Nigeria Content Online

South African
industrial conglomerate Bidvest posted higher full-year profit on
Monday as solid demand from emerging markets offset a stronger rand,
and said it was looking for potential acquisitions.

Bidvest, whose
businesses include auto retailing, shipping and food distribution, has
been helped by exposure to fast-growing markets such as Asia, which
have largely escaped the worst of the global downturn.

It also expects a
boost from decades-low interest rates at home, and as economies in
Europe and South Africa make a gradual recovery.

Bidvest, which has
a market value of around $6.2 billion, said in a statement it is
budgeting for “real growth” in earnings in the coming year.

“Our capacity to do deals is quite significant,” Chief Executive Officer Brian Joffe said in a telephone interview.

“We obviously have to put our balance sheet to work over the next short while.”

He declined to say
how much Bidvest would be looking to spend on a potential acquisition.
The company has said it is looking to expand its food service business
in Europe.

The company’s
current leverage ratio stands at around 30 percent, Joffe said, adding
that could “easily” be boosted to 40 or 50 percent.

Overseas profits

Bidvest, which
makes more of a quarter of its sales overseas, said full-year results
were boosted largely by stronger auto sales in South Africa and rising
demand for catering services in Asia.

“It’s a good
quality set of results and shows that something is happening in the
economies it operates in,” said Mark Hodgson, an analyst at Avior
Research.

But the company was also hit by the strengthening rand, which eats into the value of overseas earnings.

Earlier this month
the rand hit a 2-1/2 year high against the dollar, prompting South
Africa’s finance minister to say he was concerned about the rise of the
currency.

Bidvest’s Joffe
said the soccer World Cup, which was expected to lift earnings at home,
failed to deliver due to fewer than expected foreign visitors.

Headline earnings per share rose 15 percent to 1,070 cents in the year to end-June.

Headline EPS, the main gauge of profit in South Africa, strips out certain one-time items.

Revenue fell 2.3 percent to 109.8 billion rand, hit in part by the stronger rand.

Bidvest’s cash
generation increased 18.3 percent to 8 billion rand, debt fell 7.3
percent to 3.8 billion rand, while finance charges dropped by around a
quarter.

Shares of the
Johannesburg-based company, which are little changed so far this year,
gained 1.2 percent to 130.50 rand as of 1110 GMT, slightly
underperforming a 1.6 percent rise in the blue-chip Top-40 index.

It is possible some
people may not have heard of browser wars. This term is used to
describe the rivalries for the control of the web browsing market,
specifically between Microsoft’s Internet Explorer and Netscape’s
Navigator in the 1990s (Internet Explorer won that one hands down), and
the resurgence of rivals to Internet Explorer since 2003. The major
competitors are Mozilla’s Firefox, Apple’s Safari, and more recently,
Google’s Chrome.

All this is in the
desktop computing space however, and Opera, a Norwegian software maker,
has always been one of the ‘little’ boys in that battle. But in recent
times, the mobile browsing space is becoming more significant and more
important, and when it comes to that space, Opera is king. Today, we
are going to take a look at their browser for mobile phones, Opera Mini.

First things first,
Opera Mini is free. Simply go to Opera.com and download it. It is
supported through a partnership between the Opera Software company and
Google.

The browser is
designed primarily for mobile phones, smart phones, and personal
digital assistants. It uses the Java ME platform and as a result,
requires that the mobile device be capable of running Java ME
applications.

Opera Mini was
derived from the Opera browser for personal computers, which has been
publicly available since 1996. It began as a pilot project in 2005 and
after limited releases in Europe, it was officially launched worldwide
on January 24, 2006.

Easy interface

Opera Mini has an
easy interface with an address bar and a Google search bar. Mobile
users do not need more than this really, and Opera manages to put them
in a short column that requires little scrolling. A pop-up menu
available from any screen brings you directly to any of these basic
navigational components, no matter how deeply you are in a site. A
Settings tool opts in or out of image loading, forcing the screen to
jump to the first available text, font size changes, etc.

For me, the killer
feature of Opera Mini is that it requests web pages through Opera
Software’s servers. The servers are configured to process, and then
compress them before relaying the pages back to your mobile phone. This
compression process makes transfer time about two to three times
faster, and the pre-processing smoothes compatibility with web pages
not designed for mobile phones.

