The Nation Newspaper

Tag: recapitalisation

  • SEC extends capital market operators’ recapitalisation deadline to Dec 2016

    SEC extends capital market operators’ recapitalisation deadline to Dec 2016

    •Investors get 150 additional days for free e-dividend registration

    The Securities and Exchange Commission (SEC), Nigeria’s apex capital market regulator, has granted an extended window of 15 months to capital market operators that failed to meet initial recapitalisation deadline to comply with the new minimum capital requirements for their functions.

    Director General, Securities and Exchange Commission (SEC), Mr. Mounir Gwarzo, at a briefing yesterday in Lagos on the deliberations at the Capital Market Committee (CMC), said capital market operators that were unable to meet the September 30, 2015 initial deadline for new capital requirements have been given a 15-month grace to recapitalise.

    Also, operators who were disqualified for non-compliance or inability to substantiate claims of compliance by the audit firms will be allowed to come back to the market once they show evidence of compliance within the stipulated period.

    “We have given a grace of about 15 months from the initial deadline of September 30, 2015 to December 31, 2016. Operators who did not meet the requirement within this period will have their operating license cancelled” Gwarzo said.

    SEC had in December 2013 announced major increases in minimum capital requirements for capital market functions under a new minimum capital structure that was initially scheduled to take off by January 1, 2015. It however extended the deadline to September 30, 2015.

    Minimum capital base for broker/dealer was increased by 329 per cent from the existing N70 million to N300 million. Broker, which currently operates with capital base of N40 million, will now be required to have N200 million, representing an increase of 400 per cent. Minimum capital base for dealer increased by 233 per cent from N30 million to N100 million.

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

    Gwarzo said SEC has also decided to extend the deadline for free e-dividend registration by 150 days.

    He said SEC would bear the cost of registration on behalf of any investor who registered within the 150 days grace period noting that at the expiration of the grace period, subsequent registration of an investor would attract a fee of N100.

    He noted that the e-dividend management system which was launched last year by the Commission in collaboration with the Central Bank of Nigeria (CBN) and Nigeria Interbank Settlement System (NIBSS) to enable investors have direct access to their dividends has enjoyed high level of compliance from the investing public.

  • BDCs: 2,839 operators cross recapitalisation hurdles

    BDCs: 2,839 operators cross recapitalisation hurdles

    The Central Bank of Nigeria (CBN) has listed 2,839 Bureaux De Change (BDCs) that have met the N70 million regulatory capital base.

    In a circular released at the weekend, the CBN said the BDCs have complied with new N35 million capitalisation requirements and another N35 million cautionary deposit stipulated for operators. The CBN had last June, announced a new minimum capital requirement of N35 million for the operation of BDCs, up from the N10 million it was previously.

    The new capital base, is contained in a new guideline for the industry backed by the CBN Act of 2007 and the Banks and Other Financial Institutions Act 2004 (BOFIA). Both statues, stipulate a non-refundable application fee  of N100,000 and  non-refundable licensing fee  of N1 million.

    The circular, which will come into effect this month, orders retail money exchanges to deposit a mandatory cautionary deposit of N35 million in an account with the CBN, in addition to a minimum capital requirement of N35 million.

    The new guideline said no person should carry on the business of BDC in Nigeria, except with the prior authorisation of the CBN. It also stipulates that a BDC shall be construed as any company that is licenced to carry on small scale foreign exchange business in Nigeria and whose sole object is the carrying on of such business on a stand-alone basis.

    It said the application for BDC licence shall be processed in two stages, namely: approval-in-principle (AIP) and final licence.

    For the AIP, a formal application to the CBN governor to grant the promoters an AIP to carry on the business of a BDC in Nigeria is required. Also, a non-refundable application fee of N100,000 or such other amount as may be determined by the Bank from time to time in bank draft payable to the Central Bank of Nigeria.

    “There also should be an evidence of payment of the prescribed minimum capital of N35 million or any other amount as may be determined by the CBN from time to time, into the designated CBN account. The bank shall refund this amount with interest after the proposed institution has obtained its final licence,” it said.

    The guideline, also said that not later than six months after the grant of AIP has been secured, the promoters of a proposed BDC shall submit application for the grant of a final licence to the Governor, with evidence of payment of a non-refundable licencing fee of N1 million, only or any other amount as may be determined by the CBN from time to time among other conditions.

    “There should also be evidence of payment of N35 million mandatory caution deposit, or any other amount as may be determined by the CBN from time to time, into a designated CBN account and evidence of having suitable office accommodation for the operation of the proposed BDC,” it said.

