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Tag: capital

  • Why we need additional capital, by UACN

    Why we need additional capital, by UACN

    UAC of Nigeria (UACN) Plc plans to use the net proceeds of its proposed multi-level capital raising programme to finance business expansion and deleverage existing businesses with a view to optimise the conglomerate’s businesses.

    Shareholders of UACN last week approved several capital raising proposals proposed by the board, paving the way for the board to engage professional parties and continue the new issue process.

    Chairman, UAC of Nigeria (UACN) Plc, Senator Udoma Udo Udoma, told shareholders that the company needed new capital to finance its expansion and reduce indebtedness.

    According to him, the group is currently realigning its portfolio and making strategic shifts where necessary while it has also been selectively expanding its capacity to meet customer demand in its logistics operations.

    He said the capital raising was in pursuit of plans to improve returns and address the high leverage position in UACN Property Development Company (UPDC), the real estate subsidiary, and Portland Paints as well as to provide capital for expansion in the Feeds and Logistics businesses and other business expansion plans.

    He said while the directors of the company recognised that the task ahead may not be easy, the board and management are determined to take advantage of the opportunities in the economy to deliver the corporate goals for 2015.

    Key extracts of the audited report and accounts of UACN for the year ended December 31, 2014 showed that the conglomerate recorded a modest top-line growth of nine per cent from N78.7 billion in 2013 to N85.7 billion in 2014 while profit before taxation was N14.1 billion compared to N13.9 billion of 2013. Shareholders at the meeting approved the distribution of N3.3 billion as cash dividends for the 2014 business year. Shareholders would receive a dividend per share of N1.75.

    He outlined that in order to further consolidate on its technology improvement initiative, capacity and efficiency in operations, three new plants were commissioned including a new Feed mill at the Ikeja plant of Livestock Feeds Plc, an automated Pie line for the Restaurants business and a new processing and packaging technology for Supreme Ice cream.

    He noted that in 2014, in line with the company’s vision to be number one in its chosen markets, UACN Group achieved market leadership with its Vital Fish feed brand, which was introduced just three years ago.

    He pointed out that as part of the business transformation process, the company has fully implemented both the new SAP enterprise resource software across the group and the Enterprise Risk Management framework to enhance the control environment of its business.

    He added that the group has already started seeing value from the outsourcing of its internal audit function and whistle blowing mechanism, key initiatives that have strengthened corporate governance at all levels of the business and in the group’s joint-venture operations.

    The Nation’s check indicated that UACN might raise as much as N40 billion in the multi-level capital issue.

    Besides, the board of the conglomerate is also considering new equity funds through a rights issue to existing shareholders. Shareholders approved several resolutions including one that empowers the board to raise N20 billion through any means of capital raising and another resolution that mandates the board to offer some 160.07 million ordinary shares of 50 kobo each to existing shareholders on the basis of one new ordinary share for every 12 shares held as at the closure date.

    In a major strategic move, the conglomerate is seeking to undertake a private placement of 230 million convertible non-redeemable preference shares of 50 kobo each to pre-identified investors at a price of N45 per share.

    In another private placement, the meeting approved a proposed private placement of 100 million convertible non-redeemable preference shares of 50 kobo each to pre-identified investors at a price of N50 per share.

    Under the proposed terms of private placement, the preference shares shall be convertible to ordinary shares within five years on terms to be agreed by the directors. The preference shares holders would not be entitled to dividends but they would be entitled to any distribution of assets and they can attend general meeting and vote as well.

    According to the proposed terms of the rights issue, rights that were unsubscribed would be allotted and sold to other investors.

    To facilitate the new capital issue, shareholders increased the conglomerate’s authorised share capital from N1 billion divided into 2.0 billion ordinary shares of 50 kobo each to N1.7 billion, consisting of 3.0 billion ordinary shares of 50 kobo each and 400 million preference shares of 50 kobo each.

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

    UACN acquired Livestock Feeds and Portland Paints in 2013. Other members of the group included UAC Foods Limited, UAC Restaurants Limited, MDS Logistics Plc, Warm Spring Waters Nigeria Limited, Grand Cereals Limited, and Unico CPFA Limited. Listed in 1974, UACN is owned by some 190,000 shareholders.

  • ‘Buhari’s reforms ’ll make money available for capital projects’

    ‘Buhari’s reforms ’ll make money available for capital projects’

    The Federal Government said yesterday that ongoing institutional reforms are aimed at make additional resources available for the implementation of capital projects for improved service delivery and transformation of the Nigerian economy.