Some websites are
not yet compatible with mobile phones, so do not render well on your
Blackberry’s native browser, but render quite well on Opera Mini. All
this is done without taxing the phone itself, and most crucially for
me, in a way that is very friendly to the Nigerian pocket. Images on
the websites are scaled down so you can see them on your phone, but
they do not use much of the 100MB that Zain (what’s their new name
nowadays?) allocates on what I consider to be the most reasonably
priced mobile Internet plan in Nigeria.

For someone like me
who does most of my mobile browsing on a Blackberry, this browser is a
must have. The only problem I had with it was that it kept crashing
each time I opened more than four tabs at a time, but that was probably
a function of the kind of websites I visit.

However, it beats
RIM’s own Blackberry browser hands down, and neither the Android’s
native browser, nor Safari on the iPhone are nearly as good as what
Opera has put out in the Mini. This browser is a must-use for anyone
who is serious about having access to the Internet on the go.

There were two
interesting headlines in the local papers last week. The first,
‘Nigeria needs N23 trillion for oil exploration’, was all about the
sums required as investment in exploration and development in the
upstream sector of the oil and gas industry, if the country is to
achieve its oil output targets over the next five years. What struck me
most about all the reports on this particular story was that you had to
be close to the end of each one before the initial sense, in the
screaming headlines that somehow it was in the power and responsibility
of the managers of the public accounts to find the US$150 billion
(N22.5 trillion), which the oil industry would be needing, was
dispelled. Obviously, the larger portion of this investment will have
to come from non-public sources, if these targets are to be met.

The other story,
‘Lekki residents protest planned road toll’, concerned the hoopla over
the host communities’ response to the poster child of the Lagos State
government’s public private partnership (PPP) scheme. Apparently
worried over plans by the state government to permit a private
developer toll vehicles plying a 24km stretch of the Lekki-Epe
expressway, residents of Eti-Osa east and west local councils in Lagos,
blocked traffic on the road. The immediate toll was on commuters along
that narrow corridor. But there are, in addition, other far-reaching
and more disturbing costs.

Seemingly
unrelated, these two stories tell of Nigeria’s modern day struggle with
the task of development. At one level, a rapidly growing population and
its needs have put a strain on a public sector budget still stranded in
the dynamics of the 1970’s, when new oil wealth augmented the national
purse. In the absence of much intelligent work at growing the public
sector’s revenue sources over the years, it has become fashionable to
argue that alone on its own, that sector can no more bear the burden of
national development. At several removes, a number of us have argued as
well that the main development concern might not be with dwindling
public sector revenues. Ignore clear evidence of defalcation and sticky
fingers in public offices, and it is increasingly clear that as society
gets more sophisticated, and needs multiply, the efforts (however
well-intended) of a few eggheads in the economic planning ministries of
government cannot help individuals, let alone whole communities reach
optimum solutions. In our case, we have also seen how cack-handed
government can be, even in the management of the projects it has
identified as priorities in its efforts at driving economic development.

However, to the
argument that government ought to hand over the economy to private
sector operators, except “in those cases where the cost to the private
operator of providing goods/services results in benefits to consumers
for which the provider cannot fully charge”, one encounters the
counter-question, “Which government?” For this requirement presupposes
a public sector that is capable, once it has privatised the “commanding
heights of the economy”, of arbitrating fairly between private
commercial interests, to the material advantage of the “electorate as
consumers”.

This is one
assignment that is so palpably beyond the ken of our governments as
presently constituted. It simultaneously calls for corrections to
governance structures that allow government decisions to better reflect
the aggregate of society’s choices along all the dimensions of our
lives. More crucially, it also requires capacity building in the
non-political arm of government, which properly done, should put the
bureaucracy in a better position to create conditions that will lead to
the implementation of this aggregate of society’s choices.

Without all of
this, the decisions about which sectors of the economy require private
sector funding as a necessary condition for going forward, and how much
such investment will be needed over successive plan horizons, will
remain guesstimates. That these are likely to be over- or
under-estimates is the least of the problems here. The more worrisome
consideration is the possibility that as a consequence, we end up
duplicating across the economy, the current stasis in the downstream
sector of our oil industry.

Still, the decision
as to where to let private sector spending take over from the public
sector is slightly less important than the governance arrangements
“pre-” and “post-” these decisions. This is the main lesson from the
unfolding debacle in the Lekki corridor: in all of this, the people
matter!

Some finance experts have said that until the Nigerian
government is serious about the war against corruption, the country may never
see significant development in the years to come.

Akinbade Ibisiola, head, research team, at Resource Cap Company,
a portfolio management firm, said corruption is the only “cancer” that is
eating the development status Nigeria should have attained.

