The Nation Newspaper

Tag: stock market

  • Stock market to lose N224.2b to Union Bank’s delisting

    Stock market to lose N224.2b to Union Bank’s delisting

    Union Bank of Nigeria (UBN) Plc is finalising arrangements to delist its shares from the Nigerian stock market, a move that will reduce the market’s capitalisation by N224.23 billion.

    The board of directors of UBN yesterday confirmed that the 54-year old bank has entered the final phase of its delisting process, highlighting the imminent exit of the first generation bank after more than 53 years of listing at the stock market.

    Incorporated in May 1969, UBN, one of the oldest listed company on the Nigerian Exchange (NGX), was listed in January 1970 and it has been one of the active stocks in the highly influential banking sub-sector. The banking sub-sector is the most influential group at the stock market, in terms of key indicators of capitalisation and activity.

    The board said the second oldest bank “is finalising the process of obtaining approval to delist” its shares from the Nigerian Exchange (NGX). The shareholders will be paid a final price of N7.70 per share, estimating the value of the bank at N224.23 billion. However, the bank closed yesterday with a market value of N193.65 billion at N6.65 per share.

    “Consequent upon the approval, the Registrars will remit the scheme consideration (N7.70 per share) to all shareholders of the bank, pursuant to the decision of the court-ordered meeting and the subsequent sanction by the Federal High Court. All shareholders of the bank are enjoined to ensure that their accounts have been duly mandated, for the purpose of receiving the scheme consideration,” the board stated.

    The imminent delisting followed the acquisition of the shares held by minority shareholders by Titan Trust Bank Limited, the new majority core investor in the bank.

    Titan Trust Bank had in May 2022 completed the acquisition of the shares of UBN’s major shareholders, including Union Global Partners Limited (UGPL), Atlas Mara Limited (ATMA), Standard Chartered Bank (SCB), Montane Partners West Africa Limited (Montane) and Mr. Emeka Emuwa, resulting in a transfer of 93.41 per cent of Union Bank’s issued share capital to Titan Trust. UGPL and ATMA had taken over the first generation bank in 2012.

    The acquisition of the majority shareholding by Titan Trust Bank triggered mandatory takeover offer (MTO) for the acquisition of minority shares.

    Offer circular for the mandatory takeover offer (MTO) showed that Titan Trust Bank offered to acquire about 1.928 billion ordinary shares of 50 kobo each of UBN held by minority shareholders at N7 per share.

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    With the acquisition of 1.928 billion shares under the MTO, Titan Trust Bank, which had acquired 27.337 billion ordinary shares or 93.41 per cent majority equity stake in UBN in May 2022, would have 100 per cent holding of the first generation bank.

    After the full acquisition of the minority shares, Titan Trust Bank had indicated it would delist UBN and reregister the bank as a private limited liability company, ending 53 years of active listing and trading on the shares of the first generation bank at the stock market.

    Re-registration of UBN as a private company implies that beyond delisting from the NGX, its shares will also not be traded on the NASD OTC Securities Exchange, the platform for trading in the shares of unlisted public limited liability companies.

    The MTO was primarily triggered by Section 131, Part XII of the Investment and Securities Act, No. 29, 2007 and Rule 445 of Securities and Exchange Commission (SEC) Rules and Regulations, 2013. Section 131 of the Investment and Securities Act (ISA) and Rule 445 of SEC make it mandatory for any institution or person that acquires at least 30 per cent of a company to make an MTO to other minority shareholders. The MTO is usually at the transaction price for the deal that led to the emergence of the major shareholding.

    While many MTOs in recent period have been for part of shares held by minority shareholders, Titan Trust Bank’s offer was for full acquisition of the minority shares, which enables the new major investor to take over UBN fully and turn it into a private company.

    Titan Trust Bank was incorporated in December 2018 and obtained its National Banking license in April 2019 from the Central Bank of Nigeria; to operate as a commercial bank with national authorisation.

  • Stock market’s 70,000 points set new record

    Stock market’s 70,000 points set new record

    • NGX: it’s a boost for economic stability

    Share prices at the Nigerian stock market rallied to their highest level yesterday.

    A positive sentiment on ongoing economic reforms and corporate earnings drove the pricing gauge for the Nigerian market to a new threshold.

    The All-Share Index (ASI) – the benchmark index that measures pricing trend at the stock market, crossed the 70,000 mark to close yesterday at 70,581.76 points. It was the first time the index reached the 70,000 points.

    With this, the average year-to-date return for the Nigerian equities rose to 37.7 per cent, implying that investors had netted N10.52 trillion in capital gains so far this year.

    Yesterday’s feat underlined the continuing rally at the Nigerian stock market, after the market had on August 29, 2023 surpassed its previous all-time record to set a new record at 66,490.34 points. The previous highest index point was 66,371.20 points recorded on March 05, 2008.

    The ASI, a value-based common index that tracks all share prices at the Nigerian Exchange (NGX), is widely regarded as Nigeria’s sovereign equities index, a barometer of pricing trend and investors’ return at the nation’s stock market.

    The ASI rose on the back of intense and widespread bargain-hunting to close at 70,581.76 points, an increase of 1.94 per cent on 69,236.19 points recorded as the opening value. It had opened 2023 at 51,251.06 points.

    Aggregate market value of all quoted equities rose from its opening value of N38.039 trillion to close at N38.78 trillion, an increase of N739 billion. It had opened 2023 at N27.915 trillion.

    There is analysts’ consensus at the stock market that the bullish trend witnessed in recent period was driven partly by positive investors’ perception of the pro-market administration of President Bola Tinubu.

    “The market has been on an upward trajectory since the entry of the new administration led by President Bola Tinubu, due to proactiveness in implementing necessary reforms such as the removal of petrol subsidy and the liberalization of the foreign exchange market,” the NGX stated yesterday, explaining the exceedingly bullish market.

    Read Also: Stock market transactions soar to N2.42tr

    The NGX noted that “the remarkable milestone has stirred a frenzy of excitement among investors and ignited fervent discussions about the nation’s economic future”.

    “The historic high of the Nigerian stock market has created ripples in the global financial arena, with investors keenly observing the nation’s economic trajectory. Although it does not guarantee prosperity, it does signify global recognition of Nigeria’s vast potential. The hope is that this extraordinary accomplishment will lead to improved living standards for Nigerians and bolstered economic stability for the nation,” the NGX stated.

    Trading data had shown that while foreign investor participation has been fluctuating, although better than previous records; Nigerian domestic investors have shown stronger positive sentiment, with increased allocation into equities. Already, total transactions in the equity market rose to N2.71 trillion by the end of third quarter ended September 30,  2023; 38 per cent higher than the corresponding period of 2022.

    Analysts were excited about the market performance, noting that the 70,000 points represented a major breakthrough for the market.

    Afrinvest Securities described the market performance as “historic”, although it expected the capital gains to lead to profit-taking and intermittent negative closing.

    Cordros Securities said the market rose above “psychological mark”, referencing the importance of the new threshold.

    SCM Capital stated that “buy interest persists” at the stock market, underlining investors’ perception and prospects for the equities market.

    Nigerian equities had rallied net gain of N1.708 trillion in October 2023 as investors reacted positively to better-than expected corporate results.

    Despite concerns over macroeconomic challenges, most companies have shown resilience with considerable improvements in profitability.