    It stipulates that the qualifications and experiences of the Managing Director/Chief Executive Officer (CEO) shall be first degree or its equivalent in any discipline with three years post-graduation while the minimum qualifications and experience shall be first degree or its equivalent in any discipline with two years post-graduation experience.

    “One of the Management staff appointed above should be designated as compliance officer for the purpose of ensuring compliance with all regulatory guidelines and circulars,” it said.

    It said any person/individual wishing to sell foreign currency above $10,000 or its equivalent to a BDC shall be required to disclose the source.

    “The maximum amount per transaction for a BDC shall be determined from time to time by the CBN with respect to business and personal travel allowances. The maximum amount currently for Personal Travel Allowance and Business Travel Allowance (BTA)  per quarter is $4,000 and $5,000.

  • Recapitalisation: SEC compiles list of compliant capital market operators

    The Securities and Exchange Commission (SEC) is putting finishing touches to the final list of capital market operators with adequate minimum capital base, seven days to the deadline. They are the ones which will continue with their business in the fourth quarter.

    A source at SEC confirmed the development, saying this arose following the receipt of final updates from capital market operators.

    The source said the Commission was working to ensure that the market has a smooth transition from the previous capitalisation to the new capital base.

    SEC is expected to revoke licences of operators that fail to meet the September 30 deadline.

    SEC in December 2013 announced major increases in minimum capital requirements for capital market functions under a new minimum capital structure that was initially scheduled to take off by January 1, 2015. It, however, extended the deadline to September 30.

    Minimum capital base for broker and dealer was increased by 329 per cent from the existing N70 million to N300 million. Broker, which currently operates with capital base of N40 million, will  be required to have N200 million, representing an increase of 400 per cent. Minimum capital base for dealer increased by 233 per cent from N30 million to N100 million.

    Also, issuing houses, which facilitate new issues in the primary market, will be required to have minimum capital base of N200 million as against the current capital base of N150 million.

    The capital requirement for underwriter also doubled from N100 million. Trustees, rating agencies and portfolio and fund managers had their minimum capital base increased by 650 per cent each from N40 million, N20 million and N20 million to N300 million, N150 million and N150 million. A  Registrar will have a minimum capital base of N150 million as against the requirement of N50 million.

    While the minimum capital base for corporate investment adviser remained unchanged at N5 million, individual investment advisers will have to increase their capital base by 300 per cent from N500,000 to N2 million.

    The Nation had reported exclusively that the Commission had directed all capital market operators to file necessary additional updates to their statutory filings with the Commission in preparation for final review of the compliance status of each operator.

    A market source in the know of the directive said market operators are expected to file any additional information to their last filing with apex regulator of the capital market. The additional information report is expected to highlight changes that had taken place in the firms’ assets and other variables since the submission of the second quarter returns earlier sent to SEC.

    The source said SEC appeared to have set in motion the process for the final phase of the recapitalisation compliance review noting that most operators saw the latest directive as the last chance to make case for their compliance.

    The additional information update is expected to highlight changes in capital base, business combination; either merger or acquisition, any changes in number of functions registered for, subsisting applications with the market regulators, changes in board of directors and executive management, additional investments in key operational areas and other information on changes that might have occurred in the past 11 weeks.

    SEC has repeatedly ruled out any further extension of the September 30, 2015 deadline. The apex capital market regulator says that any operator that failed to comply with the new capitalisation will be automatically delisted from the market. SEC’s compliance timetable indicates that a list of the compliant operators will be published on Friday October 2. October 1 is a national holiday in commemoration of Nigeria’s Independence Day.

    SEC on August 31 drew the curtain on a preliminary deadline for capital market operators to file notifications for mergers and acquisitions or any reclassification of their functions. SEC had initially given a deadline of July 31 for the market operators to formalise any business combination and reclassification and file the necessary information with the apex capital market regulator. The Commission later extended the deadline to August 31, 2015.

    In a July 4 circular to all capital market firms, the apex capital market regulator directed all capital market operators which might have opted for mergers, acquisitions or any other form of business combination as a vehicle to meet the new minimum capital requirements to file their notifications with the Commission not later than July 31, 2015.

    The directive also applied to capital market operators proposing reclassification or reduction of their registered functions, including those seeking to downsize from stockbroker to sub-broker, broker-dealer to either broker or dealer and from multiple functions to a single function, among others.

