The Nation Newspaper

Tag: exchange

  • Fed Govt, SEC, NSE open talks on demutualisation of Exchange

    Fed Govt, SEC, NSE open talks on demutualisation of Exchange

    The Federal Government has opened discussions with key stakeholders in the capital market on the demutualisation of the Nigerian Stock Exchange (NSE), Nigeria’s only stock exchange.

    The Federal Government, which played a major role in the founding of the private members-owned NSE in 1960, is in talks with the NSE and the Securities and Exchange Commission (SEC) on the possible guidelines, options and approaches for the demutualisation of the Exchange.

    SEC has released draft rules on the demutualisation of the NSE, a member-owned, limited by guarantee self-regulatory organisation (SRO), under which the membership rights of stockbrokers, dealers and other members will be converted into shareholdings in a demutualised Exchange.

    The draft rules, according to sources, are part of the discussion points among the key stakeholders. There are also related concerns by other stakeholders including a push by stockbroking and dealing firms, which are members of the NSE, for a further delay in the implementation of the new minimum capital requirements deadline to ensure their post-demutualised shareholdings are included in their valuations.

    Minister of State for Finance, Ambassador Bashir Yuguda, confirmed the discussion between the government and other stakeholders on the demutualisation.

    According to him, the government is engaging stakeholders such as SEC and the NSE because of the importance it attaches to the capital market and the import of such demutualisation on the market.

    He noted that the engagements and discussions with the stakeholders were geared towards ensuring that government comes up with the right policy for the demutualisation.

    President, Nigerian Stock Exchange (NSE), Mr. Aigboje Aig-Imoukhuede, also said the discussions on the demutualisation of the Exchange are ongoing noting that the exercise is of critical importance to the NSE and the entire capital market.

    According to him, giving the position of the NSE, the demutualisation of the Exchange will require input from both the government side and the private sector.

    Nigerian shareholders had expressed supports for the demutualisation of the NSE, describing the release of the draft rules for the demutuali-sation by the SEC as a step in the right direction.

    Shareholders’ leaders who spoke to The Nation said the demutualisation of the Exchange would open up the marketplace for popular ownership and enable minority shareholders who have been part of the growth of the market to benefit from ownership of the market.

    Demutualisation is the process of changing a member-owned stock exchange, otherwise known as mutual exchange, to a corporate entity owned by shareholders. In a mutual exchange, the three functions of ownership, management and trading are concentrated into a single group, hence the broker members of the exchange are both the owners and the traders on the exchange and they further manage the exchange as well.

    In a demutualised exchange, the three functions of ownership, management and trading are clearly separated. The draft rules by SEC simply defined demutualisation as “the separation of the ownership of the Securities Exchange from the right to trade on such Securities Exchange”.

    The NSE has been locked in intense grip of demutualisation with divergent views on the necessity, procedures and timing and other details of the exercise. The released of the draft culminated a four-year exercise to provide amenable template for the demutualisation.

    Established as Lagos Stock Exchange (LSE) in 1960, the stock exchange was conceptualised as a limited by guarantee not-for-profit organisation thriving on the goodwill, reputation and integrity of its members. While Nigeria’s doyen of accounting, Mr. Akintola William, is the only surviving initial signatory to the founding memorandum of the NSE, the membership list of the NSE has always included “the movers and shakers” of the Nigerian economy.

    Beside stockbroking firms and other capital market operators that are dealing members, members of the NSE included Alhaji Aliko Dangote, Chief Ernest Shonekan, Mr. Gamaliel Onosode, Mr. Oba Otudeko, Otunba Adekunle Ojora, Mr. Pascal Dozie, Chief Phillip Asiodu, Rear Admiral Allison Madueke (rtd.) and Senator Udo Udoma among others.

    Altogether, the NSE has  360 individual and institutional members including some 255 active dealing members.

    poration, New Nigerian Development Company Limited, Niger State Development Company Limited, Sokoto Investment Company Limited and Yobe Investment Company Limited among others.

    According to the draft of the demutualisation rules, obtained by The Nation, no single entity or person or related entities and persons should be permitted to own, directly or indirectly more than five per cent of the equity and or voting rights in the demutualised securities exchange.

