The Nation Newspaper

Tag: securities

  • Court okays Peregrine Securities, Legae merger

    The Competition Tribunal has  approved the acquisition of a 65 percent stake in Peregrine Securities by Nkholi Consolidated Investments.

    Through its operating subsidiaries, Peregrine is one of the largest stockbroking in South Africa with a client base of local and foreign hedge funds, investment banks, institutional fund managers, life assurers and high-net-worth individuals.

    Nkholi is a black economic empowerment consortium formed by the management of Legae Securities — a South African company established in 1996 as the first black-owned and managed stock broking firm — together with the management of Peregrine Securities and others.

    Effective immediately, the two businesses will merge into an entity renamed Legae Peresec, the largest black-owned, managed and controlled independent financial securities company in South Africa with 51 percent black ownership, more than 30 percent being black women.

    Legae Securities Chief Executive James Stewart and Peregrine Equities Director and Head of Trading Technology Tshepo Maseko will lead the combined business.

    “This is a very exciting event for both companies and their employees, our clients, and the industry at large. Our clients will now have access to increased liquidity and capital, world class financial technologies and even more robust risk management processes,” Maseko said.

    “Legae Peresec will retain focus on its founding values of client-centricity, care, integrity, proficiency, and a profound desire to promote sustainable transformation and development in South Africa’s financial market,” Stewart added.

  • Why PFAs shun investments in foreign securities

    Why PFAs shun investments in foreign securities

    The Contributory Pension Scheme (CPS) has yielded N5.3trillion, but Pension Fund Administrators (PFAs) are shying away from investing contributors’ and retirees’ funds in foreign capital and money market instruments. Instead, pension funds in Retirement Saving Accounts (RSA) of active contributors and retirees are being invested in domestic shares and money market securities. OMOBOLA TOLU-KUSIMO writes on the reasons and implications of this development.

    For long, Nigeria’s Pension Fund Administrators (PFAs) have given foreign shares and money market securities a cold bath. They have restricted themselves from investing pension funds in Retirement Saving Accounts (RSA) of active contributors and retirees beyond the nation’s shores in foreign ordinary shares and money market securities. What they have actually done was to invest the N5.14 trillion funds accumulated under the Contributory Pension Scheme (CPS) in the domestic capital and money market instruments.

    This,according to The Nation’s findings, has been the case since the enactment of the Pension Reform Act (PRA) 2004. Although, the PRA 2014, which repealed the (PRA) 2004, allowed foreign investment, the National Pension Commission (PenCom) is yet to give PFAs the nod to invest the funds in foreign capital and money market instruments because of perceived lack of capacity by the PFAs and the need to encourage the use of the funds to solve Nigeria’s local problems, especially building of infrastructure.

    Besides, the Central Bank of Nigeria (CBN) Foreign Exchange (forex) policy, it was  learnt, has also frustrated move by the pension managers to invest in foreign assets. This is because access to forex to procure these foreign assets has been prohibited following the CBN’s June 23, 2015 circular excluding some imported goods and services from the forex market.

    Under the CBN circular, Eurobonds, foreign currency bonds and shares were number 40 on the prohibition list. But some experts, who spoke with The Nation, said by refusing to invest retirees and workers’ fund in foreign assets, the PFAs’ may have inadvertently denied contributors the opportunity of getting more returns on their investments.

    They pointed out, for instance, that investment in foreign assets is aimed at improving diversification, given the possibility of higher returns and meeting pension benefit payments in foreign currency. To them, it therefore, means that the pension managers are not maximising returns for contributors and retirees.

    A senior official at PenCom, who does not want his name mentioned, also said the situation has implications on retiree’s savings and investment. He pointed out that the primary objective of the Commission’s supervisory philosophy is to ensure safety of the pension assets and fair return on investment.

    He, however, noted that: “To allow foreign investment would require safe custody of the assets offshore and clear understanding of the foreign assets and investment climate. We need to build these capacities particularly the custody aspect of the assets.”

