The Nation Newspaper

Tag: stock market

  • Stock Exchange mulls direct corporate information flow to stock market

    The Nigerian Stock Exchange (NSE) has started arrangements to launch the auto-flow mechanism in its trading engine, that would allow companies to send their corporate earnings’ reports and  information directly to the trading engine on a real time basis.

    The auto-flow function, an existing function of the issuers’ portal, was partially disabled in order to allow a first level, non-substantive review of filings by the NSE before they are circulated to the market and the general public.

    Since inception in 2013, the Exchange has seldom permitted information to auto-flow to the market. During the immediate post launch period, the Exchange had observed that a number of companies needed assistance with making the filings in the appropriate formats and that there were also incidents of erroneous or incomplete filings which necessitated the Exchange to suspend the auto-flow function of the issuers’ portal.

    A confidential circular obtained by The Nation however indicated that the Exchange has decided to enable the auto-flow mechanism.  The auto-flow mechanism is one of the functionalities of the X-Issuer platform of the Exchange. It allows information filed by companies and other issuers through the issuers’ portal to flow directly to the market on a real time basis without any human intervention.

    “The Exchange has come to the conclusion that the time is ripe for all information submitted via the issuers’ portal to auto-flow directly to the market without any intervention of the Exchange.  Operationalizing the complete auto-flow function on the issuers’ portal will, therefore, eliminate the current practice of reviewing financials before the financials flow to the market and the Exchange’s website. This will ensure a real time flow of information directly from the issuer to the market,” the circular stated.

    The complete auto-flow is expected to start in January 2018. In order to ensure a seamless transition from the current system to a complete auto-flow system in January 2018, The Exchange will adopt a four-phase approach that includes regulatory and statutory disclosures training, assessment of issuers’ compliance with disclosure requirements, pilot test of auto flow and full launch of complete auto flow.

    Under the phase one, which will be between November and December 2016, the Exchange will organise trainings for company secretaries, compliance officers, chief finance officers and other issuers’ representatives charged with the responsibility of making disclosures to the Exchange.

    In the second phase, the Exchange will conduct a comprehensive review of issuers’ filings using interim returns for the last quarter of 2016 and the December 2016 audited accounts of listed companies with December year ends. Deficiencies identified at this phase will be highlighted and communicated to companies for correction in subsequent filings.

    Under the third phase, the Exchange will conduct a pilot test of the auto-flow mechanism using September 2017 interim returns and September audited accounts of companies with September year ends. Any report with regulatory and statutory deficiencies will be withdrawn and corrected immediately. There will be no sanction imposed for any report with deficiencies at this stage.

    In the final phase, the Exchange will with effect from January 2018, the Exchange will commence full operationalisation of the auto-flow mechanism in X-Issuer using December 2017 audited accounts.

    The circular indicated that with the full launch of auto-flow in January 2018, the Exchange will apply regulatory sanctions on companies whose filings flow to the market with any form of deficiency.

    The Exchange had on March 27, 2013 launched the issuers’ portal, otherwise known as X- Issuer. The issuers’ portal is aimed at enhancing greater transparency and efficiency in information dissemination.  X-Issuer employs information technology to expedite the discharge of issuers’ financial reporting and continuous disclosure obligations to the investing public. One of the key benefits is enhanced market integrity as a result of significant reduction in information leakages, thereby creating a level playing field for all market participants.

  • Stock market opens trading week on positive note, gains 0.23%

    Contrary to Nigerian stock market analysts’ expectation that the equities market will experience a downturn at resuming of trading, the market posted a positive outing yesterday to open trading for the week.

    The equities market returned from the 2-day public holiday with a positive inclination as the lead indicator, All Share Index gained 64.61 absolute points or 0.23 per cent to close at 27,642.13 points. Similarly, the market capitalization appreciated by N22 billion to close at N9.495 trillion.

    Although, market breadth closed weaker but gains by some major capitalised stocks impacted positively on yesterday’s return. Among these capitalised stocks are, Conoil, Unilever, Dangote Cement, Flour Mills and Lafarge Africa.

    However, analysts said: “We expect a quiet start to proceedings this week, as investors gradually return after an extended weekend. While sentiment will likely remain mixed, we anticipate the bulls will have a head start, as they position in well beaten counters in search of bargains.”

    Market breadth closed negative with 15 gainers and 19 losers. Conoil led the gainers table by 10.17 per cent to close at N26.21 per share. Unilever followed with a gain of 4.99 per cent to close at N42.28, while African Prudential advanced by 4.84 per cent to close at N2.60 per share.

    While Unity Bank went up by 2.94 per cent to close at 70 kobo and Champion Breweries rose by 2.41 per cent to close at N2.55 per share.

    On the other hand, Diamond Bank led the laggards’ table by 5.83 per cent to close at N1.13 per share. Sterling Bank trailed with a loss of 4.95 per cent to close at 96 kobo, while Transnational Express and FCMB declined by 4.67 per cent each to close at N1.02 each per share. While Aiico Insurance shed by 4.48 per cent to close at 64 kobo.

    Meanwhile, the total volume traded declined by 33.19 per cent to 182.298 million shares, valued at N1.79 million, and traded in 2,776 deals. Transactions in the shares of Guaranty Trust Bank topped the activity chart with 43.33 million shares valued at N1.17 billion. Diamond Bank followed with 31.02 million shares worth N35.61 million, while FCMB traded 21.92 million shares valued at N22.56 million.

