The Nation Newspaper

Tag: investors

  • Why investors won’t stay away from Nigeria, by Heineken boss

    Why investors won’t stay away from Nigeria, by Heineken boss

    Nigeria will continue to attract foreign investors because of the high rate  of returns on investment,  the Chairman of the Executive Board/CEO of Heineken, Jean-Francois Van Boxmeer, has said.

    Jean-Francois Van Boxmeer, who  is also the Co-Chair of the World Economic Forum, currently holding in Abuja, (WEFA), stressed the great prospects of investing in Nigeria because of what he termed, “the high rate of return on investment.”

    Van Boxmeer told journalists in Abuja that the gains of investing in Nigeria are more than the imagined fears of insecurity.

    He urged Nigerian entrepreneurs to emulate the enterprising spirit of Alhaji Aliko Dangote to invest or expand their investment in the Nigerian economy as a way of boosting foreign investment.

    Despite the security challenges exacerbated by the kiddnap of the Islamist group, Boko Haram, delegates arriving at WEF, are still focused on tapping the continent’s oil reserves in the south and a growing middle class, said Teresa Coelho,  a Money Manager at BPI Gestao de Activos SA, and an owner of Nigerian stocks, who spoke by phone from Lisbon.

    “It’s grabbing the attention of everybody globally, but it doesn’t give investors in Africa a surprise,” she said, adding,  “it doesn’t change the investment case.”

    Those incidents and others carried out by the Islamist militant group Boko Haram, have been mainly confined to the north of the country and as long as that remains the case, money will keep flowing into the country, said Kevin Daly, who helps oversee about $12 billion in emerging-market and Nigerian debt for Aberdeen Asset Management. (ADN)

    “If this were to spread to other parts of Abuja and to Lagos, which is obviously getting closer to the oil infrastructure, that’s where you start to have some potential impact on investor sentiment,” Daly said in a phone interview from London.

    Companies such as Procter & Gamble Co. (PG) and MTN Group (MTN) Limited, have invested in Nigeria to tap into the inherent gains associated with it’s huge population of about 170 million people and the biggest economy that the government said will expand 6.75 per cent this year.

    Foreign direct investment rose 28 per cent to $21.3 billion last year, and stood at $2.5 billion in the first two months of 2014, according to the National Bureau of Statistics.

    Meanwhile, African leaders have been called upon to come up with policies that would help address the growing cases of inequality on the continent.

    At a meeting hosted by KPMG Professional Services specifically targeted at exploring Africa’s leading economies at the World Economic Forum Africa, the Chairman, KPMG Global Africa Practice and Senior Partner KPMG Nigeria, Mr. Seyi Bickersteth, said for the continent to address and reduce poverty, there was need to deepen intra Africa trade which currently stands at 12 per cent.

  • Investors lose N554b as depression climbs to 6.88%

    Investors lose N554b as depression climbs to 6.88%

    Nigerian equities wriggled through April with a marginal negative month-on-month return of -0.68 per cent, building on the bearish trend that had characterized the stock market in the first quarter.

    The negative return in April further depressed the overall market performance so far this year, increasing the four-month average loss to 6.88 per cent. This implies that an average investor has lost 6.88 per cent of its portfolio so far this year.

    Aggregate market value of all quoted equities closed April at N12.672 trillion as against its opening value of N13.226 trillion for the year.

    The benchmark index at the Nigerian Stock Exchange (NSE), the All Share Index (ASI), closed April at 38,485.48 points as against its opening index of 38,748.01 points for the month. However, aggregate market capitalisation of all quoted equities showed an increase of N226 billion from N12.446 trillion to N12.672 trillion. The difference between the ASI and market capitalisation might not be unconnected with the listing of the first-ever upstream company-SEPLAT Production and Development Company, on the NSE during the month. The high-profile listing had led to review in the pricing rules of the Exchange.

    The performance of the stock market in April underlined the cautious investors’ appetite and showed the dragging effect of the first quarter decline. The performance of the Nigerian equities market was largely bearish during the first quarter of the year. In January, February and March, the market consistently recorded losses of 1.8 per cent, 2.5 per cent and 2.0 per cent respectively. This was in sharp contrast to the corresponding period of 2013 when the market returned about 17.7 per cent in the first three months. In terms of activities, the average daily volume of transactions of 380 million units for the first quarter of 2014 was also lower than 512 million units in the corresponding period of 2013.

    The ASI closed the first quarter of 2014 with a drop of 6.25 per cent to close at 38,748 points while market capitalization dropped by 5.89 per cent to close at N12.45 Trillion. Total market volume for the quarter also fell by 26 per cent at 22.83 billion while total market value rose marginally by 6.3 per cent to close at N269.4 billion.

    The performance so far in 2014 contrasted sharply with performance in the corresponding period of 2013, when Nigerian stock market had rallied whooping capital gains of N3.10 trillion within the first five months of 2013.

    The market had subsequently built on this momentum to close 2013 with a capital gain of more than N4.25 trillion. The 2013 business year set the stock market on a new high with average full-year return of 47.19 per cent, its best performance since 2007.

    Aggregate market capitalization of all quoted equities on the NSE closed 2013 at N13.226 trillion as against its opening value of N8.974 trillion for the year. This represented a whooping increase of N4.252 trillion. The ASI recorded full-year return of 47.19 per cent rising from its opening index for the year of 28,078.81 points to close the year at 41,329.19 points.