    Month-on-month analysis had shown that the market capitalisation rose by N1.708 trillion from N36.331 trillion at the beginning of the month to close at N38.039 trillion on October 31, 2023. The ASI also rose by 4.30 per cent from its month’s opening index of 66,382.14 points close October 2023 at 69,236.19 points.

    Managing Director,  Highcap Securities, David Adonri, said the gain reported by the equities market in October showed impressive nine-month results, noting that foreign investors were turning to Nigerian stocks.

    According to him, the overall market performance is driven majorly by sentiment arising from the smooth handover and President Bola Tinubu’s bold economic policy on foreign exchange.

    He outlined that Tinubu prompt change of security chiefs also boosted investors’ confidence. The removal of Godwin Emefiele as Central Bank of Nigeria (CBN) Governor was another icing on the cake which impressed investors. All these added to the usual end-of-quarter rally to propel the equities market.

    “Since the huge gain was propelled by investor sentiment, interest in equities in second half, 2023 can only be sustained if the policy changes translate into growth in corporate fundamentals and a fall in interest rate, otherwise, we might see a market correction that may purge equities off the sentiment that inflated it in seven months of 2023,” Adonri said.

    One of Africa’s leading investors and entrepreneurs, Mr. Tony Elumelu had recently said the current economic atmosphere in Nigeria offers the best opportunity for good returns for investors.

    Elumelu owns the single largest stakes in several publicly quoted companies including United Bank for Africa (UBA) Plc, Transnational Corporation of Nigeria (Transcorp) Plc, Transcorp Hotels Plc, United Capital Plc and Africa Prudential. Elumelu’s Heirs Holdings also own major stakes in insurance, real estate, power and financial services companies.

    Providing an entrepreneurial investor’s perspective to a global audience at the Nigeria-India Presidential Roundtable and Conference in New Delhi, India, Elumelu cited his personal experience, corporate records and researches that underlined a robust outlook for the Nigerian economy.

    He urged the Indian private sector to seize the opportunity to invest in Nigeria, noting that Nigeria s a large market with immense opportunities for foreign investors.

    “This is the time to invest in Nigeria. I speak as a private sector investor in Nigeria, the companies in our group’s investment portfolio demonstrate the opportunity. I believe you also can take advantage of our track record and success.

     ”Nigeria is a huge market; over 200 million people with the largest economy on the continent. Most importantly, the population is not just over 200 million people; the demography of the population is exciting. We have a cohort of young people who are there to consume, and we also have people who are intelligent, energetic, hardworking, who provide the human capital that investors need to drive their businesses,” Elumelu said.

  • Haldane McCall to list shares on stock market

    Haldane McCall to list shares on stock market

    Haldane McCall Plc plans to list its shares on the main board of the Nigerian Exchange (NGX), opening up the ownership of the real estate and hospitality company to other investors.

    Haldane plans to list by way of introduction in the first quarter of 2024.

    As a prelude to the listing, Haldane McCall has commenced preliminary documentations at Securities and Exchange Commission (SEC) and NGX through its appointed parties to the listing.

    Att the company’s investors forum in Lagos, Group Managing Director, Haldane McCall Plc, Mr Edward Akinlade said the company had always operated on the strength of strategic growth, stellar returns, diversified portfolio and proven expertise.

    According to him, the company has a strong board and management team that comprises topnotch professionals in diverse professional backgrounds.

    “We have gone far in our plan to ensure that our company is listed on NGX in the first quarter of 2024. We shall be listed by introduction since we have complied with all the listing requirements of NGX. The listing will enhance the company’s perpetuity and sustainability of returns and avail us more financing options in the future . We regard our shareholders as partners. We have generous dividend policy. Our company has capacity to collaborate with the government to bridge housing deficits in Nigeria.

    Read Also: Stock market transactions soar to N2.42tr

    “The company intends to expand by procuring at least one additional hotel annually over the course of the next decade at choice locations such as Lagos, Abuja, Port Harcourt, Ibadan etc. In the medium term, the Haldane McCall Group seeks to further develop 10 budget hotels. The company intends to intensify its drive for sourcing and identifying viable investment opportunities in the African emerging markets. The strategy among others is to buy existing hotels, invest, remodel and finally rebrand for optimality,” Akinlade said.

    Chairman, Haldane McCall Plc, Mr George Oguntade, SAN, explained that the time was ripe for listing of Haldane McCall on NGX to enable indigenous and foreign investors benefit from its superior return on investment. Oguntade urged investors to take advantage of the company’s unique characteristics .

    One of the company’s advisers and Chief Executive Officer , Professional Stockbrokers, Mr Dapo Adekoje noted that with its trajectory of good performance and policy of creating value for shareholders, the company’s shares would be on high demand after the listing.

    The investors forum attracted many high net-worth individuals and institutional investors and the parties to the proposed listing made presentations.

  • Stock market hits highest level

    Stock market hits highest level

    • Investors’ return rises to N8.3tr

    Investors at the Nigerian stock market are in for a better deal as share prices rallied yesterday to their highest level-ever.

    Investors continued bargain-hunting for equities on expectations that ongoing reforms will stimulate significant improvements in the economy.

    The benchmark index – which measures pricing trend at the stock market, exceeded its previous all-time high set in March 2008 to set a new record. There are expectations that the rally may extend further in the period ahead.

    The All Share Index (ASI)- a value-based common index that tracks all share prices at the Nigerian Exchange (NGX), is widely regarded as Nigeria’s sovereign equities index, a barometer of pricing trend and investors’ return at the nation’s stock market.

    The ASI set a new all-time record to close at 66,490.34 points yesterday, about 119.14 points or 0.18 per cent above the previous highest index point of 66,371.20 points recorded on March 05, 2008.

    The rally nudged the average year-to-date return for Nigerian equities to 29.73 per cent, implying that investors in Nigerian equities have earned about N8.3 trillion in capital gains so far this year.

    Nigeria’s average return of 29.73 per cent is one of the five highest returns globally, ahead of several advanced and emerging global stock markets; including United States, United Kingdom, France, Germany, Japan and China.

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    There is analysts’ consensus at the stock market that the bullish trend witnessed in recent period was driven partly by positive investors’ perception of the pro-market administration of President Bola Tinubu.

    The NGX yesterday stated that experts’ opinions on the strong performance of the market were that the bullish trend was due to “a combination of factors, including investor sentiment influenced by macroeconomic developments such as the formation and swearing-in of the economic cabinet by President Bola Tinubu”.

    The Director-General of the Securities and Exchange Commission (SEC), Mr. Lamido Yuguda, who spoke after a capital market stakeholders’ meeting, which closed at the weekend, said there was general optimism that ongoing reforms would rejuvenate the economy and lead to a brighter future.

    Not less than 277 stakeholders attended the meeting of the Capital Market Committee (CMC), a consultative assembly of stakeholders in the capital market. Attendees included management and senior staff of SEC, capital market operators (CMOs), representatives of relevant government agencies including the Central Bank of Nigeria (CBN), Debt Management Office (DMO), Federal Inland Revenue Service (FIRS), Investments and Securities Tribunal (IST), National Insurance Commission (NAICOM), National Pension Commission (PENCOM), and Financial System Strategy 2020 (FSS2020).

    The NGX had also attributed the market performance to the “audacious macroeconomic reforms under the new administration” of Tinubu.

    According to the NGX, market operators were of the view that “the policies of the new administration under President Bola Tinubu” had “led to the rise in the fortunes of investors”.

    Afrinvest Securities had said “economy reform optimism” bolstered the market performance, noting that the “the rally in the market followed the promise of critical reforms by the President Bola Tinubu administration”.