    FBN Holdings traded 16.41 million shares worth N50 million and Skye Bank transacted 14.77 million shares valued at N9.63 million.

     

  • Govt, stakeholders mull tax incentives for stock market

    Govt, stakeholders mull tax incentives for stock market

    Ministries,  agencies,  regulators and  stakeholders have launched a scheme to review the tax structure in the capital market – to encourage companies enlist on the stock market.

    The discussion is targetted at the stock market includes the Ministry of Finance, Federal Inland Revenue Service (FIRS), Securities and Exchange Commission (SEC) and representatives from the Capital Market Committee (CMC), a body of all stakeholders in the market.

    The committee is expected to fashion out a new tax structure for the stock market, including concessions and incentives that are expected to encourage listing of companies on the Exchange and ensure greater disclosures by listed companies.

    Beside corporate the tax of 30 per cent, education tax of two per cent and other statutory charges, government collects 10 per cent withholding tax on cash dividends and charges stamp duty on capital market deals.

    The government, after long-drawn consideration, had in the throes of the recession in 2012, granted exemption on value added tax (VAT). The formal implementation however started in 2014.

    Capital market stakehold-ers have cited the multiple taxes at the stock market as disincentives to listing on the stock market, especially since listing subject companies to greater disclosures and scrutiny by several agencies unlike private companies.

    Stakeholders consider corporate tax and withholding tax as duplication since both are drawn from the profit of the company. Indirectly, shareholders, the owners of the companies, are paying some four levels of taxes on their investments. Stakeholders have also called for a differential and reduced corporate tax for listed companies, since public disclosures and scrutiny ensure that public listed companies are less susceptible to tax avoidance and underestimation.

    Sources said the discussions were aimed at streamlining the taxes on the capital market on one hand and working out concessions as incentives for public-listed companies.

    The sources said the tax incentives would be considerate enough to encourage companies to list their shares on the stock market.

    Securities and Exchange Commission (SEC) Director-General, Mr Mounir Gwarzo, said the government had extended tax concessions granted to conventional corporate bonds to Sukuk bonds-the non-interest bonds.

    To develop the debt segment of the capital market, the Federal Government granted tax concessions on government and corporate bonds in 2011.

    The Personal Income Tax Amendment Act 2011 (PITA Amendment), which was gazetted in January 2012 but with a commencement date of July 14, 2011, provides tax waivers to investors in corporate bonds. This was further complemented by the Companies Income Tax Exemption Order and Value Added Tax (Modification) Order, which had commencement dates of January 2, 2012. These exempted incomes and proceeds from the disposal of debt securities from income tax and VAT.

    The PITA Amendment exempts bonds issued by all tiers of government and their agencies; corporate and supranational bodies including World Bank and Africa Development Bank from personal income tax while the amended companies income tax grants exemption to companies on their trading incomes from corporate bonds, government bonds, treasury bills and other fixed-income securities. Debt issues are also exempted from value added tax (VAT).

    Most of Nigeria’s largest companies, especially in the major economic sectors of oil and gas and telecommunication, are not listed on the stock market. Debate about the mechanism to open up such companies has centered on incentives and waivers that could encourage their listing rather than compulsion.

    MTN Nigeria, Nigeria’s largest telecoms company,  recently announced its listing plan as part of a regulatory forbearance package. MTN has already appointed the advisory team and set out a roadmap towards listing on the Nigerian Stock Exchange (NSE) in 2017.

    Airtel Networks Limited, Nigeria’s second largest telecoms company, has also said it may consider listing its shares on the NSE, after a review of the MTN process.

  • Only 2% of Nigerians invest in stock market, says SEC

    Only 2% of Nigerians invest in stock market, says SEC

    Securities and Exchange Commission (SEC) has said only two per cent of Nigerians, about 3.4 million, are investing in the stock market, but the ongoing implementation of the capital market master plan could increase such participation to four per cent over the next 10 years.

    Securities and Exchange Commission (SEC) Director-General, Mounir Gwarzo, said the successful implementation of the master plan is necessary to attract retail investors to the market.

    He outlined that since assumption of office, his administration decided to implement the plan that the entire market prepared and that is why every year the SEC comes up with some initiatives that the market can drive.

    During a visit to the management of Nigeria Television Authority (NTA) in Abuja, Gwarzo listed some of the achievements in implementing the master plan to include recapitalisation, direct cash settlement, e-dividend, national investors protection fund (NIPF), and corporate governance scorecard among others.

    He emphasised that the only way to attract retail investors back to the market is to ensure that concrete steps are taken to adequately address their concerns, especially the issue of unclaimed dividend.

    “The issue of unclaimed dividends, which according to our records is in excess of N80billion, will also be a thing of the past. These unclaimed dividends came about from dividends of small stakeholders like you and me and we need to ensure that they are claimed,” he said.

  • Stock market in stormy weather

    Stock market in stormy weather

    The declining fortunes of the nation’s stock market in recent times has fueled animosities among stakeholders many of who believe the market has been hijacked by a cabal. Ibrahim Apekhade Yusuf and Jide Babalola in this report examine the issues

    The Gambler, which stands out as one of the famous lyrics of the country music legend, Kenny Rogers where an expert gambler gave useful suggestions on how to wheel and deal is probably one advice the players in the stock market should have heeded long enough to avoid falling on evil days.