“I see no reason why Nigeria at 50 years old cannot achieve some
serious level of developments like other nations, since we have both human and
natural resources,” Mr Ibisiola said.

“The only problem here is that a country like ours, where
different governments keep awarding the same project at different cost, can
never see significant improvement in infrastructure, the basic tool for any
economic development,” he said.

Afrinvest West Africa Limited, an investment management company,
in a report last month, also noted that the past government seemed to have lost
its grip on Nigeria’s anti-corruption war, as the successes achieved by the
Economic and Financial Crimes Commission (EFCC) have been eroded.

“Prior to Ribadu’s removal, the fear of arrest and conviction by
the EFCC was an ever growing consciousness in the minds of Nigerians,
especially within the political class. Under his leadership, the
anti-corruption war led to the prosecution of several high profile individuals
including former state governors, cabinet ministers, and senators, a scenario
that was hitherto unprecedented,” the report said, adding that despite
criticism that the EFCC was selective in its approach to fighting corruption,
there was noticeable change in the conduct of public officials.

“Nigeria made such significant strides in the war against
corruption that it climbed out of the bottom of global rankings in the
corruption perception index,” the report said.

Hopeless case?

According to the report, the current state of affairs in Nigeria
is “extremely disheartening” and leaves one with a feeling of hopelessness.

“Where an agency of government loses direction, following a
change of guard, shows inherent weaknesses in the nation’s governance and
institutional structures. A situation in which a contract for the construction
of a second runway at the Abuja international airport was awarded at the sum of
N64 billion ($400m) indicates a brazen proclivity towards misappropriation of
funds.Though this contract was only recently revoked, it is indicative of the scale
of abuse present within all three tiers of government across the nation,” it
said.

The report said the 48.4 percent in the 2010 budget over 2009,
which, according to government figures, was only 39 percent implemented, also
follows a similar trend of gross inflationary provisions for both recurring and
capital expenditure, without sufficient justifiable explanation.

Experts said for the government to deliver its goals of vision
2020 projects, making Nigeria one of the developed countries, President Goodluck
Jonathan has to find the political will to fight corruption headlong, as the
obvious slide down the corruption perception index will continue to impede
Nigeria’s quest for sustained economic growth.

On banking reform

In the same development, Kingsley Moghalu, Central Bank’s deputy
governor on financial system stability, recently said Nigeria has a lot to
learn from the developed nations, especially on the reformation of the banking
industry.

Citing an example, Mr. Moghalu said Nigeria needs to learn from
the new financial law, the Dodd-Frank Wall Street Reform Consumer Act, which
has just been signed into law by President Barrack Obama in the United States
(US).

“That Act is very important because of the dominant position of
the US in global finance. The banking reform exercise in Nigeria has some
similar characteristics with the Dodd-Frank Act,” he said, adding that “when
you see the characteristics, you’ll discover that there are strong parallels in
what is happening in Nigeria today and what the Central Bank is trying to do.
That makes it very clear that the reforms the CBN is setting out are not just
isolated idiosyncratic reaction to financial crisis, but are part of global
best practice adapted to the Nigerian condition,” he said.

Mr. Moghalu said one of the characteristics of the Act is that
it increases the authority of regulators to resolve systemic threats.
“Regulators can now break up threat financial firms whose capital collapsed and
has negative system life implication,” he added.

He also said that the Dodd-Frank Act contains the Volcker Rule,
which is important to the Nigerian economy.

“The Volcker Rule prohibits large banks from making speculative
propriety trades with their own funds. It limits banks, investment of banking,
edge funds and private equity funds to a maximum of three percent of every bank
capital, and it requires banks to spinoff non-core banking businesses and
financial derivatives.

“I think this is exactly what is happening in Nigeria. We have come to see
that it is time to split core banking out of non-banking business. We have our
own Volcker Rule, and it will be coming out very shortly,” he said.

It is important that retirees invest in a
diversified manner across all asset classes. By spreading your investments
across various asset classes, you will be less vulnerable where a particular
class underperforms.

Mrs Gomez is 72 years old. She has always been a
diligent, disciplined saver, and planned ahead for a secure and comfortable
retirement. She is a conservative investor and retained most of her savings in
the money market so that she could earn regular income. When the stock market
plummeted in 2008, she sold off the last of her shares, which she had held for
decades and thereafter placed all her hard-earned money in a bank deposit. Her
investments had traditionally earned her about 15% per annum; this made it
possible for her to take care of her monthly expenses.