     Analysts at Arthur Steven Asset Management said the equities market’s bullish momentum was “because of the new administration which tends to affect the market positively”.

    “The market reacted to the high expectation from the new administration as the government promised the investors easy repatriation of their investment and profit,” Arthur Steven Asset Management stated.

    The ASI rose from its opening index of 66,151.38 points to close by 66,490.34 points, indicating average gain of 0.51 per cent yesterday. It had opened 2023 at 51,251.06 points.

    Aggregate market value of all quoted equities also rose from its opening value of N36.205 trillion to close yesterday at N36.391 trillion, representing net capital gain of N186 billion. It had opened 2023 at N27.915 trillion.

    The NGX stated that yesterday’s performance was particularly driven by “a surge in banking stocks as investors strategically positioned themselves, taking advantage of the recent record earnings posted by banks”.

    The bullish pricing trend at the stock market has also seen a corresponding level of activities, a twin movement that validates a value-driven pricing trend.

    The Nation exclusively reported that transactions at the stock market have reached a record highpoint in recent period.

    Latest trading data obtained at the NGX showed that transactions at the stock market rose by 22 per cent to cross the N2 trillion thresholds to N2.15 trillion in the first seven months of this year.

  • Stock market deals up by 22%

    Stock market deals up by 22%

    Available records have shown that investors’ expectations that ongoing economic reforms will stimulate improvements in macroeconomic performance and investment returns are yielding results.

    The economic outlook has pushed transactions at the stock market up by 22 per cent, the latest trading data obtained at the Nigerian Exchange (NGX) showed.

    The transactions crossed the N2 trillion threshold to N2.15 trillion between January and July.

    It is the best performance since 2014, when the NGX began the publication of its monthly foreign portfolio investment report.

    The decade-old publication is a general report that captures transactions by local and foreign investors at the Nigerian market.

    The high-value trading pattern comes simultaneously with sustained rally in share prices, a market pattern showing the buy side driving trading more than the sell side.

    Read Also: Stock market eyes 48-hour trading settlement

    The rise in investors’ demand allows sellers to optimize their sell orders at higher prices, thus ensuring that deals are closed at premium price.

    The stock market operates a 10-per cent daily share price movement range, a band within which a share price can rise or fall in a day.

    At the weekend, the Nigerian equities’ year-to-date return rose to 27.92 per cent, one of the five best returns among tracked advanced and emerging global stock markets; including United States (U.S.), United Kingdom (U.K.), France, Germany, Japan and China.  

     Analysts’ consensus at the stock market that the bullish trend witnessed in recent period was driven partly by positive investors’ perception of the pro-market administration of President Bola Tinubu.

    The Director-General, Securities and Exchange Commission (SEC), Mr. Lamido Yuguda, said a stakeholders’ meeting of the capital market, which ended at the weekend, was optimistic that ongoing reforms would rejuvenate the economy and lead to a brighter future.

    Yuguda spoke on the highlights of the discussions at the Capital Market Committee (CMC), a consultative assembly of stakeholders in the Nigerian capital market.

    At least 277 stakeholders attended the CMC meeting, including management and senior staff of SEC, capital market operators (CMOs), representatives of relevant government agencies including the Central Bank of Nigeria (CBN), Debt Management Office (DMO), Federal Inland Revenue Service (FIRS), Investments and Securities Tribunal (IST), National Insurance Commission (NAICOM), National Pension Commission (PENCOM), and Financial System Strategy 2020 (FSS2020).

    The NGX has also attributed the market performance to the “audacious macroeconomic reforms under the new administration” of Tinubu.

    According to the NGX, market operators were of the view that “the policies of the new administration under President Bola Tinubu” had “led to the rise in the fortunes of investors”.

    Afrinvest Securities had said “economy reform optimism” bolstered the market performance, noting that the “the rally in the market followed the promise of critical reforms by the President Bola Tinubu administration”.

    Analysts at Arthur Steven Asset Management attributed the equities market’s bullish momentum “to the new administration which tends to affect the market positively.

    “The market reacted to the high expectation from the new administration as the government promised the investors easy repatriation of their investment and profit,” Arthur Steven Asset Management stated.

    The report, for the period ended July 31, 2023, showed that total transactions for the seven-month period increased to N2.154 trillion in 2023 as against N1.763 trillion recorded in the comparable seven-month period of 2022.

    A month-on-month analysis of the trading values showed that the 2023 performance largely driven by the bullish trading that has characterized stock market transactions since Tinubu’s inauguration.      

    Total transactions for the first four months of 2023 stood at N721.44 billion, slightly above N702.98 billion recorded in July alone.

    Total transactions for the three-month period of May to July stood at N1.433 trillion, about 99 per cent above total transactions in the first four months and 66.53 per cent of total transactions so far this year.

    The further segmental analysis of the report indicated considerable improvements in investors’ sentiments. Domestic retail investors’ turnover has risen by about 32.7 per cent in 2023 compared with similar period of 2022 while domestic institutional investors’ turnover rose by 31.9 per cent.

    The report also showed improvement in foreign portfolio investments, with a trading pattern that suggests foreign investors were taking advantage of the relative ease in access to foreign exchange (forex) and the high returns at the Nigerian market to run a profit-taking trading pattern.

    For instance, while foreign inflows saw remarkable improvements from the recent lows in May and June 2023, foreign outflow was substantial in July 2023.

    Share price analysis underlined that the bullish trend at the stock market was driven by widespread positive sentiments as all indices at the NGX remain substantially positive.

    The benchmark index, the All Share Index (ASI) – a value-based common index that tracks all share prices at the NGX, closed weekend with year-to-date return of 27.92 per cent. The average return was driven by gains across the sectors.

    In most of the sectors indexed by the NGX, average year-to-date returns are higher than the overall market return.

    These include NGX Oil and Gas Index, 93.01 per cent; NGX Consumer Goods Index, 70.23 per cent; NGX Insurance Index, 55.48 per cent; NGX Banking Index, 54.19 per cent while the NGX Industrial Goods Index, recorded average return of 18.62 per cent.

  • Mutual funds investment provides diversification of risks

    Odiri Oginni is Managing Director, United Capital Asset Management Limited, one of Nigeria’s largest investment management firms. In this interview with Capital Market Editor Taofik Salako, Oginni, who is also a chartered financial analyst, speaks on the savings, investments and macro-economic drivers necessary for a national investment base and economic growth.

    The proportion of Nigerians investing in the domestic capital market is abysmally low compared with other countries. What do you think is responsible for this and what can be done to grow domestic investors’ base?

    According to the World Bank, in 2017, Nigerian domestic savings as a percentage of Gross Domestic Products (GDP) stood at 15.5 per cent compared with world average of 25.4 per cent and South Africa’s 19.6 per cent. This reflects the level of household, corporate and public sector savings over expenditure. This data partly indicates the low level of savings among Nigerians compared to the rest of the world, and also shows the intensity of poverty in the country. Clearly, the wealthier a country is, the higher the savings rate. Again, low level of financial literacy is a factor; Nigerians prefer to hold physical assets rather than financial assets. Lack of confidence in the financial system and the increasing get-rich-quick syndrome are other issues we need to address. To improve savings and investment culture, we need to lift people out of poverty, by creating more jobs, ease the processes and operations of doing business in Nigeria and achieve a faster GDP growth. More so, we need to do more on financial literacy and work very hard to restore confidence in the financial markets, so our people can see the need to save and invest.

