The Nation Newspaper

Tag: investors

  • Investors strike 14 deals as Oando remains on technical suspension

    Investors strike 14 deals as Oando remains on technical suspension

    •SEC, NSE still studying court order 

    Investors struck 14 deals for 142,250 shares of Oando yesterday at the Nigerian Stock Exchange (NSE) but the indigenous energy group’s share price remained unchanged at N5.99 per share, despite a court order that restrains the NSE from putting the company under technical suspension.

    A full suspension is the halt of trading activities in a listed security for a period. A technical suspension is the interruption of price movement in a listed security for a period so that any dealings in the securities which occur during the period of the suspension will not result in any change in price, which change may have occurred had the suspension not been implemented.

    The NSE had on Monday October 23, 2017 placed the shares of Oando on technical suspension, “thus, the shares will be available for trading but there will be no price movement while the technical suspension subsists”.

    Securities and Exchange Commission (SEC) had last week ordered the placement of full suspension on the shares of Oando as the apex capital market regulator launched a forensic investigation into allegations leveled against the management of Oando by two aggrieved shareholders. The Commission also indicated that the full suspension should be relaxed to technical suspension after 48 hours.

    Oando obtained an interim court order on Monday October 23, 2017, restraining the NSE and any other party working on their behalf from giving effect to the directive of the SEC to implement a technical suspension of the shares of the company pending the hearing and determination of the motion for injunction and also an order restraining the SEC and any other parties claiming through or working on behalf of the Commission from conducting any forensic audit into the affairs of the company pending the hearing and determination of the motion for injunction.

    However, both the NSE and SEC were served with the enrolled court order on Tuesday, October 24, 2017 after the technical suspension was carried out by the NSE on Monday, October 23, 2017.

    A regulatory source said there was no immediate compliance with the ex-parte order because the regulators were seeking legal interpretation and implication of the court order.

    According to the source, the court order rather than seeking to vacate and lift the suspension on the company’s shares sought to restrain a directive that was already in process since last week and completed on Monday with the relax of the full suspension to technical suspension.

    In a statement signed by Chief Compliance Officer and Company Secretary, Oando Plc, Ayotola Jagun, Oando stated that it was of the view that the SEC’s directives were illegal, invalid and calculated to prejudice the business of the company.

    Two petitioners -Alhaji Dahiru Mangal and Ansbury Inc had filed petitions against Oando with SEC, alleging gross abuse of corporate governance and financial mismanagement. SEC had ordered placement of Oando’s shares under trading suspension at the NSE while directing a forensic audit of Oando.

    Oando stated that it found it necessary to take legal action because of contradictions in the directives by SEC and the need to protect the interest of its shareholders.

    Oando noted that it had fully co-operated with the SEC since the commencement of this investigation in May 2017 and provided all information requested but it was evident that submissions made to the SEC were not duly considered due to the conclusions reached and actions taken, as all of the matters raised have been responded to in great detail with all supporting documents requested by the SEC.

  • Investors scout for banking stocks amidst tight trading

    Banking stocks dominated trading yesterday at the Nigerian Stock Exchange (NSE) as investors continued the tit-for-tat bargain-hunting and profit-taking that usually precedes earnings season. With 19 gainers and losers each, benchmark indices at the Exchange showed average decline of 0.34 per cent, equivalent to net capital loss of N42 billion.

    The momentum of activities however remained above average, driven by transactions in banking stocks. Banking stocks accounted for some three-quarters of turnover within the five-hour trading session.

    Aggregate market value of all quoted equities closed at N12.617 trillion as against its opening value of N12.659 trillion. The All Share Index (ASI)-the main price index for the Nigerian stock market, declined from its opening index of 36,776.60 points to close at 36,652.82 points. The average year-to-date return dipped to 36.38 per cent.

    Most sectoral indices however closed on the upside, underlining the fact that the negative overall market position was largely due to losses by highly capitalised stocks. The NSE Insurance Index appreciated by 2.4 per cent. The NSE Oil & Gas Index rose by 0.6 per cent while the NSE Industrial Goods Index inched up by 0.2 per cent. However, the NSE Consumer Goods Index dropped by 1.1 per cent while the NSE Banking Index slipped by 0.2 per cent.

    Nigerian Breweries-NSE’s second most capitalised stocks, led the losers with a drop of N4.90 to close at N164. Stanbic IBTC Holdings dropped by 95 kobo to close at N40.05. United Bank for Africa declined by 16 kobo to close at N9.18. Vitafoam Nigeria lost 14 kobo to close at N2.66 while University Press and Dangote Sugar Refinery dropped by 12 kobo each to close at N2.45 and N13.65 respectively.

    On the positive side, Seplat Petroleum Development Company led the gainers with a gain of N7.51 to close at N480. Nestle Nigeria rose by N2.92 to close at N1,233.12. Cement Company of Northern Nigeria added 86 kobo to close at N10.18. Guinness Nigeria rose by 75 kobo to close at N99.25 while Red Star Express appreciated by 24 kobo to close at N5.16 per share.

    Total turnover stood at 336.38 million shares valued at N1.83 billion in 3,689 deals. Diamond Bank was the most active stock with a turnover of 230.56 million shares valued at N230.24 million. Skye Bank followed with 13.44 million shares worth N6.77 million. Zenith Bank recorded a turnover of 10.5 million shares valued at N265.77 million.

    “As indicated by the market breadth, we expect sentiment to stay strong in the interim as investors take position ahead of the release of nine-month 2017 corporate earnings which are expected to be largely positive,” Afrinvest Securities stated.

  • Oil mogul to Canadian envoy: Niger Delta is investors haven

    The President of   Belema Oil Producing Limited,  Mr.  Tein Jackrich,  has described Niger Delta  as investors’ haven.

    Jackrich also said the region is peaceful, conducive and very good for both foreign and local investments.

    He spoke when the Canadian  Deputy Ambassador to Nigeria,  Mr.  James Christolf, visited  him in Port Harcourt, the Rivers State capital,  at the weekend.

