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Capital market working towards global integration

The Nigerian Stock
Exchange (NSE) says it is on track towards its integration into global
capital market operations and standards.

The chairman of the
Securities and Exchange Commission’s (SEC) board of directors, Udoma
Udoma, told participants in the ongoing Thomson Reuters Foundation
journalism training course on financial and economic reporting in
Lagos, that apart from the reforms to restore confidence in the wake of
the 2008 market crash, steps have been taken to upgrade the operational
process to bring them to global standards.

He noted
unprecedented growth by all market indicators, saying capitalisation
rose fromN2.5 trillion in 2005 to N12.1 trillion by March 2008, while
trading value increased with a daily average of N1.06 billion from
N254.7 billion in 2005 to N2.086 trillion in 2007, with a daily average
of N8.62 billion.

Though he said
market capitalisation as of December 31, 2010, was at about N10.33
trillion, with about 264 listed securities comprised of 217 equities
and 47 debts, Mr Udoma, however, traced the collapse of the capital
market to insider dealings as well as abuses of margin lending by
banks, which gave loans to many investors to buy shares without
collateral.

He said the
reactivation of FGN bond resulted in the issuance of over N3.5 trillion
bonds between 2003 and 2010, while secondary transactions of the bonds
on OTC market was over N48 trillion between 2006 and 2010, with about
11 state governments going to the market to raise funds for their
programmes.

Market challenges

He listed the
challenges the market is currently facing to include low investor
confidence; poor market depth, in terms of limited securities and
products on offer; poor savings and investment culture as a result of
the country’s low per capita income; low market liquidity; excessive
market concentration, with over 60 percent of trading activities on
bank stocks as well as legal constraints.

As part of the
reforms, he said 52 new rules and amendments have been introduced since
2008, including new margin trading guide lines by the Central Bank of
Nigeria and the Anti-Money Laundering/Combating Financing of Terrorism
manual to help banks and stockbrokers check incidences of money
laundering.

Besides, he said a
new code of corporate governance, which became effective last month,
requires auditors to report on the adequacy and effective of internal
regulatory systems as well as change the company’s audit and partners
every year, while upgrades have been carried out on the NSE platform to
meet international standards.

“We are on track
towards reforming the Nigerian Stock Exchange into a world class
capital market. The country’s capital market is not in isolation from
the international community. The Nigerian economy is poised to take off
with the stability being provided better elections,” he said.

Other actions taken
to reform the system include development of a model for risk-based
supervision, particularly for regulated entities; rationalization of
the market’s intermediary structure through stratification of the
broker-community; overhauling of complaints management framework to
ensure improved efficiency and alignment of the market with
international best practices in complaint management as well as
encouragement of functional market makers to facilitate securities
lending and borrowing.

International regulatory standards

Apart from
migration to International Financial Reporting Standard before 2012,
the SEC board chairman said the commission is considering the
self-assessment exercise of the implementation of the 38 International
Organisation of Securities Commission objectives as well as the
principles of securities regulations to conform to international
regulatory standards.

“Capital market
offers enterprises and governments wider opportunities to secure funds
for development. Where there is no developed capital market, short-term
funds from commercial banks are not the best sources of funding for
business enterprises and long term investments.

“In Nigeria, where industrial production is as low as 4 percent of
gross domestic product (GDP), as against an average of 8.5 percent
about 15 years, it is the country’s low industrial capacity that is
partly responsible for the current high unemployment in the country.
Therefore, if Nigeria must realize its aspiration to be among the
world’s top 20 economies by 2020, industry share of the GDP has to
increase to about 20-25 percent. That is why the integration of the
capital market is crucial,’ he said.

Money

More quoted companies release positive results

More quoted companies release positive results

The numbers of
quoted companies posting positive financial results at the Nigerian
Stock Exchange have continued to increase in figures.

Compared to last
year’s performance of some companies, where most of them posted
negative results, about 55 companies out of the over 80 companies that
have submitted financial results at the Exchange this quarter recorded
profits.

