Nigeria Content Online

Barring journalists from covering the daily activities of the
Nigerian Stock Exchange (NSE) will further dampens investors’ confidence, some
market operators at the Exchange have said.

Boniface Okezie, the National Chairman of the Progressive
Shareholders Association of Nigeria, said the NSE’s decision is not good for
the market because it negates the issue of transparency which the Exchange
“claims to be preaching”.

“It is an illegal act and it is totally not acceptable because
that is not the norm in Stock Exchanges around the world,” Mr Okezie said.

“The NSE gallery was built to allow investors and journalists
have access to the trading floor and witness daily transactions. This enables
them to make investment decision and report such while trading is going on. The
Stock Exchange is not a secret court where you bar the media from having first
hand information. The exchange has always been open since inception till the
days of the immediate past head. I think they have something to hide,” he said.

He added that the NSE is a public domain which was why the
Securities and Exchange Commission (SEC) deems it fit to remove the director
general for the interest of the general public.

“Strange declaration”

Femi Awoyemi, the chief executive officer of Proshare Nigeria
Limited, an investment advisory firm, said the move is unusual.

“This is a strange declaration from a SEC driven NSE which
actively cultivated the press on the serious and non-essential happenings at
the NSE.” Mr Awoyemi said the action is not only ludicrous but a clear signal
that the NSE “might have shut itself in the foot.” He added that the Exchange,
according to the SEC when it took over in the public interest, is an
organisation whose affairs cannot be shielded as a private entity.

“This can and should be seen as an attempt to censure
disclosures that have emerged about internal workings of the
regulator-operator. SEC released the table and either directly or indirectly
released sensitive internal information to select media houses always,” he
said.

“It simply defies logic that they would blame information
platforms about saying too much – that is giving too much credit to a group of
which some has sold their soul for cash. This is the act of a flip flop
administration.”

The NSE’s spokesperson, Sola Oni, had said at the weekend that
journalists will no longer be allowed at the Exchange, while those seeking to
make enquiries from relevant Exchange’s staff are to apply and wait for
adequate clearance.

Mr. Oni said it was a corporate decision aimed at raising the Nigerian
market to world standards.

The Federal Government yesterday
announced the establishment of three new special commercial courts to
help in the enforcement of contracts in the country.

Minister of Finance, Segun Aganga, who
announced this yesterday in Abuja at the opening of the 51st Annual
Conference of the Nigerian Economic Society (NES), said the new courts,
which became operational in the last three weeks, would help expedite
the dispute resolution processes, to allow banks to begin lending to the
real economy.

Besides, the minister said government
has already submitted to the National Assembly amendments to some
existing laws that impede business transactions in the country, which
include the Evidence Act, Bankruptcy Act, and Land Use Reform Act.

“The problem has always been that even
when the banks decide to lend to individuals who have collaterals, it
was always difficult for them to have access to such collaterals, either
because some investors would go to the court and get injunction to
restrain them, or that some of our legal instruments are outdated.
Therefore, banks often cite this as reason for not lending for the
growth of the real economy,” he said.

The minister, who was reviewing
government efforts to grow the country’s real economy and bring
transformation to Nigerians, said apart from the establishment of an
Asset Management Corporation of Nigeria (AMCON) to help remove some of
the toxic assets in the banks and fund their balance sheets to make it
easier for them to lend, government is also setting up a Sovereign
Wealth Fund (SWF) with about $1billion capital to reduce the
vulnerability of the economy to external shocks.

He also said government, with the aid of
the World Bank, is in the process of establishing a sovereign asset and
liability risk management unit, as well as partial risk guarantees for
private sector power generators, under which individual independent
power providers (IPPs) would be required to obtain political risk
insurance to mitigate the political and termination risks in their
operations.

Recalling a recent global
competitiveness survey by World Economic Forum (WEF), which ranked
Nigeria 127th out of 133 countries considered, he said WEF officials
have been invited to visit the country within the next two or three
weeks to work with government to identify the reasons for this poor
ranking; show what other countries have done to improve their rankings;
and what Nigeria needs to do to improve its ranking.