    Besides, the rules stipulate that the aggregate equity interests of members of any specific stakeholder group such as stockbrokers and broker-dealer in the demutualised securities exchange should not exceed 40 per cent.

    The rules, made pursuant to section 313 of the Investments and Securities Act (ISA) 2007, stipulate that the securities exchange should initiate a process for determining the accurate list of members of the Exchange prior to the commencement of demutualization.

    The process of demutualization of the Securities Exchange should include an exchange of membership rights in the Securities Exchange for ownership of shares in the demutualised Securities Exchange.

    According to the rules, strategic investors should be given equity interest in the demutualised securities exchange subject to establishment of the facts that the strategic investor has technical expertise through previous experience in managing other Exchanges and the aggregate number of shares to be offered to the strategic investors shall not be more than 30 per cent of issued and fully paid up capital of the securities exchange. However, if the Exchange is in dire need of funds, it could issue a higher number of shares subject to approval of the Commission.

    The rules stipulate that the trading participants who are shareholders of the securities exchange shall with effect from the date of demutualization reduce their cumulative shareholdings in the demutualised securities exchange to not more than 10 per cent within five years.

    Application for demutualisation must include a valuation report of the securities exchange, the proposed authorized and paid-up share capital of the demutualized securities exchange with the number of shares to be issued, the names of members of the Securities Exchange proposed to be the initial shareholders of the demutualized Securities Exchange and the number of shares to be allotted to each shareholder, the number of shares to be allotted to and held directly or indirectly by the Government of Nigeria or its agencies in the public interest being at least 10 per cent of the total shareholding, the proposed Memorandum and Articles of Association (MEMART) of the demutualized Securities Exchange, the names and profile of council committee on demutualization, the proposed time within which the board of the demutualized securities exchange shall be appointed and the proposed names of directors of the demutualized Securities exchange to be appointed at the first general meeting following the re-registration of the Securities Exchange.

    Other requirements included the proposed plan for the independent management of the commercial and regulatory functions of the demutualized securities exchange and timelines for implementation of necessary structures to ensure the functional separation of commercial and regulatory functions, a detailed five year business development plan for the demutualized Securities Exchange together with the capital expenditure estimates and the sources of finance for the five year period, the manner in which the rights and liabilities of the existing members shall be treated in the demutualization, the procedure for the allocation of shares to the shareholders identified under subparagraphs (c) and (d) and a written declaration that demutualization shall not affect any rights and obligations of the Securities Exchange or render defective any legal proceedings by or against the Securities Exchange.

    Besides, the application must include the proposed timelines for the completion of operational manuals to guide the self-regulatory functions of the demutualized Securities exchange detailing the scope of regulatory functions to be performed by the demutualized Securities Exchange, the proposed rules of the demutualized Securities Exchange and the last audited financial statements of the Securities Exchange. However, the Commission may, in writing, require the Securities Exchange to provide any additional information which the Commission may require.

    The rules also stipulate the governance model, the resolution of the application and other details.

     

     

     

     

  • SEC canvasses for incentives to boost commodity exchange

    SEC canvasses for incentives to boost commodity exchange

    The Securities and Exchange Commission (SEC) has underscored the importance of incentives as part of measures to encourage active trading on the formal commodity exchange.

    Acting director general, Securities and Exchange Commission (SEC), Mr. Mounir Gwarzo, said the apex capital market regulator would make a case for incentives for the commodity exchange to the Ministry of Finance. Gwarzo spoke when a team from the Nigeria Commodity Exchange (NCX) visited him. The NCX metamorphosed from the former Abuja Securities and Commodity Exchange (ASCE).

    Gwarzo said SEC would collaborate with the NCX in a bid to make the commodity market in Nigeria more vibrant.

    The Commission also assured the management of NCX of its support in its bid to get NCX bill passed at the National Assembly and to do all within its capacity to get the commodity market on sound footing.

    “Migrating from being stock exchange to commodity exchange is a major feat and we are very excited about it. On our part, we will reach out to the Ministry of Finance so that we can make a case on some of the incentives that can encourage trading on the floor of the commodity exchange. We are very confident of the success of the exchange as the prospects are very high but a lot of things need to happen and you need to do more in that regard,” Gwarzo said.