    Savings and investment level of a country is correlated to the level of poverty, income per head and literacy rate. To boost savings and investment, we must all support President Muhammadu Buhari’s goal of lifting a 100 million people out of poverty over the next 10 years. In a country of 200 million people, if 50 per cent of us are poor, savings rate will remain abysmal no matter how well a few members of such a society is doing. So, we need to create jobs, investment in education, empower our people to be productive agents in the economy. That way, they will be able to save a portion of what they earn; this can then be deployed into investment and further productivity and growth.

    What is your assessment of the outlook of the investment markets?

    Looking ahead, although most stocks on the Nigerian Stock Exchange (NSE) appear under-valued when compared to their African and emerging market peers, interest in the Nigerian equities is likely to remain depressed for the rest of the year, especially as the overall economic condition remains challenging. In the fixed income space, we expect yields to continue to moderate gradually as the Central Bank of Nigeria (CBN) gets increasingly accommodative; however, demand and supply dynamics will play a major role. Activities will remain mostly active at the short to mid-end of the curve while interest at the longer end, that is, bond market will stay bearish, just like equities. On the supply side, we expect the government to ramp up borrowings over second half of this year in a bid to fund its  budget deficits. On the demand side, sizable Treasury Bills maturity are scheduled to hit the system over second half of 2019 and this is expected to boost the overall demand level. Our outlook, for the foreign exchange market is that of stability. The CBN will continue to use intervention sales to support for the value of the naira considering the availability of a sizable amount of dollar, worth $45 billion, in its external reserves as a buffer.

    As all arms of government settle down, what do you think should be done to improve the domestic investment markets?

    I think there should be a deliberate attempt to carry out reforms in key sectors of the economy that can accelerate growth. Local and international investors need to be clear on the policy direction of the government for efficient planning. The key sectors of the economy that need comprehensive policy overhaul include the power sector, oil and gas and the foreign exchange market.

    What is your firm doing to encourage savings and investments and general awareness about financial education?

    Last year, United Capital, in a move to drive financial inclusion in the country and serve its customers better, launched an app tagged “Invest Now”- an investment platform that enables potential investors to have easy and direct market access to different investment opportunities on their mobile phones from the comfort of their homes with the trusted guidance of experienced professionals. Commendably, more than N100 million online payments have been processed on the “invest now” app since it was launched. United Capital Asset Management has also taken investment education to Students and National Youth Service Corps (NYSC) members during their orientation programme, where we educate them on the benefits of investment as a youth. For our clients and the general public, our research team is saddled with the responsibilities of consistently providing latest and useful market updates to help them make informed decisions about the market.

    Do people really need asset managers when they can invest directly in the markets?

    The role of asset management cannot be overemphasised in the capital market. While it is true that an individual can invest directly in the market, especially the equities market, not all individuals have the expertise, time or substantial amount – to make decision about what to buy or sell and when to buy or sell – in a manner that maximises return. Asset managers are professionals in this field. They are knowledgeable, updated and are equipped with the resources to ensure this is done seamlessly to the benefit of their clients. Additionally, the asset management business helps pool resources together, from both retail and medium-scale investors, who are not sophisticated enough to invest in certain investment assets in the capital market, so they can enjoy the economy of scale available to institutional and High Networth Individuals (HNIs). So, we can say asset managers help create a level playing ground for investors, especially those that would have been disenfranchised by the huge capital requirements in some investment securities.

    What are the advantages of investing in mutual funds or collective investment schemes?

    Since the introduction of the first funds, mutual funds have been popular investment vehicles for investors. One of the major advantages of investing in mutual funds is the diversification of risk while still providing competitive returns. By investing in mutual funds, an investor is provided with the immediate benefit of instant diversification and asset allocation without the large amounts of cash needed to create individual portfolios.

    When you invest in a mutual fund, you are also choosing a professional asset manager. This manager will use the money that you invest to purchase assets that have been carefully researched. Therefore, rather than having to research thoroughly every investment before you decide to buy or sell, you have a mutual fund’s manager to handle it for you. Another advantage of mutual funds is the ability to get in and out with relative ease. You can sell mutual funds at any time as they are very liquid. Investing in mutual funds is also tax exempt.

    What challenges do  asset managers face?

    One of the major challenges being faced by asset managers in Nigeria is distribution. Distribution is key to driving the growth of asset under management of the mutual funds. The biggest asset managers in Nigeria are bank-owned and have been able to leverage the parent bank’s platform in terms of the use of the branches to spur growth in their asset under management. Innovation needs to be brought into existing distribution models to effectively address this challenge.

    Another challenge is low level of awareness of the benefits of mutual funds. Investors do not yet see that mutual fund is a way to meet their financial goals and not just a means of short-term financial gain. Mutual fund is a long-term investment vehicle with the potential to achieve financial goals and provide investment solutions especially in times of uncertainty.

    Also, the weak state of the economy has constituted a drag on investment returns in recent times. Due to the volatility in the macro-economic environment, asset managers face the daunting task of balancing risk and return expectations of clients.

    Long-term investments rest on the assurance that the asset management firm will sustain over the long-term to grow and reward the investor, what assurance do investors have in the event of corporate crisis involving the asset management firm? 

    All asset management companies are licensed by the Securities and Exchange Commission (SEC) to operate as asset managers, also all mutual funds are registered with the SEC and every fund has a separate custodian who holds custody of all mutual fund assets to ensure these funds are separated from the operational activities of the asset managers. The asset managers are only responsible for the management of the fund and in the event of corporate crisis of the asset manager, the investors funds are not affected as they are held by the custodians.

    Why do you think people should entrust their savings under your management?

    Our firm has been in existence for more than five decades and we have gained the trust and confidence of our clients over the years. We are currently the sixth asset manager in Nigeria with six mutual funds and separately managed portfolios. Our funds cater for all categories of investors with different risk appetite and wealth levels. We are also regulated by the SEC. We have a robust technological platform called “Investnow” that ensures that clients have unfettered access to their portfolios, can communicate with us real time and have our financial advisors attend to their request in a professional manner. We employ a rigorous investment process as well as deep research of investment opportunities in making decisions in order to maximise returns across all our funds. We believe that our expertise as asset managers, rigorous investment process and customer focus give us an edge in the market place. We continue to champion female inclusion in financial services through our Wealth for Women Fund which encourages more women participation in senior leadership roles. Earlier this year, we also won the Most Innovative Asset Management company award by Global Business Outlook.

    Besides your corporate strengths, what makes your mutual funds and asset management products competitive?

    As I said, we have six mutual funds that are registered and regulated by the SEC. Investors who want guaranteed capital investment and stable returns both in Naira and US Dollar would find our Money Market Fund and Eurobond Fund very attractive.  With as little as N10, 000, investors can invest in our Money Market Fund. The Money Market Fund is a naira-denominated mutual fund that is invested in short-term money market securities such as Treasury Bills, Bank Placements and Commercial Papers. It is a very liquid investment vehicle that can be exited at any time, while additional investments can be made with as little as N1, 000. Our return is currently higher than inflation rate, which means you can protect the real value of your money by investing it in the Fund rather than keeping it in bank accounts that yield very little.

    Our Eurobond Fund is a dollar-denominated fund with returns that are far higher than interest on domiciliary accounts with banks. The minimum initial investment in the Fund is $1,000 while subsequent investment can be as low as $500. The dollar mutual fund is the second largest dollar denominated mutual fund and is our fastest growing fund. The fund has grown from over $8 million in 2018 to $25 million. The return on the fund is also very competitive with a current yield of 8.06 per cent as at 30th June, 2019 as against a bench mark of 4.4 per cent. We also have a naira-denominated Bond Fund with stable return that is invested in federal government, state government bonds as well as corporate bonds.

