Certain issues need to be resolved before the trading commences. How are bonds going to be traded at the retail segment?  What is the minimum size or units that can be traded in the primary market? What is the minimum size to be traded at the secondary market? Is it 1,000 or 10,000 units at each section of the market? I think DMO, NSE and the operators still need to meet on the issue,” he added.

  • Mortgage banks scramble to raise new funds

    Ahead of the April 2013 deadline for new capitalisation, mortgages banks are struggling to raise new equity funds to meet new minimum capital requirement under the new Central Bank of Nigeria’s (CBN’s) policy framework for mortgage banks.

    Under the new CBN’s framework for mortgage banks, they will be classified into national and state mortgage banks, with the geographic demarcation as benchmark for minimum capital requirement. National mortgage banks are authorised to operate in all states of the Federation while state mortgage banks are restricted to their registered state.

    National mortgage banks are required to have minimum capital base of N5 billion while state mortgage banks must have N2.5 billion. The deadline for full compliance is April 30, 2013.

    Industry sources indicated that mortgage banks, which capital had been eroded by the meltdown at the capital market and operational losses, were finding it difficult to source new equity funds.

    Despite of a year-long intention to raise funds, none of the mortgage banks have been able to float supplementary new issues. But many mortgage banks still believed they could raise additional funds before the deadline.

    Resort Savings & Loans Plc, one of the four quoted mortgage banks, three weeks ago got the approval of shareholders to raise new equity funds towards supplementing its capital ahead of the recapitalisation deadline.

    According to the resolution, Resort could be seeking to raise funds through public offer, private placement, and rights issue among others.

    Aso Savings and Loans Plc, another quoted mortgage bank, had earlier indicated plans to raise new equity funds.

    “Let it be on record that had it not been for losses in operations in the past two years which we promise to redeem, the bank would not have had a need for new capital,” chairman, Resort Savings & Loans, Chief Francis Adefarati told shareholders prior to seeking approval to raise new funds.

    The capital raising efforts of mortgage banks have been hampered by both the general lackluster state of the inactive primary segment of the capital market and also the poor performance of mortgage banks’ shares at the stock market.

    The trio of Aso Savings, Resort and Union Homes Savings and Loans has so far this year stagnated at their nominal value of 50 kobo while Abbey Building Society is at its lowest value of N1.37 per share. Altogether, the subsector’s market value stands at N19.66 billion, barely a third of market capitalisation of only Union Homes, which had closed January 2008 at N7.66 per share.

    The large outstanding share capital of mortgage banks relative to their assets base has also encumbered new fund raising without addressing issues of share reconstruction and valuation. Resort has 11.33 billion ordinary shares of 50 kobo each, equivalent to N5.66 billion, almost a double of its shareholders’ funds of N2.87 billion and still above its total assets of N5.24 billion, according to the latest audited report ended December 31, 2011. But Resort in the interim report for the period ended September 30, 2012 reported total assets and net assets of N8.65 billion and N5.73 billion respectively.

    Aso Savings has the second sectoral outstanding shares of 8.68 billion shares, nominally valued at N4.34 billion. However, audited report and accounts for the year ended March 31, 2012 showed that Aso Savings had net assets of N3.14 billion, less than its nominal value and new minimum capital requirement for national mortgage banks.

    The Nigerian Stock Exchange (NSE) operates a stop-gap trading mechanism that does not allow share prices to drop below their nominal values.

    “The performance of primary mortgage institutions (PMIs) has not really been encouraging. The requisite fundamental depth to warrant capital injection by impending shareholders may not really be there. Shareholders look for strong fundamental value in the past to determine their interest going forward. If you look at the financials of most of the PMIs, the performance has not really been juicy, except for some very few. Besides, fund raising in the primary market for now may not be encouraging due to market tempo,” a senior investment advisor and economist at a leading investment banking firm said.

  • Banks’ holdcos, divestments to create new listed firms

    Ongoing restructuring of banks’businesses into holding company (holdco) structure and divestments from non-core banking businesses may lead to emergence of not less than six new quoted companies, The Nation has lerant.

    Besides the substitution of previously listed banks on the main board of the Nigerian Stock Exchange (NSE) by their holding companies, banks’ restructurings and divestments are expected to lead to listing of some six newly spin-off companies, that will hold large non-core banking assets.

    Industry’s check indicated three prospective new listings from United Bank for Africa and one each from First Bank of Nigeria, Access Bank, Union Bank of Nigeria, Diamond Bank, First City Monument Bank and Guaranty Trust Bank.

    Market analysts said the new listings would open new investment opportunities for investors while enabling existing shareholders to unlock inherent values in the shares.

    Shareholders are also rooting for listing of unbundled and divested businesses. A shareholders’ leader, Alhaji Gbadebo Olatokunbo, said listing on the NSE should be part of the consideration for selling the unbundled and divested companies in core-investor sale while shareholders should be given priority in direct sales through offer for sale.

    According to him, the spin-off and divestment should be done in a way that promotes transparency and unlock values for shareholders.

    Central Bank of Nigeria (CBN)’s Scope of Banking Activities and Ancillary Matters No 3, 2010 requires banks to fully concentrate on core banking functions. The new model requires banks to either sell all non-core banking businesses or form a holding company to hold such non-core banking businesses including activities such as insurance, asset management and capital market operations.

    Five banks including First City Monument Bank (FCMB) Plc, First Bank of Nigeria (FBN) Plc, Stanbic IBTC Bank Plc, United Bank for Africa (UBA) Plc and Union Bank of Nigeria (UBN) Plc have opted to keep their subsidiaries and transform into holdcos while other banks including Access Bank Plc, Diamond Bank Plc, Fidelity Bank Plc, Guaranty Trust Bank (GTB) Plc, Skye Bank Plc, Sterling Bank, Zenith Bank and Wema Bank among others, are pursuing divestments from non-banking subsidiaries.