    The performance in 2013 significantly surpassed the much applauded return in 2012 when equities posted average return of 35.45 per cent, equivalent to capital gains of N2.44 trillion. The stock market had closed the first half of 2013 with average return of about 28.8 per cent, equivalent to N2.45 trillion in capital gains. Aggregate market value of all equities on the NSE had closed the first half at N11.426 trillion while the ASI had closed the first half at 36,164.31 points.

    Major investment firms and analysts believe Nigerian capital market will be characterized by restrained bargain-hunting amidst evident lull in investors’ appetite in the remaining months of second quarter of 2014 as the market oscillates between external pressures and domestic regulatory transition.

    Leading market pundits and analysts said they expected the market to be somehow tepid in the remaining months of the first half, although there could be some modest resurgence. With a negative first quarter return of -6.25 per cent, most opinions seemed to tilt towards a negative close for the market in the second quarter.

    Investment experts at BGL Plc, GTI Capital, FSDH Securities, Financial Derivatives Company (FDC) and CBO Capital said they did not expect an overtly bullish market in the second quarter, although there were several bargain stocks that could enliven the market.

    Group deputy managing director, BGL Plc, Mr. Chibundu Edozie said the capital market would remain cautious and undecided, although it may not witness a major decline.

    According to him, the outlook for the market is unclear as the market has so far failed to respond to a number of impressive corporate financial announcements of listed companies.

    “The cautious mode of the market is likely to be sustained through the first half of the year until the new CBN Governor resumes in June and monetary policy direction becomes clearer especially in relation to exchange rates. We however do not foresee a further precipitous decline given that the market currently presents significant bargain opportunities to investors,” Edozie said.

    He noted that the bearish run in the equities market was due largely to foreign investors selling down in response to the global investment risk reappraisal in the wake of US active tapering of its quantitative easing and hence rising interest rates abroad.

    Edozie pointed out the influence of foreign portfolios in Nigerian market noting that among peers and emerging markets, the Nigerian stock market was the second worst performer in the first quarter; behind Russia which declined by 8.8 per cent during the period.

  • Foreign investors stake N2tr on Nigerian equities

    Foreign portfolio investors concluded deals worth about N2 trillion on publicly quoted Nigerian equities over the last 24 months, latest report on foreign portfolio investment compiled by the Nigerian Stock Exchange (NSE) has shown.

    The report obtained by The Nation at the weekend in Lagos, indicated that the value of foreign portfolio transactions on the NSE increased by 29 per cent last year as domestic investors showed keener interests in listed equities.

    According to the NSE report, value of foreign portfolio transactions increased from N808.4 billion in 2012 to N1.04 trillion in 2013. In both years, Nigeria retained net inflow from foreign investors.

    However, it dropped considerably from N94.4 billion in 2012 to N20.48 billion last year, reflecting the speculative and edgy nature of foreign portfolios during the year.

    But while foreign investors gradually reduced their dominance, domestic investors regained more confidence and created a near-balance market situation. Foreign investors had accounted for about 61.4 per cent of total turnover on the NSE in 2012 while domestic investors accounted for 38.6 per cent.

    However, domestic investors stepped up their participation with 49.2 per cent last year while foreign investors slowed down to 50.8 per cent. Foreign portfolios were the main drivers of transactions on the NSE between 2011 and 2012, with foreign investors accounting for average of two-thirds of equity transactions between 2011 and 2012.

    Total foreign inflow increased from N451.40 billion in 2012 to N531.26 billion last year just as foreign outflow correspondingly increased from N357 billion in 2012 to N510.78 billion last year.

    Portfolio flow analysis showed a consistent trading pattern in foreign transactions. While foreign investors flowed in more funds than they took out in the first half, they have taken more money out than they invested since the beginning of the second half, showing a sustained trend of profit-taking in the second half.

    Month-on-month analysis showed that total foreign transactions closed December last year at N69.57 billion, consisting of inflow of N32.40 billion and outflow of N37.17 billion. Total foreign transactions rose to N88.89 billion in November, including inflow of N42.68 billion and outflow of N46.21 billion. These had closed October at N82.33 billion including inflow of N39.45 billion and outflow of N42.88 billion.

    In September, total foreign inflow was N26.14 billion as against outflow of N27.88 billion, bringing total foreign transactions to N54.02 billion. Total transactions at the stock market during the month stood at N108.19 billion, out of which domestic investors contributed N54.17 billion or 50.07 per cent.

    In August, foreign inflow had stood at N31.12 billion as against outflow of N39.76 billion. Total foreign transactions thus stood at N70.88 billion, 52.26 per cent of the total turnover of N135.63 billion recorded for the month.

    Foreign investors had took out nearly a double of every penny they invested in the Nigerian stock market in July, unusually high disparity between foreign portfolio inflow and outflow, which led to significant decline in net foreign investment in the Nigerian stock market.

    The seventh month report for July last year had indicated that total foreign inflow stood at N31.81 billion as against outflow of N61.90 billion in July, showing the widest divergence between inflow and outflow so far this year.

     

     

     

     

    Total foreign inflow had risen to N90.15 billion while outflow stood at N60.09 billion as total foreign transactions increased to N150.24 billion in June.

    Foreign investors had accounted for 36.89 per cent, 39.65 per cent, 52.78 per cent, 64.48 per cent, 48.68 per cent and 51.13 per cent in January, February, March, April, May and June respectively.

    Portfolio transactions by foreign investors totaled N61.46 billion, N75.97 billion, N80.14 billion, N122.97 billion, N91.86 billion and N150.24 billion in January, February, March, April, May and June respectively.