    Investors who are willing to take some risks can also invest in other funds that have equity components. Our Equity Fund is majorly invested in stocks of companies listed on the Nigerian Stock Exchange while our Balanced Fund is a blend of equity, fixed income and money market securities. We also have a gender-focused fund called the Wealth for Women Fund which invests in companies with significant female representation in their boards and management teams. The Fund is also a blend of equities and fixed income investments.

    The professionalism with which these mutual funds are managed to ensure the returns are competitive always makes them very unique. Also, the reduction in the turnaround time of our mutual fund offering onboarding process as well as the improvement in our customer’s experience with our online mutual fund subscription and redemption process have driven up the demand for our mutual funds.

    What are the track records of returns of assets under your management compared with average returns in the market?

    We have consistently outperformed the benchmark returns for all our respective funds as all our portfolios are professionally managed by experienced fund managers.

    How do you stimulate investors’ interests and protect same in the entire chain of decision making?

    At United Capital, we have a team of professionals involved in the decision making to protect investors’ interest. The research team provides in-depth analysis of the macro-economic environment which guides the asset manager in making investment decision. The risk management team is also involved in ensuring that there are no deviations from the asset allocations stated in the trust deed across all the asset classes. The compliance and internal control team also ensure the adherence to internal as well as regulatory policies and procedures in the management of investor’s funds. We also have a culture of good corporate governance. In 2017, United Capital won the Pearl Awards for good corporate governance.

    As the only listed investment company, how do you manage the requirement for long-term growth and shareholders’ pressure for return?

    We are very conscious of the value we need to bring for our investors, not only in ensuring good returns on investments despite the difficult operating environment, but also to help them grow their wealth in a sustainable manner. We have put in place structures that would enable us to continue to deliver good returns despite pressure in the economy. We are also expanding our operations to key countries in Africa as a means of diversifying our revenue base. We have consistently paid dividends over the last five years and we plan to maintain that record going forward.

    Can you describe your firm’s investment management process? How does this impact on portfolio security and returns?

    In making asset allocation decisions, we adopt a risk-return philosophy that ensures the portfolio is well diversified, with relevant focus on alternative asset classes that have uncorrelated risk and return profiles. This approach is situated within the context of our clients’ risk profile, as defined by the Investment Policy Statements, governing documents such as Trust Deeds, as well as the mandates that we have from the universe of our clients. The diversification of the portfolio along different classes provides stability and ensures that we sustainably create value for our clients. Besides the multi-asset exposure that we provide to clients, our asset allocation provides a form of natural hedge against macroeconomic and market volatilities, as some of the asset classes have negative correlation with macroeconomic volatilities. Enterprise risk management and investment research are critical functions in investment while our operations are also highly automated.

    What other additional services or incentives do you provide your customers, especially given your relationship with other major operators in the financial services industry?

    We believe in putting the interests of our clients first especially because they trust us with their hard-earned money. Our corporate clients enjoy free investment clinics for their members of staff where we offer financial planning advice as well as informational services investment options in the market. Through our cutting-edge Investment Research unit, we constantly inform our clients on developments in the market and offer investment advice in line with current market realities.

  • Stock market opens new listing opportunities for SMEs, start-ups

    Nigerian capital market authorities have created a new platform for listing of newly established companies and small and medium enterprises (SMEs). The new window allows SMEs and new companies, otherwise known as start-ups, to list their shares and raise capital through the  stock market.

    SMEs and start-ups account for more than 90 per cent of businesses in Nigeria and provide about 85 per cent of employment, according to various national and international data.

    The framework for the operation of the new listing platform at the Nigerian Stock Exchange (NSE), to be known as growth board, was approved by Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC).

    The growth board will be the fourth board at the NSE. There are three existing listing boards at the Exchange, including premium board-for large-cap companies that meet additional requirements on dedicated corporate governance assessment, main board- the general board for all companies that meet the specific stringent listing rules and alternative securities market (ASeM), which provides listing for quotable companies that cannot meet or sustain listing requirements for the main board.

    The framework, obtained at the weekend by The Nation, creates two segments on the growth board for start-ups, micro and small companies and medium-sized companies. Start-ups and small companies are denoted by market capitalisation of between N50million and N500million while medium-sized enterprises are companies with market capitalisation of between N500million and N4billion.

    Start-up and small companies are expected to be listed on the first segment, known as entry segment, while medium-sized companies will be listed on the second segment, known as standard segment.

    For any company to be listed on the growth board, it must be a duly incorporated public limited liability company with at least two years of operations, audited financial statements in line with the International Financial Reporting Standards (IFRS) and must have grown its revenue by a minimum of 20 per cent cumulatively in its last two years of operations.

    Also, all companies to be listed on the growth board must undertake that their promoters or directors shall retain a minimum of 50 per cent of their shares for a minimum period of 12 months from date of their listing, and that the directors or promoters shall not directly or indirectly sell or offer to sell such securities during that 12-month period.

    The framework meanwhile provides alternative requirements for listing for each segment. Under the entry segment, a new business may be considered for listing if it can provide evidence of investment in it by a core investor or a strong technical partner that has a minimum of two years’ operating track record, or a majority shareholder, who is either a High Net Worth Individual (HNI) or is a director of a listed company. Under Nigerian rules, HNI is an individual with net worth of more than N100 million.

    Besides, companies heading for the entry segment must have market capitalisation of not less than N50 million, a minimum of 10 per cent of its shares available or to be available to minority retail investors and at least 25 shareholders.

    Under the standard segment, a new business may be considered for listing if it can provide evidence of a core investor or a strong technical partner who has a minimum of four years operating track record, or a majority shareholder who is a HNI. The company must also have a minimum market capitalisation of N500million, at least 15 per cent of its shares must be held or will be held by minority retail shareholders and it must have a minimum of 51 shareholders.

    The NSE stated that it aims to use the growth board for greater global visibility for eligible Nigerian entities and foreign companies in order to engender global capital flows.

    The new board is designed to support SMEs’ growth as part of the strategic initiatives by the stock market to enhance its traditional roles as catalyst for economic growth and development.

  • Stock market: Whither the bulls?

    Nigerian equities are on the decline, despite steady corporate earnings and dividends. Contrary to expectations of post-election rally, the stock market has shown tepid performance. Capital Market Editor Taofik Salako examines the undercurrents behind the bearishness.

    Nigerian equities closed weekend with negative average year-to-date return of 5.95 per cent. On the basis of straight market value, investors in Nigerian equities have so far lost N618 billion this year. It is a market-wide decline that spares no sector. Both the overall market and sectoral indices are pointing at the same direction- a bearish market. With average return of -1.24 per cent in the first quarter, this month has seen significant depreciation in share prices contrary to expectation that the conclusion of elections, corporate earnings and dividends would stem the first-quarter decline and stimulate gradual rally in share prices.

    The All Share Index (ASI) of the Nigerian Stock Exchange (NSE), which doubles as Nigeria’s benchmark for stock market valuation, closed weekend at 29,560.47 points as against its 2019’s opening index of 31,430.50 points. It opened 2018 at 38,243.19 points. Aggregate market value of all quoted equities at the NSE, which opened this year at N11.721trillion, also closed weekend at N11.103 trillion. It had opened 2018 at N13.609 trillion. The stock market has traded for most part of this year negative. Nigerian equities lost N326 billion in January 2019, with average decline of 1.82 per cent. The ASI and market value of equities had closed January 2019 at 30,557.20 and N11.395 trillion respectively.