    The PenCOM official described as correct the position of some experts who said PFAs have continued to invest the bulk of pension funds in Federal Government securities and money market instruments relative to equities, leading to having investment portfolios that are too risk averse.

    “This is correct given the high volatility of the Nigerian stock market and the encouraging returns from the FGN securities and other fixed assets. This, however, was exclusively the investment decisions of the PFAs,” he said.

    But the PFAs appear hamstrung, despite the fact that the regulation allows them to invest the funds offshore. For instance, a Stanbic IBTC official, Mr. Melvin Awolowo, said going by the regulation of investment for pension fund assets, PFAs in Nigeria are allowed to invest in foreign denominated securities such as global depository receipts/notes and Eurobonds of Nigerian entities as well as private equity.

    “We believe that some PFAs in line with their investment strategy have invested in these foreign assets in the past,” he recalled. He, however, lamented that in recent times, access to foreign exchange to procure these assets has been prohibited since the CBN policy that excluded some imported goods and services from the Nigerian forex market. He said Eurobonds, foreign currency bonds and shares were number 40 on the CBN prohibition list.

    Awolowo said the implication of this is that PFAs, who plan to increase their stake in foreign assets, can no longer buy the foreign currency needed through official channels to pay for their investment. In other words, an investment in this asset class has been limited and it is no surprise that there is no investment in foreign securities.

    While confirming that it is true that PFAs are not investing retirees and contributors’ fund in foreign securities, the Managing Director, Premium Pension Limited, Mr. Wilson Ideva, noted that it is because everything PFAs are doing comes under regulation and the regulation does not allow them to place money market outside Nigeria.

    He stressed that this can only be done when the regulation permits them. “We know where we are coming from. It was a situation where pension was seen as a big problem hence, the need for regulation to be tough to ensure that we do not go outside the bounds. So, for now, the guideline does not allow us. So, we can’t do it,” he said.

    On maximising returns for contributors, Ideva said people need to understand that the country needs the funds more than the outside. “We have huge infrastructure gap. We have roads, rail, and education among other areas that we need to bridge the gap. Everywhere you go you will see that the country is crying for funding. We need to use the pension assets to develop Nigeria first instead of taking the funds to people, who are already developed and help to drive their cost of funds,” he added.

    Beyond PFAs’ perceived lack of capacity and patriotic sentiment that appeared to have encouraged the use of the funds to bridge Nigeria’s wide infrastructure gap, CBN’s forex policy is also a pain in the neck of PFAs.

    Apparently taking a swipe at the forex policy, which he believes has implications for investment of pension fund, an Actuarial Scientist and Chartered Insurer, Dr. Pius Apere, admonished the regulator, PenCom, to exercise the requirements of Section 87 (2) of PRA 2014 to protect pensioners’ exposed future loss by the forex policy.

    He noted that Section 87 (2) of the Act provides that a PFA may invest the pension funds in units of any investment outside Nigeria within the categories of investments set out in Section 86. Section 85 of PRA 2014 provides that the safety and maintenance of fair returns on the amount invested are the main investment objectives of the PFAs operating under the CPS. The regulator, PenCom issues from time to time, regulations and guidelines on investment of pension funds and assets in order to achieve the investment objectives.

    Sections 86 and 87(1) of PRA 2014 specifies the types of financial assets and instruments pension funds can be invested in, either in Nigeria or outside by PFAs, while Sections 88 and 89 of the same Act place restrictions on assets and or securities pension funds cannot be invested in.

    Subject to the subsisting CBN forex rules, PenCOM may seek approval of portfolio limits for investment of pension fund or assets outside Nigeria from the appropriate authorities.