    Foreign investors staked about N4.08 trillion on quoted shares on the NSE between 2007 and 2012. Foreign investors had gradually and consecutively increased their investments in Nigerian equities from about 15 per cent of total market turnover in 2007 all through till a high of about 67 per cent in 2011.

    The report underlined the early positioning of the foreign investors, who had saw through the prospects of Nigerian equities amidst the downtrend and the rampant herd instinct of the domestic investors, who mostly usually look at recovering market.

    Foreign portfolio transactions increased from N615.6 billion in 2007 to N787.4 billion in 2008. These trimmed down to N424.6 billion in 2009 before rising consecutively to N577.3 billion and N847.9 billion in 2010 and 2011 respectively. Foreign portfolio trades stood at N808.4 billion in 2012. With these, the two-way flow of foreign portfolio investments showed that while foreign investors flowed in about N2.01 trillion during the period, they equally took away about N2.17 trillion.

     

     

  • Investors Protection Fund: Investors submit 600 claims for compensations

    Investors have submitted more than 600 claims and request for compensations to the Board of Trustees of the Investors Protection Fund (IPF) as Nigeria’s first investors’ compensation scheme kicks off operations.

    Securities and Exchange Commission (SEC) had two weeks ago approved the operating rules for the IPF, paving the way for the scheme to start effective operations. Part XIV of the Investment and Securities Act (ISA) 2007 requires the Exchange to establish and maintain an investors protection fund to compensate investors with genuine claims of pecuniary loss against dealing member firms resulting from insolvency, bankruptcy or negligence of a dealing member firm of a securities exchange or capital trade points; and defalcation committed by a dealing member firm or any of its directors, officers, employees or representatives in relation to securities, money or any property entrusted to, or received by the dealing member firm in its course of business as a capital market operator.

    An impeccable source told The Nation that IPF already has a bagful of more than 600 claims and requests for compensations, which will give the scheme a busy start.

    The Nation learnt priorities will be given to the most pressing claims while all claims will be treated in accordance with the rules of the IPF.

    With IPF’s fund current estimate below N800 million, the mounting claims for compensations will subject the board to rigorous tests of not only the substantiality of the claims but also the degree of compensation based on the existing capital base of the fund.

    The IPF rules empowers the board of trustees to have at anytime a written policy on the maximum compensation payable to an investor who has suffered a loss. The board can review this maximum compensation limit from time to time according to prevailing circumstances at the market.

    The rules indicate that an investor whose claim is within the maximum limit may be paid the full amount of the loss, after deduction of any amount or value of all monies or other benefits received or receivable by the investor from a source other than the Fund in reduction of the loss.

    Besides, where the board is satisfied that in principle compensation is payable but considers that immediate payment in full would not be prudent having regard to other applications for compensation, or to any uncertainty as to the amount of the investor’s overall net claim, the rules empower the board to pay an appropriate lesser sum in final settlement or to make a payment on account.

    It stated that the board may also determine to make a payment on account or to pay a lesser sum where the investor has any prospect of recovery in respect of the claim from any third party or through an application for compensation to any other person or authority.

    However, the board may determine to reduce the compensation which would otherwise be payable to an investor in circumstances where it is satisfied that the investor is partly to blame for the loss which he has suffered.

    Compensation would be paid subject to conclusive decision of the board on the basis of evidence that the investor has a claim against a dealing member, duly applied for settlement of its claim from the dealing member; the dealing member was unable or likely to be unable to satisfy the claim within a reasonable period and the investor then, duly applied for compensation from the Fund.

    According to rules, an application for compensation may be rejected if it is not promptly made and in any event within the periods stipulated in the ISA or where the investor is responsible for, or has directly or indirectly profited from, events relating to the dealing member firm’s business which gave rise to the firm’s financial difficulties.

    The rules empower the board to make payment of compensation based on the claim submitted to the NSE and verified by the NSE or claim submitted to the board of IPF and verified by it, according to relevant sections of the ISA.

    In the event of multiple claims, person who claims in a double capacity for himself and as the personal representative of a deceased investor will be treated in respect of the representative claim as if he were the deceased investor without prejudice to his own personal claim.

    Also, where a person claims for himself and as a trustee, he will be treated in respect of the latter claim as a different person.

    But where two or more persons in partnership have a joint beneficial claim, the claim will be treated as the claim of the partnership; otherwise each of them would be taken to have equal shares in the claim unless the contrary is proved to the satisfaction of the board.

    According to the rules, where an agent has a claim for one or more principals, the principal or principals are to be treated as having the claim, to the exclusion of the agent.

    In order to replenish the fund, where the IPF finds an investor’s claim to be genuine and makes compensation on that basis, the board of the IPF shall have the right to recover such amount from the concerned stockbroking firm, even from the sale of the assets of such dealing member firm.

    According to the rules, the board of IPF upon the payment to any investor shall be subrogated to all rights of the investor against the dealing member concerned to the extent of such payment; and such subrogation shall include the right on the part of the board to recover an equivalent amount from the dealing member or from the proceeds of the sale of the assets of such dealing member.

    Such recovery from the dealing member firm or sale of the asset of the firm shall be paid into the Fund. Stockbrokers are mandatorily required to contribute to the IPF. Besides, the board of IPF is also empowered to invest the funds with a view to grow its capital base.

    The NSE had in 2012 inaugurated a nine-man Board of Trustees under the chairmanship of Deacon Gamaliel Onosode.