    In February 2019, investors recorded positive average return of 3.80 per cent, equivalent of about N433 billion in capital gains. The ASI and market value of quoted equities had closed February higher at 31,718.70 points and N11.828 trillion respectively. The market closed March 2019 with a net loss of N156 billion and average decline of 2.135 per cent. Average return so far in April stood at -6.80 per cent.

    Sectoral indices illustrated a widespread selloff with all groups and sub-group indices closing in the red. The NSE Banking Index, which tracks the most active and influential sector, has so far depreciated this year by 5.15 per cent. The NSE Industrial Goods Index recorded average year-to-date decline of 6.99 per cent. The NSE Insurance Index has dropped by 7.19 per cent. The NSE Consumer Goods Index has depreciated by 12.73 per cent while the NSE Oil & Gas Index has so far this year lost an average of 5.88 per cent. The NSE 30 Index, which tracks the 30 most capitalised companies at the NSE, indicated average decline of 6.57 per cent. The NSE Premium Index, which tracks equities large-cap companies quoted on the premium board of the Exchange, showed average decline of 2.14 per cent. Broadly, the sectoral indices showed a slit through the low-priced to mid and high-priced stocks.

    The continuing decline in 2018 has exacerbated the decline at the equities market, which had suffered average decline of 17.81 per cent or about N1.89 trillion in 2018. Average decline in investors’ portfolio over the past 15 and a half months now stand at 23.76 per cent, equivalent to net decline of about N2.51 trillion. The decline since 2018 contrasted sharply with average return of 42.30 per cent or net capital gain of N4.36 trillion recorded in 2017. The continuing decline appeared to have ignored the onset of corporate earnings seasons with the attendant dividends.

     

    Steady earnings, higher yields

    Post-listing rules at the NSE require quoted companies to submit their audited earnings reports, not later than 90 calendar days, or three months, after the expiration of the period. The rules also require quoted companies to submit interim report not later than 30 calendar days after the end of the relevant period. With not less than 85 per cent of quoted companies, using the 12-month Gregorian calendar year as their business year, March 31 is usually the deadline for submission of annual report for companies with Gregorian calendar business year while April 30 is the deadline for the quarterly report. Early filers had started submitting their annual reports in February and the earnings season climaxed by the last week of March to the first week of April. The price indices have shown no considerable share price appreciation for most stocks, despite subsisting dividend declarations. Corporate earnings showed a largely steady performance.

    In the influential banking sector, Nigeria’s most capitalised financial institution, Guaranty Trust Bank (GTB) Plc recorded modest growths in the top-line and bottom-line with pre-tax profit rising by 9.1 per cent to N215.6 billion in 2018. The audited report and accounts for the year ended December 31, 2018 showed that gross earnings rose by 3.7 per cent to N434.7billion in 2018 as against N419.2 billion in 2017. Profit before tax stood at N215.6 billion in 2018 as against N197.7 billion recorded in 2017, representing an increase of 9.1 per cent. GTB is paying final dividend per share of N2.45, in addition to interim dividend per share of 30 kobo, bringing total dividend per share for 2018 to N2.75.

    United Bank for Africa (UBA) Plc grew gross earnings by 7.0 per cent to N494.0 billion in 2018 compared with N461.6 billion in 2017. Profit before tax rose by 2.4 per cent from N104.2 billion to N106.8 billion. After taxes, net profit inched up by 1.4 per cent to N78.6 billion in 2018 compared with N77.5 billion in 2017. UBA is paying a final dividend per share of 65 kobo, bringing total dividend per share for the 2018 business year to 85 kobo. At current market price, this translates to a dividend yield of more than 11 per cent, an attractive return by analysts’ consensus.

    Access Bank, which last month consummated a merger with Diamond Bank, grew pre and post tax profits by 32 per cent and 58 per cent respectively. Gross earnings had risen by 15 per cent. Total assets increased by 21 per cent while customers’ deposit grew by 14 per cent. Gross earnings rose to N528.7 billion in 2018 compared with N459.1billion in 2017. Profit before tax rose from N78.2 billion to N103.2 billion while profit after tax increased to N95.0 billion in 2018 as against N60.1 billion in 2017. The board of Access Bank has recommended payment of a final dividend per share of 25 kobo to shareholders, bringing the total dividend per share for the 2018 business year to 50 kobo. The bank had paid an interim dividend of 25 kobo per share.

    Jaiz Bank Plc, Nigeria’s only commercial non-interest bank, grew its top-line to N8.74 billion in 2018 as net profit rose by 55 per cent to N834.37 million. Jaiz Bank’s gross earnings rose by 11 per cent from N7.86 billion in 2017 to N8.74 billion in 2018. Profit before tax increased from N894.01 million to N897.70 million while net profit after taxes rose from N537.12 million to N834.37 million.

    The audited report and accounts of Union Bank of Nigeria (UBN) Plc showed mixed performance as gross earnings dropped by 11 per cent from N163.8 billion in 2017 to N145.5 billion in 2018. However, with 113 per cent reduction in credit impairment, net income after impairments increased by 16 per cent from N80.64 billion to N93.5 billion. Profit before tax thus increased by 33 per cent from N13.9 billion to N18.5 billion while profit after tax also rose from N13 billion to N18.1 billion.

    Stanbic IBTC Holdings Plc grew its top-line earnings to N222.4 billion in 2018 compared with the N212.4 billion in 2017. Profit before taxation rose by 44 per cent to N88.2 billion as against N61.2 billion while profit after tax rose by 54 per cent to N74.4 billion in 2018 as against N48.4 billion in 2017.

    In the consumer goods sector, Nigeria’s highest-priced stock, Nestle Nigeria Plc will be distributing N46.42 billion to shareholders as dividends after net profit rose by 27.5 per cent in 2018. Nestle Nigeria’s turnover rose to N266.27 billion in 2018 as against N244.15 billion in 2017, representing an increase of 9.06 per cent. Gross profit thus rose faster by 12.94 per cent to N113.92 billion in 2018 compared with N100.87 billion in 2017. Profit after tax grew by 27.53 per cent from N33.72 billion in 2017 to N43.01 billion in 2018. With these, earnings per share rose by 27.52 per cent to N54.26 in 2018 as against N42.55 in 2017. Nestle Nigeria’s shareholders will receive a final dividend per share of N38.50 in addition to interim dividend per share of N20, bringing total dividend per share for the year to N58.50.

    However, audited report and accounts of Nigerian Breweries showed that turnover dropped by 5.8 per cent from N344.53 billion in 2017 to N324.339 billion in 2018. Profit before tax also dropped from N46.57 billion to N29.36 billion while profit after taxes declined by 41.2 per cent from N33.01 billion to N19.4 billion. Earnings per share consequently dropped from N4.13 to N2.43. Meanwhile, Nigerian Breweries has indicated it will distribute the entire net profit of N19.4 billion recorded in 2018 as cash dividends to shareholders. The dividend payout for the 2018 business year, however, represents 41.2 per cent decline on the N33.01 billion payout for 2017, reflecting the decline in the performance of the company.