Market watchers had
predicted early this quarter that more quoted companies, particularly
the banks, will return to profitability in their financial reports on
the back of the improved state of the nation’s economy.

Stockbrokers at GTI
Capital, a stock broking firm, also said that the recent streak of
positive earnings emanating from quoted firms has continued to “add-up
enthusiasm to the market.” “Despite the fact that the market has been
in oscillatory trend as a result of periodic profit taking, volume of
transaction confirms intensified interest from the investing public,”
the firm stated. “In response to positive earnings reported in the
market, indicators grew northward (upward).”

Recent results

Nigerian Breweries’
unaudited result for the first quarter ended 31st March 2011 shows a
turnover of N52.029 billion as against N40.574 billion in the
comparable period of 2010. Profit after tax stood at N7.919 billion
compared with that of N6.456 billion in 2010.

Also, UAC Nigeria’s
unaudited result for the first quarter ended 31st March 2011 shows a
turnover of N12.533 billion, as against N10.912 billion in the
comparable period of 2010. The company’s profit after tax and minority
interest stood at N464.3 million compared with that of N422.09 million
in 2010.

In the unaudited
result of Nigerian Bottling Company, for the first quarter ended 31st
March 2011, the company recorded a turnover of N29.144 billion as
against N26.787 billion in the comparable period of 2010. Profit after
tax stood at N331 million compared with that of N241 million in 2010.
Oceanic Bank’s unaudited result for the first quarter ended 31st March
2011 shows gross earnings of N27.173 billion as against N30.351 billion
in the comparable period of 2010. The bank’s profit after tax stood at
N1.902 billion, compared with that of N1.676 billion in 2010.

Adesoji Solanke, a bank analyst at Renaissance Capital, an
investment bank, said Oceanic Bank financial results showed that the
company is returning to profitability though it is still evident that
the bank’s performance is “lethargic; as it experienced massive
write-back and recovery last year.” “Going forward, we believe
investors’ focus for these banks should be to see whether the yield
from their asset mix currently dominated with liquid assets, would be
adequate enough to cover their operating and regulatory expenses,” he
said. “We expect 2011 to be mixed in terms of financial performance
across the intervened banks space, but with an incremental
profitability run-rate through the quarters.”

Money

Senate leader blames civil servants for excessive spending

Senate leader blames civil servants for excessive spending

The senate deputy leader, Victor Ndoma-Egba, has risen in
defence of the National Assembly over allegations of profligacy, saying the
civil service and not the legislature consumes most of the the nation’s wealth.

In a veiled reference to claims by the governor of the Central
Bank of Nigeria, Sanusi Lamido Sanusi, that the National Assembly takes home a
greater part of the nation’s income, the re-elected senator said the civil
service consumes more.

He called for a review of public expenditure at all levels so
that more money is available for investment in infrastructure, social service,
health care and industrialisation.

“I do not think that the National Assembly is consuming the
wealth of this nation more than any other group,” he said. “Check the
parastatals, main civil service and local government councils; they consume
more. Every office has overhead costs. When you add these together every month,
you discover that civil servants consume more of the nation’s resources.”

Continuity in service

On the just-concluded general elections in the country, Mr
Ndoma-Egba said the high rate of attrition in the National Assembly is
affecting robust legislation, as fresh lawmakers find it difficult to catch up
with their older colleagues on thorny issues.

“[The] high turnover of senators in this country affects
lawmaking as newcomers start from the scratch, finding it difficult to catch up
with their senior colleagues,” he said. “The senate in the USA is stable
because it does not experience such a huge number of new members, despite the
biennial conduct of legislative elections in that country.” He recommended that
senators be allowed to spend more years at the National Assembly to gain
experience in lawmaking for the good of the country, as having a new crop of
senators every four years negatively impacts on administration at the federal
level.

Mr Ndoma-Egba said, although parliamentary bodies the world over
are bolstered by the equality of their members, irrespective of the spread of
their constituencies, the experience of older members is what keeps that arm of
government moving so that it does not fall short of expectations nor become a
rubber stamp for the executive.