Everything changed in June this year; Mrs Gomez
received a letter from her bank informing her that the interest rate on her
investment had been reduced to 3%. This came as a huge shock and she wondered
how she would cope with such a drastic reduction in her income. As she is
completely dependant on the interest on her savings, she sees her long-term
capital dwindling and fears that her living standards will soon be affected.
Her worst nightmare is that her money may run out well before she does!

Seek professional advice

It is important to seek professional financial
advice. A financial advisor will take a holistic view of your current financial
circumstances, and then devise an investment strategy that is in line with your
own unique situation. Taking into account your age and lifestyle, it will be
possible to determine how far you can stretch your funds, given certain
assumptions.

Don’t put all your eggs
in one basket

Senior citizens are usually discouraged from
taking risk and are more likely to be advised to hold most of their money in
‘safe’ investments that are capital protected. Cash is a most tempting asset
class, particularly in volatile times, yet it holds little promise of long-term
wealth creation, with inflation eating away at the principal and eroding the
value of their funds. With interest rates this low, it is difficult to earn any
meaningful income from your money without assuming at least some degree of
risk. It is thus important to invest in a diversified manner, spreading your
money across various asset classes. By doing this, you will be less vulnerable
where a particular class underperforms.

Whilst stocks have historically outperformed
other asset classes over the long term, for most old people the priority is to
preserve what they have. Without the advantage of a long period of time,
assuming such risk at this stage may not be appropriate as this is sure to
increase the risk and volatility of your returns over the short and medium
term.

If you are uncomfortable with, or cannot afford
to take any risk whatsoever, then it is important to remain in cash and hope
that rates will eventually recover. In the meantime, you may need to dip into
the principal to tide you over the volatile period, which could well be for an
extended period of time. In this regard, you may need to revisit your lifestyle
requirements, and cut back on your expenses for some time.

Dividend yielding stocks

Dividend yielding stocks, that is, stocks that
provide a decent cash flow, are one of the keys to a successful retirement
portfolio. The inclusion of such stocks can go some way to protect investors
from stockmarket volatility by compensating with dividends. Dividend yields on
some stocks are fairly predictable and can be as high as 5% and more, which is
higher than current money market rates. In addition, the growth prospects of
some of the companies present capital gains.

A cautious investor may prefer to invest in
equity mutual funds, which pool investors’ funds to invest in the stock market.
They are more diversified and as such, not as risky as direct investments in a
handful of individual stocks.

Can bonds help?

Bonds play an important role in any portfolio,
either through the purchase of individual bonds or via bond mutual funds.
‘Laddering’ bonds involves buying an assortment of bonds of various maturities
and then staggering the maturities over say one, two, and three, years. As each
bond matures, it may be re-invested for another period thus helping to set a
base level of income that can be relied upon to support retirement spending
needs.

Consider purchasing an
annuity

Another way to potentially receive regular income
and address the prospect of longevity, is to purchase an annuity from a
leading, reputable insurance company. Insurance companies in exchange for an
amount of money should be able to provide you with guaranteed income for a
specific period of time or sometimes for life. After determining how much
income you will receive from your pension and other investments you might
consider purchasing an annuity to make up the shortfall.

Annuities come with different terms and
conditions and can be quite complex for the lay investor. It is important that
you fully understand the terms and carefully weigh your options to be sure that
the fees and charges are not excessive and remove the advantage of such a
strategy.

Whilst low interest rates are generally viewed as
being detrimental to savings and of concern to those that rely on fixed income,
a low interest rate regime is expected to spur economic growth. In an ideal
world, companies and businesses should be able to borrow at affordable rates,
thus lowering their costs of production contributing to their profit margins.
As they invest in new factories and plants, and production increases, they hire
more workers with a reduction in unemployment. Consumers can also borrow at
cheaper rates than they ordinarily could and are able to reduce their personal
debt.

As a retiree focused on capital preservation and income generation, it is
easy to ignore the possibility of bonds, high-quality, dividend yielding
stocks, and other asset classes in a portfolio. Yet, there is the increasing
prospect of having to fund a 20-year post retirement period. By regularly
reviewing your retirement strategy, and ensuring diversification and exposure
to the various asset classes, you should be in a better position to navigate
market volatility and ensure your capital lasts for the rest of your life.

The management of
the Nigeria Telecommunications Limited (NITEL) has said the national
carrier’s workers were party to the decision of the federal government
to sack 2,900 of the 3,389 work force.

