Nigeria Content Online

While many firms
could hardly raise cheap capital to run their businesses last year, the
state and federal government had a field day accessing funds from the
bond market. Since the stock market crisis which began in 2008, many
believed that the bond market would provide a more reliable avenue for
firms to raise capital.

But that was not to
be. In addition to forays by the federal government, five state
governments, namely Bayelsa, Ebonyi, Kaduna, Niger and Lagos all raised
various sums to meet their developmental needs. The private sector was
not so lucky. Apart from United Bank for Africa and Guaranty Trust Bank
which raised N20 billion and N13.162 billion, UAC Properties raised N15
billion while C & I Leasing raised N2.24 billion. Other firms that
planned to venture into the bond market eventually had to shelve the
plans as market sentiments did not tilt in their favour. The
alternative for these firms was bank borrowing which added to the cost
of business.

On the other hand,
the Debt Management Office (DMO), on behalf of the federal government
raised over N1.1 trillion from the domestic bond market last year. With
plans by the DMO to raise N186.5 billion in the first quarter of this
year, the private sector may yet again be at the receiving end in 2011.
The Debt Office plans to raise N66.5 billion next Wednesday and another
N60 billion in March. This capital raising plan by government, compared
to N5 billion raised by Food Concepts Limited last week already sets
the tone of what to expect in the bond market this year.

Government has been
blamed for crowding out the private sector from the bond market, a
claim often countered by the director general of the DMO, Abraham
Nwankwo, who insists that the government is in the bond market in order
to develop it sufficiently for the private sector to thrive. Mr.
Nwankwo said the goals of the office is to develop the domestic bond
market to enable the private sector access long term funds to develop
agriculture, mining, solid minerals, transportation, manufacturing,
power. “Now, there are funds of up to 20 years in the Nigerian capital
market, through the issuance of FGN bonds. Today, if any private entity
wants to issue a bond to raise five, seven, 10, 20 years money for
investment in agriculture, manufacturing, power sector or other
infrastructure will succeed,” he said in an interview last week.

Mr. Nwankwo said
Nigeria’s debut $500 million Eurobond which was subscribed by 150 per
cent was part of government effort to encourage the private sector to
tap into the international bond market. “Government desires an active
role by the private sector in this direction. What government has done
through the Eurobond issue is to open a new window to facilitate
Nigeria’s private sector to go into the international capital market to
issue their own debt instruments and raise long term monies to fund the
country’s various needs in the real sector and infrastructure.”

However, not many
operators share this outlook. “The sustained expansion in public
borrowing risks crowding out the private sector,” said the interim
administrator of the Nigerian Stock Exchange, Emmanuel Ikhazobor, in
his presentation at a press briefing on the review of 2010 and the
outlook for 2011, held last month in Lagos. Mr. Ikhazobor noted that
the international and Nigerian capital market would be very busy this
year as the federal government and various government agencies source
funds from both markets.

Tola Odukoya, an
analyst at Dunn Loren Merrifield, an investment firm in Lagos is also
optimistic that the corporate bond market will fare better this year.
“We anticipate a strong growth trajectory for corporate bonds on the
back of the revised Pencom guidelines and the success of the corporate
bonds issued in 2010. From our standpoint, over N30 billion will be
raised from the market via corporate bonds in the first half of the
year.”

Unchanging trend

This enthusiasm is
not totally shared across the industry as some operators are still
skeptical, given the huge funds raised by government last year. Akin
Oladeji, chief executive officer of Futures and Bonds Limited, a
financial services firm, said the trend may not change much this year.
“The market will not be different from previous years since FGN has
devised a crafty way of raising bonds to finance its projects. WMarket
will continue to be crowded with FG and State Bonds.” Mr. Oladeji said
attraction of the corporate to the bond market will be determined by
interest rate. “If the usual high lending rate and low deposit rate
should continue, most corporate organisations will consider bond
issuance subject to their existing allowable debt to equity ratio.”