    Meanwhile, PenCom summary as at end of October 2015 showed that only Closed Pension Fund Administrator (CPFA) Funds was invested in foreign ordinary shares and foreign money market securities, while it showed the concentrated investment of the funds in Treasury  Bills and Federal Government Bonds. The funds are largely invested in equities and bonds including state government Securities, Corporate Debt Securities, Supra-National Bonds and Local Money Market Securities.

    The CPFA Funds are mainly Defined Benefits final salary pension schemes. Section 51 of PRA 2014 requires that new employees of sponsor companies with CPFAs shall join the CPS and open RSAs. Thus, CPFA Funds are closed to new entrants after the enactment of PRA 2014, which means that membership of CPFA Funds, is likely to decline over time.

    For instance, in October last year, 13.97 per cent amounting to N719, 240m of the Total Pension Fund Assets. N5, 149,652m was invested in CPFA Funds. Out of the total CPFA Funds, 9.78 per cent was invested in both foreign ordinary shares and money market securities totalling N70, 313.58m, while 9.93 per cent, 45.35 per cent and 17.12 per cent were invested in ordinary shares, FGN securities and Real Estate Properties in the domestic market, respectively.

    In the latest report of last October, total assets under the CPS rose to N5.14t. The summary noted that 56.28 per cent of the money totalling N2.8t, was invested in Federal Government of Nigeria bonds, while 10.27 per cent or N528.76b was invested in treasury bills. A total of N514.28b, which is about 9.9 per cent of the total pension assets, was invested in domestic ordinary shares within the period under review.

    According to the figures, 10.41 per cent or N535.90b was invested in local money market securities, while 4.08 per cent totalling N209.87b, was invested in real estate properties. Similarly, N162.03b or 3.15 per cent and 3.05 per cent or N156.877b of the growing funds was invested in state government securities and corporate debt securities, respectively.

    The operators invested about 0.42 per cent each, amounting to N21.5b and N21.8b in open/close end funds and cash and other assets, while 0.34 per cent or N17.3b and 0.22 per cent or N11.55 billion were invested in private equity funds and supra-natural bonds, respectively.

    Apere, who is also Deputy Managing Director of Linkage Assurance Company Plc, said the basic investment principles of pension schemes are to minimise the risk of failing to meet the liabilities of pension schemes, having considered the nature, term, currency and certainty of the liabilities, and also to maximise the investment return within an acceptable level of risk.

    He said based on this, every PFA needs to invest the employees’ contributions prudently, having considered the individual circumstances in terms of risk profile. He reiterated that the CBN’s forex policy has effect on only the CPFA funds because of the investment in overseas financial instruments mainly ordinary share purchase.

    The policy’s impact on the industry, according to him, include but not limited to exposure to currency risk unless it is hedged for a fee, resulting in volatile returns from overseas investments due to the devaluation of the naira. There is also the risk of inability to invest new contributions from existing employees and or funds injected by sponsors to bridge funding gaps as determined by the actuarial valuation of the schemes in overseas assets in order to meet future pension liability payments in foreign currency. This is because of the extra cost to be incurred in order to obtain foreign currency outside Nigeria’s forex market.

    Apere said the impact also include sales of foreign assets of pension schemes to meet expected pension liability payments in domestic currency and to realise higher returns because of the devaluation of the naira.

    “The CBN forex policy has also created uncertainties in the domestic capital market, which would lead to volatility of market value of domestic equities and hence, have a second order effect on pension fund investment,” he added.

  • N3.25tr pension funds invested in govt securities, says PenOp

    N3.25tr pension funds invested in govt securities, says PenOp

    About N3.25 trillion out of the almost N5trillion of the Pension Funds so far collected have been invested in Federal Government securities, the managers of the fund, have said.

    The Chairman, Pension Fund Operators Association of Nigeria (PenOp), Alhaji Musbahu Yola, said this yesterday when he addressed journalists at the end of the consultative forum between the National Pension Commission (PenCom) and Pension Fund Administrators (PFAs) in Abuja.