    In the insurance sector, emerging results showed improved performance, although most results in the NSE’s most populous sector are being delayed by regulatory reviews due to conversion to International Financial Reporting Standard 9 (IFRS 9). Custodian Investment Plc, the insurance-based holding company, reported that gross revenue rose by 16.6 per cent to N50.2 billion in 2018 as against N43.1 billion in 2017. Profit before tax rose to N9.5 billion in 2018 compared with N8.9 billion in 2017. The company is paying N2.65 billion or 45 kobo per share as cash dividends for the 2018 business year. Shareholders will receive a final dividend per share of N2.06 billion, representing a dividend per share of 35 kobo, in addition to N588.19 million or 10 kobo per share earlier paid as interim cash dividend.

    In the industrial goods sector, Nigeria’s largest quoted company and Africa’s largest cement company, Dangote Cement Plc will be distributing N272.65 billion to shareholders as cash dividend for the 2018 business year, an increase of 52.4 per cent in cash dividend. The increase in payout came on the heels of 91 per cent growth in net profit to N390.33 billion. Shareholders will receive a dividend per share of N16 for the 2018 business year as against N10.50 paid for the 2017 business year. Audited report and accounts of Dangote Cement showed that turnover rose by 11.87 per cent from N805.58 billion in 2017 to N901.21 billion in 2018. Profit before tax increased slightly by 3.87 per cent to N300.81 billion in 2018 compared with N289.59 billion in 2017. Tax gain of N89.52 billion boosted net profit after tax to N390.33 billion in 2018 as against N204.25 billion recorded in 2017, when the company paid taxes of N85.34 billion.  Consequently, earnings per share jumped from N11.65 in 2017 to N22.83 in 2018.

    In the oil and gas sector, emerging results showed steady growths, despite volatility and poor margins bedeviling the sector. Seplat Petroleum Development Company Plc reported that turnover rose by 65 per cent from N138.28 billion in 2017 to N228.39 billion in 2018. Profit before tax jumped by 499.4 per cent to N80.62 billion in 2018 compared with N13.45 billion recorded in 2017. However, with taxes of N35.75 billion paid in 2018 as against tax gain of N67.66 billion in 2017, profit after tax dropped to N44.87 billion in 2018 compared with N81.11 billion in 2017. Earnings per share thus dropped from N143.96 in 2017 to N79.04 in 2018. The company is paying a dividend per share of $0.05, the same payout for 2017 year.

    In the healthcare sector, May & Baker Nigeria Plc grew turnover by 6.08 per cent from N8.06 billion in 2017 to N8.55 billion in 2018. Profit before tax stood at N817.91 million while profit after tax rose from N336.62 million to N585.20 million. The company is paying N345.05 million as cash dividend for the 2018 business year, representing a dividend per share of 20 kobo. The dividend payout of 20 kobo represents a dividend yield of 8.0 per cent on the company’s recent rights issue’s offer price of N2.50.

    While some companies reported declining performance, many hitherto ailing companies such as Chams Plc, have reported rebound. Chams recovered from a loss of N1.27 billion in 2017 to a profit of N380 million in 2018.

     

    Macro-economic environment

    While infrastructural gap and policy coordination remain major challenges, most forecasts expect the economy to stagger forward. Nigeria’s Gross Domestic Product (GDP) grew by 2.38 per cent in fourth quarter 2018 from 1.81 per cent in third quarter 2018. The International Monetary Fund (IMF) projects Nigeria’s growth at 2.1 per cent in 2019, to rise to 2.5 per cent in 2020. If the crude oil price rises and non-oil revenue picks up, growth rate could be higher.

    “For Nigeria, what’s very important is the oil price. So, to the extent that other global risks transmit into a weaker oil price or there are other developments that are oil market specific, this would be a factor weighing on Nigeria. We expect a growth recovery; growth was reasonably strong last year and we think that things will improve a bit going forward. We cut our forecasts for 2019 precisely because oil prices are going to be a bit weaker than we expected last time we did the forecast,” Division Chief, Research Department, International Monetary Fund (IMF), Oya Celasun said.

    IMF had earlier predicted growth rate of 2.02 per cent for Nigeria in 2019. It, however, raised the need for major policy decisions to boost revenue position and reduce operational inefficiencies including removal of subsidy, increase in tax revenue through increase in Value Added Tax (VAT) and excise duties and removal of tax incentives, major decisions with serious political implications. The idea of an increase in VAT has already been generating strong opposition, including from some stalwarts in the ruling political party. Will the government have the will to push through the reforms? Many believe the composition of the new cabinet will determine the direction of economic policy.

    Managing Director, APT Securities & Funds Limited, Mallam Kasimu Kurfi, said investors, especially foreign investors that contribute more than half of transactions at the Nigerian stock market, are waiting for clear economic direction to determine their investment priorities.

    Financial Derivatives Company (FDC) Limited noted that the stock market performance appeared to be weighed down by macro concerns rather than the valuation and performance of quoted companies. “Market sentiment has been driven by profit-taking and sell pressures, despite positive earnings. Typically, there is an inverse relationship between interest rates and asset prices. A reduction in interest rates would push up price of assets such as bonds and equities,” FDC said on the back of continuing price decline after the Central Bank of Nigeria (CBN) reduced the Monetary Policy Rate (MPR) by 50 basis points from 14.00 per cent to 13.50 per cent.

    “Sentiment remains fundamentally weak in the equities market; this is not anticipated to change in the immediate as a result of rate cut. The gradual recovery in the economy is slow paced and may not support an overtly bullish earnings expectation in the short-term,” Afrinvest Securities stated.

     

    Waiting for the next push

    There is almost analysts’ consensus that the continuing decline at the stock market is a reflection of the macro-economic uncertainties, despite reduced political risk. Kurfi noted that foreign investors are waiting for the composition of the executive cabinet, the completion of the tenure of the CBN Governor and renewal or appointment of a new CBN Governor, the policy direction of the new CBN administration and the passage of the 2019 national budget.

    “These are very important for the direction of the economy, especially the capital market. These are the reasons our stocks are still going down after elections. We need the blueprint on economic policy for the next level as well as the drivers for the economy, together with the president’s statement; these will promote market activities,” Kurfi said.

    Chief Executive Officer, Sofunix Investment and Communications, Mr. Sola Oni, said many investors that offloaded out of fear that the last general elections would lead to breakdown of law and order are possibly adopting wait and see attitude, especially foreign portfolio investors that are so risk-averse.

    According to him, the state of the economy is also still tenuous, despite the positive gradual recovery indicated by many forecasts.

    “As long as quoted companies are operating in a weak economy, the market shall continue to serve as barometer of the underlying concerns,” Oni said, noting that investors sometimes look beyond corporate earnings in making their investment decisions.

    National President, Constance Shareholders’ Association of Nigeria, Mikail Shehu, said that political risk remains a major consideration as post-election activities have not given strong comfort about political stability, a situation compounded by spate of insecurity across the country.

    “Every investor will like to look at all these factors before taking decision. We can only expect the bulls back after May 29 (after the inauguration of the president), when we start to know the direction of the new government,” Shehu said.

    He noted that the major drivers for economic growth and capital market recovery are political stability, capable hands, stable policies and generally enabling environment.

     

    When will the bulls return?

    The outlook for the market in the immediate to short-term remains uncertain. Most pundits see a tepid performance in the second quarter, but the strength of the recovery lies in key macro-economic decisions. “The outlook for second quarter largely depends on the state of economy. This is more reason why the government should address the issue of infrastructure gap and create enabling environment for the economy to bounce back,” Oni said. “The second quarter will not be different from the first quarter, it could even be worse,” Kurfi said.