Mr. Odukoya said
the corporate bond market has its attraction as many firms may need to
restructure their debt portfolio and may see the bond market as an
alternative. “Our optimism stems from the obvious need for most
corporates to restructure their debt portfolios, which for the most
part are expensive and short tenured in nature.” Mr. Nwankwo, however,
said government was not unaware of the need not to crowd-out the
private sector and that government is creating space for private sector
in the flow of credit. This may account for the drop in government
activity as shown by the DMO’s issuance calendar. While N186.5 billion
is planned for the first quarter of this year, N238.5 billion was
raised during the same period last year, a 21.8 per cent reduction.

Following the
extension of trading period at the Nigerian Stock Exchange (NSE) last
December from two and half hours to four and half hours, trading
analysis showed that some sectors of the NSE have improved
significantly in their performance.

The NSE is the
second most capitalised market in Africa after Johannesburg Stock
Exchange, which is open for five hours, and the third place Cairo Stock
Exchange; opens for five and half hours in comparison.

A market assessment
carried out recently by analysts at Proshare Nigeria Limited, an
investment advisory firm, revealed that more sectors of quoted equities
at the Exchange witnessed growth in value. The figures traded in the
following sectors, last Thursday, when compared with the average
figures recorded prior to extended trading hours on December 6th showed
that Automobile & Tyre sector had 937.59 per cent value growth,
Packaging sector 604.90 per cent, Construction 566.02 per cent,
Commercial Services 199.69 per cent and Maritime sector 195.26 per cent
value growth. Other sectors that witnessed significant growth include
the Foreign Listings, Engineering Technology, Breweries,
Food/Beverages, and Mortgage.

Wole Tokede, the
Exchange’s spokesperson, last Thursday, said the extension “has
continued to yield positive results as the market has continued to
record improvement in volume, value and the number of deals.”

The Interim
Administrator of the NSE, Emmanuel Ikazoboh, had also said the
extension “was a strategic move to reposition the market for enhanced
competitiveness which would give foreign investors, especially those in
the United States of America opportunity to participate in the Nigerian
market.” Available data for the two months preceding the extension of
the trading hours with the two months of the extension shows that the
volume of shares traded recorded a growth of 31.93 per cent. The market
recorded 13.892 billion shares in the two months preceding the
extension while the volume of shares transacted in the two months after
the extension rose to 18.328 billion units.

The market value
also recorded a growth of 16.81 per cent in the review period. As
against the value of N147.142 billion recorded in the two month prior
to the extension, shares value now stand at N171.875 billion in the two
months after the extension. The Exchange also recorded growth in the
number of deals in the review period. A total of 171.875 billion deals
were executed in the two months of extension compared to a total of
147.142 billion deals executed in the two months before the extension.
This represents a growth of 16.81 per cent.

Indigenous investors

Meanwhile, some
operators at the nation’s capital market said that while the Exchange
management is focusing on attracting more foreign investors through
trading hour extension, it should place more priority at protecting
indigenous investors.

Tunde
Oladapo-Dixon, chief executive officer, StockPicks Consulting, a
stockbroking firm, said, “Although it is good for the NSE to woo
foreign investors to the market for some capital projects, the main
focus for capital market authority should be to encourage indigenous
investors who will not take their funds out of the market in a long
time because the market actually is a long time investment.” Mr.
Oladapo-Dixon said more priority should be given to local investors
because “it was these same foreign investors that left our market to
crash when they pulled out their funds aftermath the financial crisis
in their countries.” He said local investors want their confidence
guarded jealously in the market.

Analysts at Asset and Resource Management Company, a fund
management firm, said for the nation’s capital market to reach its full
potential, “regulators must constantly focus on promoting a system that
instils confidence by continuously adapting existing or formulating new
rules to promote market discipline.”

A halt to cocoa
buying in Cote D’Ivoire is leaving beans to rot in farm warehouses,
while smuggling through Ghana intensifies and some growers switch to
other crops, farmers said on Thursday.

Economic sanctions,
a cocoa export ban, and a liquidity shortage since incumbent Laurent
Gbagbo seized the central bank’s local branch has left the cocoa
industry in chaos in the world’s largest grower, as beans pile up in
farms or are smuggled out.