The WEF report had noted that investors
and stakeholders in various sectors of the country’s economy lacked
constant and reliable supply of electricity, while the country was
having massive infrastructure deficit as well as health and
training/education challenges.

“We can no longer ignore some of these
reports. Whether we agree with them or not, it is important that we
continue to learn from what we are doing internally, and what others are
doing. That way, we can become one of the world’s top 20 economies,
which we all aspire to become by 2020,” Mr. Aganga said.

Head of the civil service of the
federation, Stephen Oronsaye, who noted government’s determination to
achieve macro-economic stability in the country, said there has been a
genuine effort to raise the standard of living of the people, as well as
put the economy on the path of sound growth and sustainable
development.

The theme of the conference was ‘Distortions in the Nigerian economy: Implications for Sustainable Development.’

Political leaders from Nigeria and Angola met over the weekend
to discuss practical ways of addressing the problem of instability and poor
governance in the Republic of Guinea Bissau.

Idi Hong, minister of state for foreign affairs, received a
visit from George Chicoty, a special envoy from the President of Angola on Friday.

However, Mr Hong told journalists that he could not disclose the
details of the discussions, only saying that Nigeria, which currently holds the
leadership for the Economic Community of West African States (ECOWAS) has
convoked an ordinary session of ECOWAS Heads of states to discuss the issue.

“We are already aware of the agreements and resolutions that
have been taken,” said Mr Hong. “Angola is the chair of Portuguese-speaking
countries, and with Guinea Bissau being a Portuguese-speaking nation, they are
interested about the resolution of this matter; that is why they are here.”

Mr Chicoty said that Angola and Nigeria share a good bilateral
relationship and he wanted to deploy this relationship in addressing the Guinea
Bissau challenge.

“We share a common view on security issues in Africa and in this
particular case, we do share views about how to restore security in Guinea
Bissau,” Mr Chicoty said.

He said both governments want to contribute to peace in Guinea
Bissau and said that Angola has already made a contribution of $20 million to
the security and defence reform sector in the country.

In September, ECOWAS met to discuss whether to send troops to
stabilise the deteriorating security situation in the nation. The country has
been plagued by coups and drug trafficking since independence from Portugal in
1974.

United Nations officials say Guinea Bissau’s tiny scattered
islands have become a hub for the drug trade between Latin America and Europe.

Billions of dollars worth of cocaine is believed to pass through the
impoverished state each year. A number of political slayinglast year, including
that of Guinea-Bissau’s president, army chief and a presidential candidate, are
likely linked to the trade, they said.

Two recent
proposals are being discussed at the Nigerian Stock Exchange (NSE) with
brokers and regulators that would have far reaching implications for
the market. They would also have a revolutionary effect on investor
confidence and trading.

The first is the
proposal to migrate to a modern platform of Straight Through Processing
(STP), designed to eliminate settlement risk and ensure that all trade
settles cash versus securities. In other words, there will be no failed
trade and all trade ideally will settle same day.

This means that all
cash settlement will go straight to investor bank accounts, thus
eliminating the nagging issues of rogue brokers, who sell their
client’s shares without authorisation. This has been a major confidence
issue with some investors before and has contributed to labeling all
brokers as fraudulent, even though the records show that only few
brokers are involved in these condemnable acts.

For example, the
requirement for investor bank accounts, that will be tied to a CSCS
account for every investor, will enhance the ‘Know Your Customer’ rule,
as it will be another check for knowing who the account holder is. It
will eliminate mystery investors who launder money through the stock
market.

This has been a
major omission in the past. No one can open a brokerage account today
in any advanced market, without a corresponding bank account to keep
records of the inflow and outflow of cash. There is also the added
benefit to stock brokers, as it will eliminate customer payment duties
in their back offices, leading to more efficient back office operations
that are a major challenge for small broker offices, which currently
rely on manual processes that is fraught with errors and delays, with
the attendant client dissatisfaction. The resulting back office
efficiency will enhance broker income and allow focus on the more
important aspects of their functioning in the market.

