Nigeria Content Online

South Africa’s
Freeworld Coatings has received an unsolicited bid from Kansai Paint
and is now 26 percent-owned by the Japanese firm, South Africa’s
competition watchdog said on Friday.

Freeworld, a maker
of automotive and industrial paint, believes the bid by Kansai raises
competition issues, according to a statement by South African
competition officials.

Reuters reported in
October that Kansai, one of Japan’s largest paint makers, had acquired
about 25 percent of Freeworld and was in talks to take at least a
majority stake in the firm, citing people familiar with the matter.

“According to Freeworld, Kansai has made a systematic attempt to
gain control of the company, including approaching Freeworld’s
shareholders without its knowledge,” competition officials said in the
statement.

International oil
trader, Trafigura, has bought BP’s assets in the southern African
nations of Namibia, Botswana, and Zambia, The Namibian daily newspaper
said on Friday, citing a government minister.

The newspaper gave no amount for the sale, which it said had been confirmed by Namibia mines and energy minister, Isak Katali.

BP has committed to
sell up to $30 billion of non-core assets to pay for its devastating
oil leak in the Gulf of Mexico this year.

A spokeswoman for
BP in Johannesburg, Glenda Zvenyika, said the company was in talks to
sell assets in the three countries, as well as Malawi and Tanzania, but
no decision had been made.

The central bank
did not intervene last week to help the Egyptian pound recover from a
five-year low against the U.S. dollar, and is not targeting exchange
rate levels for the currency, the deputy governor said on Sunday.

The pound fell to
its lowest levels since June 2005, last week, against the dollar, but
rebounded on Thursday, after the U.S. Federal Reserve said it would buy
$600 billion of government debt to spur the U.S. economy.

The pound slid to
5.7770 to the dollar, around 5 percent weaker than at the start of the
year. It is now trading around 5.7140 to the greenback.

The general
manager, Brightway International Exhibition Co. Ltd., Fa Frank, says 60
Chinese firms are to showcase products at the ongoing Lagos
International Trade Fair.

Mr. Frank told the
News Agency of Nigeria on Sunday, in Lagos, that their stands would be
opened to visitors and investors as soon as the Chinese pavillion was
completed.

“About 60 companies
from China will be at this 24th Lagos International Trade Fair and they
are coming with various products that Nigerians will not resist.
However, their presence at the fair is not for buying and selling, but
to look for distributors and Nigerian partners,” he said.

According to him,
reaching out to developing countries for trade relations in any form is
one of the priorities of the Chinese government.

Mr. Frank said that some of the companies would exhibit heavy duty trucks and household utensils, among others.

The Nigerian Stock Exchange All Share Index (NSE-ASI) had mixed performance through the week under review.

Ordinarily, prices
are expected to drop, but for the continued flow of corporate actions,
the resistance remains strong. NSEASI recorded three black days that
took 1.37%, and two black days that added just 0.40%. It actually had a
turnover of 1.586 billion shares in 28,169 transactions. Comparing the
opening index of 25,042.16 and the closing figure of 24,800.47, a
negative difference of 0.97% or 241.69 points is noticed.

The banking sector
dominated performance during the week with the 814.362 million shares
traded on its equities in 15,696 deals through the week. The said
performance was boosted by volume on the shares of Zenith Bank Plc,
Oceanic Bank Plc, Access Bank, and United Bank for Africa Plc.

The insurance
sector was enhanced by volume on the shares of Lasaco Assurance,
African Alliance, and AIICO Insurance Plc, as it traded 259.754 million
shares on all its equities through the week.

Gainers and losers

A total of 33
stocks closed the week above their respective opening prices; 39 closed
in the red, while 130 stocks end the week on a flat note. Advancing
equities traded 566.498 million shares or 35.71% of market volume,
declining ones did 629.740 million shares or 40%, while the unchanged
stocks accounted for the remaining 390.185 million shares, same as
24.60% of market volume.

CORPORATE REPORTS

Intercontinental Bank Plc

One of the lead
bank ultimately declared by CBN as massively exposed to hang-over fund
in the stock market. Activities in the bank, in terms of operation and
profitability, are gradually looking up, but grey areas remain weighty.
In the recent interim Q3 statistics of the company, the massive decline
of sales revenue and negative shareholders’ fund should give concern to
shareholders.

In the review
period, Q3 turnover slashed 39.80% of N124.29 billion posted in
comparable Q3 2009 at current N74.82 billion. After accounting for tax
of N2.55 billion, Profit After Tax (PAT) stood at N10.19 billion,
revealing significant 106.3% recovery from loss after tax of N161.68
billion in Q3 2009.

Despite triple
digit growth in the bottom line, shareholders’ fund remains deep rooted
in liability at net loss of N368.88 billion. Total non-performing loans
to total loans and advances at the group level stood at 82%, against
76% in Q3 2009; while within the bank, it stood at 81%, compared to 75%
in Q3 2009.

