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  • We have 1.1b litres fuel stock, says NNPC

    We have 1.1b litres fuel stock, says NNPC

    The Nigerian National Petroleum Corporation (NNPC) yesterday said  its subsidiary, the Pipelines and  Products Marketing Company (PPMC) presently has a stock level of 1.1billion litres of fuel representing 27 days sufficiency.

    It stressed that the stock excludes volumes with confirmed delivery dates within the next couple of days.

    NNPC Group Managing Director (GMD), Dr. Joseph Dawha , said the state-run oil firm is ready to work with all relevant stakeholders in the downstream sector of the oil and gas industry to bring to an end the lingering fuel scarcity across the country.

    Its Group General Manager, Group Public Affairs Division, Mr. Ohi Alegbe, in a statement, explained that the NNPC boss spoke while on a tour of some filling stations in Abuja with top management staff of the Corporation.

    Dawha noted that the NNPC as the supplier of last resort, has improved availability of petrol in the country and would ensure its effective distribution nationwide.

    He said arising from the meeting with petroleum products marketing stakeholders last week, the NNPC and its downstream subsidiary PPMC is committed to bringing the fuel queue situation to an end in Abuja and across the other states of the federation.

  • Fuel scarcity looms as marketers run out of stock

    Fuel scarcity looms as marketers run out of stock

    The country is set to experience fuel scarcity, The Nation learnt last night.

    The Executive Secretary, Major Oil Marketers Association of Nigeria(MOMAN), Femi Olawore, said the stock in Apapa would last three and half days beginning from Friday to Monday.

    He said it would be extremely difficult for his members to supply fuel to the public, once Apapa runs out of the product.

    He said marketers are operating partially because they are unable get enough money to import fuel.

    He said marketers have cut down on importation, following the refusal of the government to pay them huge arrears on subsidy.

    He said: “ Aggregate subsidy arrears owed oil marketers  by the Federal Government  is N356.2,billion. Out of this amount, the Federal Government had made provision for N100billion in a Sovereign Debt Note (a postdated financial instrument) , which is expected to mature at the end of April 2015.  However, the remaining N256.2 billion comprises actual subsidy arrears for part of 2014 (batch T and U) and 2015 (batch A and B) and the foreign exchange differentials cum bank interests. The development is gradually grounding our operation to a halt.

    He added that: “Strike action, on the part of marketers is inevitable, in view of the on-goings in the petroleum sub- sector Can we open our outlets across the country. If we do not have fuel to sell. No. We supply 40 percent of fuel in the country. Before, it was 60 percent. But the inability of the government to pay us our arrears left us with no option than to reduce importation. The Nigerian National Petroleum Corporation (NNPC) supply smaller proportion of petroleum products in the country.”

    According to him, marketers have resolved to go on strike because the government is not ready to meet its debt obligations, stressing that this is the time for marketers to get their money.

    Olawore said since another government is coming and that it would not be wise to saddle the government with the responsibility of paying the debt it does not owe.

    He said the fact that the strike was coming few weeks to the inauguration of a new government does not mean the strike action was politically motivated.

    ‘’Oil marketers would have embarked on strike before now. In fact, we wanted to go strike during the electioneering campaign but we have to shelve it to avoid a situation where by people would be reading political meanings to our actions. But now, there is nothing we can do,” he said.

    NNPC, in a statement signed by its Spokesman, Ohi Alegbe, said it has enough stock of petrol to service the country for 27 days at a national consumption rate of 40milion litres per day. The National Oil Company said it has stepped up efforts to end the fuel problems.

     

  • Stock futures higher as crude oil weakens

    UNITED States stock index futures have risen, pointing to a second straight daily gain as a trio of M&A deals lifted sentiment after a recent bout of weakness.

    Despite that, energy shares could come under pressure as crude oil fell sharply, due to a possible deal with Iran that could bring an end to sanctions and allow an increase in the country’s oil exports. Crude oil fell 1.8 percent to $47.94 per barrel.

    Separately, an increase in the U.S. dollar could weigh on multi-nationals.