    He said the Commission was ready to support NCX whenever there is public hearing on its bill at the NASS, but advised the management of NCX to do its networking very well before then.

    Besides, Gwarzo also advised NCX to be well positioned for competition as there were other commodity exchanges, like AFEX that will soon be competing with it.

    Gwarzo said that SEC was very keen on the growth and development of the exchange largely because of its important role in the economy.

    He added that since circulars were issued to companies to ensure their shares are traded on the stock exchange, it made a lot of difference in market transactions in the secondary market. He assured that once the warehousing receipt system and all other things were in place in the commodity exchange, the Commission will collaborate in any other area to ensure a very active market.

    Acting managing director, Nigeria Commodity Exchange (NCX), Hajia Zaheera Baba-Ami, lamented the non passage of the 2010 Warehouse Receipt Bill which is one of the issues hindering the growth of the exchange.

    Baba-Ami also advocated for incentives like excise and Export Duty rebate to encourage trading on the exchange. She appealed to SEC to assist in talking to end users and processors, like Nestle Nigeria,   Guinness Nigeria and Cadbury Nigeria to purchase commodities through the NCX to deepen the market.

    She noted that there was the need for proper legislation to regulate commodity trading in Nigeria and enhance liquidity and sustainability of the commodity exchange, adding that there was the need to compel companies to trade on the exchange, similar to what obtained in stock market

    According to her, adequate legislation has made Commodity exchange in Ethiopia to be ahead of others in Africa and made coffee a major foreign exchange earner for that country.

    She however disclosed that the exchange with the assistance of the Central Bank of Nigeria (CBN) is rehabilitating 22 warehouses that will assist in storing grains so that they are readily available to meet demands of processors and increase activities of the exchange.

     

  • Fears over foreign exchange reserves

    Analysts at FBN Capital have said the Central Bank of Nigeria (CBN’s) expectations of foreign exchange reserves increase to about $45 billion by year-end may not be realised.

    The reserves have come under pressure in recent months over declining oil prices and need to support the naira. The reserves stood at $39 billion on October 23, and were at $39.56 billion on September 26, down 0.15 per cent from the previous month, data from the CBN showed.

    Reserves stood at $39.62 billion in August and were $45.66 billion in September last year.

    Further analysis showed that reserves which were at $39.65 billion on August 25 and was at $38.4 billion on July 17. The rate of accretions to the reserves has been marginal but consistent since the CBN reviewed the bureau de change (BDC) policy guidelines.

    FBN Capital said the apex bank uses administrative measures to support its exchange-rate agenda. It said the mandatory recapitalisation of bureaux de change to stem leakages is one of such measures.

    According to the firm, the fall in the international price of Nigeria’s benchmark Bonny Light crude to about $95/barrel has fuelled fears that the CBN will be unable to hold the line on the naira exchange rate.

    “There remains a cushion of close to $20/barrel above the assumed export price in the 2014 budget although in reality pressures in the market develop far more quickly, which we can detect from the reluctance of offshore portfolio investors to participate in the most recent auctions of Federal Government of Nigeria bonds and Nigeria Treasury Bills,” it said.

    According to the firm, official statements give the impression that some of the oil production losses have been recovered, a claim, it said, it was unable to confirm in the absence of a unified source of metering.

    “As for the price, we do not think that global demand warrants significant further weakness. We also point to the many geopolitical risks and OPEC’s (Organisation of Petroleum Exporting Countries) interest in arresting the decline. The level of official reserves has settled on a plateau of $39.6 billion this month but still provides nine months’ merchandise import cover,” it said.

    Another measure to boost the naira, it said, is dollarisation of the banking system. “The CBN data though to March 2014 shows a limited build-up to 25.7 per cent of commercial banks’ total deposits,” it said.

  • School sponsors students on exchange programme to Singapore

    Grace High School Lagos, has sponsored her pupils on exchange programme to Singapore.

    The move, according to the School Administrator, Mrs. Tokunbo Edun, is in furtherance to the school’s commitment of turning out well groomed pupils, who would make meaningful contribution to the advancement of the country and the society at the large.