    Since the advent of global economic recession, investors have been suspicious of the stock market for good reasons.

    Fears over declining fortunes of stock market

    The plummeting profile of the nation’s stock market has been a source of great concern to a cross section of Nigerians.

    The hitherto buoyant capital market which was seen as the barometer of the economy began a decline in 2008, a decline which was seen by many investors as caused by different factors.

    Experts say the market has lost about 40% since the beginning of the year.

    Hence, it was a welcome development that the House of Representatives Committee on Capital Markets and Institutions, headed by Hon. Tajudeen Yusuf had a two-day public hearing on two motions: “downward trend of the Nigerian Stock Exchange and urgent need to address the vexed issue of unclaimed dividends.”

    The efforts of the committee crystallised the inherent problems plaguing the stock market and the reason for the loss of investors’ confidence in the sector.

    The submissions of various stakeholders were revealing. Amongst those who raised their voices above the din were: The Renaissance Shareholders’ Association, Institute of Capital Market Registrars, Independent Shareholders Association of Nigeria, the Securities and Exchange Commission, and the Central Bank of Nigeria.

    The essential questions were: What exactly where the problems plaguing the capital market? How can the challenges be surmounted and investors confidence in the sector restored?

    Besides, another aspect of the hearing was the vexed issue of unclaimed dividends and how the trend can be rectified.

    Many stakeholders stated their perceived reasons for the downturn of the capital market, such as the slide in oil prices which is responsible for over 80 percent of Nigeria’s foreign exchange earnings, the decline in manufacturing and industrial productions, the systematic withdrawal of foreign direct investment and the global economic recession.

    Other reasons given were that regulators were taking over the stocks to the disadvantage of investors, insider abuse in which operators of stock market are members of, or directors of quoted companies.

    One the gloomiest pictures was painted by the President of the Renaissance Shareholders Association, Olufemi Timothy, who said the manipulations of shares and other illegality being perpetuated in the Nigerian Stock Exchange have impinged on the integrity of the sector.

    Timothy who fell short of accusing the NSE of dereliction of duty said there was the likelihood that the Exchange either through errors of omission or commission was manipulating the outcome of the stock prices, a development, he said was eroding confidence in the sector.

    “He alleged that high NSE transaction fees cost foreign investors about USD 4 million on every USD 100 million of investment. These costs also deter those investors, who had exited the market from reinvesting,” he was quoted to have said.

    “We don’t understand why stock market prices go one way and company performances are going another way. There is no more confidence.”

    He said the fundamentals of the financial capability of a company “are no longer the reason for growth.”

    “We investors (retail, Institutions) have discovered that the Nigerian Stock Market have turned into something else, hence the continued downward trend of the market without being able to recover for eight years, since 2008.”

    Echoing similar sentiments, Hon. Yakubu Dogara noted the gradual fall in the Nigerian stock market, “which has led to the sudden pull out of foreign investments, continuous slide of stocks and equities.”

    Dogara, who, was represented by Deputy Minority Whip, Onyema Chukwuma said the House instituted the hearing “to engage other stakeholders and players in the nation’s economy to unravel reasons behind the continued slide of the capital market,” with a view to finding solutions to it.

    In the view of Mounir Gwarzo, Director General, Securities and Exchange Commission, a number factors from the complex to the superficial may have been responsible for the parlous state of the stock market.

    Gwarzo who spoke at a forum in Lagos gave plausible explanations as to why transaction volumes fell at the stock market.

    The SEC boss who delivered a paper titled: Capital Market as the Engine of Growth of the Economy,’ said the nation’s stock market holds a lot of promises.

    “We all know why transaction volume fell over 40% within year 2016. We all know why we experienced those declines. The oil price shocks, declining foreign reserve, foreign exchange volatility, the delisting of FGN bond and the exit of foreign investors.”

    While admitting that most businesses in the country were battling the twin challenges of massive infrastructural deficit and difficulty in accessing capital, he however said it was heartening to note that the current administration has made deliberate attempts to address these challenges headlong.

    “Going by our growth projection we’re very optimistic that our master plan can help us deliver one of the biggest, most liquid and most diversified market in 2025,”he said.

    Upbeat, the SEC boss said: “Nigeria is too important for any discerning investor to push aside. We’re very optimistic about our growth projections going forward. It can only be positive.”

    Stock market drivers

    The apprehension over the fate of the stock market notwithstanding, analysts however hold the view and very strongly to that a combination of factors determines what happens in the sector.

    In the view of Vincent Nwanma, an economist with Bloomberg, emotions can drive market behavior in a few short-lived situations.

    In an interview with The Nation recently, Nwanma who has covered emerging markets economy like Nigeria, Ghana among others said: “The stock market runs like a chessboard in a manner of speaking. Different factors drive the market. It could be a policy announcement by the government, the company itself, a simple change in board appointment can be a positive or a negative depending on what side of the divide you’re.”

    Nwanma’s position is not any different from the ideals espoused by Richard Dobbs and Timothy Koller, both of McKinsey and Company.