  • Stockbrokers seek extension of recapitalisation deadline

    Stockbrokers seek extension of recapitalisation deadline

    Stockbrokers at the weekend called for extension of the deadline for compliance with the new minimum capital requirements for capital market operators introduced by the Securities and Exchange Commission (SEC) and the Minimum Operating Standards (MOS) being implemented by the Nigerian Stock Exchange (NSE).

    Acting President, Chartered Institute of Stockbrokers (CIS), Mr. Oluwaseyi Abe, said both SEC and the NSE should take into consideration the downtrend in the stock market and investors’ apathy in the primary market, which have militated against several market operators.

    He said while the objective of capitalisation and the MOS is laudable, regulatory authorities should show concern and take another look at the timing in order to further encourage inclusive development of the market.

    “The regulatory authorities should give people more time, the market is down, people need more time to comply,” Abe said.

    He reiterated the commitment of the stockbrokers to further deepening and development of the capital market, noting that the CIS has been implementing various initiatives to enhance standards of operations in the market and investors’ confidence in the integrity of the market framework.

    SEC had late 2013 announced major increases in minimum capital requirements for capital market functions under a new minimum capital structure that was initially scheduled to take off by January 1, 2015. It, however, extended the deadline to September 30, 2015.

    Minimum capital base for broker and dealer was increased by 329 per cent from  N70 million to N300 million. Broker, which operates with capital base of N40 million, will now be required to have N200 million, representing an increase of 400 per cent. Minimum capital base for dealer increased by 233 per cent from N30 million to N100 million.

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

    SEC last week drew the curtain on a preliminary deadline for capital market operators to file notifications for mergers and acquisitions or any reclassification of their functions. SEC had initially given a deadline of July 31 for the market operators to formalise any business combination and reclassification and file the necessary information with the apex capital market regulator. The Commission later extended the deadline to August 31, 2015.

    In a July 4 circular to capital market firms, the apex capital market regulator directed all capital market operators which might have opted for mergers, acquisitions or any other form of business combination as a vehicle to meet the new minimum capital requirements to file their notifications with the Commission not later than July 31, 2015.

     

     

    The directive also applied to capital market operators proposing reclassification or reduction of their registered functions, including those seeking to downsize from stockbroker to sub-broker, broker-dealer to either broker or dealer and from multiple functions to a single function among others.

    The MOS requirements were introduced last year by the management of the Exchange. The MOS requirements relate to all the dealing members of the Exchange and they address the five broad areas of manpower and equipment; organizational structure and governance; effective processes; global competitiveness; and technology.

    The NSE has insisted that the main objective of the MOS programme is to enhance investors’ protection and the integrity of the secondary market by ensuring that operators have adequate resources for professional and globally competitive operations.

    The SE had also given stockbroking firms July 31, 2015 deadline to submit a status verification report on the functions that their resources may be able to cope effectively with, in an indirect reclassification that may lead to withdrawal and issuance of new licences.

    In a circular to all stockbroking firms, the NSE directed the stockbroking firms to submit notification report that should state the capacity that each firm desires to operate in the market on or before July 31, 2015.

    Stockbroking firms are expected to choose from the four categories of operations including broker-dealer, the highest level; broker, the second level; dealer, the intermediate level and sub-broker, the lowest level similar to investment agent to without any trading privileges.

    SEC has repeatedly ruled out any further extension of the September 30, 2015 deadline for all capital market operators to comply with the new minimum capital requirements for their functions.

    The apex capital market regulator had stated that all capital market operators who are yet to comply with the new minimum capital requirement must do so before the deadline of September 30, 2015.

     

     

  • Recapitalisation: MfBs’ funds hit N173b

    Recapitalisation: MfBs’ funds hit N173b

    Microfinance Banks (MfBs) paid-up capital and shareholders’ funds have risen to N173.45 billion, the Central Bank of Nigeria (CBN) has said.

    Its Deputy Governor, Financial Sector Stability, Dr. Joseph Nnanna, made this known in the Financial Stability Report released at the weekend.

    He said the increase in capital was due to the recapitalisation of MfBs which upgraded from Unit to State MfBs and State to National MfBs.

    He said the funds increased by 13.48 per cent and 7.37 per cent to N82.44 billion and N91.01 billion  at the end of December last year, from N72.65 billion and N84.76 billion, at the of end of June, last year.

    He said the total deposit liabilities and net loans/advances also increased by 0.99 and 25.80 per cent to N145.83 billion and N162.91 billion, compared with N144.4 billion and N129.5 billion, as at last June.