    Edun said the school believes that only well groomed pupils, who understand the dynamics of the modern world, can make impact in the society.

    Accordingly, she said the school has taken it upon itself to ensure that her products are well exposed in line with global best practices.

    Speaking on arrival with the students after a two-week trip to Singapore, Edun said: “Our pupils can only achieve much if they interact with the best from other climes. At Grace High School, we understand that the world is now a global village. Therefore, we prepare them to have a global outlook, which is one of the reasons for our international exchange programme with top schools across the globe.”

    She continued: “We were in Singapore because this is a country, which at a time was on the same level of development with Nigeria, but has since made giant strides that has placed her in the league of developed nations of the world. “Our thinking for this exchange programme with a top school in Singapore is that our pupils can learn from the pragmatic educational system that has produced best brains that turned around the fortunes of Singapore from developing to a developed nation. Our belief is that if Nigeria must attain her lofty vision of joining  the league of developed economies in the nearest future, then her young minds must not be push overs.”

  • Stock Exchange to sanction stockbrokers over reporting failure

    The Nigerian Stock Exchange (NSE) will impose sanctions on stockbroking firms that fail to submit their stockbroking transaction report for the just concluded month ended August 31, 2014 by the close of business on Wednesday September 10.

    In a circular to stockbroking firms, obtained by The Nation, the exchange indicated that it would impose regulatory sanctions including financial penalties on stockbroking firms that fail to meet the September 10 deadline. The sanctions will be imposed with effect from Thursday September 11.

    The NSE uses the transaction report to track inflow and outflow of foreign transactions, major deals in the market and to monitor the market to ensure suspicious sources are not using the stock market to launder ill-gotten funds or finance terrorism.

    The circular was signed by head; broker dealer regulation, Nigerian Stock Exchange, Mr. Olufemi Shobanjo.

    According to the circular, the submission of transaction report is in line with Article 14 of the rules and regulations governing dealing member firms of the Exchange which requires every dealing member to keep proper records and books of account in respect of all stockbroking transactions.

    “The council shall prescribe the forms in which such records and books are to be kept by dealing members and be entitled to empower the compliance department of the Exchange to inspect the records of dealing members from time to time and report thereon to the council,” the rule stated.

    It should be recalled that the NSE had earlier this year introduced uniform accounting year for all its dealing members. According to the directive, stockbrokers and dealers on the NSE will now run the normal Gregorian calendar year as their uniform business year, with every company expected to close its accounts by December 31.

    The new directive, which will take effect not later than December 31,  brings stockbrokers and dealers to the same standards as banks, which also run the Gregorian calendar year as industry-wide accounting year.

    According to the NSE, the uniform accounting year was in order to ensure consistency and more effective regulatory oversight.

    “Consequently, all affected dealing members should as a first step, pass board resolutions to the effect that their accounting year end will be December 31 and, thereafter, inform the Exchange and other relevant agencies accordingly,” NSE stated.

  • 20 companies to form new Stock Exchange’s premium board

    The Nigerian Stock Exchange (NSE) may pick 20 companies out of the 30 stocks that made up its NSE 30 Index to form its new premium board. The NSE 30 Index tracks the 30 most capitalised stocks at the stock market.

    The Nation‘s investigation indicated that the NSE may soon launch the new premium board, which will effectively make the Exchange a three-tier trading platform. The new premium board is designed as a market for the most capitalised stocks with the best corporate governance and liquidity. It is meant to showcase Nigeria’s best stocks to the global market.

    The proposed premium board will be NSE’s exclusive board with its listing rules and criteria. The existing listing boards, the main board and the Alternative Securities Market (ASeM), will also continue to run concurrently with the new premium board. The existing listing rules will continue to apply to companies currently on the main board and ASeM.

    Investigation showed that some 20 companies may make the inaugural list for the new premium board, which will subsequently be used by the NSE to woo major companies in Nigeria’s premium sectors of oil and gas, telecommunications and manufacturing.

    Companies that will be regrouped into the new premium board, according to a preview of the criteria obtained by The Nation, will be taken from five sectors of the NSE. These included leading breweries, cement-manufacturers, leading fast moving and consumer goods companies (FCMGs), oil and gas companies and banks. However, the new board will still be dominated by banks which are expected to have the largest representation and as well as liquidity.