The senator, who has just secured a third mandate, sees his
re-election as victory for history.

“This is the first time a senator from Cross River State will be
doing a third term at the National Assembly, but I am not the first from the
Niger Delta to be so elected. James Manager is older than me at the senate. He
is also from the Niger Delta,” he said.

Fair elections, but…

He described the recent elections as transparent, orderly and
fair; and asked INEC to correct the lapses it noticed in the 2011 exercise
since the country’s democracy is still growing.

“If INEC had an arrangement whereby accredited voters exercise
their franchise immediately, more people would have come out to participate,”
he said. “In rural communities of Cross River State where the inhabitants are
predominantly farmers, they find it difficult to wait for many hours after
being accredited before voting,” he said.

Mr Ndoma-Egba, who said it was a challenge for him to convince his kinsmen,
who are mainly farmers, to get accredited and wait for some hours before
voting, advised INEC to develop a new voting system that would ensure Nigerians
vote immediately after accreditation and leave for their homes or farms.

Road safety agency generates N1.4b from traffic offenders

Road safety agency generates N1.4b from traffic offenders

The Federal Roads Safety Commission (FRSC) has generated N1.4
billion as fines from traffic offenders in the country in the last four years,
the Corps Marshal of the commission, Osita Chidoka said yesterday in Abuja.

Speaking at the launch of the UN Decade Of Action On Road, with
the theme: “Committed To The Decade Of Action Road Safety 2011-2020,” Mr
Chidoka warned that the FRSC will not spare any violator of road safety rules
regardless of who ever is involved, stressing that if serious measures are not
taken, accidents will overtake malaria, tuberculosis and AIDS as the leading
cause of death in the country.

“Efforts are in top gear to ensure a national council on road
safety and inclusion of a broad coalition of multi-agency stakeholder
approach,” he said.

Traffic collisions

Speaking also at the event was the minister of health, Onyebuchi
Chukwu who said traffic collisions constitute major health and economic hazards
globally, with extensive deleterious effect in developing countries such as
Nigeria.

He also announced that the World Health Organisation and the
World Health Assembly have projected that by 2020, road traffic collisions
would have risen to be the third leading cause of disability and the fifth
leading cause of death by 2030.

The minister also revealed that a national stakeholders committee
has been constituted towards preventing collisions and making roads safer. He
said the committee would ensure effective collaboration among identified
stakeholders as well as partner with local and international agencies and
organisations.

The Obi of Onitsha, Alfred Achebe; Works minister, Sanusi
Daggash and the Women Affairs and Social Development minister, Josephine Anenih
all signed commitment cards which forbids them from over speeding, drinking
while driving and using mobile phones while driving. It also commits them to
always wear seat belts while driving.

Free and Fair

Free and Fair

A national official
of the Independent National Electoral Commission (INEC) yesterday
declared that the April general elections were conducted with utmost
transparency and fairness, hence the acceptability of its results by
most of the contestants.

The INEC national
commissioner in charge of Osun, Oyo and Ondo states, Adedeji Soyebi,
speaking in Osogbo at the presentation of certificates of return to all
the elected candidates, said INEC conducted the elections with the fear
of God and without prejudice to any authority.

He said the
elections were adjudged the best in the history of the country’s
elections even by the international community, saying INEC achieved
such a lofty height through commitment and determination to building a
virile society.

Mr Soyebi, who
acknowledged the support of the people, said the credible conduct of
the polls was made possible by the co-operation the commission enjoyed
from the people.

Particularly, the
INEC boss noted that the electoral body recorded peace in Osun state
during the polls, saying that the elections were conducted in a
relatively peaceful atmosphere in all the Local Government Areas in the
state compared with other parts of the country.

The INEC resident
electoral commissioner in the state, Rufus Akeju said the commission
succeeded in redefining the electoral landscape of the country with its
performance during the last eletion.