    He explained that the improvement in the operations of MfBs was attributed to the impact of the CBN’s initiated Microfinance Certification Programme (MCP) for the boards and management of MfBs, and the growing acceptance of the microfinance banking model.

    Reserves, he said, however, decreased by N3.5 billion to N8.6 billion at the end of last December, from N12.1 billion at the end of last June, no thanks to increased loans.

    The bank chief said the apex bank collaborated with development partners and other stakeholders to establish a unified application (Core Banking System) for the MfB sub-sector.

    The proposed unified platform, and the Rural Financial Institutions (RUFIN) project for online rendition of electronic returns by MfBs, he added, is expected to facilitate accurate and prompt rendition of statutory returns.

    He said in the review period, 289 candidates completed the Microfinance Certification Programme (MCP), bringing the number of certified operators to 2,882 at last December.

    The certified operators are spread over 632 microfinance banks, representing 71.5 per cent of the sub-sector.

    The number of primary mortgage banks (PMBs) increased to 42  by December last year, from 40 at by last June, as two dormant PMBs were reactivated following their recapitalisation.

    “National PMBs remained at 10 at end of December 2014, while State PMBs increased to 32 from 30 at the end of June 2014,” he said.

    Nnnanna said the CBN extended the deadline, from last June 30 to last December 31, for some PMBs that are recapitalising. However, the total assets of PMBs decreased by 5.97 per cent to N389 billion at the end of last December, compared with N413.7 billion at the end of  last June.

    “However, their paid-up capital, deposit liabilities and loans/advances increased by 51.78, 35.33, and 22.18 per cent to N121.69 billion, N703.74 billion and N133.02 billion, at the end of December 2014. Aggregate reserves declined by 74.53 per cent, from N94.61 billion to N24.10 billion, while shareholders’ funds increased by 35.95 per cent, from N107.24 billion to N145.79 billion at end-June 2014,” he said.

    Continuing, he said: “There were 3,538 Other Financial Institutions (OFIs) in Nigeria at the end of December last year, compared with the 4,220 licensed institutions at the end of June last year, representing a decrease of 682 institutions (16 per cent).

    “The change was attributed to the net effect of the exit of 733 Bureaux De Change (BDCs) owing to their inability to meet the recapitalisation requirements, the licensing of 54 new OFIs (51 MfBs and three Finance Companies (FCs); and the revocation of two MfBs licences during the review period.

    “The total number comprised six Development Finance Institutions (DFIs), 42 Primary Mortgage Banks (PMBs), 903 Microfinance Banks (MfBs), 64 Finance Companies (FCs) and 2,523 Bureaux de Change (BDCs).”

    He said the total assets of the sub-sector increased by 23.2 per cent to N1.69 trillion at the end of December, last year, from N1.37 trillion at the end of June, last year. The total paid-up capital, however, decreased by 0.36 per cent to N444.8 billion at the end of December, last year, from N446.4 billion at end-June, last year, while the total net loans/advances increased by 58.03 per cent to N1,048.5 billion at end December 2014, from N663.5 billion at end-June 2014.

    Total deposits decreased by 22.81 per cent to N357 billion as at last December, from N462.5 billion last June.

  • Recapitalisation: MfBs’ funds hit N173b

    Recapitalisation: MfBs’ funds hit N173b

    Microfinance Banks (MfBs) paid-up capital  and shareholders’ funds have risen to N173.45 billion, the Central Bank of Nigeria (CBN) has said.

    Its Deputy Governor, Financial Sector Stability, Dr. Joseph Nnanna, made this known in the Financial Stability Report released at the weekend.

    He said the increase in capital was due to the recapitalisation of MfBs which upgraded from Unit to State MfBs and State to National MfBs.

    He said the funds increased by 13.48 per cent and 7.37 per cent to N82.44 billion and N91.01 billion  at the end of December last year, from N72.65 billion and N84.76 billion, at the of end of June, last year.

    He said the total deposit liabilities and net loans/advances also increased by 0.99 and 25.80 per cent to N145.83 billion and N162.91 billion, compared with N144.4 billion and N129.5 billion, as at last June.

    He explained that the improvement in the operations of MfBs was attributed to the impact of the CBN’s initiated Microfinance Certification Programme (MCP) for the boards and management of MfBs, and the growing acceptance of the microfinance banking model.

    Reserves, he said, however, decreased by N3.5 billion to N8.6 billion at the end of last December, from N12.1 billion at the end of last June, no thanks to increased loans.

    The bank chief said the apex bank collaborated with development partners and other stakeholders to establish a unified application (Core Banking System) for the MfB sub-sector.