    Both the dollar and commodity prices have given investors reason to be cautious of late, especially going into the first-quarter earnings season, where traders will look to see how much oil prices and the strong U.S. dollar will impact corporate bottom lines. Last week, the S&P 500 fell 2.2 percent, the Dow lost 2.3 percent and the Nasdaq declined 2.7 percent.

    In deal news, OptumRx Corp, a unit of UnitedHealth Group, agreed to buy pharmacy benefit manager Catamaran Corp in a deal worth $12.78 billion. Shares of UnitedHealth, a Dow component, rose 2.7 percent to $121.60 before the bell while U.S. shares of Catamaran added 26 percent to $60.75.

    Ireland’s Horizon Pharma Plc said it would acquire Hyperion Therapeutics Inc in an all-cash deal worth about $1.1 billion, while Fujifilm Holdings Corp agreed to acquire U.S. biotechnology firm Cellular Dynamics International Inc for $307 million.

    Hyperion rose 5.6 percent to $45.13 in light premarket trading while Cellular more than doubled in premarket and was among the most active Nasdaq stocks.

    The deals follow reports last week of Intel Corp being in talks to buy Altera Corp in a deal that could top $10 billion.

    Trading could be quiet this week as investors look ahead to earnings season, which will start in earnest in mid-April, as well as to the March payroll report, which will be released on Friday, when stock markets are closed for the Good Friday holiday, leaving investors unable to trade on the data until the following week.

     

     

     

     

  • Oil drops toward $59 on dollar, stock builds

    Brent crude oil fell toward $59 a barrel as the dollar strengthened and a supply glut pushed global oil inventories to record highs.

    The dollar hit a more than 11-year high against a basket of currencies after the United States (U.S.) unemployment rate in February fell to its lowest level since May 2008, making commodities priced in the greenback more expensive for holders of other currencies.

    Oil inventories are rising across the world as production outstrips demand, offsetting tensions in the Middle East and the risk of output cuts in Libya and Iraq.

    Brent LCOc1 was down 35 cents at $59.38 a barrel by 1130 GMT. The North Sea crude oil futures contract fell 4.6 percent last week in its biggest decline since the week ended January 9.

    U.S. crude CLc1 was up 5 cents a barrel at $49.67. It closed down $1.15, ending a third week of declines.

    “More and more investors are coming to the conclusion that the market is awash with oil,” said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt. “Unprecedented stocks levels cannot be ignored forever.”

     

     

    Goldman Sachs (GS.N) analysts argued in a note to clients that oil prices would reverse recent gains due to rising global inventories. They forecast U.S. crude would drop to around $40 a barrel.

    Oil producers in the Organization of the Petroleum Exporting Countries (OPEC) have opted not to curb output, despite oversupply in many parts of the world, choosing to defend market share rather than try to support oil prices.

    OPEC Secretary-General Abdullah al-Badri has said the group should not cut output to “subsidize” higher-cost shale oil, now being produced in large quantities in North America.

    Oil prices fell by 60 percent between June 2014 and this January but recovered by almost a third between January and February on Middle East supply disruptions, strong winter demand and high refinery margins.

    Fighting in several oil-rich countries has kept a lid on production and exports.

    In Libya, up to 10 foreign workers are missing in the latest attack on oilfields by Islamist militants and there is a possibility they have been taken hostage, Czech and Libyan officials said on Saturday.

  • Etisalat takes stock, rates 2014 high

    Etisalat takes stock, rates 2014 high

    Etisalat has said this year has been good for its business in the country, promising to delight its customers with innovative products and good service quality in the coming years.

    Its Centre Manager, Marina Flagship Experience Centre, Oluwaseyi Ayebiwo, who spoke on the sideline with The Nation during the commissioning of the centre in Lagos said in six years of its operation, it has achieved the 20 million subscriber milestone, insisting that it is no mean feat considering that the telco came late and enjoyed no any form of incentive which the early birds did.

    He said: “For the year, we have not done badly as a company. Recently, towards the end of October, we hit the 20million subscriber base. That is in less than six years since we came onboard. For us, this is a great feat for any company and I don’t think any other company in the world has done that.  We have grown so fast at so short a time. We intend to maintain that feat.

    According to him, next year will be full of activities as the telco will not rest on its oars but keep redefining customer experience through innovative products.