    Analysts at Cordros Securities said the market needs positive catalysts to sustain a rebound, opting for a cautious trading in the meantime. Afrinvest Securities said the outlook in the near term remains bearish. FDC noted that given the quantum of foreign portfolio investors in the Nigerian market, the ongoing monetary normalisation in developed economies such as United States  (US) could further trigger capital flow reversals in emerging markets, including Nigeria. Managing Director, Trust Yields Securities Limited, Alhaji Rasheed Yussuf, said there is need to develop the trading capability of the domestic investors to enhance liquidity and reduce the vulnerability of the stock market to foreign portfolio fluctuations.

    He urged the Securities and Exchange Commission (SEC) and the CBN to work with the market operators for the reintroduction of margin loans in order to address current liquidity challenge. According to him, one fundamental problem of the stock market, apart from structural issues, is liquidity and the market may not witness any meaningful growth until the issue of liquidity is resolved. Shehu said the government needs to constitute the board of SEC and appoint substantive management for the apex capital market regulator to demonstrate its seriousness about the market.

    But there is a consensus on the attractiveness of the Nigerian stocks. Afrinvest Securities said Nigerian equities are the most attractive among the major African markets. “Yet, we believe the market has been far compressed and remains attractive for equity investors; although we expect foreign investors to chair this effort. … we are convinced the next phase is a bullish run,” Afrinvest stated.

    Cordros Securities stated that “stable macro-economic fundamentals and compelling valuation remain supportive of recovery in the mid-to-long term”. Oni said the long-running depreciation in share prices has opened up opportunities for discerning investors to build up their portfolios. “The bull is always at the back of the door,” Oni quipped, noting that the market at every point presents opportunities for a discerning investor.

    Head, Corporate Communications, NSE, Mr Olumide Orojimi, said the Exchange is committed to long-term growth of the market through financial literacy and investors’ education. According to him, the Exchange is committed to helping to grow a financially responsible generation through various initiatives and collaborations.

    Vice Chairman and Chief Executive Officer, Capital Assets Limited, Mr. Ariyo Olushekun said Nigerian equities are undervalued and attractive, adding that the fundamentals are supportive of a rebound this year. As the market totters hither-thither, the bulls may be behind the door, but it will take concerted efforts by all to tickle the bulls to sustained rally.

  • 100 shareholders’ associations in stock market

    There are more than 100 registered shareholders’ associations in the stock market.

    Former Commissioner and Acting Director-General, Securities and Exchange Commission (SEC) Ms Daisy Ekineh said the Commission had recorded more than 100 shareholders’ associations registered with the Corporate Affairs Commission (CAC) by 2017.

    She decried the proliferation of shareholders’ associations and their activities noting that shareholder associations are neither effective nor respected and therefore, not taken seriously by stakeholders including public companies.

    “They are perceived as often seeking pecuniary benefits from companies as against ensuring good governance. The associations are also perceived as disruptive rather than disciplined at Annual General Meetings. Besides, there are too many shareholders associations, making it difficult for regulators and others to effectively engage with them,” Ekineh said.

    She noted that in order to mitigate the negative activities of the associations, SEC had issued the Code of Conduct for Shareholders Associations which should strengthen the associations, if embraced by them.

    Ekineh was the guest speaker at the maiden forum of Issuers & Investors Alternative Dispute Resolution Initiative (IIADRI) held in Lagos

    She pointed out that shareholder associations can only ensure required governance on companies, if they themselves act responsibly and with integrity.

    “Shareholder activism in Nigeria should not be synonymous with confrontation and intimidation but effective engagement. To do so requires knowledge of their companies and understanding of the subject matter. Effective shareholder activism complements regulators in investor protection, promotes good corporate governance and could enhance shareholder value,” Ekineh said.

    Also , SEC Acting Director-General Mary Uduk assured investors of its readiness to ensure that disputes arising from capital market activities are resolved amicably and in a timely manner.

    Uduk, represented by Mrs. Olubukanla Rufai, a director at the Commission, noted that the complaint management framework, issued by SEC, spells out the procedures for resolution of disputes and encourages the first line resolution of disputes between investors, capital market operators and public companies before escalation to relevant authorities.

    “Without investors, there can be no capital formation. Investors are thus, the life wire of any capital market and as such, must be protected. The Commission takes investor protection seriously, as it is one of its core mandates,” Uduk said.

    She noted that shareholders’ associations were borne out of the need to promote good governance of public companies, influence corporate and government policies that seek to encourage investment, advance the interest of shareholders, especially the minority shareholders, and optimise shareholders’ value.

    According to her, shareholders’ associations, should ideally, provide a platform for networking and exchange of ideas among shareholders and give minority shareholders greater access to knowledge and increased awareness on the financial and operational activities of companies.

    She assured shareholders of the readiness of the Commission to resolve capital market disputes timely and amicably.

    “Disputes arise in everyday life. As such, the capital market has also witnessed its share of disputes over the years. The Commission is committed to ensuring that disputes are resolved amicably and in a timely manner,” Uduk said.

  • Stock market in mixed performance

    Profit-taking in some large-cap stocks has dragged Nigerian equities to a loss of N84.4 billion but investors stepped up bargain-hunting for value stocks ahead of the announcement of the final results of the presidential and National Assembly elections.

    With more gainers than losers and 46.6 per cent increase in turnover, the equities market showed underlying positive sentiment. However, losses suffered by some highly capitalised companies including Nestle Nigeria Plc, Nigeria’s highest-priced stock, dragged the overall market position to negative.

    Aggregate market value of all quoted equities at the Nigerian Stock Exchange (NSE) dropped from its opening value of N12.194 trillion to close at N12.109 trillion. The All Share Index (ASI)- the main value-based index at the Exchange declined by 226.30 points or 0.69 per cent to close at 32,473.82 points as against its opening index of 32,700.12 points. This moderated the average year-to-date return to 3.32 per cent.

    Sectoral indices showed mixed performance, with a swing towards positive. The NSE Banking Index dropped by 1.18 per cent while the NSE Consumer Goods Index declined by 1.57 per cent. Meanwhile, the NSE Insurance Index rose by 3.22 per cent. The NSE Oil & Gas Index appreciated by 1.56 per cent while the NSE Industrial Goods Index inched up by 0.04 per cent.

    There were 21 gainers against 20 losers. Nestle Nigeria led the losers with a drop of N70 to close at N1,510. Union Bank of Nigeria followed with a loss of 60 kobo to close at N6.65. FBN Holdings declined by 30 kobo to close at N8 while GlaxoSmithKline Consumer Nigeria, United Bank for Africa and Zenith Bank declined by 20 kobo each to close at N11.80, N8 and N25.80 respectively.

     

    On the positive side, Guinness Nigeria led the gainers with a gain of N2.05 to close at N67.15. Dangote Flour Mills added N1 to close at N12.05 while Oando rose by 65 kobo to close at N7.25.

    Total turnover increased by 46.6 per cent to 322.18 million shares valued at N2.43 billion in 4,066 deals.

    “Based on market performance today, we advise cautious trading till the final results of the presidential elections are announced,” Afrinvest Securities stated.

    Analysts at Cordros Capital noted that in the absence of a positive catalyst, as well as the still tense political milieu, investors should trade cautiously in the short term.

    “However, stable macroeconomic fundamentals and compelling valuation remain supportive of recovery in the mid-to-long term,” Cordros Capital stated.