Analysis on ratios
revealed that Q3 EPS now stands at 52 kobo, against loss per share of
832 kobo in Q3 2009. Price earnings multiple of 4.54 strengthen return
period of Intercontinental Bank. Net profit margin returned 13.6%
growth.

OBSERVATION: Deep
rooted negative shareholders’ fund is not healthy for stake holders.
Nevertheless, the massive drive in recovery of hang-up fund could
override the current shareholders’ fund position in the recent future,
especially with the AMCON set to start operation soon.

UAC Nigeria Plc

The conglomerates
group, UAC Nigeria Plc, provided its numerical numbers (results) for Q3
ended September 30, 2010. Cursory assessment on the figure revealed
abysmal performance. Turnover dropped lower by 11.59% against all
expectation.

In the same vein,
bottom line dipped by 19.23% at N3.74 billion. The current performance
conveys the possibility of lower full year gross revenue and PAT
against FY 2009. If this obtains, dividend payment may drop lower
against FY 2009 figure.

Additional analysis
shows that at Q3 EPS of 234 kobo, earnings strength has depreciated by
19.03%, when compared to 289 kobo in Q3 2009. Order ratio indicators
revealed lower growth in numbers; ROE- 10% and net profit margin –
10.07% against 12% and 11.02% posted respectively in Q3 2009.

OBSERVATION: UACN is a defensive stock and remains attractive for long term investors.

The
press release at the end of the US Federal Reserve’s Open Market
Committee meeting last week did not surprise too much. The markets
underestimated the amount of freshly minted money that the Fed was
willing to throw at the sluggish US economy: US$500bn, instead of the
US$600bn announced. In the end, I think even this is an overkill.

As
far back as August this year, Ben Bernanke, the Federal Reserve
chairman, had presaged his organisation’s commitment to reinvest
principal payments from its securities holdings, while buying
longer-term treasury securities, as part of a process of fostering
“maximum employment and price stability” in the US.

Of
greater moment is the debate over how useful this policy will be. A lot
has changed since the Fed first massively eased monetary conditions in
the US in response to the Great Recession. US banks, for one, are back
to their profitable old ways. They may not be lending as much today as
they did pre-crisis, but that’s the consequence of a different order of
things, and not because their balance sheets are burdened. Having only
recently had their chestnuts so dramatically pulled out of the fire, it
would be foolhardy for any to return to the fireside as closely as they
got last time, just because the Fed’s say so.

The
problem, however, with much of the debate on the pros and cons of this
second round of quantitative easing, especially in the US, is how
arcane it has gotten.

On
the strength of this alone, I rue the day when authorities here would
cite the US’ example, as reason to do the same here. Not just is it
still not so clear amongst US policy wonks that this is the best way
out of the current difficulty, with employment creation in the United
States, you indeed get the sense that even with the Fed, the assurances
are not so strong on the correctness of this policy trajectory.

Rather,
having run out of ammunition, and confronting an intractable problem,
the monetary authorities in the US, unwilling to sit and twiddle their
thumbs while their corner of “Rome” burns, have decided to throw the
kitchen sink at the problem. It may yet work! In the United States of
America.

Not
here! Same symptoms, though: no jobs, no new investment in fixed
assets, inventory stock remains flat, and a restive citizenry. But with
this big difference: our economy is ticking at fairly decent pace –
7.4% this year, and another 8.6% in 2011 (if you believe government’s
number crunchers, that is). Again, all of the growth in our case is
from a pretty low base.

There
is an additional difficulty in all of this. Reference to practice in
places like the United States of America is regularly excused in terms
of the need to apply global best practices to domestic affairs. This
trend has strengthened of late, as sections of the diaspora, victims of
the global financial crisis, return home. It is difficult, as it were,
to live with the “from the pulpit” mindset of this class of Nigerians.
Harder still to persuade the “returnees” of the fact that the failure
of the Nigerian state is not the consequence of unfamiliarity with
“global best practices.”

Instead,
our leaders have made a conscious choice, and the terms of a social
compact implicitly accented to by all segments of the populace – an
agreement that spares the middle class and all other strata of society
above it the full burden of the consequences of our leaders choices –
makes it easy to live like this.

Moreover,
it is to the consequences of our preferred lifestyle that we must turn
in search of resolution, rather than to practice elsewhere. Urban
unemployment in Nigeria is put at 25%. It is somewhat higher
nationally. Amongst the most important (since it is the largest)
demographic group, the 15 – 25 years old, unemployment stands at 58%.

Underemployment
is not usually measured here, but anecdotal evidence would suggest that
it is a major worry. What passes for manufacturing is increasingly no
more sophisticated than the Asian sweatshops that were the butt of
western environmental and fair labour activists in the 70s and 80s.

In
other words, we have local constraints, whose effect on the economy is
more perverse, than the application of global practices to their
solution could be salutary.

The Federal
Government, on Friday, demonstrated magnanimity by granted a 20-day
extension on the deadline for the payment of the initial big security
on the national telecoms carrier, the Nigerian Telecommunications
Limited (NITEL), and its mobile subsidiary, MTel.