    He said: “There are all manner of news about this state,  they are not true.  All over the world, there are challenges. You have been in this state now,  you have seen how calm everywhere is. This is a great state I must tell you.

    “One of the things your visit to the state has done is also to demonstrate that investing in the state is safe. The state is friendly,  the youths are friendly,  Niger Delta youths are exceptionally good and friendly.

    “The issue in this whole thing is that,  until we understand that the manner we do business 40years ago needs to change in this jet age, when technology has evolved; the manner we look at the youths needs to change.”

    Jackrich went on: ” The vision behind Belemaoil Producing Limited is not just to much more for shareholders,  the business managers,  but to ensure that there are strategic visible footprint in the communities we operate.

    “We consider the communities as strategic partners in creating wealth for all stakeholders. That is the reason why immediately we took over the operation,  we took on the transformational agenda with great vigour.

    “We have provided jobs for more than 500 of the indigenes. Training and scholarship awards to as much as 400 has been given out this year2017/2018 alone and still counting.

    “Belemaoil also collaborated the Rivers State government in giving out scholarships to deserving indugenesbof the state to celebrate the 50th anniversary of the state this year.

    “To us,  the main thing is to educate these youths in such a manner that will equip them adquately to be able to take on the responsibilities that will enable them add the same values to others, and I chose Canada for a good place to train them.”

    Christolf praised Belemaoil.

    He said: “I am very new in the country,  having arrived barely one month ago. When the opportunity was presented to me to come here (Port Harcourt),  I quickly accepted it.

    “This is because firstly,  there are potential strategic alliances to be formed with Canadian companies and part of our job is to come here and make sure that we meet people, and understand companies,  like Belemaoil and all others you mentioned to provide services.“

  • Sukuk bonds …Grassroots investors’ golden chance

    Sukuk bonds …Grassroots investors’ golden chance

    In Nigeria, 40.1 million adults, representing 41.6 per cent of the adult population do not have access to financial services. COLLINS NWEZE. examines the N100 billion seven-year debut Sovereign Sukuk offer by the Federal Government through the Debt Management Office (DMO) aimed at getting a large number of the financially-excluded individuals into the financial services net. 

    The need to get more people into the financial system- financial inclusion- is becoming a priority for policymakers, regulators and development agencies globally.

    In Nigeria, getting people and businesses to access affordable financial products and services that meet their needs- including investment in bonds– remains a priority for the government and the private sector.

    Financial access facilitates day-to-day living, and helps families and businesses plan for everything from long-term goals to unexpected emergencies. It also contributes both to economic growth and wealth creation, and remains a key factor in tackling poverty.

    Creating new investment opportunities is seen as the easiest route to get more people connected to the financial sector, boost capital market liquidity by offering new investors an opportunity to participate in Nigeria’s growing capital market. It is also an opportunity to raise huge capital for government and private sectors to meet their financial needs.

    A good example was the N100 billion seven-year debut Sovereign Sukuk offer by the Federal Government through the Debt Management Office (DMO). It was an opportunity to get more Nigerians into the investment net and boost capital market liquidity. The offer, concluded September 22, was over oversubscribed, with over N105, 878,320,000 realised.

    The Sukuk Bond issuance, remains part of government’s plan to fast track the development of infrastructure and engage in project-tied capital raising given that Nigeria has challenges with road, railway and power infrastructures. It was a project-tied investment facility and attracted investors from across a broad spectrum of the public comprising pension funds, banks, fund managers, institutional and retail investors.

    In the run up to the offer, Nigerians developed tremendous enthusiasm as they embraced the investment instrument advertised nationwide through roadshows by officials from the DMO, Ministry of Power, Works and Housing, and Central Bank of Nigeria (CBN) in Lagos, Port Harcourt, Kano, Abuja and Kaduna.

    The awareness campaign which drew attention to the projects Sukuk aim at, the construction and rehabilitation of 25 roads across the six geopolitical zones, aroused in the investors the patriotic fervour that led to the oversubscription.

    Investment experts pointed out that Sukuk, as a novel investment platform, achieved one of its aims which is to offer new investors an opportunity to participate in Nigeria’s growing capital market.  A look at the investors that subscribed for the Sovereign Sukuk revealed that another significant objective was achieved through the participation of over a thousand retail investors from across the nation who accounted for over four per cent of the total subscription.

    Vice President and Treasurer, International Finance Corporation, Jingdong Hua, said deepening the capital market through bond issuance will help smaller companies raise funds that are key to economic growth. He said Nigeria’s capital market has huge potentials and should be tapped into.

    The Director-General of DMO, Patience Oniha said that the acceptance of the offer was an indication of the viability of the instrument as an investment option as well as a demonstration of utmost faith in the economy.

    She praised the Federal Government and, in particular, the Minister of Finance, Mrs. Kemi Adeosun, for the policy support that led to the success of this initial offer which industry watchers accept as another window that has opened for the government to raise funds to fill the nation’s yawning infrastructure gap.

    She explained that debut Sovereign Sukuk is an ethical-inclined investment in which rent is based on the investment bi-annually and the principal sum paid at the end of the seven-year tenor. She said the product was designed as a revenue source to fund the construction and rehabilitation of key economic infrastructure projects across Nigeria, such as roads.

    “It is intended to diversify the sources of government funding, offer ethical investors an opportunity to invest in government-issued securities, achieve higher level of financial inclusion and serve as a reference for pricing Sukuk issued by other bodies, especially private sector issuers,” she said.

    Oniha, at the various stops on the roadshow, assured potential investors that the Sukuk is backed by the full faith of the federal government and was one of the avenues it intends to raise funds for capital projects.

    “This is one of several efforts to raise funds for specific projects and this is backed by the full faith of the Federal Government. It is a rental product to cater for segment of our society that requires such services,” she said.