    The government also said it remained committed to the economic development of the country and was determined to hold people accountable and ensure that business activities in both the public and private sectors are carried out effectively and transparently in line with global best practices.

    The Secretary to the National Planning Commission, Bassey Akpanyung, who disclosed this at a news conference to announce activities lined up for the 21st Nigeria Economic Summit, said some of the reforms include the adoption of a zero-based budgetary system with effect from the 2016 financial year.

    Other reforms, according to him, include the introduction of the Treasury Single Account system, the restructuring of the Nigeria National Petroleum Corporation and blocking of financial leakages in the Federal MDAs, among others

    He said this year’s economic summit had been designed to elicit deeper dialogue on how best to make tough choices, considering the present global economic realities which the government needs to deal with.

    He said the continuous decline in oil prices, resulting in reduction in government revenues, insurgency in some parts of the country and rising unemployment rate, especially among the youth, has made it imperative for government to start thinking outside the box on a post-oil economy.

    While announcing the 21st Nigerian Economic Summit will hold between October 13 and 15 in Abuja, Akpanyung said  the summit had become “an  annual dialogue event which is jointly organized by the National Planning Commission representing the public sector and the Nigerian Economic Summit Group representing the private sector.”

    He said further: “It is the most enduring public private dialogue process that has been sustained over the past 21 years since it started in 1993. The NES has provided a credible and widely recognised platform for forging understanding and consensus on our national economic policy direction and economic growth strategies.

    “Over the years, stakeholders in Nigeria and abroad have come to acknowledge the NES as the premier platform for policy dialogue in Nigeria. The NES has indeed become the largest and most prestigious annual economic forum for policy makers and the private sector, the academic and development partners and civil society organisations

    “The summit has over the years contributed immensely to strengthening the relationship between the public and private sectors and the transformation of the Nigerian economy. It is also reassuring to note that the key outcome of the summit has helped in influencing policies since the inception of the summit arrangement.

    “The theme of the summit this year is ‘Tough Choices: Achieving Competitiveness, Inclusive Growth and Sustainability’. This is consistent with the aspiration of the present administration’s change agenda and the medium term successor strategic plan 2016 to 2020 which focuses on fighting corruption, addressing unemployment, insecurity, institutional reforms, economic growth and development.

    “Experience worldwide has shown that issues of unemployment, insecurity, corruption and inclusive growth cannot be tackled effectively without addressing the competitiveness of the economy.

    “Indeed, the World Economic Forum Global Competitiveness Report 2014-2015 indicated that Nigeria fell seven places to 127th out of 144 countries, largely on account of weakened public finances, as a result of lower oil export and prices, weak institution, corruption, dire security situation, weak infrastructure and high youth unemployment rate. We expect that the summit will come up with measureable outcomes on how best to achieve competitiveness and inclusive growth in a sustainable way”.

    He further said: “One has observed that we are talking about issues of inclusiveness, competitiveness and sustainability. There is no way you can discuss these issues without looking at the policies that relate to making our economy competitive. To this, I will say at the summit, we will discuss everything, including the TSA. The essence is to open up discussion and then see the pros and cons and when the public sector meets the private, we jointly look at the pros and cons and advise better on what is there.

    “We are also aware that there are various schools of thought. These issues need to be taken in the contest in which they are. We have to look at those policies and why they happened in the first place.”

  • REC joins Egypt’s O Capital to tap Middle East, Africa

    REC Solar Holdings AS has signed a deal with O Capital, the renewable energy arm of Orascom Telecom Media and Technology Holding SAE, forming a partnership to sell solar panels and related services in the Middle East and Africa.

    O Capital will manage tenders and turnkey installations while REC will be responsible for the engineering side, it said in a statement. The companies are seeking to provide REC’s solar panels to residential, commercial and utility-scale projects.

    REC sees Middle East and Africa as growth areas for the solar industry, according to Luc Graré, senior vice president for the region.

    “Beginning in 2017, we are expecting 10 gigawatts to be installed every year in the Middle East and Africa, which would make the region second in the world for new solar capacity after China,” he said by phone.

    Egypt is expected to be a major contributor to this growth, since the country is targeting to get 20 percent of its electricity from renewables by 2020.

    To reach this goal, it would need to install 2 gigawatts to 3 gigawatts of clean energy a year, Graré said. Cairo-based O Capital was chosen as a local partner to facilitate access to the Egyptian market and surrounding area.