    Other members of the board included Chief Executive Officer of Nigerian Stock Exchange (NSE), Oscar Onyema; Misan Kofi-Senaya, managing director of Central Securities Clearing System (CSCS), Mr. Kyari Bukar; Chairman, Ibadan Zonal Shareholders Association (IBZA), Chief Sola Abodurin; Fubara Anga, Edosa Kennedy Aigbekaen, Sam Onukwe and Umaru Modibo.

     

     

  • Why Nigeria is haven for investors

    David Botha is the general manager, (West Africa) Mr Price, a South African clothing retailer in Nigeria. He is also the anchor tenant at Leisure Mall, Surulere, Lagos. He spoke with TONIA ‘DIYAN on the state of the clothing industry and how his firm has helped to reduce unemployment.

    Nigeria has become an attractive destination for foreign investors why?

    I think it’s a combination of many aspects; the many positive changes the government has facilitated and made possible; the many success stories of phenomenal business men and women; the improvement of the economic growth rate as well as the world waking up to the tremendous potential Nigeria is able to offer as an investment destination.

    How would you rate the clothing industry?

    We do not have access to figures on the true size and rate of growth of the clothing industry; therefore, I am unable to comment.

    Your firm has contributed positively to the economy. Would you say you have put the retail market here on the platform, compared to other African countries?

    We are very excited and privileged to grow the Mr Price business in Nigeria. People are very hungry for quality and innovation and we are bringing world-class stores with all standard international guarantees and returns policies. We put our customers first, by providing the latest international fashion, at great prices and in trendy and stylish stores.

    Given South Africa’s dismal growth prospects, investors are keen to see evidence of retailers expanding into fast-rising sub-Saharan economies such as Nigeria. How are you part of this?

    We began our business in Nigeria with one test Store and opened another one in the same year. Last year, we doubled the number of stores. We have four stores in Nigeria and will be opening new ones this year, as well as launching our online offering very soon. Our Mr Price website will enable customers to view our fashion online, whenever it suits them. They will be able to purchase the items via the website and pay with their cards online, or upon delivery.

    How do you intend to bring more resources and grow your staff in Nigeria?

    As the Mr Price business grows, we will invest more capital in the country, as well as continue to employ more people. We are committed to our business in Nigeria being run by our Nigerian team.

    We regularly take our people for training in other countries and are excited by the fantastic potential of our Nigerian team members. We promote from within our business and we only have one expatriate, who will be replaced by a Nigerian, by the end of the year.

    What makes you unique?

    I cannot comment on what other retailers are doing. However, the Mr Price Group is dedicated to learning how we can improve on the way we do things to make our current and future customers’ shopping experience, as enjoyable and rewarding as possible. We are not simply copying what we do in other countries, we are customising our business to suit the needs of our customers in the various regions in which we have stores.

    Before now, what did you think of the clothing industry in Nigeria?

    We thought it was very restrained and was dominated by cheap imports with not much formal shopping. Since we began operating here, we have been very impressed by the retail market, which will grow in importance as time goes on and will contribute immensely to the growth of the economy. It will also be a great contributor to increased employment opportunities across the country.

    Where do you see the retail industry in a few years?

    We think that in a few years we are going to see a very different retail landscape, in terms of different store types and there will be many more new shopping malls built, throughout Nigeria. Mr Price will be a part of this growth. There will be many opportunities for local entrepreneurs to develop new store brands and different types of entertainment offerings, restaurants and fast food businesses. There will likely be new foreign stores, which will enter Nigeria and this will result in numerous different retail-related job opportunities, as well as prospects to supply such stores with all the various services they will require.

    The malls will provide a great place for people to browse and do their shopping, as well as meeting their friends and families, also enjoying themselves during their free time.

    What innovations are you coming up with?

    The innovation we are primarily focusing on is to get our business running as smoothly as possible, so that we have new fashion items reaching our stores every week, thus ensuring that our customers always have the freshest fashion available, when they visit our stores.

    We will also be launching our Mr Price E-commerce site early this year, so our customers in all corners of Nigeria will eventually be able to go online and order their fashion items, which will be delivered to their doorstep.

    Where is Mr Price?

    We started off with one Store in Ikeja City Mall in Lagos. We then opened a store in Surulere, within Lagos. In our second year of doing business in Nigeria, we opened a further store in the Heritage Mall in Ibadan, as well as in the Grand Towers Mall in Abuja. So, there are four Mr Price stores in Nigeria.

    We will open additional new stores this year as well as begin trading online. As a result of this growth, we are able to offer an ever-improving shopping experience with the most fashionable items at the best possible prices.

    That means you are even helping Nigerians in employment?

    Absolutely, the success of Mr Price is based on the passionate and dedicated efforts of all our staff in Nigeria and elsewhere. We are focused on the development of our staff and continue to invest in their training and development. As more stores open, we will continue to hire and develop staff. We make use of an organic growth model, whereby we largely promote staff members from within the Mr Price business. There are numerous staff members who hold senior positions, who began their working career with us as casual employees.

  • Investors rebalance portfolios ahead of earnings season

    Six days to the end of the year, investors appeared to be rebalancing their portfolios in favour of year-end earnings and returns.

    The stock market has sustained a largely bullish outlook in spite of the Yuletide season and year-end demand for cash. Average market gain was 1.88 per cent last week while it rose further by 0.87 per cent on Monday.

    Market assessments by analysts and investment advisors several securities and investment firms including FSDH Merchant Bank, GTI Securities, Capital Assets and Morgan Capital Group, among others, indicated possible increase in momentum of portfolio rebalancing as pundits advised investors to lock in into equities with strong fundamentals and better prospects for good returns.