     

    Stakeholders speak

    Managing Director of Credit Bureau, Ahmed Popoola said in a lecture  delivered at the 10th annual lecture of Muslim Lawyers Association of Nigeria (MULAN) in Lagos with  theme: “Pulling Nigeria Out of the Economic Recession” that bond issuance is key to economic growth.

    He contended that Sukuk, also called non-interest bond, is an alternative option worth exploring to raise funds for  public works and to support the private sector access to finance. He stressed  that the options that altanative finance offers in  funding public infrastructure and empowering small business will help bail the country out of recession.

    He explained that worldwide, Sukuk bond is no more peripheral to conventional finance as  it is being operated in 75 countries, including western nations. “People think that the non-interest financial system is based on faith, but it is based on justice for the two parties. Besides, the system does not allow investments that harm people  or the environment,  thereby promoting sustainable finance,” he said.

    He emphasised the  need to a diversify the economy and invest massively in  infrastructure, stressing “ there needs to be a re-orientation of Nigeria towards  appreciating our products is imperative. Peace and stability has to be restored to all parts of the country as it is crucial and a pre-requisite for any economic development.  “Foreign direct investment needs to be nuances and the promotion of Small  and Medium Enterprises (SMEs) needs special attention  as there is a need to  separate SMEs development  from poverty alleviation programmes.

    A financial analyst, Abiodun Rasaq, said prospects for the Sukuk are very bright. He said the finance system has become necessary given a very significant proportion of Nigeria population strongly believe that based on the nature of the capital market and the dictates of their religion, they cannot invest in the market.

    He called for the development of products that is attractive to these set of investors to allow easy flow of their funds into the market.

    The Managing Director/Chief Executive Officer of the Islamic Banking and Finance Institute of Nigeria (IBFIN), Sani Aminu Dutsinma, stressed that non-interest banking and finance instruments have the potential to check greed, high handedness, selfishness and corruption, not only in the banking and finance industry, but also in the public sector.

    Dutsinma, explained that such financing option, being asset-based, should, in principle be less prone to financial crime.

    According to him, the industry had expanded rapidly over the past few decades, growing between 10 to 20 per cent annually, as shariah-compliant financial assets are estimated at about $2 trillion, covering bank and non-bank financial institutions.

    The banking assets have been grown faster than conventional banking assets, he said, adding that there has been an increased interest in alternative finance from countries such as the United Kingdom, Luxembourg, South Africa and Hong Kong.

    Within sub-Saharan Africa, he revealed that South Africa leads in terms of alternative finance, with one of the largest international non-interest banking conglomerates namely Al-Baraka Banking Group.

     

    Opportunities in Sukuk

     With dearth in regular deposits, finding alternative funding sources by government and private sectors remains critical to growth and development.

    The Sukuk finance development has in recent years, become very attractive to investors in many African economies. Specifically, Nigeria, Sudan, South Africa and Senegal, Kenya, Morocco and Niger among other countries have put in place necessary legal and regulatory frameworks to enable alternative banking offerings in their respective jurisdictions thrive.

    The Federal Ministry of Power, Works and Housing, listed 25 road projects spread across the six geo-political zones of the country which the fund will be used for. Some of the projects include the Loko Oweto Bridge, dualisation of a section of the Abuja-Lokoja road, dualisation of the Suleja-Minna road, the dualisation of the Kano-Katsina road (phase 1), rehabilitation of the Onitsha – Enugu Expressway, and the Enugu-Port Harcourt road (section one to three). Others are the Ibadan-Ilorin Road (Oyo-Ogbomoso), Kolo-Otuoke-Bayelsa-Palm Road (Yenegwa Road Junction), Kaduna Eastern By-Pass and Kano-Maiduguri Road (Potiskum-Damaturu).

    Experts said the offer will boost investments flows based on trends already witnessed in the Federal Government of Nigeria (FGN) Bond, savings bond among others issued by the debt office.

    Benefits of investing in the Sukuk, according the DMO, include safety of investment, regular income which are tax free and liquidity as they will be listed and traded on The Nigerian Stock Exchange and the FMDQ OTC Securities Exchange Plc.

    The debut Sovereign Sukuk is for N100 billion with a tenor of seven years at N1,000 per unit. The offers were certified as ethically compliant by the Financial Regulation Advisory Council of Experts of the CBN. The product is also useful as collateral to access loans from banks.

    Also, the minimum subscription is N10,000, that is, 10 units at N1,000 per unit and in multiples of N1,000 ( per unit) thereafter. The rental payment is semi-annually while the redemption involves a bullet payment of invested funds at maturity.

    “Sukuk is different from Convention Bonds in the sense that it represents ownership interest in assets while bonds represent a pure debt obligation due from the issuer. The funds raised from Sukuk issuance must be used only for ethical purposes. Bonds can be issued to finance any legal purpose. The sale of Sukuk represents the sale of the holder’s interest in an asset. The sale of a Bond is the sale of a debt,” the DMO said.

    It said all categories of investors, including retail investors, high net worth individuals, institutional investors such as commercial banks, insurance/takaful companies, pension funds, asset managers, private banks and others. Also, ethically inclined investors, cooperative Societies, religious bodies, state investment companies and foreign investors will find it really attractive.

    Assessing the benefits of the financial instrument, the president of Federation of Muslim Women in Nigeria, Rivers State Chapter, Hajia Maimuna Bello, described it as a bold initiative to cater for a critical segment of the country and urged the DMO to deepen its awareness drive.

    In Abuja, a former executive director of the Nigeria National Petroleum Corporation (NNPC), Ibrahim Waziri, expressed the hope that the raised funds would be deployed to the listed projects. He stressed that as an ethical financial instrument, investors are assured of timely rental returns.

    The offer will be listed and traded on The Nigerian Stock Exchange and the FMDQ OTC Securities Exchange Plc.