    While analysing trends among companies at the stock market, the duo said, earnings per share and share prices aren’t the whole story—particularly in the medium and long term.

    The most common approach to measuring the stock market performance of a company is to calulate its total returns to shareholders (TRS), defined as share price appreciation plus dividend yield, over time, they said.

    NSE reforms to the rescue

    It is however instructive to note that the NSE has designed a number of measures to ensure investor confidence in the sector.

    One such measure is the whistle blowing programme tagged: X-Whistle.

    This is to provide a dynamic and robust capital market regulatory regime.

    X-Whistle is a programme that empowers a whistleblower (an employee, an investor, a compliance officer, an Issuer, a stockbroker or any member of the public) to report possible violations of the rules and regulations of The Exchange, the securities law and fraud related to activity within the market run by The Exchange. It is an important aspect of The NSE’s investor protection strategy designed to encourage those with information about misconduct to come forward to report it and to provide all stakeholders with the means of expressing their concerns in a responsible and effective manner.

    X-Whistle is a very powerful means of defending and upholding the integrity of the capital market. The Nigerian Stock Exchange encourages stakeholders to blow the whistle to rid the market of infractions and misconduct.

    Besides, the NSE had last year launched the Broker Oversight & Supervision System (“X-BOSS”).

    The system, which is the first of its kind in the West African capital market, seeks to redefine the compliance and regulation experience between the Exchange and its dealing members.

    Justifying the need for the system, Onyema explained that it would automate the regulatory and oversight function of the Exchange over its dealing members and ultimately enhance the regulatory experience.

    He noted that the system would enable the secure and electronic dissemination of dealing members’ information in a structured and sustainable manner, which would reduce the burden and inconvenience of a manual system.

    The General Counsel and Head of Regulation at The Exchange, Ms. Tinuade Awe summarised the system as a marriage between cutting edge, twenty-first century technology and robust, comprehensive regulation, both of which are essential elements of a thriving capital market.

    Mr. Olufemi Shobanjo, Head of the Broker Dealer Regulation Department remarked that The Exchange is “confident that X-BOSS has ushered in a new dawn on the regulatory program of the Nigerian capital market. With the implementation of X-BOSS, the Exchange continues to set the pace in ensuring that our capital market is aligned with global best practice as well as providing leadership in promoting and integrating sustainability by automating processes that hitherto were paper based.”

    Way forward

    The chairman of the committee, Tajudeen Yusuf expressed the optimism that the forum would significantly aid the country’s quest for a more vibrant capital market.

    “One of the planks of the 8th House of Representatives is to consciously seek, support and evolve meaningful, realistic and constructive initiative and measures through which Nigeria’s economy can experience growth and development,” he said.

    Truly as he envisaged, the forum brought good suggestions on the way forward. Some stakeholders asked for improved regulations in the Stock Market, by removing regulations from the hands of the operators. Operators’ licences by the Securities and Exchange Commission or its agents must not be allowed to become part of regulator and or a board member of any quoted company in Nigeria.

    It was also suggested that the National Assembly should strictly enforce strict market principle, and nature of determining stock market trends through companies financial fundamentals, forecast, or warning profits instead of speculations.

    Other suggestions was that the CBN should provide a window of intervention to the tune of N200billion which should be availed designated market makers to shore up the market as was done in China.

    China’s state-backed margin finance company supported brokerage firms and fund managers, and were in turn supported by direct line of liquidity from the People’s Bank of China (Central Bank). This has become even more appropriate considering CBN’s role in the 2008 downturn which actually set the tone for the loss of investor confidence.

     

  • ‘Nigeria stock market will bounce back’

    ‘Nigeria stock market will bounce back’

    Oscar Onyema, chief executive officer, Nigerian Stock Exchange in this interview with Ibrahim Apekhade Yusuf speaks on the challenges and prospects of the nation’s stocks market

    The Morgan Stanley Capital International (MSCI) index threatened to remove Nigeria from the frontiers market. What’s your reaction to that development?

    Well it has always been a risk right from when JP Morgan removed Nigeria from the emerging markets. So we’ve been concerned about it. The risk seems to have been heightened. We’re currently working to dimension what that means for us. I do know that there is about $480m that is exposed in Nigeria so a lot of that from that index but we haven’t concluded dimensioning what it really means in terms of capital outflow should they remove Nigeria from the MSCI frontier market. However, we intend to engage with MSCI and to continue to engage with the government to make sure that the concerns that they’ve raised are properly addressed.

    The market has been suffering a lot of shocks lately. What is causing that?

    I’m you’re very active in the market place. The global commodity price shock that has affected multiple countries has led to macroeconomic challenges and Nigeria is not an exception. We just went through a reporting circle. While a few of the companies did well, we did not get the kind of bumper harvests we’re used to so all of those things impact on the market.

    As a result of FX rate, l’m sure you’re aware that a lot of the foreign portfolio investors have exited the market. But in the process of exiting the market it provides opportunities. I always say it when the market is doing badly you want to look at it closely because it provides opportunities. The Nigeria economy given our demographics, given the sheer culture of entrepreneurial growth that we have, it continues to remain an attractive growth story in spite of the fact that we’re going through short term difficulty right now.

    It is a circle and I expect that we should view it as such. There is nothing that is happening today that has not happened before. We just need to look at new ways to approach the problem to make sure that we continue to drive confidence, especially investor confidence to participate in the market.