The combined
benefits of implementing the programme and the expected results will
increase trading volumes and investor confidence, which should
translate to liquidity. The New York Stock Exchange, when it adopted
STP in 1995, after a 203 year history, witnessed huge volume increases.
It ushered in a new era with automated trading of this type and
shortened processing time; we expect the same to happen here.

Interestingly,
implementation will have minimum disruption, since all that will be
required will be for clients to submit their bank accounts to their
brokers, who will cross check their validity with the banks.

Improving trading economics

The other proposal
is aimed at improving trading economics by expanding the current
trading band. I see this as another forward looking proposal likely to
move the market forward quickly. Many analysts have questioned the
rationale for limiting the price movement to a daily plus 5 percent up
and minus 5 percent down, and have called for its elimination.

That seems drastic,
and may bring about volatility that we may not be able to manage. The
new suggestion to move gradually by increasing the current position to
plus 10 percent up and 10 percent down has my support. The current low
volume of trade and sluggish upward movement of prices means no
profitable trade can take place.

Even though average
daily volume has increased since the crash of 2008, the price decline
has meant average trading value has remained below 2007 and 2008
levels. This has affected broker/NSE revenues. By widening this trading
band, we will see increased activity, as investors will be more willing
to trade their accounts.

This will also
dramatically improve liquidity and provide a basis for the current
stabilised market prices to appreciate more steadily and give room for
faster correction of bubbles when they appear, as investors and brokers
trade to take profits quicker and correct market imperfections in stock
prices.

Margin guidelines

The margin
guidelines jointly provided by the Central Bank of Nigeria and the
Securities and Exchange Commission seem to be an overreaction that will
produce the bubble in share prices in the future if corrections are not
made before implementation.

First, they want
all bank stocks eliminated from margin lists for margin financing
purposes, a situation that affects 60 percent of market capitalisation.
Second, they want a 50 percent maintenance limit and then 10 percent
market cap on exposure to margin lending within banks portfolios.

While some of these
are best practices, concentrating margin financing to only 40 percent
may lead to the situation where the most liquid of these are the only
stocks banks will agree to finance, leading us back quickly to bubble
prices.

The second half of
the year 2010 has already showed evidence of what is likely to happen;
second half volume is lower than the first half for same period last
year. The advances/decline ratio is also reduced, while cumulative
volume for the year which was looking promising to exceed 2009, is now
weakening and may barely match 2009 levels.

I think the
appropriate thing will be to use percentage guides, for example, no
margin financed portfolio should carry more than 25 percent bank
stocks.

There is also the
need to fast track introduction of the margin list, as this will give
clarity to this aspect of the market and reduce panic selling. The
market needs to be sensitised to the technical details of how margin
accounts work, and how it will operate under the new guidelines. It
should be clear that margin accounts are an important part of the
market. They were not the problem, but their operation.

Victor Ogiemwonyi is the MD/CEO of Partnership Investment Plc, Lagos.

The governing board
of the Petroleum Products Pricing Regulatory Agency (PPPRA) yesterday
met with officials of the Petroleum and Natural Gas Senior Staff
Association of Nigeria (PENGASSAN) in Abuja on ways of aborting a
crisis over a demand for the reinstatement of two members.

Sources revealed
that one of the key resolutions of the meeting was the immediate
reinstatement of the two officials on or before next week Tuesday,
ahead of the next meeting of the board.

But it was gathered
that even as the two officials are expected to be issued with fresh
letters, latest next Monday, reinstating them to their former positions
as well as being paid the backlog of their salaries and entitlements
for the period, it might not be smooth sailing for them to resume their
seats.

The affected
members , Phillip Salvation and Daniel Afiakurue, who were General
Managers, finance and administration, and operations until they were
suspended in September 2007, along with the then Executive Secretary,
Oluwole Oluleye, over allegations of impropriety and corruption by the
Federal Government.

After two years of
investigation by the Economic and Financial Crimes Commission (EFCC)
the three were recently cleared of all allegations.

Though Mr. Oluleye
has since December 2008 been retired with full benefits, the other two
officials, who still had long years of service, were yet to be
reinstated by the PPPRA management for lack of vacancy.