    The proposed unified platform, and the Rural Financial Institutions (RUFIN) project for online rendition of electronic returns by MfBs, he added, is expected to facilitate accurate and prompt rendition of statutory returns.

    He said in the review period, 289 candidates completed the Microfinance Certification Programme (MCP), bringing the number of certified operators to 2,882 at last December.

    The certified operators are spread over 632 microfinance banks, representing 71.5 per cent of the sub-sector.

    The number of primary mortgage banks (PMBs) increased to 42  by December last year, from 40 at by last June, as two dormant PMBs were reactivated following their recapitalisation.

    “National PMBs remained at 10 at end of December 2014, while State PMBs increased to 32 from 30 at the end of June 2014,” he said.

    Nnnanna said the CBN extended the deadline, from last June 30 to last December 31, for some PMBs that are recapitalising. However, the total assets of PMBs decreased by 5.97 per cent to N389 billion at the end of last December, compared with N413.7 billion at the end of  last June.

    “However, their paid-up capital, deposit liabilities and loans/advances increased by 51.78, 35.33, and 22.18 per cent to N121.69 billion, N703.74 billion and N133.02 billion, at the end of December 2014. Aggregate reserves declined by 74.53 per cent, from N94.61 billion to N24.10 billion, while shareholders’ funds increased by 35.95 per cent, from N107.24 billion to N145.79 billion at end-June 2014,” he said.

    Continuing, he said: “There were 3,538 Other Financial Institutions (OFIs) in Nigeria at the end of December last year, compared with the 4,220 licensed institutions at the end of June last year, representing a decrease of 682 institutions (16 per cent).

    “The change was attributed to the net effect of the exit of 733 Bureaux De Change (BDCs) owing to their inability to meet the recapitalisation requirements, the licensing of 54 new OFIs (51 MfBs and three Finance Companies (FCs); and the revocation of two MfBs licences during the review period.

    “The total number comprised six Development Finance Institutions (DFIs), 42 Primary Mortgage Banks (PMBs), 903 Microfinance Banks (MfBs), 64 Finance Companies (FCs) and 2,523 Bureaux de Change (BDCs).”

    He said the total assets of the sub-sector increased by 23.2 per cent to N1.69 trillion at the end of December, last year, from N1.37 trillion at the end of June, last year. The total paid-up capital, however, decreased by 0.36 per cent to N444.8 billion at the end of December, last year, from N446.4 billion at end-June, last year, while the total net loans/advances increased by 58.03 per cent to N1,048.5 billion at end December 2014, from N663.5 billion at end-June 2014.

    Total deposits decreased by 22.81 per cent to N357 billion as at last December, from N462.5 billion last June.

  • Operators fault planned recapitalisation for domestic carriers

    Plans by the Federal Government to raise the capital base of domestic carriers has received knocks from experts who described the proposal as  an inappropriate measure in addressing the challenges of airlines .The chairman of Air Peace,  Allen Onyema, said recapitalisation by airlines is not sufficient evidence that the carriers are in sound financial health. He said pegging a fixed amount for any airline is insufficient evidence that the carrier has the technical wherewithal to operate safe flights .

    :”’ I am in support of any policy by government that would make the aviation sector stable . Any policy that would make airlines operate very safely. I have  not heard anybody in government talking about anything about recapitalisation of airlines . But we are hearing rumours that they are proposing about N5 billion recapitalisation for domestic airlines . It is strange to me that figures are being thrown about. The airline sector is not like the banking sector. It is strange to hear this in Nigeria, it is unusual in other parts of the world to propose this.

    “Airlines are not banks that had to recapitalise because they need to give out depositors money daily  The reason is that banks need more money as back-up to give out . The same model cannot be said of airlines. Banks need solid financial base because they daily have to give money to people to trade with . Airlines do not trade with money , so the whole idea of requesting them to have a N5billion recapitalisation base is not ideal,” he argued.

    He said when government is proposing recapitalisation in aviation, the model for the banking sector should not be applied to aviation.

    “What I think government should do is to put In place policies that would assist airlines to source cheaper access to funds, ease the problem of aviation fuel , by reducing the taxes , the new airlines should be given four years tax holiday,” he said, stating that  there is no gain In the airline business.

    He said what should be paramount is to ensure that airlines are categorised  to operate according to the number of aircraft they have. For instance, airlines should be restricted to operate limited routes according to the number of aircraft in their fleet . To me this is the best form of recapitalisation .Airlines  operations should be restricted to the  number of aircraft they have . Not to set N5billion by the side, he said.