    Most quoted companies, including all banks, major manufacturers, oil and gas companies, breweries and cement companies use the 12-month Gregorian calendar year as their business year. The business year thus terminates on December 31.

    Post-listing rules at the Nigerian Stock Exchange (NSE) require that quoted companies should submit their reports, not later than three months after the expiration of the period.

    Managing director, GTI Securities, Mr Tunde Oyekunle said investors were already valuing dividend expectations into their bid and sale orders, with most bids implying optimistic view of dividend expectations.

    “Wise investors are positioning for the first quarter market boom, which is expected to be driven by good audited results and dividend,” Oyekunle said in a note to The Nation.

    He noted that investors were optimistic that the positive impact of the power sector reforms and other economic policies will provide impetus for further market performance in 2014.

    Market reports have shown marked improvement in the momentum of activities on stocks perceived to have potential for relatively high dividend yields and headroom for capital appreciation. Investors have particularly shown keen interests in low-priced stocks which modest dividend could translate into high yield given the low share price.

    Already, Transnational Corporation of Nigeria (Transcorp) and FBN Holdings have given prior notices that they would be paying dividends for the 2013 business year.

    FBN Holdings Plc, the holding company for First Bank of Nigeria (FBN) Limited and other financial services companies, has indicated that it has started definitive moves to ensure payment of dividends for the year.

    The confirmations of the dividend payment indicated the confidence of the boards of directors on the third quarter earnings and the last quarter of the year.

    The board of FBN Holdings stated that it had undertaken the group-wide audit of the third-quarter earnings of its subsidiaries to ensure that it receives dividends from its subsidiaries for onward distribution to shareholders.

    According to the board, FBN Holdings has chosen to audit the financial statements to ensure that the holding company, a non-operating entity sharing the same December year-end with its subsidiaries, receives dividend income from its subsidiaries within the year 2013 and as such enable FBN Holdings to pay dividend to shareholders for the year ended December 31, 2013.

    FBN Holdings indicated that it has concluded the audit process and submitted its audited financial statements to the Central Bank of Nigeria (CBN) for approval noting that once it receives the CBN’s approval for the audited financial statements, it will submit the third quarter accounts to the NSE.

    Also, the board of Transcorp has resolved that the conglomerate would pay dividends for this business year.

    At their board meeting, directors of the conglomerate unanimously resolved that they will recommend to the shareholders of the company the payment of dividends at the end of the financial year ending December 31, 2013.

    The dividend consideration, according to the board, was based on the impressive third quarter report for the nine-month period ended September 30, 2013 and in further consideration of the fact that since the listing of the company’s shares on the NSE in December 2006, the Nigerian public who bought into the conglomerate has not earned any dividends.

    The board however stated that the quantum of the dividend recommended herein shall be determined at the end of the year, subject to the final audited accounts and required regulatory approvals or consent.

    Market analysts said dividend consideration was part of the dynamics currently shaping share pricing trend.

    Most interim earnings reports had shown significant improvements in distributable earnings of quoted companies, which will expectedly determine the quantum of dividend payout.

    Nine-month report of Conoil for the period ended September 30, 2013 showed that pre and post tax profits rose by 341 per cent and 329 per cent. While sales growth was modest at 6.0 per cent, the company had leveraged on increasingly efficient cost management and financing structure. Turnover rose to N121.80 billion in 2013 as against N114.77 billion in comparable period of 2012.

    Profit before tax jumped from N699.42 million to N3.08 billion while profit after tax leapt to N2.09 billion as against N487.22 million recorded in corresponding period of 2012. With these, earnings per share stood at N3.01 by September 2013 as against 70 kobo by September 2012.

    There is a strong expectation that Conoil will consolidate its performance during the fourth quarter. According to the directors of the oil-marketing company, full year profit could rise to about N4 billion by the end of this year. On the basis of this management guidance, earnings per share could rise to N5.76 by the year ended December 31, 2013.

    Nigeria’s largest conglomerate, UAC of Nigeria (UACN) Plc, had also witnessed considerable growths in turnover and profit in the third quarter after it consolidated earnings from two new acquisitions this year.

    Nine-month earnings report of UACN Group for the period ended September 30, 2013 showed double-digit growths from the top-line to the bottom-line, raising expectations that the conglomerate may at least sustain its payout rate in spite of bonus shares of 20 per cent declared recently.

     

  • Investors Protection Fund may begin operations in 2014

    Investors Protection Fund may begin operations in 2014

    The Investors Protection Fund (IPF) of the Nigerian Stock Exchange (NSE) may begin effective operations in 2014 as the board of trustees of the fund meets to work out the final details of operational strategies and rules.

    An impeccable source in the know of the impending meeting of the board of trustees told The Nation that the trustees would meet before the end of this year to conclude all arrangements for effective operations.

    According to the source, the fund is in the process of rounding off its rules and processes for compensation of investors.

    The source said the board of trustees had taken its time to ensure it laid a good operational framework for the fund before it starts assessment and compensation for claims on relevant losses.

    Part XIV of the Investment and Securities Act 2007 requires the Exchange to establish and maintain an investors protection fund to compensate investors with genuine claims of pecuniary loss against dealing member firms resulting from insolvency, bankruptcy or negligence of a dealing member firm of a securities exchange or capital trade points; and defalcation committed by a dealing member firm or any of its directors, officers, employees or representatives in relation to securities, money or any property entrusted to, or received by the dealing member firm in its course of business as a capital market operator.