    “Going into 2015, you are going to see a lot of innovative programme from the company. In terms of service quality, we will always strive to take it higher. We know that customers have to be served and they are the focus of our business. That is why we make customers an important part of our decision process. We organise customer forum from time to time, where customers tell us what the challenges are and what they would want to get from us in the nearest future. So the customers are dear to our heart,” he said.

    Speaking on the uniqueness of the centre, he said the ambiance and the way it is built is interactive with the customers, such that when customers comes in, all the equipment necessary to resolve all their issues and make sure they are happy are available.

    He said: “It starts from the interactive counters for devices, where customers can come in around the devices and they know from that which one they want to use.

    “Aside that, we have other dedicated counters for special customers services. We also have different original equipment manufacturers such as Samsung, Nokia, Apple, Techno and others. .They have their stands here and they are all available to ensure that every customer’s complaints are sorted out. We have a VIP lounge where customers can come in with a fully equipped library for those who wish to read. You can come in, take some time out after passing through the stress our of the day and relax.”

  • Niger Delta Exploration plans $450m stock sale for fields

    Niger Delta Exploration plans $450m stock sale for fields

    Niger Delta Exploration & Production Plc plans to raise $450 million to acquire and develop crude fields in the country.

    The Lagos based firm is planning a “public offer, or special placement of shares. The first tranche of $200 million will be raised before the end of 2014,” Chief Executive Officer, Layi Fatona told Bloomberg.

    Smaller Nigerian oil producers are expanding operations as international companies, including Royal Dutch Shell Plc and Chevron Corporation scale back operations amid unrest, violence and crude theft in the Niger River Delta.

    Exxon Mobil Corporation, Shell, Chevron, Total and Eni SpA, pump about 90 per cent of Nigeria’s oil through ventures with state-owned Nigerian National Petroleum Corporation.

    FBN Capital Plc and Chapel Hill Denham, have been appointed financial advisers for the fundraising, which will happen on local or international markets, Fatona said.

    He didn’t say when the rest of the cash will be sought, but said NDEP also plans to expand in South Sudan and Zambia.

  • Stock Exchange to sanction stockbrokers over reporting failure

    The Nigerian Stock Exchange (NSE) will impose sanctions on stockbroking firms that fail to submit their stockbroking transaction report for the just concluded month ended August 31, 2014 by the close of business on Wednesday September 10.

    In a circular to stockbroking firms, obtained by The Nation, the exchange indicated that it would impose regulatory sanctions including financial penalties on stockbroking firms that fail to meet the September 10 deadline. The sanctions will be imposed with effect from Thursday September 11.

    The NSE uses the transaction report to track inflow and outflow of foreign transactions, major deals in the market and to monitor the market to ensure suspicious sources are not using the stock market to launder ill-gotten funds or finance terrorism.

    The circular was signed by head; broker dealer regulation, Nigerian Stock Exchange, Mr. Olufemi Shobanjo.

    According to the circular, the submission of transaction report is in line with Article 14 of the rules and regulations governing dealing member firms of the Exchange which requires every dealing member to keep proper records and books of account in respect of all stockbroking transactions.

    “The council shall prescribe the forms in which such records and books are to be kept by dealing members and be entitled to empower the compliance department of the Exchange to inspect the records of dealing members from time to time and report thereon to the council,” the rule stated.

    It should be recalled that the NSE had earlier this year introduced uniform accounting year for all its dealing members. According to the directive, stockbrokers and dealers on the NSE will now run the normal Gregorian calendar year as their uniform business year, with every company expected to close its accounts by December 31.

    The new directive, which will take effect not later than December 31,  brings stockbrokers and dealers to the same standards as banks, which also run the Gregorian calendar year as industry-wide accounting year.

    According to the NSE, the uniform accounting year was in order to ensure consistency and more effective regulatory oversight.

    “Consequently, all affected dealing members should as a first step, pass board resolutions to the effect that their accounting year end will be December 31 and, thereafter, inform the Exchange and other relevant agencies accordingly,” NSE stated.

  • NSE steps up surveillance as cyber fraudsters target stock market

    The Nigerian Stock Exchange (NSE) has issued a red alert on increasing cyber frauds and scam attempts specifically targeted at the stock market as the Exchange step up its surveillance to protect investors and operators.