“We are today
celebrating the results of national political consciousness and its
process for the conduct of election with transparency, fairness and
freedom,” he said.

Mr Akeju said the
commission is focused on its vision and mission for a new democratic
order in the country and advised the newly elected political office
holders to place the interest of the people above their personal
interest in all that they do.

Kwara tribunal orders forensic examination of election materials

Kwara tribunal orders forensic examination of election materials

The Kwara State Governorship Election Petition Tribunal
yesterday granted an order that all election materials used during the April 26
elections be made available for inspection. The order followed an ex-parte
application by Osaro Eghobamien, the counsel to the Action Congress of Nigeria
(ACN) governorship candidate, Dele Belgore.

Mr Eghobemien, on behalf of his client, had ahead of yesterday’s
inaugural sitting of the tribunal filed an application before the tribunal on
May 7, to challenge the election victory of the Peoples Democratic Party’s
(PDP) candidate, Abdulaziz Ahmed.

The three-man panel, headed by Ngozi Priscilla Emehelu, while
granting the prayers sought by the applicant, ruled among others,

that there should be an inspection of polling booths and
election materials used and unused for the April 26 governorship elections in
about 200 wards in the state.

The tribunal also granted permission for the forensic
examination, as well as the electronic scanning of the election materials.

Relying on section 151(1) of the Electoral Act (amended 2010),
and the case of Rauf Aregbesola V. Olagunsoye Oyinlola, the tribunal directed
compliance with the consequential orders.

However, the tribunal did not honour the prayer of the applicant
that the documents and materials be kept in the court custody, and this was
because of the provision of section 72 of the Electoral Act which is to the
effect that only the Independent Electoral Commission (INEC), that is, the Resident
Electoral Commission (REC) shall have the custody of election documents.

The tribunal ordered the respondents to the petition to comply
with the orders made by the tribunal.

Ms Emehelu said the establishment of the panel was pursuant to
section 285 of the Constitution of the Federal Republic of Nigeria 1999, as
amended by section 9 of the Second Alteration Act 2010, paragraph 1 and 2 of
the sixth schedule of the constitution, 2010.

She said the secretary of the tribunal, Fransisca Mesiobi Emeto
had earlier reported in Ilorin to set up the registry of the tribunal with
supporting staff. She, however added that as at the time of its sitting on
Wednesday, no single petition had been received.

“As I speak to you, no petition has been filed before this
tribunal, save for an application, EPT/KWA/GOV/1M/2011: Mohammed Dele Belgore
of the Action Congress of Nigeria and two others V. Fatahi Ahmed of the Peoples
Democratic Party and 4 others, which was filed on the 7th May 2011 seeking
inter-alia, for the leave of the court to inspect and make copies of certain
documents used in the conduct of the governorship election of Kwara State for
the purpose of instituting and, or maintaining the applicants election
petition,” she said.

Ms Emehelu, who promised that the tribunal would give petitions
before it “expeditious adjudication”, pleaded that people should know that
election tribunals “are sui generis”, that is, belonging to a class of their
own, and give it maximum cooperation to enable the accelerated hearing of the petitions.

Other justices sitting as part of the tribunal are Kadi Dahiru Abubakar and
Saidu Sifawa.

Senate approves $1b for sovereign wealth fund

Senate approves $1b for sovereign wealth fund

The senate on Wednesday, passed the Nigeria Sovereign Investment
Authority bill, with an approval that it be jump started with the Naira
equivalence of $1 billion.

The start-up capital is to be contributed by the three tiers of
government including the federal capital territory, each contributing a
percentage of the initial fund equal to such government’s share of the
federation revenue in accordance with the subsisting formula.

Subsequent funding for the fund will be derived from residual
funds from the federation account which shall be transferred to the authority.
The derivation portion of the revenue allocation formula is excluded from the
subsequent funding source.

60 percent of both the start-up capital and subsequent funds
will be allocated equally to the authorities’ three main investment options:
The Future Generation Funds, the Infrastructure fund and the Stabilization
Fund.