    The restructurings into holdcos will require banks to consummate non-core banking assets under existing subsidiaries or create new companies to hold such assets. Both divesting and holdco banks are merging their other hitherto separated banking related activities into the core commercial banking business.

    FirstBank would offload First Registrars, its industry-leading share registration business. Shareholders are already pushing for the listing of First Registrars, considered as a viable entity on its own.

    Group Managing Director, First Bank of Nigeria (FBN) Plc, Mr Bisi Onasanya, said the bank would conclude the sale of First Registrars before the end of the year.

    In response to shareholders’requests that they should be allowed to have equity participation in the post-restructuring First Registrars, Onasanya had assured shareholders that their interests and concerns would be taken care of in the divestment process.

    UBA has scheduled court-ordered extraordinary general meeting for December 13, 2012 to obtain the approval of shareholders to finally transform into holdco following the approval of the bank’s application by financial services regulators.

    Under the restructuring, three emergent separate stand-alone companies including UBA Capital Plc, African Prudential Registrars Plc and Afriland Properties Plc are scheduled to be listed on the NSE.

    Africa Prudential Registrars, which replaces UBA Registrars and Afriland Properties, which is a spin-off of the real estate assets of the bank, would be owned directly by existing UBA shareholders, but their listing would open windows for new investors.

    Group Managing Director, UBA Plc, Mr Phillips Oduoza, confirmed the plan to list the three new companies, noting that the restructuring will result in greater value and provide each entity with easier access to long-term capital to finance growth thus protecting shareholders’ value.

    “Both UBA Capital Plc and Africa Prudential Registrars Plc will eventually become listed companies on the NSE; hence, eligible shareholders will have the benefit of owning liquid stocks in these entities while Afriland Properties will be listed at a much future date,” Oduoza added.

    Other prospective listings include ADIC Insurance Limited, the risk firm sold by Diamond Bank; Intercontinental Homes Savings and Loans Plc, the mortgage banker recently sold by Access Bank, GTB Registrars, the share registration business of GTB; and Union Registrars, the share registration business of Union Bank among others.

  • NSE targets marginal oil field operators, local content firms

    The Nigerian Stock Exchange (NSE) is engaging marginal oil field operators and other indigenous oil and gas firms to use the capital market to source funds and realise their locked-in values through listing of their shares.

    Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr Oscar Onyema, said the management of the NSE and marginal oil field operators have been discussing the prospects of listing and raising funds through the capital market.

    He said the NSE was also considering opportunities inherent in the Local Content Development Act to to encourage Nigerian-owned oil and gas firms to list their shares, in the true spirits of the Act.

    Onyema, who spoke at the FBN Capital Annual Investor Conference on efforts being made by the management of the NSE to deepen the stock market through new listings, said NSE has also made representation to the Bureau of Public Enterprises to make listing on the NSE as part of pre-conditions for the sale of unbundled power companies.

    He noted that the government needs to encourage companies to list on the NSE through incentives and amenable legislations.

    According to him, though companies could not be forced to list their shares on the stock exchange, fiscal and legislative incentives would encourage companies to seek listing on their own.

    NSE is scheduled to list Geo-Fluids Plc, an indigenous oil and gas services company. About 100 million shares of the company would be listed at N5 per share.

    Managing Director, Geo-Fluids Plc, Mr Ala Ibanibo, said listing of the company would enable it to attract investors and also distribute values to Nigerians.

    “We know the attributes and prospects of the capital market as a dependable vehicle for wealth creation in the long-term. Consequently, we believe that given the right regulatory and institutional frame work, the capital market will continue to be a very important catalyst for wealth preservation and that is why we are listing now regardless of the temporary challenges,” Ibanibo said.

    He expressed optimism on the performance of the company on the secondary market, noting that the listing price will be to the advantage of shareholders because the company has great potentials.

    He said the company would pay dividend for the business year, citing the third quarter performance.

    He assured that the company would comply with best practices and codes of corporate governance, pointing out that Geo-Fluids will be open and transparent for examination by shareholders, regulators and all other stakeholders.

  • ‘Foreign portfolio equity investments drop’

    The level of foreign portfolio equity investments in the capital market has dropped from about 90 per cent to below 70 per cent as Nigerians continue to show improving appetites for quoted equities.

    Managing Director, UBA Trustees, Mrs Oluwatoyin Sanni, said the reduction was due to more participation from the domestic investors in the market.

    She said the capital Market Committee, a body of stakeholders in the capital market, has been working to get local investors back to the stock market.

    “Capital Market Committee now works as an umbrella. We treat every single issue together, regardless of how difficult the issues are. In fact, this year all issues that came up were tackled collectively. All stakeholders in the committee are part of every subcommittee. All stakeholders are involved in whatever policy drive we have,” Sanni said.

    She said the market will continue to record progress as the hiccups experienced in the past as a result of the policy made outside the contribution of the stakeholders have all been eliminated.

    Sanni, who is the chairperson of the Organising Committee for the Capital Market Committee retreat, said this year’s gathering would further consolidate the gains of previous meetings.

    According to her, the theme of the year’s retreat and conference is The pivot role of the capital market in the transformation agenda of the Federal Government of Nigeria.

    She explained that other activities at the conference include key note address and paper presentation by the Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi, Delta State Governor Emmanuel Uduaghan as well as panel discussion on business development and infrastructure.