    In a circular to market operators, the NSE stated that it has observed increasing trend of cyber fraud and scam mails being sent by fraudsters and impersonators to stockbroking firms.

    As part of the measures to checkmate the rising trend of cyber frauds, the NSE said that stockbrokers must ensure compliance with the market standards on identity fraud management and enhanced customer due diligence, otherwise known as “Know Your Client” (KYC).

    In the circular signed by NSE’s Head, Broker Dealer Regulation, Mr. Olufemi Shobanjo, the Exchange underscored the importance of customer due diligence and immediate report of any suspicious transaction or message to the market’s regulators and the law enforcement agencies.

    “The Exchange has observed an increasing trend of cyber fraud and scam mail sent by fraudsters and impersonators to dealing member firms. Dealing members are advised to confirm all client orders or mandates made by fax, telephone (voice or text) or electronic email before execution,” the circular stated.

    According to the NSE, stockbrokers and other operators must also ensure compliance with existing rules by conducting proper KYC on all clients and report suspicious transactions.

    The Exchange has mulled new policies to tighten the KYC framework in the stock market and stem investors-related frauds.  These included the policies on biometric identification and direct payment of cash to investors.

    Under the biometric identification, individual and institutional investors would have to submit for biometric identification before they could buy or sell shares at the Nigerian stock market.

    A copy of amendments to rules governing operations and operators at the stock market showed that all stockbrokers will now be required to obtain the biometrics of all their clients in a new rule being proposed by the NSE.

    In what may have far-reaching implication at the market, NSE indicated biometric identifiers to be obtained “shall include finger prints and iris recognition and the information collected shall be applied towards confirming clients’ identities”.

    While individual investors will have to provide biometrics on every account, corporate entities will provide corporate information as well as biometrics of the authorized signatories to their share trading accounts.

    “No Dealing Member shall open, accept and/or operate a share trading account or otherwise deal in any manner whatsoever, on behalf of any person or entity unless the biometrics of such person or authorised signatories of the entity have been collected by the firm,” the new rules stated.

    According to the proposed rules, any stockbroker that fails to obtain the biometrics of its clients and obtain adequate know-your-client documentation from its clients shall be suspended from trading forthwith until regularisation is effected.

    Under the direct cash policy, net proceeds of stock market transactions would be sent directly to bank accounts of investors through the Central Securities and Clearing System (CSCS, the clearing and settlement gateway of the market.

    As against the general practice whereby the payments for investors’ transactions go into the accounts of the brokers for onward disbursement to their clients, the general practice under the ‘direct cash settlement’ will be to send the net proceeds direct from the clearing and settlement system straight to the investors’ accounts while the existing practice of payment through brokers will become exceptional cases.

    The NSE has already advanced on the framework for the new direct cash payment system, with the rules setting out the framework currently undergoing review for final draft and approval by the Securities and Exchange Commission (SEC).

    According to the new rules, brokers are mandated to provide their clients’ bank account details to the CSCS, being the agent of the Exchange for the clearing and settlement of all securities traded on the Automated Trading System (ATS) of the NSE.

    Settlement of each trade carried out on the ATS shall then be done by direct payment into the client’s account as provided to the CSCS.

    Under the proposed framework, brokers are mandated within three working days of receiving instructions from a client that settlement should be done by direct payment into such client’s account to notify the CSCS of the client’s instructions and provide the client’s account details to the CSCS.

    Any broker-dealer that fails to notify and provide the account details within the three-day timeline will be liable to a fine of N250,000 in addition to any other penalty which the Exchange may impose, according to the new rules.

    However, a client that declines direct cash payment into its account provided to the CSCS shall notify the CSCS by completing a direct cash settlement notification form, specially made for that purpose.

    Also, settlement of transactions carried out on behalf of any client whose account details are not provided to the CSCS shall be done by payment into the account of the client’s broker-dealer firm.

     

     

     

     

     

     

     

  • 20 companies to form new Stock Exchange’s premium board

    The Nigerian Stock Exchange (NSE) may pick 20 companies out of the 30 stocks that made up its NSE 30 Index to form its new premium board. The NSE 30 Index tracks the 30 most capitalised stocks at the stock market.