It was gathered
that the management had argued that it would be difficult to reinstate
the two, as directed by the office of Secretary of Government of the
Federation (SGF), as they were not consulted when the Federal
Government took the decision to suspend them from office.

Besides, the
management claimed that in the wake of the suspension of the three
officials, their positions were filled by new appointees, Gbenga
Komolafe, as acting General Manager (F&A), and Joseph Dogo as
acting General Manager (Operations).

Ultimatum

But PENGASSAN,
early this month, reportedly issued a 14-day ultimatum threatening to
embark on a nationwide strike if the directive by the SGF for the board
to find accommodation for the two was not met.

The crisis
degenerated, as the PPPRA management accused PENGASSAN of over-reaching
itself with its insistence on the reinstatement of the two officials,
since the issue had nothing to do with the welfare of its members, a
source said.

Joint conciliatory
committee meetings called for Kaduna between PENGASSAN executive
committee and PPPRA management to find a way out of the crisis was
reportedly ignored by Mr. Dogo on two occasions, resulting in the call
by the oil workers’ union for his immediate sack in line with the
dictates of labour laws, which stipulates that officials should be
summarily relived of their positions after three cases of
insubordination.

Prior to the
expiration of the ultimatum by the PENGASSAN last Thursday, it was
learnt that the PPPRA board had to take the matter before the Minister
of Labour and Productivity, Chukwuemeka Wogu, who called for an
emergency board meeting held yesterday to forge reconciliation between
the union and management, and avert the strike.

The stock market runs through a mixed performance during the week, leading from sharp disagreement between the bullish and bearish investors over market position. Even when the bargain hunters felt it was profit taking time, market received timely patronage from good numbers of bullish investors that finally turn around the market face.

Week on week NSE ASI followed an uptrend; meanwhile, month on month, the downtrend still holds. If the ongoing trend is maintained, then the latter should change soon.

Despite the short pull back within the week, NSE ASI only closed 99.03 points or 0.40% below the opening point. It opened the week with 25,077.73 points and closed at 24,978.70. Market capitalization of listed equities equally closed in the red at N6.12 trillion.

NSE-30 shed 3.97 points same as 0.33% of its opening figure to close at 1,057.82 points. NSE-Banking and NSE-Oil/Gas appreciated by 1.71 points or 0.6% and 5.10 points or 1.54% respectively. Meanwhile; NSE-Food/Beverages and NSE-Insurance dipped by 20.23 points or 2.50% and 1.24 points and 0.75% respectively.

Percentage gainers/losers

40 stocks closed the week above their various opening prices, 43 shed prices and 118 stocks were flats. Price percentage gainers chart were led by Oceanic Bank Plc that gained 25.52% over its opening price, Unity Bank Plc appreciated by 19.39% and Afribank Plc, IHS Nig. Plc, and Ikeja Hotel Plc moved up by 15.33%, 13.73% and 12.88% respectively. Niger Insurance Plc top the price percentage losers’ chart with 12.50% followed by Cadbury Nig. Plc, Skye Bank Plc, Guaranty Trust Bank and Ecobank Plc with 12.12%, 8.04%, 8.02% and 7.94% respectively.

Report on the OTC FGN bonds market

A turnover of 223.6 million units worth N216.47 billion in 1,599 deals was recorded last week, in contrast to a total of 266.9 million units valued at N246.36 billion exchanged in 1,978 deals during the week ended Thursday, October 14, 2010. In terms of turnover/volume, the most active bond was the 10.00% FGN July 2030 with a traded volume of 33.2 million units valued at N27.12 billion in 257 deals. It was immediately followed by 9.92% FGN January 2012 with a traded volume of 30.6 million units valued at N32.01 billion in 297 deals. Fifteen (15) of the available thirty-six (36) FGN Bonds were traded during the week under review compared with sixteen (16) in the preceding week.

Market outlook

Prior to the strong support on the last trading day of the week, the market was already on a short pull back and traders were already setting for sell-off in order to hold cash to position at bottom of the expected pull back. If the market fundamentals remains, then the market may continue on the bullish run from the first trading day of the new week. Nevertheless, traders should once again expect short pull back as bargain hunters may take profit at any prompt signal. Whichever way it is viewed, cautious positioning should be every trader’s watchword.