Alassane Ouattara,
who beat Gbagbo in a November 28 presidential poll, according to
U.N.-certified electoral commission results that Gbagbo refused to
concede, last week called for a one-month cocoa registration ban to
starve his rival of tax revenues.

Cocoa exporters, fearing sanctions by Western powers that recognise Ouattara’s win, have played ball.

In the western
region of Soubre, at the heart of the cocoa belt, farmers and one
cooperative manager said in interviews last week that buyers were not
taking their beans, and they feared the poorly dried beans stashed in
their warehouses would rot.

“Nothing’s moving, everything’s stopped,” said farmer, Innocent Zamble, who runs a farm in the Soubre town of Meagui.

“Our stores are
stuffed with beans and there’s no more space to stock them. We fear the
quality is going to perish because we don’t have the capacity to stock
big quantities long term.”

A first experience

Ouattara has not
said whether the ban will be extended when it expires on February 23.
Exporters estimate that around 65,000 tonnes arrived at Abidjan and San
Pedro ports in the two weeks to February 6, none of which has been
exported.

But even if it is
lifted, EU restrictions on ships registered there doing business with
the port, which the European Union says is supporting “Gbagbo’s illegal
regime”, will continue to interrupt export activities. And a shortage
of liquidity means there is not enough cash to pay suppliers on a
day-to-day basis, exporters say.

In the western
region of Gagnoa, farmers and cooperative managers said several growers
were switching to growing vegetables, tomatoes or maize, which can be
harvested faster for export or local trade.

“They’re not paying for the cocoa and farmers have to survive,” said cooperative manager, Francois Badiel.

“Lots of them are
now doing trunk farming (growing vegetables) instead. This is the first
time they’ve seen a situation like this,” Mr. Badiel said.

In the eastern
region of Abengourou, on the Ghana border, farmers said huge numbers of
cocoa trucks were crossing the border in smuggling operations.

“When we saw how
many trucks full of cocoa were heading over the border every day, we
said: ‘There’s not even that much cocoa in our region’,” said
Abengourou farmer, Joseph Amani.

“It must be coming in from other regions as well. It’s easy to get it here from Daloa or Soubre by road,” Mr. Amani added.

A purchasing
manager of an international cocoa exporter said that while major
international exporters have stopped purchases, some local exporters
were very active at the port, buying at about 900 CFA francs per
kilogramme.

Local exporters
have tended to support Gbagbo, while the big multinationals are bound
by their base countries in Europe or the United States to recognise
Ouattara’s authority.

“The small local
exporters are still very active in the past week. They are buying a lot
of cocoa, but I’m wondering where they are exporting it and on which
ships,” the manager said.

Reuters

Trading activities
at the Nigerian Stock Exchange (NSE) witnessed a negative performance
on Thursday after recording an improvement the previous day.

The market
capitalisation of the 201 First-Tier equities closed lower yesterday at
N8.504 trillion after opening the day at N8.529 trillion, reflecting
0.29 per cent decline or N25 billion losses; about N87 billion gains
were recorded after Wednesday’s trading.

The number of
gainers at the close of trading session yesterday closed higher at 25
stocks compared to the 23 recorded on Wednesday, while losers closed
lower at 31 stocks as against the 33 recorded the previous day.

Meanwhile, the NSE
said four more stockbroking firms have met the N70 million minimum
capital base requirements instructed by the Securities and Exchange
Commission. The companies are Yobe Investment and Securities Limited,
Quantum Securities Limited, PIPC Securities Limited, and Nigerian
Stockbrokers Limited.

Afrinvest equally
announced in a statement that the Exchange “has removed the firm from
the list of suspended stockbrokers and restored our trading privileges
as of today, 10 February 2011.”

Trading hours

The NSE, on
Thursday, said the extension of its trading hours by two hours
accounted for 50.52 per cent of traded shares in the first two months
of the extension.