    He said the invested amount is equivalent of 65 per cent of the almost N5 trillion pension assets currently warehoused by pension operators, adding that another 12 per cent has been invested in equities, while 15 per cent is invested in the money market.

    Yola maintained that not withstanding the recent removal of Nigeria from the JP Morgan Index, the country’s Pension Fund Operators will continue to invest in FGN Bonds and Treasury Bills, pointing out that FGN Bonds are not only profitable, they are safe to invest in.

    He aid the removal of Nigeria from JP Morgan Index  would favour PFAs because exiting foreign investors will have to sell their assets at lower prices and it doesn’t mean that the FGN Bonds have become junk.”

    He said PenOp members “will continue to invest in FGN Bonds and Treasury Bills,” wondering  where else would we put the money, Treasury Bills and Bonds are safer assets” he said.

    Yola also revealed that it has been agreed between the PenCom and PenOp members, that 20 million Nigerians will be captured into the pension net by 2024 from the current 6.6 million pension contributors, saying “this is the best we can do under the circumstances and it points to the fact that majority of Nigerians are employed outside the formal sector.

    “State governments have also not complied. The point really is that  most Nigerian businesses are informal or are SMEs that haven’t really kicked in for one reason or the other if our economy develops and becomes more Industrialised with more formal corporations, a lot of people will be captured in the pension net but many Nigerian just do small jobs that are not incorporated.

    You can’t get them in so easily, we know we have a lot more to do, but we shouldn’t be discouraged by the fact that it is 6.7 million out of 170 million. Our objective is to go 20 million by 2024, that is where the informal sectors being captured in the guidelines comes in” he said.

    Regarding unremitted employees’ pension after deductions have been made, members of PenOp urged employees to blow the whistle on the employers. They said “employees are responsible for their pension. If employers are not remitting, employees should go to their PFAs and report, you must be in charge of your pension. The PFAs do not have the power to enforce complaints. PENCom has the power of enforcement and they have engaged recovery agents employees must also rise up the law is backing them they have to find the means of making their employers make those remittances on their behalf either as a union, they must come together and pressurize their employers particularly where they have deducted from the salaries and have not remitted.”

    Yola and his team PenOp associates wondered that “if people are afraid of speaking up for their right who will do it for them? Now anybody who wants to do a job with the federal government must produce their certificate of compliance and some private organizations have included it in their manuals too so that they don’t go foul of the law especially those that provide them with contract staff. To prevent victimization PenCom has been mandated not to reveal the identity of whistle blowers.”

  • Regulators, govt to review securities pricing

    THE Securities and Exchange Commission (SEC) plans to spearhead a concerted effort to review the pricing of financial instruments, especially government securities, to deepen private sector funding and reduce overcrowding of the capital market by government securities.

    A source said the review of the pricing models for government securities, such as Nigerian Treasury Bills (NTBs) and government bonds, is one of the mandates of the high-powered lobbying and advocacy group, billed to be announced by the SEC before the end of next month.

    The right pricing of financial instruments is one of the highlights of the 10-year Capital Market Master Plan, which include input from other financial services’regulators, including the Federal Ministry of Finance and Central Bank of Nigeria (CBN). The Capital Market Committee (CMC), led by SEC, has started the implementation of the 2015-2025.

    The source said SEC and the advisory council would liaise with the CBN, Debt Management Office (DMO), Economic Management Team (EMT), the Federal Executive Council (FEC) and the National Assembly to ensure the re-examination of the pricing models for all instruments.

    The Capital Market Master Plan noted that the pricing of risk-free government securities, such as the NTBs, is undermining the nation’s creative financial management and crowding out private sectors from the capital pool.

    According to the master plan, a copy of which was obtained by The Nation, the situation where the rate of risk-free securities such as NTBs is very high makes any form of risk-taking very unattractive and results in government inadvertently crowding out the private sector.