     

    CBN speaks on the offer

     The CBN said the offer was geared towards infrastructural development and a worthwhile investment. Speaking at a one-day investors’ forum in Kaduna, CBN’s Deputy Director, Financial Markets Department, Demenongu Yanfa, said the the Sukuk will not only allow Nigerians take ownership of the roads with half yearly rental incomes, but will fast track the building of road infrastructure in the country.

    “The world is looking for new areas of investment. As of today, South Africa, Malaysia and some other countries of the world have embraced Sukuk to fund some of the construction and rehabilitation of key sectors of their economies,” Yanfa said.

    The International Monetary Fund (IMF) links the rapid growth of alternative banking in developing countries to its relative resilience to financial crises as compared to conventional banking. The sukuk is based on an ijara structure, a common leasing arrangement in the type of finance, which bans payment of interest.

     

    How it started

     Osun State issued a N10 billion sukuk yielding 14.75 per cent, bankers said. The bond, issued in October 2013, was the first Sukuk issuance from a major economy in sub-Saharan Africa.

    The cocoa-producing, southwestern state of Osun received N11.4 billion in total subscriptions for its seven-year paper, from asset managers, bankers said.

    The sukuk bond was issued in accordance with enactment of the Osun State Bonds, Notes and Other Securities Law 2012 and setting up the Osun Sukuk Company Plc. Though non-interest in nomenclature, the sukuk bond was a conventional bond and coordinated by the regular investors in the nation’s capital and money market. The bond was issued in accordance with the Security and Exchange Commission’s rules and regulations.

    The bond, being used to finance roads and school constructions across the state, is due in 2020. While authorising and approving the offer at the board meeting for the Sukuk Company, the Osun State Governor, Ogbeni Rauf Aregbesola, said his government took the Sukuk bond as an opportunity for the development of the state. He appealed to the people to see the bond as an avenue to attract development to the state for the benefit of all and sundry.

    Other African countries including South Africa, Kenya and Senegal have been laying plans to issue a sukuk and Gambia has been selling small amounts of non-interest debt for several years.

    Managing Director of Cowry Assets Management limited, Johnson Chukwu, said the basic thing is that it provided opportunity for people that do not want to invest in interest-bearing instruments to participate.

    “The Sukuk bond will meet the investment need of large population of Nigerian that do not want to invest in interest-bearing instruments. It will attract funds from people that have refused to invest in other debt instruments because of their values. It will bring more people into the financial system,” he said.

    He said sukuk can play an important part in the development of an non-interest market and banking system.

     

    CBN’s regulation

     

    The CBN had in 2015, issued guidelines for an advisory body that will oversee non-interest banking in the country.

    An essential governance structure and element of regulatory oversight for institutions offering non-interest financial services is the establishment of an advisory body at the level of the Central Bank. The bank is to provide assurance that the strategic direction and conduct of financial transactions of Non-Interest Financial Institutions (NIFIs) are in compliance with the rules and principles underpinning their operations.

    Also, section 9.1 of the CBN Guidelines for the Regulation and Supervision of Institutions Offering Non-Interest Financial Services in Nigeria provides for the establishment of an advisory body at the CBN on non-interest banking and finance.

    CBN Director, Development Finance, Mudashiru Olaitan, said financial inclusion can help people step out of poverty and address long term growth  challenges.

    The CBN has overtime, emphasised the need for Nigerians to embrace savings culture to bridge the huge gap between the banked and unbanked.

    The demand is in line with the its National Financial Inclusion Strategy (NFIS) meant to reduce the percentage of adults excluded from financial services from 40.1 per cent to 20 per cent by 2020 with specific targets for payments and promotion of savings culture.

    The CBN believes that  having at least 80 per cent of all adult Nigerians have access to affordable financial services as well as the right environment within which to invest and  flourish economically will boost the country’s  development profile.

     

  • ‘Foreign investors need incentives’

    ‘Foreign investors need incentives’

    The economy has been upbeat since the Central Bank of Nigeria (CBN) introduced the Investors’ & Exporters’ Forex Window. With improvement in forex inflow, investors who complained bitterly of not being able to repatriate their funds, except through the parallel market, now have a better deal. In this interview with COLLINS NWEZE, Managing Director, Afrinvest Asset Management Limited, Ola Belgore, says the market has responded positively to the change in policy, going up by over 36 per cent from what was negative in the first quarter. This is about 50 per cent growth within the last four months.

    The impact of foreign fxchange (forex) on the market has always been significant. What is your take on the current forex situation in the country?

    In January 2017, Afrinvest published our economic outlook clearly indicating the need for reforms. Fortunately, the Central Bank of Nigeria (CBN) came up with the Investors’ & Exporters’ (I&E) FX Window which made it easier for foreign investors to repatriate their funds. Prior to its launch in April, investors complained bitterly that after liquidating their investments, funds was repatriated through the parallel market where the dollar was sourced leading to great loss in value.

    Since April, the foreign portfolio investment has increased and there has been positive impact on the market. A clear indication of this impact is the growth in the Nigeria Stock Exchange (NSE) market capitalisation to close to N13 trillion.

    Do you believe that the market now enjoys enough liquidity?

    When the I&E FX Window was introduced, many investors cautiously tested the market to ensure it would work. Now, we have more investors coming on board because they have had a better experience repatriating their profits. We must, however, recognise that improvement is a gradual process, and today, portfolio investors are more confident. With the right – and stable – government policies, I believe investors will get even more confident to come in, especially when there is an assurance that the rules will not change in the middle of the game.

    Our observation on the stock market shows that there has not been new capital rising by local companies in recent months. Can we attribute this to the recession?

    Activities in the investment environment largely depend on whether you are raising equity or debt. For debt, the environment is rather stiff, and with Monetary Policy Rate (MPR) currently at 14 per cent, this may not change soon. There have, however, been one or two bond issuances, including the recent Lagos State Government bond issued at 16.5 per cent which was competing against Federal Government’s Treasury Bills at 18 per cent.