NITEL spokesperson,
Sule Shehu, in a telephone interview said, “What I know is that when
the report was submitted, we are told that the committee consists of
ministers, National Council on Privatization (NCP), officials from the
Bureau for Public Enterprises (BPE) and some NITEL union leaders etc so
it means that even the NITEL workers were represented in the committee
and are aware of the task force’s decisions to downsize the workers.

“The committee has
recommended that some of the workers should be downsized which we all
saw when they were presenting their report to the vice-president, so we
have to wait for the federal government’s reaction,” added Mr. Shehu.

No operation

He said the committee’s recommendation justifies the fact that NITEL is not operational at present.

“But part of the
recommendation states that they should pay the workers all their
entitlements and the committee has favoured that first scenario.
Although, the task force advised the FG government to take a decision
and government is advised to quickly resolve the issue because
unnecessary cost is being accumulated since NITEL is not working.”

The task force had
recommended three scenarios, which were: to disengage all current
employees and immediately re-engage 445 transition staff from the 3389
staff, with a monthly wage bill of N115.5 million, down from the
current N695 million. The reengaged staff will remain to hand over to a
new core investor; to disengage all employees who are currently aged 45
and above and those that have served 25 years and above – which will
reduce the work force by approximately 66% of the staff and reduce
monthly wage bill from N695 million to N187.6 million. The third option
is to disengage all employees who are aged above 50 and employees that
have served 35 years and above. This, the task force says, is capable
of reducing the wage bill from N695 million to N313.8 million.

Union disagrees

Emmanuel Abu, the
chairman of the Senior Staff Association of Communications, Transport
and Corporations, NITEL, Abuja said NITEL union leaders were not part
of the task force’s committee and would not accept the downsizing of
workers.

“What we are
interested in first is to pay the workers, after the payment of the
workers we would battle the second issue which is the downsizing of
workers. After the payment of the workers, we will talk about the
downsizing issue; it’s a bridge and when we get there we will cross it.”

“We thank God that
the report has been submitted to the vice-president and might be with
the president by next week,” added Mr. Abu.

However, last
month, some workers said they would prefer to be laid off than for
government to keep them idle in their offices without pay. Mr.Abu said
that such comments by the workers were made out of frustration.

“Those comments
were said out of frustrations because they are being owed money for
over 27months. What do you expect from them but after collecting that
money, a worker can recoup himself and say this country belongs to all
of us.”

The committee
advised the federal government to look into the bid of NITEL that was
concluded in February, 2010. The bid result that was announced by the
bureau declared New Generation consortium as the preferred bidder with
a bid of $2.5 billion for NITEL.

However, the
spokesperson for BPE, Chukwuma Nwokoh, said that there is no present
update on the bid result for NITEL as the bureau is still waiting the
federal government’s decision on the review committee report.

“There is no update on the NITEL bid; we are still awaiting the
decision of the president on the report submitted by the review
committee.”

Finance
minister, Olusegun Aganga said the plans to change some existing laws
in the country that impede the growth of the economy will soon go into
effect. He said the move was necessary in order to stimulate credit to
the real sector. At a media briefing in Lagos at the weekend, he
explained that the independent assessment report by the World Bank
states that Nigeria’s current credit profile is adequate for the
country’s economic status and was still higher than her peers in sub
Saharan Africa like Kenya and South Africa. Contrary to what many
Nigerians think, a World Bank assessment report shows that Nigeria is
not going through a credit squeeze. “Between when we had banking
consolidation and when there was credit boom, there is no country that
will go through such an artificial credit that will not experience a
bust immediately after. So World Bank conclusion is that there is no
credit squeeze. Yes there is lack of liquidity, but not credit
squeeze.”

Legislative overhaul

He
said based on consultations with various players in the financial
sector, there was need for a major overhaul of the Bankruptcy Act, Land
Use Act, and Evidence Act in order to stimulate lending to the real
economy. Two of these laws are already with the National Assembly.
“Secondly, is the establishment of commercial courts. Part of the
problems we have is people use their houses as collateral. In order
parts of the world, I have access to that house once you default, but
here you can’t. The debtors easily go to court and get injunction so
banks are left with non performing loans. With a commercial court,
issues like this can be settled, in two to three weeks.” He said the
ministry has applied to the chief judge of the high court on its
establishment.

Another
issue which the World Bank addressed is that of setting up credit
guaranty schemes which is like insurance for credit default. “We have
done it for small and medium enterprises. What we want to do with the
World Bank is to look at the existing schemes to see how effective they
are, what has changed and whether we need to come up with a new
guaranty scheme,” Mr. Aganga said. All these are geared towards
enabling the real sector have access to cheaper longer term funding.