    For instance, the 91-day NTBs auctioned by the CBN for the Federal Government, on July 8, this year and which matures on October 8, this year, carries a yield of 10.26 per cent. A five-year bond offered by the government the same month carries a marginal rate of about 15.3 per cent.

    The NTBs and government bonds are considered as sovereign securities and are as such deemed as risk-free instruments because they carry the authorities of the government. NTBs are, particularly, fascinating; short-termed, upfront interest payment, acceptable as collateral, guaranteed repayment at maturity and interest income not subject to tax, they make for easy way to grow funds without risk-taking.

    The Master Plan noted that the combination of risk-free and relatively high rate of NTBs and others also lead to high cost of borrowing for the economy as other non-government borrowers become uncompetitive. Non-government borrowers often tend to offer higher rates to woo investors, thereby fuelling additional risk of default.

    SEC’s Director-General, Mr Mounir Gwarzo, two weeks ago reiterated the commitment of SEC and the CMC to the implementation of the Master Plan.

    He said the Commission was working on the list of the members of the advisory council, one of the recommendations of the Master Plan, and that their names would be announced soon.

    The CMC, chaired by Gwarzo, consists of chief executives of registered capital market operators, including stockbrokers, solicitors, custodians, fund managers, issuing houses, rating agencies, registrars, reporting accountants, trustees and consultants.

    Others include the chief executives of the Chartered Institute of Stockbrokers (CIS); Nigerian Stock Exchange (NSE), Central Securities Clearing System (CSCS),  NASD Plc, FMDQ OTC Plc, Africa Exchange Holdings (AFEX) and Nigeria Commodity Exchange (NCX).

     

     

    The CMC also include two members each from observer groups, which include Asset Management Corporation of Nigeria (AMCON), Central Bank of Nigeria (CBN), Corporate Affairs Commission (CAC), Debt Management Office (DMO),  Federal Ministry of Finance, Federal Mortgage Bank of Nigeria (FMBN), Federal Inland Revenue Service (FIRS), Nigerian Deposit Insurance Corporation (NDIC), Investment and Securities Tribunal (IST), Nigerian Investment Promotion Council (NIPC), National Insurance Commission (Naicom), National Pension Commission (Pencom) and Financial Services Regulation Coordinating Committee (FSRCC).

     

     

  • ‘Industry risk for securities firms generally higher than banks”

    Securities firms generally have higher industry risk than traditional banks that focus on commercial banking and not investment banking, Standard & Poor’s Ratings Services has stated.

    In a report on ongoing efforts to increased rating criteria for securities firms, Standard & Poor’s (S & P) outlined that the main reasons for the higher level of risks in the securities business are typically because of securities firms’ lower level of regulatory oversight, lack of access to central bank funding or other ongoing support compared with prudentially regulated banks, and higher competitive risk.

    The report generally described securities firms to include firms that engaged in a wide variety of securities-related businesses, most notably retail and institutional securities brokerage, debt and equity underwriting, mergers and acquisitions and corporate restructuring advisory, securities sales and trading, and principal investing and proprietary trading.

    According to the report, securities firms’ financial performance is typically more volatile than traditional banks because their often less-diversified businesses are more subject to prevailing capital markets and competitive conditions.

    “Securities firms’ economic and funding risks are typically higher in countries with structurally less liquid or more volatile capital markets. In countries with historically more liquid and less volatile markets, the sector is still more exposed to market downturns and economic conditions. For instance, an uncertain economic outlook that tempers corporate activity and investors’ risk tolerances has historically contributed to greater earnings volatility for securities firms than traditional banks,” S & P stated.

    The report noted that revenue volatility hinders the ability to generate stable and recurring earnings sufficient to offset risk of capital losses due to trading activities adding that excessive leverage and risk or large holdings of illiquid assets further increase vulnerability to confidence erosion, potentially large losses, and liquidity constraints during times of financial stress.

    The report pointed out that the industry risks for securities firms are exacerbated when securities firms use excessive short-term wholesale funding, leverage, or holdings of less liquid, higher risk assets, as investment banks demonstrated during the financial crisis.