    The Nation‘s investigation indicated that the NSE may soon launch the new premium board, which will effectively make the Exchange a three-tier trading platform. The new premium board is designed as a market for the most capitalised stocks with the best corporate governance and liquidity. It is meant to showcase Nigeria’s best stocks to the global market.

    The proposed premium board will be NSE’s exclusive board with its listing rules and criteria. The existing listing boards, the main board and the Alternative Securities Market (ASeM), will also continue to run concurrently with the new premium board. The existing listing rules will continue to apply to companies currently on the main board and ASeM.

    Investigation showed that some 20 companies may make the inaugural list for the new premium board, which will subsequently be used by the NSE to woo major companies in Nigeria’s premium sectors of oil and gas, telecommunications and manufacturing.

    Companies that will be regrouped into the new premium board, according to a preview of the criteria obtained by The Nation, will be taken from five sectors of the NSE. These included leading breweries, cement-manufacturers, leading fast moving and consumer goods companies (FCMGs), oil and gas companies and banks. However, the new board will still be dominated by banks which are expected to have the largest representation and as well as liquidity.

    None of the stocks in the populous insurance sector and other sectors such as agriculture, healthcare, construction and information and communication technology will make the maiden trading list for the board.

    The existing quoted companies that will make the new premium board, according to a preview, included the two leading cement companies- Dangote Cement and Lafarge Africa, the two leading breweries-Nigerian Breweries and Guinness Nigeria, at least seven banks including Guaranty Trust Bank, Zenith Bank, FBN Holdings, Ecobank Transnational Incorporated (ETI), Stanbic IBTC Holdings, United Bank for Africa (UBA) and Access Bank as well as at least three oil and gas stocks including Oando, Forte Oil and newly listed Seplat Petroleum Development Company.

    Other companies that will make the list included Nestle Nigeria, Unilever Nigeria, Transnational Corporation of Nigeria and Flour Mills of Nigeria.

    A source in the know of the undercurrents at the Exchange indicated that the transition of companies across the three boards will be a continuous exercise as companies that meet the criteria for the premium board will be upgraded to the board while any company on the premium board that falls below the minimum standards will be downgraded to the appropriate lower board.

    The NSE will also continue to undertake primary listing of new companies on the three boards, depending on the qualifying criteria and status of the company.

    A preview of the criteria for the new board obtained by The Nation had indicated that companies to be listed on the new board must have market capitalisation of not less than $1 billion or about N157 billion.

    The companies must also score at least 70 per cent on the Exchange and the Convention for Business Integrity’s Corporate Governance Rating System (CGRS).

    Besides, the companies must have a minimum free float of 20 per cent or value of shares floated must be equal to or above $1 billion and the number of shares representing its issued share capital must be equal to or above 10 billion units.

    The companies are expected to meet stringent corporate governance, capitalisation and liquidity conditions.

    According to the draft rules for the new board currently under consideration, to remain on the premium board, an issuer’s continued eligibility shall be evaluated by the Exchange annually in line with all the outlined criteria or on the basis of additional requirements which may from time to time be prescribed by the Exchange, provided that each company shall comply with all other continuing listing obligations as specified under the listings rules of the Exchange.

    The council of the NSE may also in its discretion grant an extension of time for a company to comply with the relevant free float requirements set out in these rules; provided that the company submits a formal and substantiated request in that regard setting out the reasons why it could not meet the said requirements and how it proposes to satisfy the requirements within the time granted.

    Also, in the event of non-compliance with any applicable codes or regulations affecting their governance, companies shall be expected without prompting, to disclose in the Directors’ report of their annual report why they are in breach.

    The Exchange had indicated that the new board is aimed at providing a platform for greater global visibility for eligible Nigerian entities, which will make it easier for them to attract global capital flows and reduce the cost of borrowing.

    Head, legal and regulation, Nigerian Stock Exchange (NSE), Tinuade Awe, said the new board would subsist on a very strict regime with a great deal of emphasis placed on the need to comply with good corporate governance.

    According to her, the companies on the new board would be liable to sanctions in the event of breach of the premium board rules as well as the listings rules of the Exchange.