    REC plans to establish similar partnerships in Ghana, South Africa and Kenya.

  • Group moves to cut capital flight

    Group moves to cut capital flight

    The assembling and manufacturing of scientific instruments, laboratory equipments, chemicals, and furniture would help in reducing capital flights, and push more funds to the economy, President, Scientific Product Association of Nigeria (SPAN), Mr. Julius Famoriyo, has said.

    Speaking during group’s council meeting in Lagos, he said plans are underway to start the assembling of scientific products in the country which would reduce importation of such products and boost economic development.

    He said the association is collaborating with manufacturers of scientific products in Germany and other developed economies to make the products available to local consumers.

    Famoriyo said, such product availability, would be boosted by the upcoming trade exhibition programme holding in Germany from June 15 to 17, under the support of Spectaris, a German high-technology association and the Ministry of Trade in Germany.

    He said this year’s edition of the scientific products fair in Germany, is the biggest in the world, and would provide opportunities for the SPAN members to network, enhance members knowledge local products assembly that meets international standards.

    Famoriyo said: ‘’Through the fair, local marketers of scientific products would meet manufacturers abroad, fashion out ways of developing components, and manufacturing them in the country, which is a major  plus for SPAN’’.

    He said Spectaris, founded in 1881 is based in Berlin and has about 400 members in four branches, namely Photonics and Precision Technologies, Medical technologies, Analytical and Laboratory Technologies and Consumer optics. The SPAN belongs to the Analytical and Laboratory technologies where there are 80 companies.

    On whether government delegation from Nigeria will be at the fair, SPAN Treasurer, Mr Dapo Sonola said the recent change in government will not permit it but they are hoping that the new government would be actively involved in the scientific products industry.

  • Cyprus lifts capital controls

    Cyprus is lifting the last remaining capital controls it  imposed on its banking system during the financial crisis of 2013.

    Cyprus was the only crisis-hit eurozone country to restrict capital transfers, as it faced a run on the banks.

    The controls were eased in January.

    There will no longer be a monthly cap of €20,000 (£15,000; $22,000) on transfers by individuals to foreign banks, or of €10,000 for travellers moving money out of the country.

    Cyprus received a €10bn bailout from the EU and International Monetary Fund (IMF) after its biggest banks nearly collapsed in March 2013 because of huge losses on their Greek investments.

    The island’s second-biggest lender, Cyprus Popular Bank (also known as Laiki Bank), was wound up and deposits worth more than €100,000 in the largest bank, Bank of Cyprus, were seized.

    Those measures were part of the deal to ensure that Cyprus funded part of the €10bn bailout.

    Speaking on Friday, Cyprus President Nicos Anastasiades voiced confidence that the Mediterranean island was recovering well, despite three years of recession.

    Lifting capital controls, he said, was “a vote of confidence in our banking system which, now fully independent of Greek banking institutions, can move forward”.

    The Greek debt crisis had a severe impact on Cypriot banks, which lost about €4.5bn worth of Greek sovereign bonds – equivalent to 25% of Cypriot gross domestic product, Reuters news agency reports.

  • CBN sets N100b capital base for DFIs

    CBN sets N100b capital base for DFIs

    The Central Bank of Nigeria (CBN) has set N100 billion as the minimum capital base for Wholesale Development Financial Institutions (WDFI).

    The guideline for the sector released by the apex bank yesterday said at least N20 billion of the capital shall be paid before grant of Approval in Principle (AiP).

    The CBN also put the minimum capital for Retail Development Finance Institutions (RDFI) at N10 billion and a non-refundable application fee of N100, 000 for RDFI while N250, 000 is for WDFI.

    The CBN expalined that the DFIs were established in order to accelerate the pace of development of the Nigerian economy and the realisation of the key roles of some critical sectors in the process.

    It said the DFIs will provide financial interventions in enterprises in the identified sectors to complement the efforts of banks and other financial institutions (OFIs).

    It explained that due to limited access to long-term and low-interest funds, in addition to other factors, the DFIs have recorded limited success.

    “Consequently, the Federal Government in collaboration with development partners and international financial institutions (IFIs) decided to sponsor the establishment of a WDFI to bridge the gap and to increase the availability and access to finance, in particular, for micro-, small and medium enterprises (MSMEs) being the engine of growth, without excluding Large Enterprises (LEs). The benefits of WDFIs are documented and acknowledged in both developed and emerging markets,” the apex bank said.