    Do you see recovery before year end?

    It’s difficult to predict this thing. What we know for sure is that market moves in circles. How long those circles are going to be is anybody’s guess.

    What does the signing of the MoU with the London Stock Exchange portends for Nigeria?

    We signed an agreement with the London Stock Exchange in November 2014. And the whole idea was to create a platform to jointly market companies from both countries to the rest of Africa and to the world at large.

    For us it’s a very strategic move and it gives us an opportunity to help corporates that are looking to accelerate their growth to do that in a way that diversify risk because they are listing across two different geographies.

    It allows them to generate activities both trading and value trading activities if you have two possibilities. So we’ve done a lot of work in the background to create harmonised processes that allows you to buy a stock in Lagos, sell it in London the same day. We couldn’t do that before.

    So really this window allows companies to internationalise and offers opportunities for them to diversify their shareholdings structure. For us, we believe that it is a win-win between us and the London Stock Exchange and between us and the companies that will be coming on board.

    But as you know the London Stock Exchange has a lot of African companies that are already listed. So it’s really also a window to create international flow of capital. So that dual listing catchment is not only Nigerian companies or African companies it’s also for African companies that are listed anywhere else now taking position on the continent.

  • Stock market downtrend beats analysts

    The stocks most beloved by strategists around the world, from United States game-maker Activision Blizzard Inc to Chinese electrical appliances maker Midea Group Co, have fallen 11 per cent in 2016 on average. Companies ranked at the bottom of the heap by analysts are down 3.4 per cent, data compiled by Bloomberg show.

    Popular companies are victims of their own success as investors sell winners to meet redemptions, says BNP Paribas Investment Partners. In the US, the unraveling of momentum trades has left hedge funds’ favourite shares trailing the Standard & Poor’s 500 Index by 4.6 percentage points in 2016, after outperforming by an average of 10 percentage points in each of the last four years, according to Goldman Sachs Group Inc.

    Deepening losses in stocks that were previously leaders of the pack are adding to pessimism as investors grapple with the first bear market for global equities in more than four years.

    “When you have a risk reduction exercise like what we’ve seen, and good stocks get thrown out with the not-so-good, you really have to be confident of your fundamental analysts,” said Julian Emanuel, executive director of US equity and derivatives strategy at UBS Securities LLC in New York. “These names in a former life would have been called growth at a reasonable price, and the question is if they’ve become unreasonable.”

    The MSCI All-Country World Index added 0.9 per cent last week, paring its 2016 drop to 6.5 per cent. The gauge fell into a bear market this month for the first time since 2011 as concern about China’s economic outlook and the collapse in oil prices drove a flight from risky assets.

    Losses have stretched around the world; among benchmark measures of the biggest markets, only those in Russia and Taiwan have eked out a gain. Against that backdrop, attributes favoured by stock strategists are becoming hallmarks of the shares that investors are finding easiest to sell.

    “This year there’s probably redemption pressure on sovereign funds and mutual funds, so those stocks do face selling pressure,” said Hong Kong-based Caroline Maurer, head of greater China equities at BNP Paribas Investment Partners. “Those stocks have done well the last couple of years. They tend to be more expensive and better owned.”

    The 50 most highly-rated companies with a market value of more than $5 billion and at least five analyst recommendations tracked by Bloomberg trade, on average, at 4.1 times the value of their net assets. Energy producers dominate the firms with the worst analyst ratings, which are priced at an average 2.2 times book value, data compiled by Bloomberg show.

    Mikio Kumada, a Hong Kong-based global strategist at LGT Capital Partners, says analysts need time to adjust when market dynamics change. He cited March 2009, when they were bearish in what was, in retrospect, the ideal time to pile into equities.

    “We’re certainly not in a robust bull market anymore since at least the beginning of this year,” Kumada said. “So it will take time for the consensus rating to adapt to that.”

  • High-cap stocks rally stock market to N163b gain

    A strong rally within the highly capitalised stocks group overshadowed widespread underlining negative sentiments at the Nigerian stock market, leaving the market with a gain of N163 billion in the first trading session on Monday.

    While there were more losers than gainers, a group of highly capitalised stocks led by Dangote Cement pushed the market up to a positive close. Aggregate market value of all quoted equities at the Nigerian Stock Exchange (NSE) rose to N8.246 trillion as against its opening value of N8,.083 trillion, representing a gain of N163 billion.

    The All Share Index (ASI)-the common-share broad index that tracks prices of all quoted companies indicated average gain of 2.02 per cent to close at 23,977.10 points compared with its opening index of 23,501.87 points. The upturn helped to reduce the negative average year-to-date return to -16.29 per cent.

    Dangote Cement, NSE’s most capitalised stock, led the 17-stock gainers’ list with a gain of N9.70 to close at N134. There were widespread news reports on Monday that the cement group planned to build two new cement plants while launching operations at a completed plant. Nestle Nigeria, the highest-priced stock at NSE, followed on the gainers’ list with a gain of N2.02 to close at N705.02. Seplat Petroleum Development Company rose by N2 to close at N245. Unilever Nigeria added N1.50 to close at N31.84 while PZ Cussons Nigeria rose by N1 to close at N21.90 per share.