     

  • Downbeat for the stock market

    Downbeat for the stock market

    Nigerian equities are losing the momentum in the second half. Against the expectations that half-year earnings would boost stock market performance, equities have struggled with sustained declines over the weeks. Capital Market Editor Taofik Salako reports that insecurity, election and low earnings might have sapped investors’ appetite

    Equities opened this week with average decline of 0.32 per cent on Monday, extending the downtrend after it lost 0.83 per cent last week. With more losers than gainers, the selling pressure has built up and appeared to be spreading across the sectors. Last week, 47 stocks depreciated against 27 stocks that appreciated. In the previous week, more than half of price changes ended on the negative with 54 decliners to 26 advancers.

    The early period of August reflected the echoes of the downtrend in the preceding month of July, when equities lost some N128 billion. Equities had lost the momentum and struggled through July as a mixed of modest and uninspiring earnings dampened investors’ appetite. With the market closing on the downtrend, investors lost about N128 billion in July, implying average decline of 0.91 per cent. The downtrend in July depressed the average year-to-date return from 2.79 per cent at the beginning of the month to 1.86 per cent.

    Equities opened this week with average decline of 0.32 per cent on Monday, extending the downtrend after it lost 0.83 per cent last week.

    Equities had lost the momentum and struggled through July as a mixed of modest and uninspiring earnings dampened investors’ appetite. With the market closing on the downtrend, investors lost about N128 billion in July, implying average decline of 0.91 per cent. The downtrend in July depressed the average year-to-date return from 2.79 per cent at the beginning of the month to 1.86 per cent.

    Also, accumulated capital gains over the course of the year, which stood at N802 billion by the end of June, dropped to N674 billion by the July month-end as a last-day bearish trend sent most equities to lower prices.

    Aggregate market value of all quoted equities on the Nigerian Stock Exchange (NSE) closed July at N13.900 trillion as against the month’s opening value of N14.028 trillion. The All Share Index (ASI), the composite index that tracks prices of all equities on the NSE, also dropped from its month’s opening index of 42,482.48 points to close at 42,097.46 points.

     

    On the reverse

     

    The seven-month performance in 2014 represented a significant reversal against the performance in the corresponding period of 2013. Nigerian equities had by July 2013 rode to a seven-month average return of 35.03 per cent. Equities closed July 2013 on a high note, trotting back to N12 trillion after adding N581 billion capital gains in July.

    Aggregate year-to-date return thus improved from six-month value of N2.45 trillion to N3.03 trillion by the end of July 2013. After the downtrend in June, the market was particularly spectacular in July with a month-on-month average return of 5.08 per cent. The market closed the last trading day of July 2013 with a gain of N34 billion.

    Aggregate market value of all equities closed July 2013 at N12.007 trillion as against its opening value of N11.426 trillion for the month. The ASI also rose from month’s opening index of 36,164.31 points to close at 37,914.33 points by July 2013. With a bulging pocket of N3.03 trillion and average year-to-date return of 35.03 per cent, equities had readied for another record successive performance. In value terms, the seven-month capital gain of N3.03 trillion had already surpassed total gains of N2.44 trillion recorded for the entire 2012. Also, real benchmark return of 35.03 per cent was only a point below the average full-year return of 35.45 per cent recorded in 2012.

     

    The topsy-turvy pricing trend

     

    The July 2014 downtrend dampened enthusiasm that started the second half as capital gains accumulated to N802 billion on the back of early positioning for the second quarter and first half earnings. However, the first half reports have shown muted performance across several sectors; especially in the financial services sector where banks have shown tight bottom-line.

    Aggregate market value of all quoted equities had opened this year at N13.226 trillion while the ASI started the year at 41,329.19 points. Riding on the back of sustained gains in May and June, the stock market had erased the losses in the previous four months and left the investors with some N802 billion in capital gains by the end of first half.

    Quoted equities had wriggled all through the first four months of this year with negative month-on-month return. The stock market recorded a negative return of -0.68 per cent in April, building on the bearish trend that had characterized the stock market in the first quarter. In January, February and March, the market consistently recorded losses of 1.8 per cent, 2.5 per cent and 2.0 per cent respectively.

    The negative return in April further depressed the overall market performance, increasing the four-month average loss to 6.88 per cent. This implied that an average investor had lost 6.88 per cent of its portfolio over the four-month period.