  • CBN rules out capital controls despite naira slide

    CBN rules out capital controls despite naira slide

    The Central Bank of Nigeria (CBN) said it will not introduce capital controls, rather, it is reviewing a rule introduced last month that investors said crushed liquidity in the foreign exchange market, its Governor, Godwin Emefiele has said.

    According to Bloomberg, the naira has been battered by oil prices that have dropped more than 50 per cent since June. The naira depreciated almost 11 per cent in the past three months, the highest among 24 African currencies tracked by Bloomberg.

    The CBN last month told banks to clear foreign exchange positions daily, having previously allowed them net-open positions of one percent of shareholder funds, in a bid to bolster the currency.

    “There will be a review in due course. But I can tell you categorically it will no longer be one per cent. It will be less than one per cent. The reason we put a stop to one per cent is because we felt that it was too large to be held by banks as a trading position.

    “The CBN has no plans to change a rule adopted around the same time that dollars bought in the interbank market be used within 48 hours or sold to the regulator. The naira is “currently appropriately priced” and no new measures are being considered,”the CBN chief told Bloomberg.

    The currency weakened for a third day, declining 0.2 per cent to trade at 184.23 per dollar in Lagos.

    “We are satisfied with the current adjustment that’s been done. It remains a free entry and free exit market,” Emefiele said.

    Nigeria, which gets 70 per cent of government revenue and almost all export earnings from oil, has proposed spending cuts and in November raised interest rates 100 basis points to a record 13 per cent in a bid to stem capital outflows and defend the naira.

    The CBN on November 25 also moved the naira’s official peg for twice-weekly auctions to a midpoint of 168 per dollar from 155 and widened its trading band to five per cent either side from three per cent.

    The measures implemented by the regulator have made it difficult for foreign investors to exit their holdings, Samir Gadio, head of African strategy at Standard Chartered Plc, said.

    “There’s a risk that these measures last as long as the CBN feels it doesn’t have the ability to control the exchange rate,” he said.

    “That is news to me that foreign investors are unable to exit their positions. If any foreign investor needs to exit its position, he should make a demand to a bank. If the bank cannot find those dollars to buy in the interbank market, the central bank will provide the dollars,” he said.

  • 2015: A year of changes at the capital market

    2015: A year of changes at the capital market

    2015 will witness a lot of changes at the capital market. From the regulatory agencies to operators and investors, the New Year will see many twists and turns, writes Capital Market Editor Taofik Salako

    For the capital market, next year will witness many changes. Against the backdrop of negative return in 2014, the expected tight macroeconomic condition in 2015 and the resultant fiscal and monetary adjustments will serve as the mixer for a mixture of political, operational and regulatory variables, which are expected to moderate the market’s performance and investors’ return in 2015.

    The year is starting with the expiration of the tenure of the director-general of the Securities and Exchange Commission (SEC), Ms Arunma Oteh. The reappointment of Oteh or appointment of a new director-general will dictate the pace for many market developments, including the recapitalisation of capital market operators.

    Ms Oteh resumed as director-general in January 2010. Her tenure ends  January 2015. The Investments and Securities Act (ISA) 2007, the law regulating the capital market, provides for a five-year tenure for the director-general, in the first instance, renewable for a similar term of five years only.

    Section 5, subsection 1 stipulates that the director-general and the three full time commissioners shall be appointed by the President upon the recommendation of the minister and confirmation by the Senate. Section 5, subsection 2 states that “the Director-General shall hold office for a period of 5 years in the first instance and may be reappointed for a further period of five years and no more”.

    However, subsection 5 states that “Notwithstanding the provisions of subsections (1) and (2) of this section, the President may extend the tenure of office of the director-general and any of the Commissioners whose term of office has expired until a successor to such director-general or commissioner is appointed”.

    In the alternative, the director-general may be requested to appoint one of the commissioners to supervise activities in her absence. Subsection 7 stipulates that “the director-general or, in his absence, one of the commissioners nominated by the director-general shall be responsible for the day to day management and administration of the Commission and shall be answerable to the Board of the Commission”.

    The choice of the chief executive for the nation’s apex capital market regulator is already keeping the market on the edge. Discussions were in hushed tones at the Abuja headquarters of SEC and within the major financial centres of Customs Street and Victoria Island. Opinions are divided on Oteh’s continuity and otherwise.  Oteh’s reappointment will give verve to her reforms, especially in  corporate governance, disclosures and enforcements. She will step on with the recapitalisation of capital market operators, which has pitched her against the multitude of small and medium operators. She may also have another chance to push for her unrealised targets of full dematerialisation, unclaimed dividend management, new complaint management framework, demutualisation of the Exchange and review and promulgation of many laws that could aid market developments. Most important, she will be able to drive the long-term master plan for the capital market, a blueprint she had championed and launched in Abuja in the last quarter.