    Total turnover was around average with the exchange of 190.39 million shares valued at N1.69 billion in 2,756 deals. FCMB was the most active stock with a turnover of 38.53 million shares valued at N34.22 million.

    Sectoral analysis showed mixed performance across the sectors. The NSE Industrial Goods Index rode on the back of Dangote Cement’s gain to return a sectoral average gain of 3.8 per cent. The NSE Banking Index also appreciated by 0.1 per cent. However, the NSE Insurance Index dropped by 0.4 per cent. The NSE Oil & Gas Index declined by 0.03 per cent while the NSE Consumer Goods Index fell marginally by 0.01 per cent.

    On the downside, Guinness Nigeria led the 22-stock losers’ list with a loss of N2.84 to close at N119.50. Mobil Oil Nigeria followed with a loss of N2.62 to close at N145.01. Conoil declined by N2.09 to close at N20.25. Okomu Oil Palm dropped by N1.01 to close at N27.99. Nigerian Breweries lost 85 kobo to close at N95.20 while Cadbury Nigeria declined by 25 kobo to close at N17.80 per share.

  • ‘This is the time for investors to come into the stock market’

    ‘This is the time for investors to come into the stock market’

    Mr. Mounir Gwarzo, director general, Securities and Exchange Commission (SEC), in this interview with select capital market editors, situates the performance of the stock market within the context of the macro economy and highlights the prospects as the commission leads stakeholders in the implementation of far-reaching initiatives. Capital Market Editor, Taofik Salako, reports.  

    how will you assess the performance of stock market in 2015?

    2015 was a very difficult and challenging year not only for the capital market but for the entire economy. You know that the country is going through difficult times; oil and commodity prices are very low and access to foreign exchange is also not very easy. The stock market is a reflection of the state of the economy. Apart from the public sector, it provides the highest level of employment and provides 60 per cent of corporate tax. Therefore, it does not operate in isolation of the economy. And what we are experiencing in the stock market is not peculiar to Nigeria. Our stock market closed 2015 with a negative full-year return of -17.36 per cent. The market capitalisation of many jurisdictions also closed in the negative such as United States of America, -2.0 per cent; United Kingdom, -12 per cent; Greece, -60 per cent; Brazil, -39 per cent; Malaysia, -25 per cent and South Africa, -35 per cent.

    But beyond pricing, the year 2015 was generally an eventful year for the Nigerian capital market given several initiatives undertaken to strengthen the market and make it more globally competitive. When I came on board in January as acting director general, I informed the market that I had only one agenda. And that agenda was to faithfully and religiously implement the capital market master plan and we have been doing quite well.

    Within the master plan, we identified a number of initiatives for implementation in 2015. We also focused on internal issues within the SEC because when we came in, there were staff related outstanding issues like promotion which were negatively affecting staff morale. I am happy to report that all those issues have been sorted out. So internally, it has been quite a rewarding but difficult year. From the market side, the implementation of the master plan has been fruitful.

    Let me return to the initiatives we set for ourselves as target for implementation in 2015 and how far have we gone. One of the initiatives is the need to strengthen the capital market operators (CMOs) and you will recall that we came up with minimum capital requirements and set September 30, 2015 as deadline. I am happy to report that the deadline has lapsed and we have kept to our word. We have last week released the final list of compliant operators which showed that out of the total number of provisional list of the CMO’s we released as at September 30th, 2015, 24 of them did not make the final list because they could not substantiate their submissions.

    We also came up with the list of firms that have been inactive. We think we should not be maintaining these inactive operators in the market which we have been carrying for many years now. We have about 94 of them and in compliance with the law, we published their names and informed them that whoever wants their licence to be retained should come forward and provide justification and gave the deadline of December 4, 2015 to give reasons why their licences should not be revoked. And after our review of their submissions, licences of 84 of them were cancelled while the public was duly informed. In doing so, we have written to CSCS to ensure that investors do not suffer from the cancellation of those licences. Investors would be sensitised to ensure that they transfer their assets to another stockbroking firm of their choice.

    The second initiative we also pursued was the issue of electronic dividend (e-dividend). We are enjoying an excellent collaboration with Central Bank of Nigeria (CBN) and Nigerian Inter-bank Settlement System (NIBSS). They have provided us with their Bank Verification Number (BVN) platform. We also have the support from the Banker’s Committee. As at today, the e-dividend form is with all bank branches and registrars nationwide. So any investor who wants to complete the form must approach either a bank or registrar and they have been duly informed through public enlightenment which is still on-going. We have also issued posters that have been pasted in banks informing investors that if they want their e-dividend form, all they need to do is to collect and submit the form in either of the two places mentioned. We expect the exercise to be completed in the next two to three months. Although it is an on-going process, there is a timeline of three months in which investors are expected to complete the forms and submit, and at the expiration of the deadline, any investor that intends to complete and submit must pay a fee of N100. I therefore, wish to call on every investor to take advantage of this period and complete and submit their forms. Thus in a very short period, companies would be able to credit their shareholders with their dividends because all the data would be there.