    The ASI had closed the first quarter of 2014 with a drop of 6.25 per cent to close at 38,748 points while market capitalization dropped by 5.89 per cent to close at N12.45 Trillion. Total market volume for the quarter also fell by 26 per cent at 22.83 billion while total market value rose marginally by 6.3 per cent to close at N269.4 billion.

    However, Nigerian equities had in June built on strong gain made in May to add additional capital gains of N333 billion. Aggregate market value of all quoted equities closed June 2014 at N14.028 trillion as against the opening value for the month at N13.695 trillion. This represented additional gain of N333 billion. The ASI rose from index on board for the month of 41,474.40 points to close first half 2014 at 42,482.48 points, indicating month-on-month average return of 2.43 per cent.

    A six-month analysis of the first half had shown that the market benefited from increasing positioning and portfolio rebalancing as investors sought to strengthen their portfolios across sectors, in expectation of half-year earnings. Aggregate market value of all quoted equities closed the first half at a high of N14.028 trillion as against its 2014 opening value of N13.226 trillion. The ASI rose from the year’s opening index of 41,329.19 points to close first half at 42,482.48 points, representing average return of 2.79 per cent.

    Notwithstanding the modest gain in the first half, the downbeat was evident when also compared with the performance in the first half of 2013. In the first half of 2013, the Nigerian stock market recorded a six-month average return of about 28.8 per cent, leaving investors with approximately N2.45 trillion in capital gains during the period. Aggregate market value of all equities on the NSE closed the first half of 2013 at N11.426 trillion as against its value-on-board of N8.974 trillion that started the year, representing an increase of 27.3 per cent. The ASI rose from 2013’s opening index of 28,078.81 points to close the first half at 36,164.31 points. The market had subsequently built on this momentum to close 2013 with a capital gain of more than N4.25 trillion. The 2013 business year set the stock market on a new high with average full-year return of 47.19 per cent, its best performance since 2007.

    Aggregate market capitalization of all quoted equities on the NSE closed 2013 at N13.226 trillion as against its opening value of N8.974 trillion for the year. This represented a whooping increase of N4.252 trillion. The ASI recorded full-year return of 47.19 per cent rising from its opening index for the year of 28,078.81 points to close the year at 41,329.19 points.

    The performance in 2013 significantly surpassed the much applauded return in 2012 when equities posted average return of 35.45 per cent, equivalent to capital gains of N2.44 trillion.

     

    Losing the momentum

     

    Now, market pundits appeared to agree that the equities’ market would close this year with its lowest performance in recent years, although the level of returns differs across various analyses. Most analysts believe the market would close with marginal return, a euphemism for average return of a single digit.

    Executive director, Stanbic IBTC Nominees, Mr. Akeem Oyewale, said the Nigerian equities market may struggle through the remaining month of the year to close flat as investors continue to weigh the possible risks from the political transition programme, insecurity and insurgency and economic lull.

    According to him, the equities market would possibly close flat by the end of this year as the remaining months of this year might be more challenging for equities because of concerns over the lingering insurgency in some areas of the Northern region and political transition as the 2015 election draws near.

    He noted that the while the unimpressive performance of the stock market this year may be partly due to the boom-burst investment cycle, uninspiring earnings and macroeconomic risks are also fuelling the selling pressure.

    He noted that the lingering insurgency in the North is affecting the stock market in many ways by reducing the earnings of quoted companies and also raising risk profile of the country.

    He pointed out that the insurgency in the North has affected the earnings of several companies adding that the inability to sell their products in some part of the country negatively impacted on the earnings of companies, especially fast moving consumer goods (FMCGs) which thrive on nationwide sale strategy.

    He added that the security challenge was also partly responsible for the low earnings of banks given the constrained financing opportunities.

    Analysts at Afrinvest (West Africa) also attributed the decline in the market to what they described as “broadly unimpressive earnings published by quoted companies especially the banks”.

    According to analysts, the slowdown in the momentum of the market signifies the waning appetite for select stocks particularly stocks within banking space which continued to be weighed down by weaker earnings performance.