    But Ms Oteh faces stiff oppositions from sundry market operators, investors and stakeholders groups, including staff of the SEC. She has major obstacles in the National Assembly, which has subsisting orders against her and had blocked subvention to SEC. The Presidency  ignored the legislative resolutions but it will have to return to the National Assembly to get approval for any appointment into the office of SEC’s director-general. Several stakeholders want to see a new chief executive who could draw on the capacities of the various constituents, including the National Assembly, to push for major changes that could alter the market development. They cited inability of Ms Oteh to put the capital market forward as the vehicle for government’s divestitures in the power sector and absence of legislative supports for the market.

    Ms Oteh, who had been accused of conflict of interest, is also unsuitable to supervise the demutualisation of the Exchange, some alleged.

    The General Secretary, Independent Shareholders Association of Nigeria (ISAN), Adebayo Adeleke, is canvassing for a new chief executive, an opinion he said mirrored the feelings of the average retail Nigerian investor. Their grouse was the takeover of three quoted banks by the Central Bank of Nigeria (CBN) without whatever consideration for retail investors and lack of enforcement actions against the indicted executives in the banks’ malfeasance. Oteh’s reappointment will kick-start the implementation of the recapitalisation of capital market operators.

     

    New capital, new operators

    January 1, 2015 is a signal date for capital market operators. That’s the take-off date for the new capital new capital base for various functions prescribed by SEC as well as the minimum operating standard (MOS) requirements prescribed by the Nigerian Stock Exchange (NSE). With the December 31 deadline for compliance, 2015 will be a decisive year for the sifting the capital market operators. While there is ongoing intense lobby for extension of the recapitalisation deadline, it’s almost certain that capital requirements will play decisive roles in the classification of market operators going forward. SEC had in December 2013 announced new minimum capital requirements for all capital market operators, with a compliance deadline of December 31, 2014 and effective take-off on January 1, 2015. Under the new capital requirements, minimum capital base for broker-dealer was increased by 329 per cent from the existing N70 million to N300 million. Broker, which currently operates with capital base of N40 million, will now be required to have N200 million, representing an increase of 400 per cent. Minimum capital base for dealer increased by 233 per cent from N30 million to N100 million.

    Also, issuing houses, which facilitate new issues in the primary market, will now be required to have minimum capital base of N200 million as against the current capital base of N150 million. The capital requirement for underwriter also doubled from N100 million to N200 million. Trustees, rating agencies and portfolio and fund managers had their minimum capital base increased by 650 per cent each from N40 million, N20 million and N20 million to N300 million, N150 million and N150 million respectively. A  Registrar will now have a minimum capital base of N150 million as against the current requirement of N50 million. While the minimum capital base for corporate investment adviser remained unchanged at N5 million, individual investment advisers will have to increase their capital base by 300 per cent from N500,000 to N2 million.

    Stockbroking firms under the auspices of Association of Stockbroking Houses of Nigeria (ASHON) have already called for a deferment of the deadline. Many wanted the suspension of the recapitalisation altogether. President, Association of Stockbroking Houses of Nigeria, Mr. Emeka Madubike, said the stockbroking firms have made a case for extension or deferment of the deadline. According to him, the recapitalisation, as it is now, is not in the best interest of the market and should be reviewed.  “For me, I believe that whatever we are doing, we are doing it in the interest of the market. So, if whatever you are doing doesn’t seem to be in the interest of the market, you need to restrategise. What we are asking for is a deferment of the deadline,” Madubuike said. Many stakeholders feel that the new minimum capital requirements may adversely impact the market penetration and financial inclusion programme.

    But the NSE has already indicated it will stick to the December 31 deadline for its reclassification programme for stockbroking firms based on the operating capacity of the firms. The new MOS standards relate to all the three classes of dealing members including broker-dealers, brokers and dealers and address the five broad areas of manpower and equipment; organizational structure and governance; effective processes; global competitiveness; and technology. The Nation had reported that a circular was dispatched to stockbroking firms on the eve of the Yuletide holidays affirming the deadline and outlining the implementation framework for the MOS. Under the MOS, stockbrokers will be reclassified under four categories according to operating capacity in 2015 while other stockbroking firms that fail to meet requirements for any of the four categories will be exited from the market. Also, existing stockbrokers that fail to meet the first three levels of operating standards will be reclassified as sub-brokers, partially recognised operators, and they will lose their membership of the Exchange.