The fund, when established, would replace the country’s excess
crude account (ECA) that banks Nigeria oil revenue above a benchmark oil price.

Critics of the excess crude account, created by the
administration of Olusegun Obasanjo, says it lacks a legal framework. The
account was set-up in 2004 following a fiscal policy decision to check the
negative impact of the swings in crude oil prices at the international oil
market on government expenditure, and to help create savings from excess crude
earnings for the country.

The incumbent administration in March 2011, revealed plans to
abolish the excess crude account as the minister of finance Olusegun Aganga,
told NEXT in an interview that the government resolved to abolish the account
not only because its existence was illegal and unconstitutional, but also that
management of the ECA has in recent times been subjected to abuses that tend to
defeat the objective for which it was established.

He noted that the process for accessing the ECA is not
transparent and clear to the Nigerians, therefore there is a general perception
that there is some level of mismanagement.

“The intention is that the (sovereign wealth) fund will be
funded by what we have in the excess crude oil account,” Olusegun Aganga told
reporters after the economic council meeting last month.

“The present arrangement is just an administrative arrangement,
it has no legal basis”, he said. “What we have to begin now is to give it a
legal basis so the excess crude account will be replaced by a legal
arrangement.”

The authority is expected to invest the funds in a diversified
portfolio of medium and long term investments for the benefit of future
generation of Nigerian citizens.

Mr Aganga said the fund adds to fiscal discipline of government
and is capable of attracting investment in infrastructure development from
sovereign wealth funds of other countries. According to him, accruals to the
fund would be put to work to intervene in critical sectors of the economy.

“The fund will have the ability to attract both local and
international investors. So even if they have $1 billion, it will be capable of
attracting more than $5 or $6 billion from other funds. Already we have had
interest from other sovereign wealth funds. It will be managed in a very
transparent way because we will have better control.”

The finance minister said the setting up of the sovereign wealth
fund will improve Nigeria’s rating in the international financial market. The estimated
value of global sovereign wealth funds is currently put at $2.5 trillion.

“Creation of the fund will ensure that the present and future
generations of Nigeria will still have a country to call their own,” Teslim
Folarin, leader of the senate said in his lead debate.

In exceptional circumstances set out in the act, the authority
will utilize certain liquid assets in the stabilization fund to supplement
other available fiscal stabilization funds to temporarily sustain duly budgeted
public expenditure in the interest of macroeconomic stability in Nigeria.

Bribery allegation denied

The Senate also denied media allegations that its members
demanded N25 million in bribes to hasten the passage of the Sovereign Wealth
Fund and Petroleum Industry bills.

The Senate President, David Mark, described the allegations as
“sheer blackmail.” The denial followed complaints by Dahiru Kuta, a member of
the committee that reviewed the bills, about a Monday publication in Punch
Newspaper claiming the senators demanded bribes to pass the bills.

“This blackmail is totally unnecessary and uncalled for. It is
not a very good thing by Punch Newspapers. I think they owe this hallowed
chamber an apology,” the senate president said.

“We will investigate this and the ethics committee should take it up live on
TV. No senator has demanded for anything. It is totally uncalled.”

Nigerian banks sitting on excess cash

11/05/2011 nigeriang No comments

Nigerian banks sitting on excess cash

Nigerian
banks are currently sitting on excess level of liquidity as financial
institutions are cautious to do real banking business post crisis
period. A recent report by Renaissance Capital (RenCap) stated that
with the relatively robust returns from government instruments, the
banks have virtually abandoned their intermediation role and are
playing safe.

“Traditionally
low-risk government T-bills, and recently government guaranteed
interbank assets, offer high-single digit to low-double-digit returns,
which encourages banks to run their balance sheets like hedge funds, as
opposed to proper economic intermediators of funds, as the additional
return (if any) on lending for the increased risk involved is, at
times, simply not worth the risk,” the report stated.