    The NSE had last year inaugurated a nine-man Board of Trustees under the chairmanship of Mr Gamaliel Onosode. Other members of the board included Chief Executive Officer of Nigerian Stock Exchange (NSE), Oscar Onyema; Misan Kofi-Senaya, managing director of Central Securities Clearing System (CSCS), Mr. Kyari Bukar, Chairman, Ibadan Zonal Shareholders Association (IBZA), Chief Sola Abodurin; Fubara Anga, Edosa Kennedy Aigbekaen, Sam Onukwe and Umaru Modibo.

    The Board of IPF had prepared a new set of draft rules governing the operation and effective management of the fund on June 11, 2013. These rules were made available to stakeholders on June 14, this year to undergo stakeholders’ review up till June 21.

    Head, Public Relations, NSE, Mr. Dante Martins, had confirmed that the Exchange received comments from stakeholders and had made necessary amendments to the rules.

    Under the draft rules, IPF is empowered to take over the assets of insolvent or erring dealing members of the Exchange.

    According to the rules, where the IPF finds an investor’s claim to be genuine and makes compensation on that basis, the board of the IPF shall have the right to recover such amount from the concerned stockbroking firm, even from the sale of the assets of such dealing member firm.

    The board of IPF upon the payment to any investor shall be subrogated to all rights of the investor against the dealing member concerned to the extent of such payment; and such subrogation shall include the right on the part of the board to recover an equivalent amount from the dealing member or from the proceeds of the sale of the assets of such dealing member.

    Such recovery from the dealing member firm or sale of the asset of the firm shall be paid into the fund.

    The draft empowers the board of IPF to have at anytime a written policy on the maximum compensation payable to an investor who has suffered a loss. The board can review this maximum compensation limit from time to time according to prevailing circumstances at the market.

    The draft indicates that an investor whose claim is within the maximum limit may be paid the full amount of the loss, after deduction of any amount or value of all monies or other benefits received or receivable by the investor from a source other than the Fund in reduction of the loss.

    Besides, where the board is satisfied that in principle compensation is payable but considers that immediate payment in full would not be prudent having regard to other applications for compensation, or to any uncertainty as to the amount of the investor’s overall net claim, the draft empowers the board to pay an appropriate lesser sum in final settlement or to make a payment on account.

    It stated that the board may also determine to make a payment on account or to pay a lesser sum where the investor has any prospect of recovery in respect of the claim from any third party or through an application for compensation to any other person or authority.

    “The board may determine to reduce the compensation which would otherwise be payable to an investor in circumstances where it is satisfied that the investor is partly to blame for the loss which he has suffered,” the draft stated.

    Compensation would be paid subject to conclusive decision of the board on the basis of evidence that the investor has a claim against a dealing member, duly applied for settlement of its claim from the dealing member; the dealing member was unable or likely to be unable to satisfy the claim within a reasonable period and the investor then, duly applied for compensation from the Fund.

    According to the draft, an application for compensation may be rejected if it is not promptly made and in any event within the periods stipulated in the ISA or where the investor is responsible for, or has directly or indirectly profited from, events relating to the dealing member firm’s business which gave rise to the firm’s financial difficulties.

    The draft empowers the board to make payment of compensation based on the claim submitted to the NSE and verified by the NSE or claim submitted to the board of IPF and verified by it, according to relevant sections of the ISA.

    In the event of multiple claims, person who claims in a double capacity for himself and as the personal representative of a deceased investor will be treated in respect of the representative claim as if he were the deceased investor without prejudice to his own personal claim.

    Also, where a person claims for himself and as a trustee, he will be treated in respect of the latter claim as a different person.

    But where two or more persons in partnership have a joint beneficial claim, the claim will be treated as the claim of the partnership; otherwise each of them would be taken to have equal shares in the claim unless the contrary is proved to the satisfaction of the board.

    According to the rules, where an agent has a claim for one or more principals, the principal or principals are to be treated as having the claim, to the exclusion of the agent.

    To build up the IPF, the draft rules stipulate that all penalties and fines paid by erring stockbrokers for contravening capital market rules, regulations and market practices shall be paid into the IPF in addition to established contributions from stockbrokers. The board of IPF is also empowered to invest the funds with a view to grow the capital base of the IPF.

     

  • Foreign investors scramble for Nigerian equities, debts

    Foreign investors scramble for Nigerian equities, debts

    •Surplus liquidity depressing yield

    Foreign investors have increased portfolio investments in Nigerian equities and bonds with increased inflows from foreign portfolio investors stoking excess liquidity and depressing yield in the domestic bond market.

    Market operators in the know of foreign portfolio transactions told The Nation that foreign investors appeared to have increased stakes on Nigerian equities and bonds. They cited recent transaction trends in both the equities and bond markets.

    Market operators said the market is awash with liquidity, a technical reference to increased inflow of investment funds. This has supported positive market scenario.

    The N87.5 billion Lagos State Bond, which was concluded last week, recorded an oversubscription of 40 per cent while the equity market has sustained average year-to-date return of more than 38 per cent, in spite of recurring profit-taking trend.

    Managing Director, Cowry Asset Management Limited, Mr. Johnson Chukwu, said foreign investors have shown stronger interest in Nigerian instruments, which they considered as better growth portfolios because of Nigeria’s relative higher returns and decreasing inflation rate.