    With effect from March 31, 2015, each dealing member of the NSE is required to submit a final MOS compliance level report in the prescribed templates previously provided by the Exchange. Dealing members that do not comply by March 31, 2015 will immediately be suspended from trading until they comply. Also, commencing in April 2015 and until the beginning of the fourth quarter of 2015, the Exchange will conduct thematic reviews and examinations to evaluate each dealing member’s level of compliance with the MOS. Following the thematic reviews and examinations, stockbrokers that are not in compliance with the MOS by the fourth quarter of 2015 will be advised to reclassify from broker-dealer status to a classification with lower MOS requirements. These include splitting the functions and becoming either a broker or dealer or becoming a sub-broker, a quasi operator with no membership of the NSE. Other stockbroking firms that fail to meet any of the four categories will be directed to “exit the market in an orderly manner”.  Head, legal and regulation division, Nigerian Stock Exchange, Ms Tinuade Awe, said the objective of the minimum operating standards is to transform the operators into more competitive and compliant operators. “We intend to ensure that the broker dealers, brokers and dealers have very robust controls, strong governance framework and sustainable operations that will enable them compete on a global scale for the benefit of the investors and the Nigerian capital market,” Awe said.

    Analysts’ estimate indicates that not less than 200 stockbroking firms may be affected by both the recapitalisation and the MOS scheme. This may further pressure the delicate overall market situation, which is under extraneous influence of the global crude oil crisis and resultant national monetary and fiscal adjustments.

     

    Another difficult year

    Head, Equity Research, FBN Capital Limited, Olubunmi Asaolu, said 2015 could be another difficult year for investors given the global crude oil crisis, a variable that has served as triggered for a chain of reactions, including tight monetary and fiscal policies. “Given the challenges which the oil price decline is posing, we expect next year to be another relatively difficult year for the equities market, though we don’t expect it to be as bad as this year,” Asaolu, a chartered financial analyst (CFA) said. Nigeria earns more than 70 per cent of its national revenue from crude oil.  With a steep decline in global crude oil, by some 40 per cent, rocking the national economy, the Central Bank of Nigeria (CBN) had responded with increase in monetary policy rate (MPR) from 12 per cent to 13 per cent, the first change in three years. It also devalued naira exchange rate to N168 per dollar with a band of +-5.0 per cent, that is, N160-N176. It was previously at N155 per dollar with a band of +-3.0 per cent, that is, N150-N160. Many analysts said they expected the apex bank to further devalue the Naira in the New Year. The increase in interest rate, the devaluation of Naira and expected spike in inflation rate are expected to combine to further constrained corporate earnings in the New Year. This will also be compounded by the unrelenting violence in the Northern region. Already, the International Monetary Fund (IMF) has cut its 2015 growth estimate for Nigeria to five per cent, as against initial 6.9 per cent estimated for 2014.

    A worsening macroeconomic outlook, especially with regards to reactive monetary policies, could proof to be fatal for the capital market in 2015. The Nigerian capital market is dominated by foreign investors, whose initial concerns about the macroeconomic performance had sustained decline all through the second half of 2014. Latest Foreign Portfolio Investment (FPI) by the NSE showed that foreign investors had taken away more than N101 billion from their portfolio investments in Nigeria by October 2014. The October report indicated that Nigeria recorded a net foreign portfolio deficit of some N101.41 billion over the past 10 months as divestments significantly outpaced investments by foreign investors. The NSE report is generally regarded as a credible gauge of foreign portfolio investments in Nigeria as it coordinates data from nearly all active investment bankers and stockbrokers. Nigeria operates a mono stock exchange, which makes the NSE the sole gateway to the nation’s stock market and the NSE’s benchmark indices, the country indices for Nigeria. Foreign portfolio outflow was N676.67 billion as against inflow of N575.26 billion during the 10.-month period, representing a net deficit of N101.41 billion. While the ratio of foreign-domestic investors participation fluctuate month-by-month, trading data have established firmly that foreign investors are the largest and most dominant bloc in the Nigerian capital market.  In October 2014, foreign investors accounted for 87.5 per cent of total market transactions.

    Head, research and investment advisory, Sterling Capital Markets, Mr. Sewa Wusu, said anxieties over Nigeria’s macroeconomic and monetary outlook in the light of the declining global oil prices and rising economic risks would combine with political risks to moderate the performance of the market.