    None of the stocks in the populous insurance sector and other sectors such as agriculture, healthcare, construction and information and communication technology will make the maiden trading list for the board.

    The existing quoted companies that will make the new premium board, according to a preview, included the two leading cement companies- Dangote Cement and Lafarge Africa, the two leading breweries-Nigerian Breweries and Guinness Nigeria, at least seven banks including Guaranty Trust Bank, Zenith Bank, FBN Holdings, Ecobank Transnational Incorporated (ETI), Stanbic IBTC Holdings, United Bank for Africa (UBA) and Access Bank as well as at least three oil and gas stocks including Oando, Forte Oil and newly listed Seplat Petroleum Development Company.

    Other companies that will make the list included Nestle Nigeria, Unilever Nigeria, Transnational Corporation of Nigeria and Flour Mills of Nigeria.

    A source in the know of the undercurrents at the Exchange indicated that the transition of companies across the three boards will be a continuous exercise as companies that meet the criteria for the premium board will be upgraded to the board while any company on the premium board that falls below the minimum standards will be downgraded to the appropriate lower board.

    The NSE will also continue to undertake primary listing of new companies on the three boards, depending on the qualifying criteria and status of the company.

    A preview of the criteria for the new board obtained by The Nation had indicated that companies to be listed on the new board must have market capitalisation of not less than $1 billion or about N157 billion.

    The companies must also score at least 70 per cent on the Exchange and the Convention for Business Integrity’s Corporate Governance Rating System (CGRS).

    Besides, the companies must have a minimum free float of 20 per cent or value of shares floated must be equal to or above $1 billion and the number of shares representing its issued share capital must be equal to or above 10 billion units.

    The companies are expected to meet stringent corporate governance, capitalisation and liquidity conditions.

    According to the draft rules for the new board currently under consideration, to remain on the premium board, an issuer’s continued eligibility shall be evaluated by the Exchange annually in line with all the outlined criteria or on the basis of additional requirements which may from time to time be prescribed by the Exchange, provided that each company shall comply with all other continuing listing obligations as specified under the listings rules of the Exchange.

    The council of the NSE may also in its discretion grant an extension of time for a company to comply with the relevant free float requirements set out in these rules; provided that the company submits a formal and substantiated request in that regard setting out the reasons why it could not meet the said requirements and how it proposes to satisfy the requirements within the time granted.

    Also, in the event of non-compliance with any applicable codes or regulations affecting their governance, companies shall be expected without prompting, to disclose in the Directors’ report of their annual report why they are in breach.

    The Exchange had indicated that the new board is aimed at providing a platform for greater global visibility for eligible Nigerian entities, which will make it easier for them to attract global capital flows and reduce the cost of borrowing.

    Head, legal and regulation, Nigerian Stock Exchange (NSE), Tinuade Awe, said the new board would subsist on a very strict regime with a great deal of emphasis placed on the need to comply with good corporate governance.

    According to her, the companies on the new board would be liable to sanctions in the event of breach of the premium board rules as well as the listings rules of the Exchange.

     

  • UI, Asian Varsity exchange students

    UI, Asian Varsity exchange students

    The University of Ibadan’s Centre for Sustainable Development (CESDEV) has partnered with some Asian universities on a student exchange programme.

    The Director of UI’s CESDEV, Prof Labode Popoola, made this known at a briefing in Bodija, Ibadan, the Oyo State capital.

    He said Nigeria, and indeed Africa’s thirst for real development, was hinged on a programme that breaks disciplinary and continental boundaries the same manner the centre was doing with the global field exercise, which started in Japan.

    The programme, he said, was aimed at creating “complete” leaders that can apply diverse methods to developmental and governmental issues.

    Popoola said: “Asia may be a continent of developed countries or a few emerging economies but, in truth, there are some things that we lost in the course of all that development. Coming to Nigeria, I saw those things and I wished we had it.

    “It’s important for students to employ multi-disciplinary approach to development studies. If we do that, we’ll begin to see sustainable development. That is the beauty of the programmes we have in CESDEV.