    Onyema warned that If government’s plan is to forge mergers in the industry, this proposal will not materialise, saying that mergers are not forced. He called for the creation of a conducive environment that would encourage collaboration among the carriers. He said partnership among airlines is the way to go, as against the recapitalisation that is being proposed.

    On his part, an Aviation analyst and the Director, Zenith Travels,. Olumide Ohunayo argued that the planned recapitalisation of domestic airlines is not a solution to the several challenges facing local operators.

    He said, instead of embarking on another round of recapitalisation, he said the Federal Government through the NCAA, should strengthen its regulatory functions regarding the issuance of Air Operator’s Certificates (AOCs), to local carriers.

    Also speaking, an Aircraft Engineer and Executive Director, Centre for Aviation Research and Safety, Sheri Kyari, said the recapitalisation will lead to the death of some of the airlines that are currently struggling to survive due to several challenges confronting them. He said this is not the time to recapitalise as it may not lead the industry anywhere, adding that this may be a ploy by the authorities to force the domestic airlines to merge.

    On the minimum capital base he thinks the Federal Government is looking at, Kyari said that government may be thinking of raising it from N500 million to N5billion.

    In April 2007 , after the spate of air crashes in 2005 / 2006, the Federal Government raised capital base of airlines  flying domestic routes to  N500 million, while regional operators were required to have N1 billion, and those on international routes were required to recapilise with   N2 billion.

     

     

     

     

    Kyari stated that the committee does not understand the dynamics of the aviation sector, arguing that the recapitalisation in the banking sector is not the same with that in the aviation industry. He said any re-capitalisation attempt at this time would be perceived as a step by the government to kill the indigenous carriers in favor of the planned national carrier.

    He argued that it would be better for the authority to carry out an economic audit on the domestic airlines, as the rate at which domestic operators are going under is alarming .He said besides asking airlines to recapitalise, the Federal Government itself must provide conducive atmosphere for domestic airlines to operate, by granting them waivers, as it is applicable with the importation of aircraft spares.

    According to him, “Recapitalisation I will say it is good, but any move again this time to introduce such to the airline, I think will be suspect. A lot of people are likely to think that any recapitalisation is to kill more airlines and allow the Government to achieve their national carrier objective. Government has to be extremely sensitive about this and then, you are looking at recapitalising, those who cannot recapitalise only to find themselves outside, and will lose their investments in the industry. I think the Government must do this thing at least sensibly and while they are doing this, they must work out what I would call incentives for these other ones to recapitalise.

    He continued, “Government is doing all this and not creating market for the airlines. They will want to say it is still private sector arrangement, but Government should also do one or two things to alleviate the sufferings of the airlines. “

  • Eight days to deadline: Recapitalisation threatens 200 stockbroking firms, others

    The Nigerian capital market is holding its breath amidst wrinkled faces created by steep depreciation in shares’ values and raised brows on the impending deadline for recapitalisation of capital market operators.

    With eight days, four working days, to the December 31, 2014 deadline for the recapitalisation of capital market operators, The Nation’s check has indicated that not less than 200 stockbroking firms might be affected by the recapitalisation deadline. Stockbrokers are the largest and primary trade group in the capital market and are regarded as the face and core of the market’s operations. They are also the hardest hit in the increase in capital base.

    Reliable industry sources and available data indicated that some 100 stockbroking firms have already met or in tow to meet the recapitalisation deadline, out of some 320 stockbroking firms listed as members of the Nigerian Stock Exchange (NSE).

    While it has faced a groundswell of opposition from trade groups and largely small capital market operators, SEC has so far insisted on the implementation of the new capital requirements arguing that the new capital structure was arrived at after extensive consultation with all stakeholders.

    A reliable source at SEC confirmed that no decision has been taken on either a review of the capital requirements or extension of the deadline as at press time. SEC ostensibly has the backing of the large and medium capital market operators, which view the consolidation as a right step to deepen the market. SEC had also argued that small and poorly capitalised operators are mostly responsible for infractions in the market, which the apex capital market regulator blamed on lack of adequate material and governance structures. The NSE has also cited similar data and argument.

    Besides, the trading data at the stock market show that a handful of stockbroking firms contribute the largest chunk of activities at the market. Latest weekly trading summary by the NSE for the week ended December 19, 2014 showed that 10 stockbroking firms accounted for 84.09 per cent and 89.50 per cent of the total volume and value for the week. Total turnover at the NSE last week stood at 5.41 billion shares worth N46.47 billion in 22,986 deals.