    Head, financial advisory, GTI Capital Limited, Mr. Kehinde Hassan, said the 2015 general elections hold strong influence on the performance of the market going forward. Both Wusu and Hassan agreed that either way, the politics of 2015 will modulate the market performance. According to the analysts, a change in government in the February 14 presidential election and renewal of ongoing presidential term will influence the economic direction and investors’ reaction.

    Besides, the expected cut in banks’ earnings in the New Year could have strong sectoral influence on the market. Banking stocks are the most active stocks and they have influence on the overall market situation. The progressive reduction in Commission on Turnover (COT) will again reduce this charge from N2 per N1,000 in 2014 to N1 per N1,000 in 2015, halving banks’ earnings from this source. Impending capital adequacy ratio (CAR) changes are also expected to impact cost and earnings. Large commercial banks classified as systemically important banks (SIBs) are required to have an additional 100 basis points on the general benchmark of 15 per cent, that is, 16 per cent CAR with effect from April 2015. Nigerian banking industry will be adopting Basel II Capital Accord with effect from October 2015. “The adoption of Basel II essentially means additional capital charge for market and operational risks,” Head of Finance, FBN Holdings Plc, Mr Oyewale Ariyibi said.

    There is also the fear that the large exposure of banks to the oil and gas sector may have a pronounced impact on their bottom-line. While Ariyibi allayed the fears of burgeoning non-performing loans, he agreed that the exposures to the sector could impact on margins. “If the fundamentals of the obligors’ businesses do not change, loans do not go bad; however, temporary macroeconomic challenges might impact margins and profitability,” he said.

    Asaolu noted that the performance of the market may not be as worse as in the outgoing year. Head, Research and Intelligence, BGL Plc, Mr. Femi Ademola said although the volatile political situation is likely to scare investors away from the market, expectation of strong year end results and attractive corporate actions by listed companies could still lead to positive sentiments for the equity market. He noted that the recent reversal in oil price from below $60 to about $62 per barrel with a one year outlook of about $65 per barrel would also help to stem exchange rate volatility and thus attract portfolio investment to the country, post-election.

    “Empirical evidence suggests that Nigerian market usually recover strongly once elections have been settled and the likely policy stance of the new administration established. Therefore, we are optimistic of a positive outlook for the market in 2015, albeit modest,” Ademola said.

    Whichever twist, whichever turn, the New Year is loading, and it will throw up many challenges and opportunities.

  • UBA Capital changes name to United Capital

    UBA Capital changes name to United Capital

    •NSE reviews market indices amidst decline

    Shareholders of UBA Capital Plc yesterday approve the change in the name of the company to United Capital Plc, paving the way for the investment banking and capital markets group to conclude the process of name change.

    At an extraordinary general meeting held in Lagos, directors and shareholders of the company approved the change in the name.

    Speaking at the meeting, chairman, UBA Capital, Mr. Chika Mordi said UBA Capital has a proud heritage as one of Africa’s leading financial services companies.

    According to him, the group would build on its heritage and use its new brand identity as a catalyst to create greater values.

    “The new name reflects our shared determination to transform the continent’s financial sector, delivering exceptional value to both our shareholders and customers,” Mordi said.

    UBA Capital was until recently a member of the United Bank for Africa (UBA) Group. It was spun off and its shares distributed to existing shareholders of UBA in compliance with the new banking regime that requires banks to form holding company structure to hold non-core commercial banking subsidiaries or divest from such businesses. It was subsequently listed on the Nigerian Stock Exchange (NSE).

    UBA Capital offers four services including investment banking, asset management, trusteeship and securities. In 2013, it was named the Best African Investment Bank at the Africa Investor Awards.

    Meanwhile, the Nigerian Stock Exchange (NSE) is rounding off year-end review of its key group and sectoral indices. These included the NSE 30 Index, NSE 50 Index and the five sectoral indices- the NSE Banking Index, the NSE Consumer Goods Index, the NSE Oil & Gas Index, NSE Industrial Goods Index and the NSE Insurance Index. The composition of these indices after the review will be effective on January 1, 2015. The review will witness the entry of some major companies and exit of others.

    Major highlights of the review included the replacement of five companies in the NSE 30 Index. Fidelity Bank, FCMB Group, Total Nigeria Plc, GlaxoSmithKline Consumer Nigeria and Ashaka Cement Plc are being replaced by Seven-Up Bottling Company, Seplat Petroleum Development Company, Unity Bank, Sterling Bank and Mobil Oil Nigeria Plc. The NSE 30 Index tracks the 30 most capitalised companies on the NSE and largely controls the overall market situation.