CORPORATE REPORTS FOR THE WEEK ENDED

Dangote Cement Plc

Dangote Cement Plc emerged from the recent merger between Dangote Cement Plc (DCP), formerly known as Obajana Cement Plc, and Benue Cement Company Plc (BCC). The merger was made possible as result of majority stake held by Dangote Industries Limited (Dangote Group) in the two companies. In a nutshell, DIL interest in DCP and BCC are 99.14% and 74.77% respectively. The post merger Dangote Cement Plc now has an authorized share capital of N10 million, divided into 20 million ordinary shares of 50 kobo each. The merger assumption for BCC’s shareholders states as follow: (1) that every 2 existing shares of BCC prior to the merger becomes 1 share. (2)

That the price of BCC (N67.50) as at the time it was place on technical suspension (prior to the merger) is now multiplied by 2 to give the current price of DCP (N135).

DCP is billed to be listed on Tuesday, October 26, 2010, in simultaneous with its special sales of 100 million ordinary shares of 50 kobo at N135 each.

In readiness for the listing and the special sales offer, the directors of DCP last week reported its unaudited third quarter results for the period ended September 30, 2010. Analysis on the results revealed improved growth over similar period of 2010.

Turnover (TO) grew by 60.53% at N146.56 billion while both PBT and PAT went up by 63.93% at N76.93 billion and 66.82% at N75.30 billion respectively.

Further analysis revealed that Q3 EPS currently stands at 375 kobo resulting to earnings yield of 2.79%. Net profit margin is 51.38%. DCP currently sells at PE multiple of 35.86.

Giving weight to the special sales offer, DCP’s Board of Directors is recommending an interim dividend of N2.00 per share. The closure date is November 17, 2010 while payment date is November 30, 2010.

Wema Bank Plc

The directors of Wema Bank Plc last week reported its unaudited third quarter results for the period ended September 30, 2010. Scorecards showed re-awaking in Wema Bank, with a strong turnaround in the bottom line. Despite improved growth at the bottom line, the report remained mixed, with turnover dipping by 4.75% at N24.09 billion against N25.29 billion in Q3, 2009. Wema Bank’s return from the woods received a boost by PAT growth of 105.5% at N1.64 billion, against loss after tax of N29.73 billion in similar period 2009.

Additional analysis shows that ratios indicators are trickling in positive figures. Q3 EPS stands at 16 kobo, creating an earnings yield of 17%.

At current 93 kobo market price, PE multiple of 5.87 was generated. Stakeholders’ equity (ROE) returned 4% while net profit margin of 6.79% was equally generated. The coast is still gloomy for Wema Bank as it operates with net liability of N43.90 billion.

The performance of
trading activities at the Nigerian Stock Exchange (NSE) on Thursday was
strengthened as market indices consolidated the marginal gains recorded
on Wednesday.

The NSE market
capitalisation of the 200 first-tier equities closed yesterday at N7.99
trillion after opening the day at N7.967 trillion, reflecting 0.29
percent upturn or over N22.82 billion gains.

The All-Share Index
also appreciated by 0.29 percent or a gain of 71.61 points on the
previous day’s figures of 24,996.14 basis units, to close at 25,067.75
units. The Exchange measuring parameters had, on Wednesday, appreciated
marginally by 0.09 percent.

Commenting on
Thursday’s trading performance, equity analysts at Proshare Nigeria
Limited, an investment advisory firm, said the market consolidated the
marginal gains “on heels of continued positive market sentiments,”
adding that more stocks are expected to “decamped to gainers’ camp with
positive market breath.”

Trading activities yesterday were more dominant in banking, insurance, conglomerate, and food/beverages subsectors.

Gainers increase

Four of the NSE
sectoral indexes closed positive at the close of trading as NSE-30,
which measures the performance of blue chips in the market, gained by
0.27 percent. The NSE Insurance gained the highest point by 1.45
percent, the Banking moved up by 0.51 percent, Food/Beverages up by
0.30 percent, while the NSE Oil/Gas sheds the highest point by 1.87
percent.