    According to him, foreign investors believe that Nigerian equities offer better prospects for competitive returns than many other frontier markets.

    He noted that increasing foreign interests in bond market were partly responsible for the decline in yields in the segment as yields, even at current levels, were still better than yields in advanced economies and many emerging market.

    Chukwu said the positive outlook for the global economy as indicated by the supportive disposition of the prospective chairman of the United States’ (US) Federal Reserve (US Fed), Janet Yellen had encouraged foreign portfolio investors to build up their frontier portfolios.

    Third-quarter report on foreign portfolios showed that foreign investors had staked N801.25 billion on Nigerian equities within the first nine months. The latest report on the foreign portfolio investment flow by the Nigerian Stock Exchange (NSE) showed that foreign investors dominated transactions during the nine-month period, accounting for 50.81 per cent of total transactions during the period.

    The report indicated that total transactions at the NSE within the period stood at about N1.58 trillion, with foreign portfolio investors accounting for N801.25 billion while domestic investors accounted for N775.77 billion. Domestic investors thus accounted for 49.19 per cent within the nine-month period.

    In September, total foreign inflow was N26.14 billion as against outflow of N27.88 billion, bringing total foreign transactions to N54.02 billion. Total transactions at the stock market during the month stood at N108.19 billion, out of which domestic investors contributed N54.17 billion or 50.07 per cent.

    In August, foreign inflow had stood at N31.12 billion as against outflow of N39.76 billion. Total foreign transactions thus stood at N70.88 billion, 52.26 per cent of the total turnover of N135.63 billion recorded for the month.

    Total foreign transactions in the Nigerian market for the seven-month period ended July 31, 2013 stood at N676.25 billion, 50.73 per cent of aggregate transactions of N1.33 trillion by foreign and domestic investors during the period. Breakdown of foreign transactions during the seven-month period showed inflow of N359.47 billion as against outflow of N316.88 billion. Nigerian investors accounted for N656.85 billion over the seven months.

    First-half report on foreign portfolio investment flow had shown that total transactions-including buy and sell deals, by foreign investors totaled N582.64 billion, accounting for 49.24 per cent of total turnover at the NSE during the period. Total turnover value at the NSE during the first half was N1.18 trillion with both foreign investors and domestic investors dominating transactions in three months each.

    Foreign portfolios were particularly the main drivers of transactions on the NSE in the past two years, with foreign investors accounting for average of two-thirds of equity transactions between 2011 and 2012.

    The report underlined the early positioning of the foreign investors, who had saw through the prospects of Nigerian equities amidst the downtrend and the rampant herd instinct of the domestic investors, who mostly usually look at recovering market.

    Foreign portfolio transactions increased from N615.6 billion in 2007 to N787.4 billion in 2008. These trimmed down to N424.6 billion in 2009 before rising consecutively to N577.3 billion and N847.9 billion in 2010 and 2011 respectively. Foreign portfolio trades stood at N808.4 billion in 2012.

     

  • JPMorgan reaches $4.5 billion settlement with investors

    JPMorgan reaches $4.5 billion settlement with investors

    JP MORGAN and Chase has reached agreement with US to pay $4.5 billion in mortgage security deal even as it plans to keep overall compensation per employee roughly flat this year from last year, lagging gains at rivals, as the bank’s massive legal settlements weigh on its results, two sources familiar with the matter said.

    Bonuses were largely set early this week, though payouts could change in unusual situations or if there is an unexpected change in the company’s results during the last six weeks of the year, said the sources, who spoke on the condition of anonymity. It is not yet clear what Chief Executive Jamie Dimon’s bonus for 2013 will be.

    Pay increases have been muted across much of the banking sector in the aftermath of the financial crisis, but JPMorgan’s plans are on the low end of what experts forecast for the industry this year.

    Earlier this month, compensation consultant Johnson Associates estimated that commercial and retail bankers overall will get bonuses that are unchanged to 5 percent higher this year. It estimated bonuses across all of Wall Street, including large asset management firms, will be up 5 to 10 percent. Recruiting firm Options Group estimated that average pay will rise 4 percent.

    But JPMorgan has higher legal expenses than rivals. On Tuesday, the bank agreed to pay $13 billion to the U.S. government to settle charges it misrepresented the quality of mortgages it sold to investors before the housing crisis. After taxes, that settlement is equal to nearly half of what the bank can earn in a year.

    Without legal settlements, JPMorgan’s profit would have been about 27 percent higher in the first three quarters than the same period last year, an increase that would have made it easier for the company to boost pay per employee this year.

    The bank could have taken more dramatic steps to cut costs after recent settlements, like cutting pay across the board or reducing staff.

    But its executives believe the legal costs are a temporary drain on profits, and do not want to force current employees to bear too much of the burden of the settlements.

    CEO Dimon said this week that it would not be fair to penalize current employees for actions that occurred years ago, largely at banks that JPMorgan acquired in the heat of the crisis.

    “We have never blamed employees broadly for mistakes that were made away from them,” Dimon said on Tuesday in response to a question from a stock analyst about compensation expense.

    Some up, some down

    Even if pay on average will be more or less unchanged, an individual’s pay may rise or fall, depending on the performance of the employee’s unit, and his or her own work, the sources said.

    In mortgage lending, for example, overall pay is expected to be down because of the dramatic decline in loan refinancing volume. Asset management employees will generally see pay go up following gains in that division that have come with the higher stock market. Within JPMorgan’s investment bank, where the year has been good for some units and bad for others, pay generally will be up a little, one of the sources said.