    “In times of financial stress, we believe that such a funding profile renders a firm more vulnerable to sudden confidence erosion and liquidity constraints than retail deposit-funded institutions, and such a portfolio exposes the firm to potentially large and rapid asset write-downs. Conversely, those firms with largely agency business models; limited leverage, principal credit, and market risk; and mostly recurring revenue can potentially overcome their higher industry risk to be rated as high or higher than the anchor of a traditional bank. However, we anticipate that only a few independent securities firms are likely to achieve this,” the report stated.

    The report outlined that the past 20 years have provided examples of how the securities firms sector’s cyclicality has played out. The most severe recent downturn in the securities industry began in 2007, before the downturn in the general economy, and started to recover sooner–as the surge in fixed-income trading revenues and improved results in equities trading, helped by the rebound in many stock markets, in 2009 attest. The downturn of most of the United States securities industry in 2001 and in many Asian countries in 1997 coincided with general recessions. However, investment banks were uniquely affected by the sharp rise in interest rates in 1994, the Russian default, and the industry rescue of the long-term capital management hedge fund in 1998, while retail and other securities firms in many markets were much less affected by these events.

    “The perils of migrating from distributors of securities to large holders of risk were made evident in the massive losses many investment banks sustained during the most recent crisis. The experience of the large US independent investment banks in 2008 is an extreme example of this and shows the high volatility and confidence sensitivity that investment banking can be subject to. By the end of that year, the five formerly independent investment banks, which were among the largest in the world, had either converted to bank holding companies, failed, or were acquired by a larger banking group,” the report noted.

    The report estimated that for countries with mature securities industries, the peak-to-trough decline in revenue in the 2006-2009 cycle was typically about 50 per cent more severe for the securities industry than it was for banks.

    S & P stated that the competitive dynamics of securities firms are frequently weaker than those of traditional banks given their typically less diversified businesses, less stable revenue, and higher vulnerability to competition as new companies enter the market.

    “In addition, since securities firms are both buying and selling, securities firms run the risk of real or perceived conflicts of interest that may raise litigation risks and, if poorly managed, can damage a firm’s franchise and revenue streams. In particular, we view the competitive dynamics of investment banking as unfavorable given the overcapacity and incentive to increase risk that emerges as part of the business cycle. Securities firms’ investment banking and trading activities can deliver attractive headline returns, but as a cycle turns, firms tend to take on more risk to maintain market shares and revenue,” the report stated.

    It noted that securities firms are often at the cutting edge of financial innovations with new products that make risk management more difficult and dependent on mathematical models and assumptions adding that this complexity, coupled with the myriad transactions firms often enter into and the need for them to protect proprietary trading strategies, may result in a lack of transparency from the perspective of analysts and investors, which can exacerbate the market’s reaction to surprises.

    According to the report, where securities firms do not have a central bank to act as a “lender of last resort,” it increases their funding risk relative to banks. Lack of such a liquidity backstop increases the confidence sensitivity of securities firms’ creditors, particularly in times of systemic stress. When the market loses confidence, collateral requirements can increase as counterparties demand credit protection, revenue can dry up if customers walk away, and access to wholesale funding can become more expensive as investors charge a higher risk premium–or access can disappear if they refuse to take the firm’s credit risk.

    “For better or worse, lack of central bank access makes securities firms more dependent on local capital markets, banks, and any government or industry funding mechanisms. The extent to which securities firms fund themselves in the organized capital markets is higher than that of the average bank, which makes them more vulnerable to local securities market liquidity, particularly short-term funding dislocations,” S & P stated.

     

  • ECS will address workers’ safety, securities, says NSITF boss

    TO ensure that administrative cost of managing Employees’ Compensation Scheme (ECS) does not  fall short of International Labour Organisation (ILO)’s benchmark for Social Insurance Scheme, the Managing Director of Nigeria Social Insurance Trust Fund (NSITF), Alhaji Munir Abubakar has said the scheme would continue to address issues relating to workers’ insecurity, safety and anxiety.