    The Nation had recently reported that the NSE had already determined 81 out of the 322 stockbroking firms on its dealing members’ list as inactive, a classification that represents state of poor capitalisation and complete shutdown of operations.

    Investigation by The Nation yesterday showed that 77 stockbroking firms still remained on the list of inactive/deactivated stockbroking firms. Number of listed stockbroking firms now stands at 320.

    However, opposing view on the recapitalisation had argued that stockbrokers, as investors’ trade agent, require no huge capital to perform their roles. Beyond the fidelity assurance, stockbrokers typically carry no risk in the stock market transaction as their role is to match investors on both buying and selling sides.

    Many operators have also argued that removing a large chunk of small but active market operators will have a retrogressive effect on the capital market inclusion programme. Less than five per cent of Nigerian population participate in the capital market. They argued that small and active stockbroking firms are the foot soldiers of the market engaging the retail investors. However, a new rule by the NSE will allow stockbrokers to act as sub-brokers and agents to other large stockbroking firms.

    A market operator in the know told The Nation that the downturn in the capital market is adversely affecting mergers and acquisitions by operators. According to the source, with the depreciation in portfolio value, the underlining assets of several operators have been significantly undervalued, which make them to be hesitating on consummation of mergers and acquisitions.

    The nation had earlier reported that an emergency meeting by stockbrokers, under the auspices of Association of Stockbroking Firms of Nigeria (ASHON), had concluded that stockbrokers should devise alternative plan in the event that SEC stick to the increase in capital base. The alternative plan, according to the sources at the meeting, will include mergers, acquisitions and raising of new funds through any of debt and equity means.

    SEC had announced major increases in minimum capital requirements for capital market functions under a new minimum capital structure that is expected to take off by January 1, 2015. Minimum capital base for broker/dealer was increased by 329 per cent from the existing N70 million to N300 million. Broker, which currently operates with capital base of N40 million, will now be required to have N200 million, representing an increase of 400 per cent. Minimum capital base for dealer increased by 233 per cent from N30 million to N100 million.

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

    Stockbrokers earn barely 4.0 per cent as total brokerage on complete buy and sale stockbroking transaction. Although several stockbrokers are registered for other functions such as corporate finance and investment advisory, they face strong competition from banks, insurance and other financial services companies who provide similar functions.

  • Capital market operators seek extension of recapitalisation deadline

    Capital market operators have begun intense lobbying of the Securities and Exchange Commission (SEC) with a view to securing many concessions, including a possible extension of the deadline, on the ongoing recapitalisation of the minimum capital requirements for operators.

    A reliable source indicated that the operators, majorly under the aegis of the Association of Stockbroking Houses of Nigeria (ASHON), Association of Issuing Houses of Nigeria (AIHN) and the Chartered Institute of Stockbrokers (CIS), have made several entreaties to the apex capital market regulators to reconsider certain elements of the recapitalisation plan.

    The elements included the structure of the capital requirement that fixed a minimum amount irrespective of the size and scope of operations of a firm, the implementation process and the deadline for full compliance.

    According to the source, the “positive interface” with SEC was yielding results. Although the operators were yet to secure the two major concessions including the restructuring of the capital requirements on a risk-based level and the possible extension of the January 1, 2015 takeoff date for the new capital base.

    As part of the results of the interface, SEC has extended the September 5, deadline for capital market operators to submit their recapitalisation plan.

    The extension, the source said, was to give room for further discussions among operators on the ways forward on the recapitalisation, especially through the options of mergers and acquisitions.

    The Nation had exclusively reported that several operators were considering mergers and acquisitions as alternative plan while the bodies of operators continue to press the case for risk-based capital structure that will allow many niche and small operators to continue their businesses independently.

    The recapitalisation plan will now be submitted at a later date after a one-day workshop on mergers and acquisitions to be organised later this month by ASHON and AIHN.

    The source hinted that mergers and acquisitions plans could be used to push for extension of the December 31,  deadline given the intricacies and extended timeline for successful merger and acquisition deal.

    SEC had announced major increases in minimum capital requirements for capital market functions under a new minimum capital structure that is expected to take off by January 1, next year. Minimum capital base for broker/dealer was increased by 329 per cent from the existing N70 million to N300 million.

    Broker, which currently operates with capital base of N40 million, will now be required to have N200 million, representing an increase of 400 per cent. Minimum capital base for dealer increased by 233 per cent from N30 million to N100 million.