    About 156,000 of JPMorgan’s 255,000 employees work in retail, mortgage and credit card businesses, where pay is generally lower than in its investment bank.

    The company’s headcount has fallen a little since the end of last year, when it was around 259,000, but most of the job cuts have been in lower-wage jobs rather than the investment bank. The bank does not disclose total compensation expense for the whole of JPMorgan Chase.

    The settlement JPMorgan signed this week covers its mortgage lending, sales and securitization practices from more than five years ago. Mortgage deals done by Bear Stearns and Washington Mutual before JPMorgan acquired them accounted for about three-fourths of the liabilities involved in recent mortgage settlements.

    Dimon’s bonus for 2013 has not been set, but for 2012, the board cut his total pay in half to $11.5 million, citing the $6.2 billion of “London Whale” trading losses that happened under his watch.

    Even after the substantial checks JPMorgan has written, its legal and regulatory issues are not over. The bank faces at least nine other government probes, covering everything from its hiring practices in China to whether it manipulated the Libor benchmark interest rate. It may still also face criminal charges linked to mortgage matters.

    In the third quarter, JPMorgan lost $380 million after it set aside more than $7 billion, after taxes, to cover litigation expenses. It was the bank’s first quarterly loss since 2004.

    The bank said last month it has some $23 billion set aside to cover remaining litigation expenses. The $13 billion settlement it agreed to this week is covered by that figure.

    (Reporting by Nadia Damouni and David Henry; Editing by Lauren Tara LaCapra, Leslie Adler and Tim Dobbyn)

     

  • Creating friendly environment for investors

    Creating friendly environment for investors

    How can foreign direct investors across Africa be shielded from non-commercial risks in their dealings? It is by entering into Bilateral Investment Treaty (BIT), with the country they intend to invest, according to participants at the International Bar Association (IBA) Conference on Merger and Acquisition and Inward Investment in Africa in Lagos.

    Their lawyers, the conference said, could help them in that regard.

    IBA, it said,was a major guarantee against exploitation of foreign direct investors and would ensure the investors were given fair and equitable treatment.

    While noting that terrorism, war, political unrest are inversely proportional to investment opportunities, the participants advocated investment-friendly legislations and corruption-free judiciaries across the continent.

    The conference, which lasted three days, discussed topics such as investors’protection, transactional issues and capital markets, as well as alternate dispute resolution, Chinese investment in Africa and the oil and gas Industry law.

    At the conference were Lagos Governor Babatunde Fashola (SAN), who declared the event open; President, Nigerian Bar Association, NBA, Okey Wali (SAN), former Attorney-General of Lagos, Supo Sasore (SAN); co-Chair, IBA African Regional Forum, Mrs. Olufunmi Oluyede; conference co-Chairs, Gbenga Oyebode and Sergio Sanchez Sole, as well as former Secretary, IBA, Chief Idowu Sofola (SAN); Mrs. Funke Adekoya (SAN); Afolabi Caxton-Martins; David Glennie; Guy Harles; Richard Harney and Rebecca Major, among others.

    Wali in his speech said that apart from mergers and acquisitions, there are other reforms and development measures being put in place in Africa to ensure continuous inward investment and protection of investors.

    He noted that economic integration at the global level has pushed nations to change their laws and legal processes on merger and acquisitions, adding: “Not only is there greater pressure for efficient enforcement of laws, but there is also the need to rewrite legislations to conform to regional and international standards.

    “As Africa labours to become more attractive to foreign investors, it becomes clear that an inefficient judiciary may repel potential investors. One clear factor that investors consider when rating a country is whether they will have access to suitable mechanism by which to resolve disputes.”

    According to Wali, Africa has been undergoing tremendous transformation economically, socially and politically. Within each of the 54 countries, a renaissance is occurring, energising citizens to take the next steps into Africa’s future.

    “The International Monetary Fund (IMF) sees sub-Saharan Africa’s projected economic growth of 5.4 per cent in 2013 and 5.7 per cent in 2014, as evidence that the continent’s economies are thriving at sustainable growth rates.

    “Beyond the economy, evidence of the renaissance is showing up in access to health care, education and increase in Foreign Direct Investment (FDI) and partnerships, which have strengthened existing institutions.

    “African governments have begun to adopt investment-friendly policies and incentives to attract and encourage more private sector participation and in some cases leadership in our economies

    “In many African countries, legal frameworks in the area of capital market, oil and gas, foreign investments, arbitrations, mergers and acquisitions are being deployed, to encouraging the inflow of foreign investment, underpinning economic growth” Wali said.

    In her welcome address, Oluyede said Africa has become the beautiful bride, being wooed and courted globally.

    She noted that corporate finance, merger and acquisition events in the continent have continued to make world headlines.

    She said: “IBA conferences are not jamborees as is the case with this regional conference. They are meticulously planned and the topics for discussion carefully chosen with the needs of our society in mind.

    “Lawyers are after all social engineers too and must remain relevant to their environment if they are to remain economically buoyant. Attendance at these conferences should be taken seriously by serious-minded practitioners globally.”

    She described as distractive and unproductive, the debate on the impropriety of large contingents of Nigerian lawyers at IBA conferences, arguing that only the lawyers, who pay their bills to the conferences are better placed to state if they get value for their money.

    “The constructive debate should be on how to ensure that more members of these large delegations are involved at the very soul of the conferences.

    “Not only should more lawyers attend IBA conferences, but more of such conferences should be held in Nigeria… in particular, the IBA annual convention,” Oluyede said.