The number of
gainers at the close of trading session yesterday closed higher at 30
stocks, as against the 25 gainers recorded on Wednesday, while losers
closed lower at 20, compared with the 27 losers recorded the previous
trading day.

The Banking
subsector led the market transaction volume with 190.17 million units
valued at N1.49 billion, as against the 254.90 million units valued at
N2.02 billion recorded on Wednesday.

The volume recorded
in the subsector was driven by transaction in the shares of Zenith
Bank, United Bank for Africa, Guaranty Trust Bank, BankPHB, and Diamond
Bank. The total volume of 105.81 million units valued at N1.10 billion
traded in the shares of the five stocks accounted for 42.21percent of
the entire market volume.

The subsector also closed with 14 gainers to 5 losers, compared with 13 gainers to 6 losers recorded on Wednesday.

Financial results

Meanwhile, at the Exchange floor on Thursday, five companies presented their financial results.

Consolidated
Hallmark Insurance, in its first quarter report, posted a negative
gross premium of 7.1 percent and a negative Profit After Tax (PAT) of
35.0 percent. The company in its second quarter results also recorded
negative gross premium of 20.2 percent and negative PAT of 67.1 percent.

Access Bank, in its
third quarter results, recorded a positive PAT growth of 198.3 percent,
while it recorded negative gross earnings of 15.2 percent.

South Africa’s
government has no target for foreign exchange reserves and will help
the Reserve Bank accumulate reserves as and when it can afford to,
finance minister, Pravin Gordhan, said on Thursday.

Mr. Gordhan also
told a parliamentary committee the government had extended guarantees
to state power utility, Eskom, from174 billion rand to 350 billion
rand, to enable it to continue with its power generation programme
through 2017.

The government is
under pressure from exporters and unions to tame the rand, which has
rallied more than 26 percent against the dollar since the start of
2009, and Mr. Gordhan said on Wednesday the government would allocate
more funds to let the central bank build up reserves.

The rand’s
strength, largely fuelled by foreign investment into South Africa’s
high-yielding assets, is hurting mining and manufacturing exports in
particular.

“There is no target
as far as reserves are concerned. As and when we can afford to fund the
Reserve Bank’s purchase of dollars and accumulation of reserves, we
will certainly do that,” Mr. Gordhan told a parliamentary committee on
Thursday.

The Treasury says
it has spent 43 billion rand so far this year to support the central
bank’s reserve-building efforts and will continue to do so, pushing
reserves to over $44 billion by the end of September.

The central bank
started using currency swaps in August to shore up its reserves.
Through an overbought forward book, it purchases dollars in the spot
market and enters into longer-term contracts to settle the purchases.

The central bank’s forward book stood at $1.1 billion in September.

Rand overvalued

Treasury director,
General Lesetja Kganyago, reiterated on Thursday the rand was
overvalued by up to 20 percent, but said its strength had offered some
benefits for a country investing in infrastructure.

“Depending on what
you use, the overvaluation would vary between 5 and 20 percent and that
is not very helpful in making a decision. The range is so wide, so you
try to shoot for something in the middle,” Mr. Kganyago told the
parliamentary committee.

He told legislators it was necessary to allow foreign exchange to go out of South Africa to mitigate the rand’s gains.

The central bank
says it does not target a level for the local unit, which was last
trading at 7.0023 against the dollar on Thursday, up to 1.03 percent
from Wednesday’s close of 7.0750.

The Treasury
offered more guarantees for Eskom, which has been struggling to find
all the money it needs to pay for two new 4,800 MW coal-fired power
plants.

The electricity
firm has said it will tap the U.S. bond market in early 2011 for cash
to pay for new power stations, including the Medupi and Kusile projects
and other infrastructure desperately needed to avoid a power crunch.

“Backed by these
guarantees … when they complete Medupi and Kusile, the energy that is
going to be generated by these power stations should actually enable
Eskom to service its debt,” Lungisa Fuzile, head of asset and liability
management at the Treasury told the same hearing.

Officials have warned of rolling blackouts from 2011 to 2016 unless extraordinary measures are taken to generate more power.