Deputy
governor, economic policy of the Central Bank of Nigeria (CBN), Sarah
Alade said recently that banks now prefer lending to government instead
of the real sector. “In terms of interest rate being high, when
government borrows money, offering banks higher rates than the private
sector can offer, banks naturally lend to government,” she said last
week at a forum in Lagos.

Efficient intervention needed

The
RenCap report therefore advised banks to grow their loan books. “For
us, the bottom line here is that the structure of Nigerian banks’
balance sheets, on average, highlights a very cautious, underleveraged
banking system that could comfortably squeeze-out more leverage, and
therefore bigger profits, without dramatically shifting out of their
low-risk comfort zones.” The report mentioned UBA and Zenith Bank as
institutions with the largest pool of cheap funds.

Recent positive trends

The
report incorporates coverage on Zenith Bank, First Bank, Access Bank,
Diamond Bank, Guaranty Trust Bank (GTB), United Bank for Africa (UBA),
Skye Bank, First City Monument Bank (FCMB) and Fidelity Bank. It
incorporates strong buy recommendation for Zenith Bank, First Bank,
UBA, FCMB, Skye Bank and Fidelity Bank as the sector looks forward to a
new growth spurt following the clean-up process undertaken by AMCON
(ASSET Management Corporation of Nigeria).

Renaissance Capital also anticipates strong credit growth in 2011
following recent positive trends. Speaking about the report, lead
author David Nangle said, “Taking into account AMCON’s success at
restoring confidence in the Nigerian Banking sector, we believe it is
poised for a new era of growth. This is based on Nigeria’s strong
macro-economic outlook, with growth projected to be between 7-8 per
cent in 2011 and the strong capitalisation in the banking sector.” The
report added that the moves by foreign banks to buy into the sector may
represent a medium-term threat to the current local private
bank-dominated playing field.

The
report stated that though the Nigerian banking space offers an
appealing investment base, there was still the risk associated with
frontier-markets investment. These include the legal system, with
regards to the length of time required to resolve financial court
cases, corruption, weak corporate governance, and the need to diversify
the economy.

Money

Capital market working towards global integration

11/05/2011 nigeriang No comments

Capital market working towards global integration

The Nigerian Stock
Exchange (NSE) says it is on track towards its integration into global
capital market operations and standards.

Market challenges

International regulatory standards

Money

Nigerian naira eases after Central Bank forex auction

11/05/2011 nigeriang No comments

Nigerian
naira eases after Central Bank forex
auction

The Nigerian naira
eased against the U.S dollar on the interbank market on Monday after
the Central Bank sold dollars at a higher rate than last week at its
foreign exchange auction.

The naira closed at
155.85 to the dollar on the interbank market compared to 155.15 at
Friday’s close, although the sale of $400 million by state-owned energy
company NNPC helped prevent it from slipping further.

“We have NNPC funds
in the market, about $400 million, but those who received the dollars
are not selling, possibly covering their short positions with the
funds,” one dealer said.

Traders said some
of the banks were holding onto the funds in view of the closing gap
between the central bank’s official rate and the interbank rate.

The central bank
sold $300 million at 153.18 to the dollar at its latest bi-weekly forex
auction on Monday, short of the $352.54 million demanded and compared
to $350 million sold at 153.02 a dollar at the previous auction last
Wednesday.

A one percent
commission charged at the forex auction meant dollars effectively cost
154.71, narrowing the gap with the interbank rate.

NNPC is the largest
supplier of foreign exchange to the interbank market with its large
monthly dollar sales usually providing support for the local currency.

Some analysts said
continued weakness in foreign reserves compared to year-ago levels were
continuing to put pressure on the naira.

Nigeria’s foreign
exchange reserves fell to $32.66 billion by May 5 from $34.55 billion a
month earlier and remain significantly lower than a year ago. They
stood at $40.12 billion by May 5, 2010.

Dealers said the
naira could weaken further in the coming days unless the central bank
moves to reassure the market that it will continue to support the naira
at current levels.

REUTERS