    Regardless, we must give foreign investors incentives to invest in the economy. The average rate for Treasury Bills is 18.5 per cent. However, once you mark it up with risk premium, you are approaching 20 to 22 per cent, which is a challenge within the operating environment, especially when you consider what cost manufacturers will borrow.

    When you look at equities, in the first quarter of 2017, the market was at 16.5 per cent negative, which naturally affected investors’ appetite, with many of them losing huge sums of money. Consequently – and as expected – that was not the right time to introduce fresh offers.

    However, the market has responded positively to change in policy and has gone up by over 36 per cent from what was negative in first quarter of 2017, implying that there has been about 50 per cent growth within the last four months.

    Fortunately, the growth will likely be sustained because corporate earnings are coming up strong, and with most of the stocks trading below their book value, the market evidently shows potential to sustain the growth. We can then expect a boost in investors’ interest in new offerings. For instance, Guinness and Unilever just concluded their rights issues which they would have been hard-pressed to do in the past. If they are successful as we expect, it will encourage others to test the waters and ultimately boost market performance.

    Can you tell us about Afrinvest West Africa Plc?

    Afrinvest West Africa Plc (Afrinvest) is an independent investment banking firm, focusing on the four principal areas of investment banking, securities trading, asset management and investment research. It has been in existence for 22 years, and is the parent body to two subsidiaries: Afrinvest Securities Limited and Afrinvest Asset Management.

    We see ourselves as a ‘financial supermarket’ of sorts, considering that we are licensed by the Securities and Exchange Commission (SEC) to operate as an issuing house and underwriter as Afrinvest West Africa; a broker-dealer as Afrinvest Securities Limited; and a portfolio manager as Afrinvest Asset Management. Underlying these services is in-depth research, innovation and a passion to deliver invaluable financial solutions.

    Could you tell us more about Afrinvest Asset Management?

    Afrinvest Asset Management – under my leadership – manages two listed mutual funds. The Afrinvest Equity Fund (AEF), which invests in shares of blue chips listed on the Nigerian Stock Exchange (NSE) and the Nigeria International Debt Fund (NIDF), which invests in Federal and State Government bonds. The NIDF – which started out as a closed-ended fund till it was restructured in 2010 as an open-ended fund – was created 19 years ago.

    It has consistently paid dividend to investors twice annually. As you may be aware, we just paid the 2017 interim dividend of the fund making it the 39th dividend in the history of the NIDF.

    What exactly is NIDF? Is it a Federal Government instrument and does it target only high net-worth Individuals (HNIs)?

    The issue of the NIDF’s primary target audience is one that has been consistently raised over time. Before now, one would be correct to say the NIDF was for the high net-worth investors as new a subscriber would require about a minimum of N1 million to meet the minimum units of 500.

    With a record of consistent payout and superior performance, we were inundated with requests to make the fund more accessible to the retail investors. These requests inspired us to review this amount downwards in a 10 to one stock split in 2016.

    That way, we are able to accommodate more retail investors without losing the core focus of the fund. Today, the NIDF is no longer exclusive to any singular class, and investors with a little over N100, 000 can gain easy entry.

    How easy is it to liquidate the fund and how could this be done?

    Any investor can liquidate his funds easily at any time, and it will take a maximum of five days. To liquidate, you simply complete and submit the redemption form, which can be downloaded on our website. Once this is done, your signature is verified by the registrar, and investment proceed is paid to your bank account on record.

    Subscribing to the NIDF is just as easy.  You simply complete the subscription form, provide your Know Your Customer (KYC) requirements – identity card and address, inclusive – make payment into the account, and you are all set. You can also track the performance of your investment by monitoring NIDF prices we circulate to all investors daily.

    What do you think accounts for the success of the NIDF and its consistent coupon payment over the last 19 years?

    For any mutual fund, you have what is called the trust deed which clearly states how the fund would be managed and what assets it can invest in. So, what we do is actively following market trend and strategizing to meet fund objective per time. We distribute 25 per cent of the income, while the rest is re-invested in the fund, making it easy for us to pay coupon.

    Tell us more about the Afrinvest Equity Fund.

    As earlier stated, the AEF tracks stocks quoted on the Nigerian Stock Exchange. With a minimum initial subscription of N50,000 and subsequent investments of N10,000, investors can subscribe to the AEF with returns greatly affected by the returns on the stock market. Regardless, the AEF has enjoyed impressive performance over the years due to our superior mix of service, research and management.

    Another recent trend in the market is the banks’ move to substitute costly assets out of their balance sheets in preference for cheaper deposits to reduce their cost of fund. What could be responsible for this move?

    It becomes increasingly clear that retail is the future. In many countries of the world – including Nigeria – about 50 per cent of the population is unbanked, with a lot of cash in the informal sector. From our own experience, we have seen people test the markets with smaller amounts of money to ascertain that they will not lose out, before introducing the more substantial sums. For instance, we had a subscriber to one of our mutual funds who invested less than N200,000 in the AEF.

    After a time of consistent performance, he made a move to withdraw his funds, to test our promise of easy entry and exit. Based on his success in dealing with us, he made the move to entrust us with over N20 million, simply because he trusts us to give value. The importance investors place on liquidity and confidence building, therefore, has a significant impact on designing products and services for the market.

    In line with this experience, players have recognised a need to widen the client base, with even the Federal Government going for cheaper funds, with the Federal Government of Nigeria (FGN) Savings Bond offering less than 14 per cent to investors, as against Treasury Bills rate of around 18.5 per cent.

    Currently, we have what is called investor apathy. When we design a mutual fund, we approach a group of people and encourage them to invest. At the same time, Bank ‘A’ conducts a Public Offer, targeting the same group of people. It gets rather tiresome. However, with retail customers all players can market different products comfortably, and because the market is so huge, we can both take a market share that is completely exclusive.

    More so, with retail, the sustainability of the funds is more stable. If the bank has a balance sheet built by a select few, a withdrawal of funds by any singular client will have a significant effect. Conversely, if there are 100,000 customers each depositing N10,000 you will still have N1 billion, but if 10 of them decide to move their funds, the impact is greatly reduced.