The Interim
Administrator of the NSE, Emmanuel Ikazoboh, had said the extension
“was a strategic move to reposition the market for enhanced
competitiveness which would give foreign investors, especially those in
the United States of America, opportunity to participate in the
Nigerian market.”

Wole Tokede, the
Exchange’s spokesperson, said, “Out of the 171.875 billion shares
traded between 6 December, 2010, and 4 February, 2011, the two-hour
added time (between 12.30pm and 2.30pm) accounted for a total of 86.834
billion shares traded, while the initial three hours (between 9.30 am
and 12.30pm) accounted for 85.041 billion.”

Mr. Tokede said the
extension “has continued to yield positive results as the market has
continued to record improvement in volume, value, and the number of
deals.”

Available data for
the two months preceding the extension of the trading hours with the
two months of the extension shows that the volume of shares traded
recorded a growth of 31.93 per cent. The market recorded 13.892 billion
shares in the two months preceding the extension, while the volume of
shares transacted in the two months after the extension rose to 18.328
billion units.

The market value
also recorded a growth of 16.81 per cent in the review period. As
against the value of N147.142 billion recorded in the two month prior
to the extension, shares value now stand at N171.875 billion in the two
months after the extension.

The Exchange also
recorded growth in the number of deals in the review period. A total of
171.875 billion deals were executed in the two months of extension
compared to a total of 147.142 billion deals executed in the two months
before the extension. This represents a growth of 16.81 per cent.

Trading activities
at the Nigerian Stock Exchange (NSE) witnessed a negative performance
on Thursday after recording an improvement the previous day.

The market
capitalisation of the 201 First-Tier equities closed lower yesterday at
N8.504 trillion after opening the day at N8.529 trillion, reflecting
0.29 per cent decline or N25 billion losses; about N87 billion gains
were recorded after Wednesday’s trading.

The number of
gainers at the close of trading session yesterday closed higher at 25
stocks compared to the 23 recorded on Wednesday, while losers closed
lower at 31 stocks as against the 33 recorded the previous day.

Meanwhile, the NSE
said four more stockbroking firms have met the N70 million minimum
capital base requirements instructed by the Securities and Exchange
Commission. The companies are Yobe Investment and Securities Limited,
Quantum Securities Limited, PIPC Securities Limited, and Nigerian
Stockbrokers Limited.

Afrinvest equally
announced in a statement that the Exchange “has removed the firm from
the list of suspended stockbrokers and restored our trading privileges
as of today, 10 February 2011.”

Trading hours

The NSE, on
Thursday, said the extension of its trading hours by two hours
accounted for 50.52 per cent of traded shares in the first two months
of the extension.

The Interim
Administrator of the NSE, Emmanuel Ikazoboh, had said the extension
“was a strategic move to reposition the market for enhanced
competitiveness which would give foreign investors, especially those in
the United States of America, opportunity to participate in the
Nigerian market.”

Wole Tokede, the
Exchange’s spokesperson, said, “Out of the 171.875 billion shares
traded between 6 December, 2010, and 4 February, 2011, the two-hour
added time (between 12.30pm and 2.30pm) accounted for a total of 86.834
billion shares traded, while the initial three hours (between 9.30 am
and 12.30pm) accounted for 85.041 billion.”

Mr. Tokede said the
extension “has continued to yield positive results as the market has
continued to record improvement in volume, value, and the number of
deals.”

Available data for
the two months preceding the extension of the trading hours with the
two months of the extension shows that the volume of shares traded
recorded a growth of 31.93 per cent. The market recorded 13.892 billion
shares in the two months preceding the extension, while the volume of
shares transacted in the two months after the extension rose to 18.328
billion units.

The market value
also recorded a growth of 16.81 per cent in the review period. As
against the value of N147.142 billion recorded in the two month prior
to the extension, shares value now stand at N171.875 billion in the two
months after the extension.

The Exchange also
recorded growth in the number of deals in the review period. A total of
171.875 billion deals were executed in the two months of extension
compared to a total of 147.142 billion deals executed in the two months
before the extension. This represents a growth of 16.81 per cent.