    Also, issuing houses, which facilitate new issues in the primary market, will now be required to have minimum capital base of N200 million as against the current capital base of N150 million. The capital requirement for underwriter also doubled from N100 million to N200 million. Trustees, rating agencies and portfolio and fund managers had their minimum capital base increased by 650 per cent each from N40 million, N20 million and N20 million to N300 million, N150 million and N150 million respectively.

    A  Registrar will now have a minimum capital base of N150 million as against the current requirement of N50 million. While the minimum capital base for corporate investment adviser remained unchanged at N5 million, individual investment advisers will have to increase their capital base by 300 per cent from N500,000 to N2 million.

    Besides, dealing members of the Nigerian Stock Exchange (NSE) are contending with minimum operating standards recently introduced for all the three classes of dealing members including broker dealers, brokers and dealers.

    The new standards address the five broad areas of manpower and equipment; organisational structure and governance; effective processes; global competitiveness; and technology. The new standards are also expected to take off on January 1, 2015, just as the new capital requirements by SEC.

    The Nation had reported that an emergency meeting called by ASHON had reached consensus on the need to develop alternative plan to ensure that as many as possible operators scale through the new capital requirements.

    The alternative plan is expected to serve as a rescue option in the event that the ongoing engagement on the new capital requirements between the stockbrokers and other operators and the capital market regulators fails to yield any meaningful relief.

    While stockbrokers were optimistic that the capital market regulators would consider reduction in the capital requirements and a reclassification of the minimum operating standards, they were worried that outright implementation of the capital requirements would reenact the “Soludo effect” in the capital market, a reference to capital base-centered banking reforms under the former Central Bank of Nigeria (CBN) Governor, Professor Charles Soludo, during which number of banks reduced from more than 80 to less than 25.

    The alternative plan, according to the sources, will include mergers, acquisitions and raising of new funds through any of debt and equity means.

    A source at the meeting noted that stockbrokers, mainly founded on sole entrepreneurship, are now more than before open to discussions on mergers and acquisitions, giving the shrinking operating space for small firms in the industry.

    An informed estimate indicated that not less than 180 stockbroking firms may be affected by the new capital requirements, given their current state of illiquidity and operations.

    There are some 322 stockbroking firms listed as members of the NSE. A recent report by The Nation indicated that the NSE has already marked 81 out of the 322 stockbroking firms on its dealing members’ list as inactive, a classification that exposed them to the risk of being delisted under a new rule being considered by the NSE.

    Stockbrokers earn barely 4.0 per cent as total brokerage on complete buy and sale stockbroking transaction. Although several stockbrokers are registered for other functions such as corporate finance and investment advisory, they face strong competition from banks, insurance and other financial services companies which provide similar functions.

    The precarious position of the larger number of stockbroking firms is compounded by the heavily skewed transaction pattern at the stock market, where less than 20 firms account for more than two-thirds of trades at the NSE.

  • Recapitalisation:1000 BDCs may emerge

    BureauX De Change (BDCs)  are waiting for the Central Bank of Nigeria (CBN) to release the list of operators that met the July 31 recapitalisation deadline, Managing Director, Blue Wall Bureau De Change (BDC) Limited Lucky Aiyedatiwa has said.

    He told The Nation that feelers indicated that about 1,000 operators may make emerge.

    Aiyedatiwa, who is former Association of Bureau De Change Operators of Nigeria (ABCON) president, said: “We are waiting. The collation process is ongoing. I think that the CBN may complete the collation before the week runs out.”

    He said operators that hitherto ran four or more BDCs would be forced to go for only one licence because of the new huge capital base. Duplication of ownership, he said, would no longer be feasible.

    ABCON President Alhaji Aminu Gwadabe said the policy was an indirect attempt to empower few operators and force many others out of business.

    ABCON proposed a 40-week timetable for operators to meet the new minimum capital requirements. The proposal, he said, was sent to CBN for consideration. He said though CBN extended the deadline to July 31, the time was still too short to enable BDCs comply with the statutory and legal requirements of the new policy.

    The timetable, he said, contained actions needed to be taken to enhance the successful implementation of the policy for the subsector.

    Managing Director, Kayewd Bureau De Change (BDC) Limited, Rotimi Dada said the CBN was still selling only $15,000 to BDCs as against $50,000 before the policy was announced.

    Dada  said CBN was “a bit hasty” by cutting the dollar sales to BDCs, adding that the regulator should consult with stakeholders on what to be done. CBN, he said, should see the BDCs as macroeconomic factors that favour the economy.