According
to him, the increase in credit growth in 2008 did not have impact on
the economy as it was channelled to three sectors, especially margin
lending and insider lending. “In margin lending, they were using it to
buy bank shares. Not a lot of that went into the real economy. There is
a report that says less than five per cent was going to the real
economy. What we have now is a boom and bust situation.”

Economic growth

He
said despite the turmoil, the economy was still growing at an average
of 7 per cent every year but without impact on the average Nigerian.
“We need a stronger foundation so that we do not have the boom and bust
we had before. Yes there is no credit squeeze, but consumer spending is
down significantly. There is high level of unemployment in the
country.” He said major sources of credit like bank lending, foreign
direct investment (FDIs), remittances and government spending has
decreased due to the economic downturn.

According
to the minister, there were lessons to be learnt in the whole process
and the need to build the economy on a stronger foundation. “Banks are
not lending any more. They have stopped taking risks. We now have
responsible lending. Banks have realized the need to build capacity in
order to make more informed lending.”

$500 million bond

The
minister said the plan to raise $500 million bond from the
international market was still on course and would materialize within
the next two months. “The only reason why we are raising this bond is
to have bench mark price so that institutions here that have good
credit rating can go abroad and raise funds.” He said encouraging banks
to raise long term capital through the bond market would provide long
term capital for onward lending to the real sector instead the current
practice where banks lend out deposits which are short term.

According
to him, the World Bank report estimates that six million new job
seekers enter the economy each year “The level of unemployment in this
country is unacceptably high. If you look at the statistics, it is not
only an economic issue, it is also a social issue.” He said government
is embarking on inclusive growth with focus on the real sector in order
to stimulate job creation.

The bear’s knife
cut deeply into listed equities during the first few days trading this
week. All Share Index of the Nigerian Stock Exchange nose-dived
within the first three trading days and only managed a slight
appreciation by the end of the week. Moving from the opening figure of
25,106.86 points it shed 832.35 points, equivalent to 3.34 percent and
wrapped up at 24,274.51 points. The market capitalization equally
closed below the opening value at N5.936 trillion from N6.14 trillion.

The NSE-30 Index
lost 33.51 points or 3.22% to close the week’s transactions at
1,012.41. The four most active sector’s index closed in the red through
the week. NSE Banking index closed down by 16.69 points same as 4.5 per
cent to end the week at 355.43 points. NSE Food/Beverages lost 27.74
points or 3.33% to close with 782.43 points. NSE Insurance Index closed
at 168.88 points having shed 5.51 points or 3.2% of its opening points.
NSE Oil/Gas was down by 361.47 points or 2.43% closing at 361.47 points.

Technical view

Nigerian Stock
Exchange All Share Index (NSE ASI) currently trends below RSI (Relative
Strength Index) 30 which is a sell/oversold position. The current
pattern is new for the year. The last time the index broke RSI 30 with
full force was August 2009 (then it recovered exactly around RSI 15).
Other periods were March 2009, November and December 2008. In all these
periods, the NSE ASI has always recovered on a common point of RSI-13+.
On the third trading day of the week, the index hit RSI 15 and
recovered the next day. The recovery attempt seen on Thursday and
Friday was due mainly to the support point; therefore NSE ASI will
require some fundamental bases to sustain the recovery otherwise it may
not last.

NSE ASI chart performance for the week

Investors traded
1.2 billion units of shares on all equities within the week. The said
volume was valued at N110.40 billion and was moved by 32,155
transactions. As in previous weeks, the banking sector dominated market
activities with the 725.80 million units of shares it traded in 16,779
deals. The said volume accounted for 60.41% of the total volume traded
on all equities through the week. United Bank for Africa, First Bank of
Nigeria Plc, Union Bank of Nigeria Plc and Guaranty Trust Bank were the
most active in the sector. Meanwhile, volume traded on the shares of
AIICO Insurance Plc and Continental reinsurance Plc boosted performance
in the Insurance sector; investors exchanged 79.03 million units of
shares valued at N85.31 million in 1,396 deals through the week.

Gainers and losers for the week

As investors start
showing keen interest in African Petroleum shares due to their
attractive prices, the price moved up by 27.45% from the opening price
of N21.20 to N27.02. First Aluminum recorded 23.81% price appreciation
to close at N0.78 from N0.63. Vono products, Longman and Evans medical
followed in that order with 15.38%, 10.08% and 7.5% respectively.
Meanwhile, Intercontinental bank reduced in price by 15.14% and close
in the black at N1.57. Oceanic Bank lost 14.11% to and Wema Bank Plc,
Bank PHB and AIICO shed 13.83%, 13.14%, 11.97% of their respective
opening figures respectively.