    The other initiative we have also concluded is the issue dematerialisation. This has been an issue in the market for 20 years since the inception of Central Securities Clearing System (CSCS) in 1995. The problem was the fact that the record of the CSCS was clearly different from the record of the registrars. In fact, as at July last year, CSCS informed us that barely 30 to 40 per cent of shares that were with the registrars had actually been dematerialised. But I am happy to report that we have achieved 100 per cent dematerialisation. There will certainly be some reconciliation issues which we have directed both parties to continue to interface with each other.

    The fourth initiative that we have successfully concluded is the issue of direct cash settlement (DCS), which ensures direct payment of sales proceeds to the selling investor by the clearing system rather than through the broker as intermediary. With the DCS, once a client’s shares are being sold, while the broker’s account is being credited with brokerage fees, the account of the client would also be credited directly. So the era of a broker remitting the funds to account of a client will be a thing of the past. In the past, there have been some issues, when the broker is meant to remit the proceeds to the client, but for some certain reasons, there is either delay or not done. And let me commend the excellent efforts of the members of the committee that work round the clock to ensure the actualisation of this initiates. The DCS  began  operations on Monday, January 4, 2016 and it’s not compulsory that every investor must give such a mandate. Any investor that wants the broker to keep the proceeds of his or her shares, especially speculative investor, should write to the broker and such broker will in turn inform CSCS. There have been a lot of improvements in terms of infractions in the market and with DCS; such infractions will almost be eliminated.  We made a commitment when we came on board that infractions will not be tolerated and methods by which such infractions are committed will be eliminated.  So these are some of the critical initiatives, which I am happy to say have been achieved successfully well.

    SEC has subsisting corporate governance code, how is the corporate governance scorecard that you launched in 2015 relevant to corporate governance?

    Again, the corporate governance scorecard is actually one of the initiatives identified in the master plan. In the last four to five years, there have been discussions about corporate governance scorecard and there is a provision in our rules, which makes it mandatory for companies to comply with the code of corporate governance. But what has been lacking is just to have the scorecard that is able to assess the level of compliance. The one we launched last November is the first to be launched in Africa. What the scorecard means is that there will be checklist of requirements that every quoted company must have to comply with. So the scorecard has questions, requests answers from the companies, saying that they have met so and so aspects of the corporate governance code, have met ABCD, and have done the XYZ etc. And the scorecard is to be completed and submitted by every company and if for any reason, the company is not able to meet any of the requirements within the scorecard, the company will now have to explain. So it is just about disclosure for investors to ascertain which company complies fully with the scorecard and which one does not, this will give confidence on that company and I believe by having that scorecard, companies will be more up and doing because they know that investors will be monitoring and judging them based on their scorecard. Everywhere in the world, the belief is that a company that complies fully with the code of corporate governance is likely to do better in terms of performance, growth and sustainability as a going concern.

    What are you doing to deepen the market nationally and within the regional bloc?

    We have launched the National Investors Protection Fund (NIPF). The master plan recognises the need for an NIPF that can give succour and comfort to investors who innocently invested in the market and for certain reasons they lost their money. Already, there is the Investors Protection Fund (IPF) being managed by the Nigerian Stock Exchange (NSE), which is meant to address issues relating to the dealing members of the NSE, that is, it is strictly for members of the NSE. The Investment and Securities Act (ISA) mandates all exchanges to set up an IPF which is to address issues within the market.  The other Platform Financial Market Dealers Quotations (FMDQ) is also making efforts to bring on board its own IPF.  Our NIPF will therefore address infractions relating to the activities of operators such as; issuing houses, fund managers, registrars, custodians, trustees and all other non-broker/dealer operators registered by the SEC. SEC was magnanimous within its limited resources to set aside N5 billion for that fund, and I wish to commend the foresight and efforts of the previous SEC board under the Chairmanship of Distinguish Senator Udo Udoma, the current Honourable Minister of National Planning.

    Let me clarify that it does not mean that if you invest N1 million and you lose your money and then you will now come and SEC will give you N1 million. The procedures are very robust. The operator must be registered with SEC, the functions that the operator performed must be in line with what that operator has been registered for, the investor must have done the necessary due diligence on that operator, and SEC must have established a clear negligence from that operator and the maximum any investor can get from the NIPF is N200,000. So the idea is not to pay back what the investor had lost but to pay something in the interim, before SEC does its necessary due diligence in terms of inviting the company, looking at the assets of the company, selling the assets and recovering what to settle the investor.  And once those monies have been recovered, SEC will now deduct that N200,000 was extended to the investor, and I’m happy to report that the first beneficiaries of 554 people that invested in Mega Assets and the board of NIPF has approved the payment, their names have been published inviting them to go to our zonal offices in Lagos and Onitsha and last week I approved the disbursement of the 1st batch of people that have submitted their names and payment details.

    We also launched the Capital Market Master Plan Implementation Council (CAMMIC), which is a new thing in the history of the Nigerian capital market for the market to have a council dedicated to advocacy for capital market initiatives. So if there is initiative in the market and there is need to upscale that initiative to a higher level, it is that council that will now interface either with executives or with the legislature or even with the judiciary with a view to ensuring that the initiative is given attention. We believe it will bring a lot of changes; it will be a game changer because you are dealing with people who are of high integrity, people who understand the market, and people who have lived for this market for the last 30 to 40 years. The council has Mr. Tola Mobolurin, who has been in the market for I believe over 40 years, as its chairman.