    The banks also have the resources to support the retail end of the market with the advent of Financial Technology (FinTech). Today, a customer can open an account with his mobile phone, and go ahead to handle virtually all transactions without physically visiting the bank.

    Are there other difficulties faced in managing HNIs?

    Many banks have realised that HNIs require more resources to manage. For instance, with deposits as high as N300 million, you have customers demanding 18 to 20 per cent interest rate on their funds, whereas, the retail customer will accept five per cent happily. With more retail accounts, the banks can, therefore, lend cheaper and make higher profits.  When you put this side by side the manpower required to service HNIs who typically demand one-on-one service, the retail customer generally seems more attractive. I would, however, state that HNIs should be highly valued and should receive the deserved attention, while technology is deployed to capture the millions of unbanked in the society.

    Another factor that boosts confidence is ‘rating’. What is significant about an investment being rated?

    The significance of credit rating is the credibility it shows to the investor. When there are multiple players asking for your money, you must decide who you will trust sometimes with no prior experience. The rating, therefore, becomes significant because it basically says, from our own experience as fund managers and our valuation of company ‘A’, we believe this is its expected performance and the level of guarantee we can provide on a return, as opposed to company ‘B’ with a lower credit rating.

    The credit rating is mostly premised on the track record of its borrowing and debt instruments, and there are several recognised organisations that provide this stamp of confidence including Fitch, GCR and Agusto, to name a few.

    Based on the above, would you say the NIDF rating is better than the sovereign rating of the country?

    This is an argument that has existed over time: should an entity within a sovereign nation have a higher rating than the sovereign itself? The fact is, investors are looking for credibility. If Lagos State issues a bond at the exact time the Federal Government issues same, investors will go after the body that has shown higher credibility over time. However, we must remember that there are several factors that can affect the payback of such debt, ranging from economic, to social, and to political issues.

    In determining the credit rating of the NIDF, it is recognised that it has not defaulted in its obligations for several years and has consistently met its dividend payment. These have certainly contributed to its credit rating today.

  • Investors earn N2.97tr in nine months

    •Got N765b in three months

    Equities’ investors at the stock market netted N765 billion in the three-month period that ended September 30, pushing the year-to-date gain for the first nine months of the year to N2.97 trillion.

    Despite a recurring profit-taking trend that led to tepid performance in September, quoted equities drew on strong rallies in the early months of the third quarter to close the period positive.

    Benchmark indices and sectoral trackers at the Nigerian Stock Exchange (NSE) indicated that Nigerian equities continued to outperform other classes of assets as historically low valuations, improved macroeconomic outlook and foreign exchange management sustained another quarter-on-quarter rally to push average year-to-date return by the nine-month period ended September 30, 2017 at 31.87 per cent.

    While the profit-taking transactions had depressed most equities in the last month, most quoted equities still closed the third quarter at their four-year best performances with double-digit returns, ahead of inflation and benchmark interest rate. The average investors have seen their portfolios rising by almost a third while several investors are considerably higher than the average benchmark.

    The nine-month average year-to-date return represents 15.87 percentage points and 17.87 percentage points above inflation rate and the Monetary Policy Rate (MPR)-interest rate benchmark, respectively. Adjusted for inflation and interest rate, the nominal real return stands positive at 1.87 per cent. Nigeria’s inflation rate stands at 16.0 per cent while the MPR is retained at 14 per cent.

    Aggregate market value of all quoted equities on the NSE closed the third quarter at N12.217 trillion as against 2017’s opening value of N9.247 trillion, representing net capital gain of N2.97 trillion or 32.1 per cent. The All Share Index (ASI)-the benchmark index that doubles as sovereign equities index for Nigeria, crossed nine levels to close September at 35,439.98 points compared with its year’s opening index of 26,874.62 points, representing an increase of 31.87 per cent.

    Investors in the banking sector continued to sustain their lead on the returns’ table with the NSE Banking Index indicating average year-to-date return of 60.46 per cent for the nine-month period. The NSE 30 Index, which tracks the 30 most capitalised companies, posted above average return of 35.75 per cent. The NSE Consumer Goods Index ended the period with 29.35 per cent. The NSE Industrial Goods Index trailed with 24.37 per cent while the NSE Insurance Index posted a return of 10.64 per cent. However, the NSE Oil and Gas Index recorded a negative return of -10.19 per cent as oil and gas stocks continued on downtrend.

    The NSE Pension Index, which tracks stocks specially screened in line with pension investment guidelines, showed that pensioners might be in for wider dining tables with above-average return of 50.81 per cent. The NSE Lotus Islamic Index-which tracks stocks that comply with the Islamic law, recorded appreciable return of 21.01 per cent, underlining the attractiveness of ethical investment in the midst of the rally. The NSE Lotus Islamic Index excludes interest-based banks, breweries, gambling and overleveraged companies among others.

    Quarter-on-quarter analysis showed that the ASI recorded average return of 7.01 per cent, suppressing a downtrend that saw a decline of 0.18 per cent in September. The overall market performance was driven by considerable rally in the consumer goods sector. The NSE Consumer Goods Index doubled the average performance with a return of 15.89 per cent. The NSE Banking Index followed with a gain of 10.6 per cent. The NSE 30 Index recorded three-month return of 7.84 per cent. The NSE Industrial Goods Index rose by 2.69 per cent while the NSE Insurance Index appreciated by 1.36 per cent. The NSE Pension Index and NSE Lotus Islamic Index rose by 5.52 per cent and 8.87 per cent respectively. The NSE Oil and Gas Index was the contrarian index, with a negative return of -13.1 per cent.