Over-the-counter bond market

Measured in
volume, a turnover of 260.9 million units of bonds valued at N256.173
billion and crossed in 2,602 deals were executed last week, in contrast
to a total of N239.15 million units worth N243.862 billion exchanged in
2,890 deals in a forth night ago. As recorded in the preceded week, the
10% FGN July 2030 bond with recorded volume of 97.63 million units
valued at N88.827 billion in 1,022 deals was the most active traded. It
was followed by 4% FGN April 2015 series with a traded volume of 34.6
million units valued at N28.383 billion in 247 deals. Fifteen (15) of
the available thirty thirty-seven (37) FGN Bonds were traded in the
concluded week, compared with eighteen (18) in the preceded week.

Corporate actions

First quarter (Q1)
reports of National salt & co. plc in the current fiscal year
(2010) showed weakened performance. Head line indicators plunged by
double digits as shown in the table below; Turnover (TO) -13.7% and
profit after tax (PAT) -19.5%. As a result of dip in bottom line, Q1
EPS shed 23.1% from Q1 ‘09 of 13k at current 10k. PE ratio of 76x shows
that NASCON return period is in the long term. On every N1 sales,
computed figure revealed a returned on profit of 15 kobo.

Observation; On the
ground of this Q1 results, NASCON appears weak on capital growth
considering PE ratio of 76x. Market awaits the over due Q2 results to
accentuate investment position.

Access bank plc

The Q2 reports of
Access Bank for the period ended June 2010 revealed modest recovery
from the red. Recall that the company plunged into negative figures
after the provisioning for toxic loans in Q2 2009. Sales revenue dipped
by 19.5% at N49.41 billion. Conversely, PAT recorded significant triple
digits growth at +155.8%. Q2 EPS now stands at 37 kobo against negative
value in Q2 ‘09. PE ratio of 22.7x appears attractive for long term
investment.

Incentive &
Observation; An interim dividend of 20 kobo per share has been
recommended by Access’s directors for shareholders’ benefit. Closure
date is scheduled on September 3, 2010.

The current price of Access is high and this reduces possibility for capital appreciation in the short term.

Benue cement company plc

Both Q1 and Q2
reports of BCC Plc for period ended March and June 2010 were
simultaneously released last week. Indicators revealed slide
performance against Q1 and Q2 ‘09. Feelers in the market adduced this
to product/segment competitiveness. As shown in the below table, TO and
PAT headed south. The earnings potency of BCC dipped by 16% at (Q1 EPS
of 115k), and 2.8% at (Q2 EPS of 283k).

Observation; At market price of N62.50 against Q2 PE ratio of 26x, BCC is high and not a suitable short term investment.

Market outlook

Although the market
is currently attempting a recovery, it may not last owing to the fact
that the two days’ appreciation cannot even account for the loss
experienced in one day (Wednesday). ASI currently trades below 90 Days
Moving average. This is a sell, the implication is that most entry made
may hold investors longer than expected nevertheless, most equities are
currently selling below their intrinsic values and are therefore very
attractive. Investors should adopt the investment strategies of
positioning towards the bull’s arrival.

When Eunice Okeke bought shares of MTech Plc in July, 2009,
through her stockbroker, she thought she was making a worthy investment. The
shares had been listed by introduction on the daily official list of the
Nigerian Stock Exchange (NSE), under the information and communication
technology subsector, at N2.50 a few weeks earlier. At that point, investors
who had participated in its private placement barely a year before at the price
of N1.50, had already reaped a handsome 66.7 percent returns on their
investment.

MTech Communications had, in May 2008, raised N3.5 billion by
offering to prospective investors 2,333,333,334 ordinary shares of N1.00 each
at N1.50 per share. The offer was fully subscribed, proceeds of which was to
expand its business and enhance returns to its shareholders.

It was the hope of such returns that prompted Mrs Okeke to
invest in the firm, which was the first Value Added Services (VAS) company to
be listed on the exchange. On June 9, 2009, a total of 4,966,666,668 ordinary
shares of 50 kobo each were offered at N2.50 kobo per share, bringing its
market capitalisation to N12.42 billion. Chika Nwobi, cofounder and managing
director of the company, said of the listing, “we decided to list by
introduction so that those who have invested in the business can have an option
of liquidity.”