    Abubakar said the primary objective of the scheme was the protection of citizens against problems associated with disruptions and changes in their income, which could expose them to poverty, suffering and indignity.

    The NSITF boss, while reviewing the on-going NSITF and the Nigeria Employers Consultative Association (NECA) safe workplace intervention project and an interactive session with participating employers on the implementation of the ECS in the country, said more employers are embracing the scheme as NSITF management continues to explore the option of moral suasion rather than sanction.

    He said: “As part of our efforts at ensuring accountability and transparency in the operation of the ECS, and ensuring that administrative cost of managing the ECS does not exceed the ILO’s benchmark for social insurance scheme, we inaugurated the Independent Investment Committee as provided by Sections 62 and 63 of the Employees’ Compensation Act (ECA 2010). The Committee, which is headed by NECA’s Director-General, Mr. Olusegun Oshinowo has the duty of carrying out investment surveys in the economy and draw up a list of safe investments. It will also initiate or carry out independent assessment of the investment activities of the Board.

    Abubakar,  who emphasised regular investment in accident management infrastructure in companies with high susceptibility to workplace accident, said: “Action started with NSITF/ NECA’s programme of annual awards to employers would measure up to standard required in Occupational Safety and Health (OSH) and donation of OSH tools/equipment to others adjudged deficient in OSH standards.” According to him, the event afforded the management of the scheme an opportunity to update employers and other participants on the implementation of the ECS and  future plans  for the scheme

    Abubakar said: “While a number of employers in the public and private sectors of the economy registered, although, not all of them have fully complied. Appreciable progress has been made in claims and  compensation payment. Virtually all commercial banks in Nigeria have been authorised to collect ECS contributions on behalf of NSITF, making it possible for employers not restricted to any bank across the Federation, while defaulting employers are regularly served with Demand Notices for payment of one per cent of their total emoluments as provided in the Act, with effect from July 1, 2011 and they are complying now; some via additional legal letters.”

    Speaking on awareness drive, the NSITF’s boss stressed that on-going enlightenment campaigns via sensitisation programmes and seminars across the country in collaboration with employers’ and employees’ organisations with appropriate flyers, pamphlets and booklets on ECS have been printed for wide distribution to all stakeholders. According to him, the number of  employers that  had keyed into the scheme is continuously increasing by the day and over 500,000 workers have been covered by the scheme. Apart from other benefits and compensation paid, those earning benefit for life have started receiving it.

    On challenges affecting the smooth operation of the scheme, Abubakar said public awareness of the ECS is  becoming known  as the scheme’s features and benefits are not yet fully understood. “Under-reporting of occupational accidents/diseases to pre-empt corporate negative image and/or evade full compliance with the provisions of the ECA, as well as the improper documentation with respect to claims affect guaranteeing the  genuineness of medical health providers and practitioners,” he said.

  • NASD to start trading on unlisted securities July 2

    Investors who are interested in buying and selling equities of unquoted companies such as MTN Nigeria Limited, West African Milk Company (Wamco), Fan Milk Plc, Nigerian Bottling Company and Citibank Nigeria among others, will have a more organised and transparent trading platform to trade their shares on July 2 with the commencement of operations of the NASD.

    Formerly known as the National Association of Securities Dealers, NASD Plc is a registered over-the-counter (OTC) trading platform for unquoted securities including equities and bonds. NASD is owned by several investment and financial institutions as well as strategic investors. The Nigerian Stock Exchange (NSE) holds 6.86 per cent equity stake in the NASD, which is registered by the Securities and Exchange Commission (SEC) as an organised trading platform for unlisted securities.