    Also, during the year, we took important steps to address the issue of unclaimed dividends. We issued a directive to all registrars instructing them to return all dividends older than 15 months in their custody, including those that are statute barred to the issuing companies. This is important because along with e-dividend, it will put a stop to the growth in quantum of unclaimed dividends.

    We equally did a lot in the non-interest capital market space especially in organising regional round table events to sensitise potential issuers of non-interest products like the sukuk. We moved forward with the integration efforts of West African capital markets. The committee of regional exchanges had done quite a lot in that regard, what was lacking was the full involvement of the region’s regulators. Within 2015, we the regulators came together here in Abuja and signed a Memorandum of Understanding (MoU) that established the West African Securities Regulators Association (WASRA) to push the integration initiative forward.

    Within the context of all what have you said, what hopes for the investors and the market, especially given the continuing decline in share prices?

    My advice to investors is that they should not lose hope. The stock market everywhere in the world has its own risks of going up and down. That is normal. There is no stock market in the world that will only continue to grow without declining. Sometimes it will rise, sometimes it will fall, that is the beauty of a stock market. But the fundamentals of the companies are largely okay.

    There are some companies that are not doing too well, while there are some that are doing better. With the corporate governance scorecard that we are introducing, companies are going to do much better and so once they imbibe that culture of corporate governance, the performance of the company will definitely improve. This is the time for investors to come into the market. The attitude is that once stocks are low, that is the best time to come in. What is important is to see where those stocks have potential to rise.

    We need to understand the context clearly. The foreign investors that constitute between 25 to 35 per cent of the market are the real portfolio investors. They buy and sell on regular basis while the domestic investors both institutional and retail largely buy and keep their investments unlike their foreign counterparts, and because the market is not very deep, any movement in say the banking sector which constitute significant portion of the market capitalisation will show a corresponding movement in the total market capitalisation.

    On our part, we are collaborating with the Central Bank of Nigeria (CBN) in terms of introducing Unified Licensing Model for market operators to access the money market for liquidity. Once, we are able to do that, I think the market will be better. We are also looking at how we can bring in the huge unclaimed dividends that we have in the market so that it can be invested and this can be done either through the setting up of National Trust Fund or each company to set up its own Trust Fund and register with SEC.

    What are those things that will define regulatory activities in 2016?

    Going into 2016, we will continue our faithful implementation of the master plan, we have already identified the master plan initiatives that will receive priority attention in 2016 including pushing for more listings of large companies operating in Nigeria especially from the upstream oil & gas and telecommunication industries. We also have a number of initiatives lined up for small and medium enterprises (SMEs), we want to make it easier for SMEs to list by relaxing listing requirements and proposing fiscal incentives for them. We will equally do a lot on reduction of transaction cost, pushing for more liquidity, demutualisation of the NSE, strengthening the commodities markets and many others. It will be a busier year than 2015.

  • Forte Oil rallies stock market on crude oil contract

    Forte Oil rallies stock market on crude oil contract

    Forte Oil Plc led a break-even rally at the Nigerian stock market yesterday as the petroleum company announced that it had been awarded contract to lift crude oil by the Federal Government of Nigeria.

    Forte Oil’s share price rose by N12.10 to close at N254.10, representing an increase of 5.0 per cent. In a statement, Forte Oil stated that it was awarded the crude oil lifting contract by the Nigerian National Petroleum Corporation (NNPC) after it bid successfully scaled through the tender by the national oil corporation.

    Forte Oil’s announcement reverberated in the oil and gas sector. Another oil major, Total Nigeria recorded the second highest gain, in value terms, with a gain of N7.20 to close at N152.20, representing an increase of 4.97 per cent. Oando, another oil major, rose by 25 kobo or 4.80 per cent to close at N5.46 per share.

    The gains by the oil majors pushed the NSE Oil and Gas Index to the top with above average gain of 3.0 per cent.  The NSE Insurance Index rose by 0.8 per cent. The NSE Industrial Goods Index appreciated by 0.3 per cent while the NSE Banking Index improved by 0.1 per cent.

    The average benchmark index at the Nigerian Stock Exchange (NSE), the All Share Index (ASI), rallied on the back of the gains by the oil majors to close with a modest gain of 0.02 per cent, its first increase in four trading sessions. The ASI rose from 26,948.43 points to close at 26,953.05 points. This moderated the average year-to-date return to -22.23 per cent.

    Aggregate market value of all quoted equities also rose marginally from N9.265 trillion to close at N9.267 trillion. With 29 gainers to 12 losers, the market performance was driven by both widespread bargain-hunting and improved appetite for large-cap stocks.

    Other top gainers included Unilever Nigeria, which rose by N1.45 to close at N45.50; Okomu Oil Palm added N1.34 to close at N28.34 and Lafarge Africa, which rose by N1.10 to close at N92.44 per share. Champion Breweries was the most active stock with a turnover of 36.72 million shares worth N128.89 million in six deals.

    On the other hand, Mobil Oil Nigeria led the losers with a loss of N6.57 to close at N125.84. Nigerian Breweries followed with a loss of N2.23 to close at N118.79. UAC of Nigeria dropped by N1.07 to close at N20.43. Dangote Cement declined by N1.05 to close at N155.05 while Union Bank of Nigeria dropped by 29 kobo to close at N5.70 per share.