    The NSE-30, NSE-50 and NSE Industrial Indices are modified market capitalization index with the numbers of included stocks fixed at 30, 50 and 10, respectively. The numbers of included stocks in the NSE-Consumer Goods, Banking, Insurance and Oil/Gas Indices are 15, 10, 15 and 7, respectively.

  • Companies reconsider new capital raising over declining share prices

    The bearish market at the Nigerian stock market is forcing companies that had planned to float new offer and raise new funds to reconsider their plans, a development that could reverse the modest level of activities at the primary market.

    Nigerian equities lost N1.44 trillion last week as foreign portfolio outflows exacerbated a downtrend that had seen the market mostly with month-on-month negative performance this second half. In spite of the marginal average gain of 0.03 per cent on Monday, most equities opened yesterday at their lowest values in a year.

    Investment banking sources said many companies that have recently launched new offers were reconsidering their pricing in the face of the bearish market at the Nigerian Stock Exchange (NSE).

    They said some companies were favourably disposed to delaying their new issues because of the significant undervaluation of their fundamentals by the losing spree.

    Not less than seven companies have new issues in the pipeline including Access Bank Plc, United Bank for Africa (UBA), Sterling Bank, Presco, Vitafoam, RT Briscoe and Cement Company of Northern Nigeria.

    Presco Plc, which had initially indicated it planned to raise some N3 billion at a price of N35 per share opened yesterday at the NSE at a low of N24.82 per share, significantly lower than its proposed offer price. Also, Sterling Bank Plc, which held an extraordinary general meeting on a planned new issue yesterday, opened yesterday at N2.31 per share, lower than its planned offer price. Also, RT Briscoe opened around its nominal price at 66 kobo per share while UBA and Access Bank are trading around their lowest prices in a year.

    Presco, a palm oil plantation and processing company, has already commenced the process to raise some N3 billion new equity funds from its major core investor and other minority shareholders to reorganize its highly leveraged capital structure.

    The shareholders of the company had in July this year approved the supplementary share issuance at their annual general meeting in Benin, Edo State. At the annual general meeting, shareholders had also approved the increase in the authorised share capital of the company from N500 million to N550 million through the creation of 100 million ordinary shares of 50 kobo each.

    Managing director, Presco Plc, Mr. Uday Pilani, confirmed the commencement of the rights issue noting that the board had decided to undertake the new equity raising to give the company financial flexibility and reorganise its capital structure.

    According to him, the net proceeds of the rights issue will be used to reduce the company’s debt and foreign exchange exposure.

    Directors of the company had expected the rights issue to receive overwhelming support noting that it presented an excellent opportunity for existing shareholders to increase their investment in the company.

    While the current details of the rights issue are sketchy, initial check by The Nation indicated that the rights issue will be pre-allotted to shareholders on the register of the company as at July 4, 2014 on the basis of one new share for every 10 shares held as at the qualification date. Directors of the company had also earlier indicated the rights would be offered at N35 per share.

    However, initial outlined had indicated that in the event of under-subscription of the rights issue, shareholders will not have any pre-emptive right, paving the way for other investors to acquire the unsubscribed shares. The underwriter to the rights issue will be able to acquire the unsubscribed shares, subject to the approval of the regulatory authorities.

    Also, Sterling Bank yesterday held an extraordinary general meeting of its shareholders in furtherance of its plan to raise about N50 billion in a new round of capital raising. Sterling Bank plans to raise about N20 billion through a special placement to identified strategic investors and more than N30 billion in another yet-to-be-specified instrument.

    According to the resolution, the bank plans to issue about 7.472 billion ordinary shares of 50 kobo each at N2.65 per share to Messrs. Silverlake Investments Limited or such other identified strategic investor. However, the opening price of N2.31 yesterday represented a discount of about 13 per cent to the planned offer price.

    In another resolution, the board of the bank sought to raise additional capital up to $200 million or its equivalent in Naira. The fund could be raised through any or a combination equity, global depository receipts, quasi equity, convertible loans, medium term notes, bonds and any other debt instrument.

    Head, research and investment advisory, Sterling Capital Markets, Mr. Sewa Wusu, however said that in as much as the changing price dynamics at the NSE will affect pricing of new issues, some offers may come at premium to the market prices since the prices were based on fundamental valuation.