    Group managing director, BGL Plc, Mr. Albert Okumagba, however said the second half might benefit from the muted performance in the first half. According to him, the market may witness a reversed positive trend in the second half, with better average return than the first half.

    Executive director, Magnartis Finance, Oluwaseyi Abe, said the downtrend was not peculiar to the equities, but also across fixed-income securities. This, he noted, could dissuade investors from aggressive portfolio relocation.

     

    Weak earnings, slow gains

     

    A review of operational results of most companies, especially large fast moving consumer goods (FMCGs) companies that thrive on economy of scale and large market, indicated a general decline in the momentum of sales and profitability.

    First half reports of Cadbury Nigeria, Unilever Nigeria, DN Meyer, Chellarams and Scoa Nigeria Plc among others showed declines in corporate earnings and profitability. Cadbury Nigeria’s sales dropped by 12 per cent to N15.32 billion in first half of 2014 as against N17.43 billion in comparable period of 2013. The company’s pre and post tax profits dropped by 50 per cent each. Profit before tax dropped from N3.59 billion to N1.79 billion while profit after tax declined from N2.52 billion to N1.26 billion.

    Unilever Nigeria also reported marginal decline in sales while its bottom-line was depressed by increasing sales and operating costs. Unilever Nigeria’s turnover slipped from N29.67 billion in first half of 2013 to N29.28 billion in first half of 2014. Profit before tax meanwhile dropped by 48 per cent from N3.96 billion to N2.08 billion. Profit after tax declined by 47 per cent from N2.74 billion in first half 2013 to N1.46 billion.

    DN Meyer recorded a pre-tax loss of N59.85 million in first half 2014 as against a profit of N59.01 million in first half of 2013. Loss after tax totaled N61.59 million in 2014 compared with N57.88 million in 2013. Turnover dropped from N720.63 million to N633.46 million.

    Scoa Nigeria also reported significant declines in sales and profit. Total sales dropped from N6.23 billion to N3.42 billion. Profit before tax halved to N77.04 million in 2014 as against N157.42 million while profit after tax dropped from  N123.25 million to N58.25 million.

    With its first quarter of the current business year, Chellarams recorded a loss of N109.13 million in 2014 as against N147.05 million in 2013. Turnover dropped from N7.17 billion to N6.25 billion.

    Corporate sources said spate of violence and lingering and escalating sense of insecurity have been undermining their forecasts given that the Northern market represented a major segment for nationwide companies. They said all the sales representatives in major states like Kano, Kaduna, Sokoto and Maiduguri have been forced to relocate to the Federal Capital Territory (FCT), Abuja. Particularly hard-hit were companies dealing in perishable and breakable products, which have had to contend with longer transportation schedule and sometimes, seizure and obstruction of delivery trucks.

    Banks, which form the most active stocks in the stock market, have also generally shown a largely tepid performance, ranging from outright negative bottom-line to muted growth.

    FBN Holdings Plc, the holding company for First Bank of Nigeria (FBN) Limited and its previous subsidiaries, reported 12 per cent decline in pre-tax profit in the first half. Interim report and accounts of FBN Holdings for the period ended June 30, 2014 showed that gross earnings rose by 7.9 per cent to N212 billion in first half 2014 as against N196.4 billion recorded in comparable period of 2013. Profit before tax however dropped by 12 per cent to N48.3 billion in first half 2014 as against N54.8 billion in first half 2013. Profit after tax also dropped by 19 per cent from N46.1 billion to N37.2 billion.

    Zenith Bank witnessed marginal growths across key indices. Profit before tax rose by about seven per cent to N57.85 billion in first half 2014 as against N54.08 billion recorded in the corresponding period of last year. Profit after tax also rose to N47.45 billion as against N45.42 billion for the same period in 2013. Gross earnings rose by 7.8 per cent from N171.02 billion in 2013 to N184.43 billion in first half 2014.

    Skye Bank indicated that profit before tax dropped to N7.266 billion in first half of 2014 as against N10.545 billion during the corresponding period in 2013. Profit after tax also decreased to N5.786 billion as against N8.428 billion the previous year.

    As the market winds down the alley, the only major dose from its slumbering walk is strong earnings in the third quarter. The cast is split equally; the risk is the earnings may not be strong, and the downtrend worsens..