    “These students, in the past 11 days, have been exploring multi-disciplinary subjects that affect development. They’ve been dealing with environmental protection, agriculture, food security issues and many more.”

    Popoola said prior to the students of the University of Tokyo visit to Nigeria, UI students had, between November and December, last year, spent more than two weeks in Japan, learning and sharing ideas with their counterparts.

    “Our students were in the University of Tokyo between November and December, last year, learning and sharing with students in Tokyo. Now, students from that university are here too to learn and share. That is the global nature and concept of development studies,” he said.

    Popoola described lack of electricity, poor awareness of the programme’s relevance, as well as disinterest from states in sponsoring students, as part of challenges confronting the programme.

    CESDEV is a postgraduate programme of UI, which according to the director, offers postgraduate diplomas, professional and academic masters as well as PhDs’.

    Prof. Masafumi Nagao, who led the University of Tokyo students to Nigeria, said the need to learn and share experience worldwide necessitated the deal.

    Nagao said: “Africa and Asia have a lot in common, yet each continent knows very little about each other. The idea is for students from both continents to collaborate to learn from one another’s point of view and build areas of social relevance.”

    According to him, the programme is similar to programmes run at the University of Tokyo, but he wished there was more money available to execute more of such trips to Nigeria and Africa.

    A 23-year-old undergraduate of the University of Tokyo, Tina Yamada said in the midst of Japan’s technological advancement, spectacular transport system and social organisation, the country still needs to borrow a leaf from the Third World.

    Her Nigerian counterpart, Tolu Adegbite, said: “I was in Tokyo, Japan in December for the exchange programme. In terms of development, Japan has more advanced technology and better transport system unlike Nigeria. But here, their is flexibility unlike Japan where life is rigid and more individualistic. But one similarity is that the two countries have the same education culture where people believe that young people can only excel and lead the future if they acquire education.”

     

  • Commodity exchange vital to economic growth, says Sambo

    Commodity exchange vital to economic growth, says Sambo

    The commodity exchange market is critical to the economic growth and development of any nation, as it serves as the ultimate platform for trading and marketing various agricultural produce and commodities, the Vice President, Nnamadi Sanbo, has said.

    Sambo. Who spoke at the Bureau of Public Enterprises’ (BPEs’), Stakeholders’ Workshop for the Privatisation of Nigeria Commodity Exchange, said the workshop was necessary for the successful delivery of the Exchange’s privatisation programme. The workshop organised in conjunction with the Federal Ministry of Industry, Trade and Investment, and other relevant government agencies, was declared open by a member of the technical committee of the NCP and representative of the Vice President, Emmanuel Ijewere.

    He said the workshop themed, ‘Towards Achieving Best Standards and Practices in the Nigerian Commodity Exchange Market,’ is aimed at providing a platform for key stakeholders to discuss critical success factors that would drive robust commodity exchange operations in Nigeria, adding that tthe workshop seeks to entrench best standards and practices in Nigeria’s commodity exchange operations.

    He said: “Apart from strengthening local production with these inputs, it is the earnest aspiration of this administration to place Nigeria on the global economic score card as a nation that has internationalised its revamp mechanism and regional economic prowess through non-oil exports,” adding that it was in a bid to achieve this goal that the NCP approved the recommendation by the Steering Committee on the revitalisation of the Exchange to commence its privatisation.

    “This economic reform strategy is not just aimed at attracting private sector investment, innovations and management, it is also to enhance competition in the post-privatisation era and usher in a framework under which infrastructure, like silos and warehousing facilities, a modern trading platform and state-of-the-art information technology; regulatory and compliance framework; commodity grades and standards can be attained.”

    Sanbo noted that revitalising the Nigeria Commodity Exchange would “enhance employment creation that will engage the country’s teeming youth population, boost economic growth through non-oil exports, and improve tax collection as a veritable source of revenue. It would also contribute meaningfully towards strengthening the nation’s foreign exchange reserves and the naira, and improve cross-border risk rating in foreign direct investments in the sector.”

    He said government expects a gathering of key stakeholders to, among others, address how liquidity could be made available to farmers with the operationality of the Warehouse Receipt Syatem (WRS) and other bankable arrangements for which an Executive Bill is pending in the National Assembly; how market and price information could be accessed by produce buyers, farmers and dealers as a catalyst for competitive pricing and checking unethical market practices.