    On a month-on-month basis, September was largely dominated by sell pressure as investors sought to monetise capital gains and locked in values into other equities and asset classes. The ASI slipped by 0.18 per cent during the month, driven largely by declines in the oil and gas, industrial goods and consumer goods sectors. The NSE Oil and Gas Index slumped by 6.05 per cent. The NSE Industrial Goods Index dropped by 3.30 per cent. The NSE Consumer Goods Index depreciated by 2.65 per cent while the NSE 30 Index dipped by 0.95 per cent. However, the NSE Insurance Index indicated resurgence with positive return of 1.59 per cent while the NSE Banking Index inched up by 0.11 per cent.

    The third quarter performance of the equities market further consolidated the upswing that dominated the first half of the equities market. Investors had netted more than N2.2 trillion in capital gains in the first half of this year with most quoted equities closing the first half at their four-year best performances. The six-month average year-to-date return stood at 23.23 per cent, equivalent to net capital gain of N2.2 trillion.

    Aggregate market value of all quoted equities closed the first half at N11.452 trillion while the ASI closed at 33,117.48 points.

    The sustained rebound in the equities market so far this year represents a major recovery for hard-pressed Nigerian investors, who had lost N3.98 trillion in the past three years. The stock market had been on a losing streak since 2014. Investors lost N1.75 trillion in 2014 and followed this with another loss of N1.63 trillion in 2015. Against the general expectation that political transition and new government will quicken a rebound, equities closed 2016 with a net capital loss of N604 billion. Aggregate market value of all quoted equities on the NSE closed 2016 at N9.247 trillion as against N13.226 trillion recorded at the start of trading in 2014, representing a net capital loss of N3.98 trillion.

    Meanwhile, total turnover at the NSE last week stood at 1.33 billion shares worth N14.09 billion in 14,703 deals as against a total of 1.1 billion shares valued at N17.86 billion traded in 16,070 deals in the previous week. The financial services sector remained atop activity chart with 1.06 billion shares valued at N7.34 billion in 8,202 deals; representing 80 per cent and 52.1 per cent of the total equity turnover volume and value respectively. The industrial goods sector staged a distant second with 91.35 million shares worth N2.78 billion in 933 deals. The consumer goods sector placed third with a turnover of 70.19 million shares worth N3.4 billion in 2,719 deals.

    The three most active stocks were Continental Reinsurance Plc, Sterling Bank Plc and Access Bank Plc, which jointly accounted for 412.84 million shares worth N1.49 billion in 817 deals, representing 31.14 per cent and 10.55 per cent of the total equity turnover volume and value respectively.

    Also traded during the week were a total of 274 units of Exchange Traded Products (ETPs) valued at N636,148 in 18 deals compared with a total of 58 units valued at N90,475 traded in five deals in the previous week.

    A total of 7,424 units of Federal Government bonds valued at N6.689 million were also traded last week in 18 deals compared with a total of 178 units valued at N163,407 traded in two deals two weeks ago.

    Market analysts remained optimistic on the performance of the equities market as many companies indicated their third quarter earnings report might be ready this month.

    “In the coming week, we believe market performance will be majorly driven by investors’ expectation of third quarter 2017 report card. Nonetheless, we advise investors to stay bullish on stocks with sound fundamentals,” Afrinvest Securities stated.

    Managing Director, Cowry Asset Management Limited, Mr. Johnson Chukwu, said the recovery at the stock market was a response to positive changes in the polity noting that the stock market performance usually aligns with macroeconomic outlook.

    According to him, the stock market had remained depressed in the first quarter under poor liquidity amidst uncertain and unrealistic foreign exchange management. But the market turned round in the second quarter with the changes in the foreign exchange management and improvement in macroeconomic coordination.

    Chukwu said the market recovery was boosted by the introduction of the Investors and Exporters’ foreign exchange window and the narrowing of exchange rates between official and parallel rates due to policy stimulation by the Central Bank of Nigeria (CBN).

  • Govt woos investors in South Korea

    The Federal Government yesterday in South Korea, urged investors to take advantage of Nigeria’s population, stable, independent and predictable regulatory environment and quick returns on investment (RoI) to invest in the telecom sector.

    The Executive Vice Chairman, Nigerian Communications Commission (NCC) Prof Umar Danbatta who spoke at Nigeria’s Investment Forum in Busan, South Korea, venue of the International Telecommunications Union (ITU) Telecoms World, assured potential investors in the telecoms sector of the country’s commitment to ensuring the safety and protection of their investments.

    Danbatta told the investors the story  of how the NCC in collaboration with Nigeria’s apex bank, the  Central Bank of Nigeria (CBN),  prevented a takeover bid for a telecommunication company by a consortium of banks in the country.

    He said: “The NCC is assuring the investors that our doors are open and that we will do whatever we can within the regulatory mandate assigned to us to ensure that their investment is safe and secure.”

    He said the NCC would continue to build a reputation “of a firm but flexible agency”, which provides incentives to operators and potential investors in order to ensure the gains recorded over the past couple of years are sustained.

    “We collaborated with a sister agency to successfully stave off the take over a telecommunication company by a consortium of banks. Banks are not competent to run telecom companies, they should concentrate their efforts in making the financial sector more robust, which I believe they are doing. I have no doubt about it.

    “This company is now rebranded as 9Mobile and is providing services to over 20 million Nigerians; Nigerians are on the pay roll of the company. The message we are sending out to investors is that in the NCC we are always committed to ensure stability in the telecom sector of Nigeria as well as making sure the safety of the investment is guaranteed,” he said.

    Danbatta told the dignitaries at the opening of Nigeria Pavilion including the ITU Secretary General, Mr Houlin Zhao, that Nigeria’s engagement with the global community include creating awareness of the investment opportunities in the country.

    “In this connection, we are here to tell the ICT community that Nigeria with a population of about 170 million is a preferred investment destination in Africa.

    “With over 150 million active subscribers, in the voice segment, over 102 per cent teledensity and a little over 92 million internet connections, Nigeria is indeed a place to invest,” he said.