New Generation
Consortium, which emerged the preferred bidder during last February’s
bid exercise organised by the Bureau for Public Enterprises (BPE), was
given up to last Thursday to pay for the 30 percent bid security on its
$2.5billion offer.

Following President
Goodluck Jonathan’s approval early last month, for BPE to bring the
controversial privatisation to a close, the consortium was, October 25,
asked to pay the initial bid security of $750million (about
N112.5billion) within ten calendar days from the date of its receipt of
a demand letter conveying its acknowledgment as winner.

In accordance with
the provisions of the Requests for Proposal (RFP) issued to all bidders
at the inception of the process, the letter indicated that the payment
of the bid security would be a pre-condition for the issuance of the
formal offer letter for the Consortium to go ahead to complete the
acquisition process.

However, at the
close of business on Thursday, rather than the electronic transfer
document indicating payment, the Consortium showed up at the BPE with a
copy of the letter addressed to the National Council on Privatisation
(NCP) requesting for 30 days extension to enable it mobilise funds for
the payment.

Deadline recipe for failure

Chief Executive of
the consortium, Usman Gumi, in a response to inquiries on Friday, told
NEXT that the letter despatched shortly before the expiration of the
deadline on Thursday became necessary considering the long period it
took government to approve the conclusion of the bid.

“We have sent a
letter to the National Council on Privatisation (NCP) seeking for an
extension by 30 banking days of the deadline for the payment of the
initial 30 percent bid security, considering the negative impact the
long delay by government to take a final decision to approve the
conclusion of the transaction has had on the entire process,” Mr. Gumi
said.

“Giving only ten
calendar days for the payment of $750million is a recipe for failure.
No businessman would like to tie down his money to wait for over eight
months for government to take its decision,” he said, assuring that the
consortium is committed to realising the dreams of Nigerians as well as
the expectations of the Federal Government in the privatisation
programme.

A statement by the
BPE, conveying government approval of the bidder’s request had alluded
to the “consortium’s difficulty with concluding the due diligence and
compliance processes associated with the transfer of such huge funds.

According to BPE
spokesman, Chukwuma Nwoko, the consortium requested for “a 20-working
day extension to clarify all compliance and due diligence issues, and
also to remit the funds into BPE’s account.”

Extension approved in breach

NEXT investigations
reveal that government decision to grant the extension may have been in
breach of the stipulated bid guidelines issued at the beginning of the
bid process, which indicated that the winner would have to revert to
the reserve bidder in the event of failure of the preferred bidder to
meet the payment deadline.

However, followers
of the privatisation process accuse the NCP and BPE of double standards
in the application of its bid guidelines rules by accepting to
accommodate the interest of a bid winner who experience difficulties in
meeting a payment deadline as a result of delays caused by bureaucratic
hitches, when they had ignored similar requests in the past.

Observers cite the
instance of BFIGroup, the American bidder, which emerged the preferred
bidder for the Aluminium Smelter Company of Nigeria (ALSCON) in 2003,
but was disqualified after BPE accused it of failure to meet the
deadline for the payment of 10 percent of its $410million offer.

The company had
requested for an extension of the payment deadline, following a delay
by BPE to issue it the mandatory demand letter acknowledging its
emergence as the preferred bidder within 48 hours of the declaration of
the winner by the NCP.

China Merchants
Holdings International has agreed to form a joint venture that will buy
a 47.5 percent stake in a container-terminal operator in Nigeria from
Israel’s Zim Integrated Shipping for $154 million.

China Merchants
will own 60 percent of the venture, with China-Africa Development Fund
(CADF) taking a 40 percent stake after obtaining approval from Chinese
regulators, the Chinese port operator said in a statement.

China Development Bank owns CADF, a fund which supports Chinese enterprises in their investment in Africa.

Zim will record a
pretax gain of $120 million from the sale, its parent company, Israel
Corp, said. Israel Corp shares were up 3.0 percent in morning trade in
Tel Aviv.

The First
Secretary, Delegation of the EU to Nigeria, Massimo De Luca, said the
volume of trade-related assistance to Nigeria hovers around 6.5 billion
Euros.

Mr. De Luca stated this in Lagos, on Sunday, during the EU Day at the ongoing Lagos International Trade Fair.

He said most of the
EU interventions were through the European Investment Bank (EIB), with
the cooperation of the Central Bank of Nigeria (CBN).

Mr. De Luca said
EIB made allocations through the CBN, which in turn allocates the funds
to key sectors that needed intervention.

“The EU volume of
trade ranges around 6.5 billion Euro to Nigeria. As a donor, EU is very
strict to ensure that the money it gives does not go into the wrong
pockets. That is why EU financial interventions are through many
agencies and other institutional actors. It has to be EIB to CBN, then
to specific sector,” he said.

Mr. De Luca said that the EU had been supporting Nigeria in the area of trade, good governance and security.

The First Secretary
said in the area of policy definition, EU had helped to strengthen the
institutional structures which had problems in keeping with the
challenges of making and implementing policies.