    Sambo said the gathering is expected to address the issue of how grades and standards in the nation’s commodity exchange market could receive facelifts in order for the economy to conform to international standards organisation (ISO) rating as far as commodity exchange operations are concerned; how operation of warehouses and silos could be liberalised and standardised to attract private investments and introduce international best practices into their management.

    The Director-General of BPE, Benjamin Dikki, pointed out that in a nation like Nigeria where there is huge agricultural potentials, the need for a virile commodity exchange is critical. “The giant strides that are being recorded in the agricultural sector needs to be complemented by a functional commodity exchange. This would undoubtedly add value to the economic value chain as it would pave way for competitiveness and stability in pricing of agricultural produce and commodities, as information would be available to market participants on sustained basis through modern information technology infrastructure; storage facilities like warehouses and silos would be available thus serving as storage facilities for the produce and commodities until they are sold through mutually beneficial contract.”

    Dikki also said that vast liquidity potentials would be available to farmers as warehouse receipts become tradable and negotiable; the commodity exchange sector would be guided by with the enactment into law of the Warehouse Receipt Bill and market rules to be introduced by an independent regulatory body to be set up, among others. “These key reform deliverables will usher in a revitalisation of the exchange, which has remained inactive since inception, reposition and enhance its market value both in the period preceding its privatisation as approved by government and afterwards, thus making it attractive to the private sector,” the BPE boss stated, describing the workshop as “one of the landmark activities under the reform agenda of the Federal Government.”

    Since its establishment in 1998 as part of efforts at developing the Nigerian Capital Market and with an initial primary objective of dealing in securities trading, ASCE, now Nigeria Commodity Exchange, has been bogged down by operational challenges. Dr. Vincent Akpotaire, Acting Director, National Facilities & Agricultural Resources, BPE, listed some of the challenges hampering the ability of the exchange to deliver on its mandate to include poor funding and stakeholders’ buy-in, lack of enabling legal and regulatory framework, erosion of shareholders’ funds, poor sensitisation mechanism, and absence of trading platform/infrastructure, absence of WRS, and electronic warehouse receipt system (e-WRS), among others.

    Akpotaire was however, quick to point out that in spite of the numerous challenges, “the exchange could indeed, be the ‘beautiful bride’ through value addition to the agricultural value chain, enhancement of export of produce and commodities.” He said that as part of government’s commitment to strengthen the operations of the exchange, a Steering Committee was constituted to recommend the best options for revitalising its operation. Also, the BPE, as part of its normal reform and stakeholders engagement framework, has embarked on active liaison with various stakeholders on ways of revamping the operations of the exchange. Some of the entities, he said, include the World Bank, African Development Bank, indigenous banks, Strategic Grains Reserves Department, Federal Ministry of Agriculture, Infrastructure Concession Regulatory Commission (ICRC), Federal Ministry of Industry, Trade and Investment, and ASCE management.

    The National Assembly is currently waiting in the wings to give the privatisation of the exchange the enabling legal and regulatory backing. The executive bill is now on the second reading, with Senator Olugbenga Obadara, Chairman, Senate Committee on Privatisation, assuring that the Senate would expedite action on the passage of the bill once it goes through the necessary legislative process.

    A communiqué is expected at the end of the workshop.

  • CBN may review naira exchange rate

    CBN may review naira exchange rate

    The Central Bank of Nigeria (CBN) may lower its targeted trading range for the naira as dwindling foreign-exchange reserves and falling oil prices undermine its ability to halt the currency’s slide, FBN Capital Limited has said.

    Policy makers may adjust the exchange rate to within a three percentage-point band of N160 per dollar from N155 over the next six to nine months, Gregory Kronsten, an analyst at the Lagos-based FBN Capital, said in an e-mailed response to questions over the weekend. Lower crude prices are making “it more difficult for the CBN to hold the lin on the naira exchange rate,” he said.

    FBN Capital is Nigeria’s fourth-biggest broker by trading value on the Nigerian Stock Exchange (NSE), according to the bourse.