    At a press briefing at the weekend, managing director, NASD Plc, Mr. Bola Ajomale, said arrangements had been concluded for the formal launching of market on July 1 while trading will commence on July 2, 2013.

    He said the emergence of NASD will give investors the opportunity to buy and sell unquoted securities in an organised and transparent market, which will enhance the liquidity of shares not listed on the NSE.

    According to him, all investment instruments approved by SEC could be traded on its platform including shares of unlisted multinational companies.

    “We will open up with equities and bonds many of which are currently being traded on the black or grey market in the first phase,” Ajomale said.

    He added after the initial formative period, the NASD will move to trading on commercial papers and other complex instruments such as derivatives and options.

    He pointed out that as an OTC markt, the NASD would not have a trading floor like traditional Exchange but rather trading will be done through the internet and a hosted platform leased from the NSE.”

    He added that the company had developed an integrated market system made up of the Central Securities Clearing System, six settlement banks and some registrars to ensure smooth operations while 40 brokers have been registered to trade on the market.

    “Our vision is to create a market that is accessible throughout West Africa. We intend to become the hub of first call for capital formation in West Africa and we are guided by the principles of Integrity, Performance and transparency in all our dealings with every point of contact- be they investors, issuers, regulators business partners and especially your good selves,” Ajomale said.

    He enthused that NASD would fuel economic growth in the West African sub-region by developing and operating active markets that adhere to the highest standards of performance and principles of integrity while also creating value for its stakeholders and the investing public.

    According to him, by offering more liquidity in investment instruments to the Nigerian capital market, NASD will play a crucial role in the ability of Nigeria to sustain a real growth rate of above 7.0 per cent per annum and ensure that desired capital intensive projects can get cheaper and faster access to funding.

    On the modus operandi or trading, Ajomale said that there would be no circuit breaker on pricing of equities as they would be priced based on performance and available information in the market.

     

  • Fed Govt’s securities rose by N700b in four months

    The securities issued by the Federal Government increased by about N700 billion from January to April this year, the Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi has said.

    Speaking at the yearly risk management conference in Lagos, Sanusi said when combined with drawdowns on deposits at the CBN and commercial banks, the implication is that government had spent N2 trillion from January to April this year.

    He said the apex bank would refinance and restructure N3.6 trillion Asset Management Corporation of Nigeria (AMCON) bonds in its custody maturing by December this year.

    He said the CBN does not want AMCON to offer the bonds at the international market, so as to avoid currency risks and reduce concerns for rising foreign debt.

    He said the AMCON has been advised to pay off all other bond holders by December except the CBN.

     

  • Asset Managers, SEC facilitate securities lending

    The Association of Assets Custodians of Nigeria has said that its partnership with the Securities and Exchange Commission (SEC) assisted in the implementation of securities lending in the country.

    Speaking at the first annual general Meeting of the Association held at the weekend, in Lagos, President of the association, Segun Sanni said the group is at the forefront of promoting securities lending because, such will help deepen the market.

    Sanni said the group was able to ratify its constitution, received report of its activities, approved its audited financial year for 2010 and 2011, appointed auditors among other deliberations at the AGM.

    According to him, the group has also partnered with the Central Bank of Nigeria (CBN) on collective investment and automation of the Certificate of Capital Importation (CCI). The CCI enhances confidence of foreign investors when they are investing in the country.

    Sanni explained that foreign investment constitute between about 70 per cent of the total turnover volumes in the capital market.

    He said there is increasing need to automate the CCI as such would enable foreign investors to easily find out the status of their investments in the country, increase transaction efficiency and ensure that investors get adequate returns on their investments.

    Sanni explained that the group also prevailed on the apex bank to relax its rule, mandating foreign investors to keep their investments for at least one year, before disposing them.

    He said such policy affects foreign direct investment (FDI) as there should be free entry and exit by investors. He said the risk of investors not being able to take away their investments at will would not favour the economy, adding that after presenting these views to the CBN, the policy was abolished in 2011.