  • Govt urged to restore investors’ confidence in power sector

    To achieve sustainable stable power supply, the Federal Government has been urged to restore investors’ confidence in the power sector by creating an environment that will encourage investors to invest, while ensuring the safety of their investments and profitability.

    The Global Business Director, Future Energy Nigeria, Ade Yusuf, gave the advice in Lagos.

    He said the recession or paucity of funds should not deter the government from encouraging investors to come into the sector.

    According to him, Nigeria’s energy sector and economy have a bright future.

    Future Energy Nigeria is a platform for stakeholders in the power sector. Yusuf was in Nigeria to meet decision makers to discuss the way forward for the Future Energy Nigeria’s event scheduled for November.

    Yusuf, who spoke with The Nation in Lagos, said the exited recession should have motivated the government and industry operators to ensure that basic measures to stimulate economic growth were put in place, adding that reliable and affordable power supply would drive the expected growth.

    He said the Nigerian Power Sector Recovery Programme was an important message to the world  that there would be significant improvement in power, and the achievement of the desired economic change with a more diversified and inclusive economy.

    According to him, sustainability of recovery programmes creates an important foundation to showcase the enormous business and investment opportunities that the sector provides.

    He said: “I am excited about Nigeria’s energy future. Future Energy Nigeria initiative wants to boost government’s drive to achieve sustainable energy security for the populace. We all know that there is a lot of work to do. We have to restore investor confidence, showcase the myriad of opportunities in the sector; from gas to renewable, from generation to distribution and from building projects to providing specialised services, but there is need for us as stakeholders including the government to stand together and make it happen.”

    Formerly West African Power Industry Convention (WAPIC), Future Energy Nigeria is supported by the Ministry of Power, Works and Housing, Transmission Company of Nigeria, Nigeria Electricity Regulatory Commission, Distribution Companies and prominent generation companies, among others.

  • Mining is long-term investment, PwC chief tells investors

    PriceWaterhouseCoopers (PwC) has advised investors in the mining sector not to expect returns on investments quickly as the life cycle in any mining is always long.

    Its Director, Mr. Cyril Azobu, said looking at the entire value chain of the industry, the development period is long, adding that exploration, which is the most risky part of the value chain, takes quite a long time.

    Listing the challenges that face investors in the sector, he said it takes over five years to do exploration, after which the investor would begin to develop the area by building plants that will carry out the operations and do some level of processing.

    Azobu told The Nation in Lagos that even after processing, the investor needs to have export channels, adding that what is produced would still be subject to global commodity pricing.

    He also said there were also shocks that could affect pricing globally, so returns on investment will not be expected soon on investments in mining sector.

    He urged the government to speed up the implementation of last year’s mining roadmap as it clearly articulates the government’s aspirations and expectations from the sector.

    According to him, the roadmap  determines particular strategy needed to be deployed to achieving the mining sector objectives as it looks at across a chain, from institution building to stakeholder management, funding, and management of players in the sector and the whole range of things that are needed.

    “The roadmap articulated how we intended to grow the sector, which is actually different from the one in 2012, which was very ambitious. We wanted to grow the sector by 10 per cent by 2020 and we are still hovering around five per cent. Perhaps, we are putting the cart before the horse. You can’t just have such growth objective without having a clear strategy on how you intend to get it done.

    “It is one thing to have a roadmap and another to implement that roadmap, that’s the reason I’m saying that there could be bit more work to be done, and there could be more action to be taken to make the implementation faster. To get this done, it is not just government’s action, the private sector must be carried along. In fact, it should be private sector driven,” he said.

    Azobu said there is a mining implementation and strategy brief in the roadmap. He also said a team has been constituted and its responsibility is to have a  clear implementation plan on who takes what responsibility.

  • Egbin expansion: Investors shop for $1.2b

    Owners of Egbin Power Plc are looking for about $1.2 billion to expand the power plant by additional 1,500 megawatts (Mw) by 2020, it was learnt.

    The company’s Managing Director and Chief Executive Officer, Dallas Peavey, told The Nation on the sidelines of the visit of a delegation of the United States (U.S) congressmen led by Senator Chris Coons to the company that the management has started moves to achieve the expansion of the plant. He said the environmental impact assessment (EIA) and engineering design, among others, had been completed.

    He said the management was exploring all partnerships with the United States government, World Bank, International Finance Corporation (IFC), Transmission Company of Nigeria (TCN), among others, to ensure that power was available to Nigeria.

    He said: “On the visit of the congressmen, we are working together with stakeholders and partners looking for a better future, how to do things better and especially Nigeria needs power and we need to make it available.

    “Since we took over Egbin in November 2013, we have improved efficiency more than it was and increased it to installed capacity of 1320Mw. We are working with the government to ensure evacuation of generated power. Currently, we have 700Mw stranded power that Nigerians need. We are working the TCN, U.S, World Bank, IFC and the Sahara Group to get the power out.

    “However, the challenge is that the plant is 35 years old and the cost of replacement of its parts requires a long lead term. This plant was built by Marubeni Consortium, which used Hitachi Company of Japan for the Electric/Mechanical. Therefore, to do the changes, you have to bring the company down here. But we are looking at the U.S. to find some parts to reengineer the system operate and improve it and make it work. We are working with the U.S government and other stakeholders to make it work.”

    On gas supply challenge, the Egbin chief said gas is not an issue today. We have more than sufficient gas supplies to be able to generate power. The issue is evacuation of power and that is why we are working with the TCN, he added.

    On returns on investment, Peavey said: “We have spent over $400 million on the plant and $120 million on repairs only but currently we are not focused on making returns. The strategy was not to make money immediately. The money was spent to develop the nation. It was not invested with expectation to make returns on investment immediately. The Power Purchase Agreement (PPA) with government is for 20 years. We still have 16 and half years more.

    “In the last six months, you noticed that the power sector doesn’t have blackout/system collapse as before. This is because we are working better with the distribution companies (DisCos), the transmission and gas companies so that we can generate and they can take it and do what it is needed for so that customers get what they pay for.”