    The naira traded above the band for the first time on a closing basis on June 7 on the interbank market and has ended trading above the peg each day since June 25. The apex bank, which sells dollars at auctions on Mondays and Wednesdays to support the naira, sold $700 million last week, compared with $600 million the previous week, at 155.76 to 155.79 per dollar.

    CBN Governor Lamido Sanusi Lamido, in November 2011, devalued the midpoint of the bank’s exchange-rate range at its twice-weekly auctions from N150 The nation’s foreign reserves have declined more than two per cent this month to $46.9 billion on July 18 as the apex bank boosted sales to meet demand amid declining oil prices, the source of more than 95 per cent of Nigeria’s foreign exchange income.

    The naira strengthened less than 0.1 per cent to N161.18 per dollar yesterday. The currency has weakened three per cent this year compared with a 0.5 per cent decrease in the currency of Angola, which vies with Nigeria as Africa’s top oil producer.

     

     

     

     

    Bonny Light crude, Nigeria’s main export, rose 0.1 per cent to $109.98 per barrel last week. The grade climbed to as high as $120.54 early in the year and fell as low as $100.31. Nigeria’s oil output slid for a third month in June, dropping by 70,000 barrels a day to 1.88 million barrels amid theft and damage to infrastructure, the International Energy Agency, said July 11.

    “The oil price has rebounded lately and looks more supported” even though “crude oil production reached new lows in June,” Samir Gadio, an emerging-markets strategist with Standard Bank Group Limited’s London-based unit, said in e-mailed comments. “In the absence of capital inflows over the past two months, the CBN has had to step up its foreign currency auction and direct sales to banks to address the dollar demand-supply mismatch.”

    Sanusi held the benchmark interest rate at a record 12 per cent for the 10th consecutive meeting on May 21, to check inflation and stabilise the naira. The Monetary Policy Committee will probably hold the rate when it announces the outcome of its latest decision today, according to all 14 economists surveyed by Bloomberg News.

    “Despite the recent moderate decline in foreign exchange reserves, the CBN still has enough ammunition to defend the naira for some time,” said Gadio. “The risk is also that the apex bank may be tempted to tighten liquidity conditions further at the MPC, or in coming weeks, although the surprisingly low June inflation rate probably reduces the possibility of a formal hike in the interest rate for now.”

    The nation’s inflation rate fell to 8.4 per cent in June from nine per cent in May, the National Bureau of Statistics said. Yields on the country’s $500 million of Eurobonds due July 2023 fell one basis point, or 0.01 percentage point, to 5.89 per cent.

    The CBN may increase its exchange-rate band to N160 per dollar to increase costs for importers, Sewa Wusu, analyst at Lagos-based Sterling Capital Limited, said by phone. This step “can serve as a check on dollar demand, thereby reducing pressure on reserves,” he added.

  • Royal Exchange drives MDRI with e-device

    Despite the belief in some quarters that the Market Development and Restructuring Initiative (MDRI) is not being harnessed by operators, some underwriters have started reaping from the programme.

    One of them is Royal Exchange Insurance Group. It said it is using the electronic platform to sell insurance listed in the initiative.

    The Managing Director, Royal Exchange General Insurance, Olutayo Borokini, said: “What we have done in Royal Exchange, is to use electronic platform to sell some of the compulsory insurances. For example, we are about the first to start using scratch cards to sell third party insurance policies through the various licensing offices and other distributing channels.

    “We recruited agents nationwide to sell these products through the use of scratch cards to members of the public. Apart from the third party insurance, we also created the variants of comprehensive policy. We find out that there are some people that don’t have money to purchase the comprehensive policy.

    “So, we have the variants of comprehensive policy whereby you can decide to purchase third party and damage only which we also sell through scratch card system.”

    He noted that the company has also introduced the sale of public buildings policies through the use of scratch cards, adding that the firm is mapping out strategies to sell these policies using various channels that may be available to it.

    He said the firm is embarking on strategies to reach out to the poor and owners of public buildings on the need to insure them.

    Borokini maintained that though the government is making efforts to get the people to insure their properties, there is the need for more enlightenment.

    He said the firm would send some staff to the market place, to enlighten the people and convince them on the need to have insurance policies.