Unfortunately, the listing was done at a time when the stock
market was in turmoil due to the global financial meltdown, which had began to
take its toll on the Nigerian economy. By November 23, the share price had
slipped to 91 kobo, a depreciation of over 63 percent. Initial investors were
already making profit.

False declaration

However, any further hope that the shares would appreciate
according to the dynamics of market forces were dashed finally when, on
December 14, the NSE council suspended trading on the shares in order to
protect the investing public. In a letter dated December 11, 2009, and signed
by the former director general of the stock exchange, Ndi Okereke-Onyiuke, the
council accused some parties in the offer of tampering with the register of
members, overstating of the share capital of the company, as well as false
declaration of compliance filed with the exchange prior to listing of the company.

The letter, which was copied to the CBN governor, managing
directors of the Central Securities Clearing System, Platinum Capital,
Greenwich Trust, and MTech, stated, “We are aware that the Securities and
Exchange Commission and the Central Bank of Nigeria are considering matters
arising from the dispute between MTech Communications Plc and members of the
Bank PHB Group.”

The letter was in reaction to an earlier communication by MTech
to the exchange to the effect that these discrepancies had occurred. “Upon the
conclusion of action by the commission on the matter, the exchange proposes a
comprehensive review of the listing status of the company with a view to
delisting it from the official list.”

Sola Oni, spokesperson of the NSE, said MTech had some challenges
with Bank PHB over its private placement.

“Upon listing of the company, there were some discrepancies in
the register of shareholders and the council decided that until they make
clarifications, the shares may be placed on full suspension,” he said, saying
although the exchange did not give the parties a deadline to respond, it did
not also foreclose further investigation as the issues involved borders on
criminal intent. “We should get to the bridge before we cross it. For now, we
have not received any response from them,” he said.

Indebtedness

However, NEXT investigation revealed that directors of Mtech
were indebted to Bank PHB, through its subsidiary, PHB Asset Management Company
Limited. A source in the company, who spoke off record, said the directors of
the bank who were involved in the transactions had been relieved of their
employment, following the intervention by the Central Bank of Nigeria in the
troubled bank last year. Bank PHB is owed a total of N170.1 billion by 149
individuals and firms.

According to the source, at the conclusion of MTech’s private
placement in 2008, which was fully subscribed, Bank PHB failed to remit the
full N3.5 billion. The bank instead opted to deduct the amount owed it by the
directors and remit the balance. MTech is refusing to accept this arrangement,
as it was outside the terms of the placement agreement.

Kayode Falowo, managing director of Greenwich Trust, which acted
as stockbroking to the listing, said his firm was not involved in the
discrepancies mentioned. “I have repeatedly said that we are not involved with
these accusations. We wish to reemphasis that Greenwich is not involved with
the falsification of figures or tampering with shareholders register,” he said
in a text message.

MTech reported

Efforts to speak with Mr Nwobi was unsuccessful, as he refused
to respond to calls to his mobile. A source close to the company, however, said
it was the company that discovered the discrepancy and decided to notify the
regulators. In addition, the MTech had taken the PHB Group to court alleging
that its register of shareholders had been tampered with. The company insisted
that it reported the case to SEC and CBN and sought protection for its
shareholders by requesting the suspension of trading in its shares from the
NSE, pending resolution of the matter.

“MTECH’s directors have not been involved in (1) falsification
of figures (2) tampering with shareholders register. The directors and MTECH
Plc do have a dispute with BankPHB, PHB Asset Management, and PHB Capital and
Trust over irregularities in the handling of MTECH’s private placement and
listing,” a statement from MTech said. “The matter is before the Federal High
Court so no further comment can be made on it.”

An insider to the transactions, however, said MTech was being
economical with the truth. He said the directors, who were indebted to Bank
PHB, were looking for ways not to pay back their loans.

“We gave some individuals loans. They have not paid. If they say
we tampered with their register of members, there are documents, signed off by
MTech, which is still available. We have the list of people that subscribed to
the private placement. So when the time comes, there are documents to show the
true position of things,” she said.

However, while this corporate battle lingers, hapless shareholders of the
company are left in the lurch. They cannot get value for their investment for
all they are worth. When the shares are eventually delisted by the NSE, the
shareholders would have recorded a loss of about half the value of their
initial investment as at the time the shares were listed.

Some finance experts have said that until the Nigerian
government is serious about the war against corruption, the country may never
see significant development in the years to come.

Akinbade Ibisiola, head, research team, at Resource Cap Company,
a portfolio management firm, said corruption is the only “cancer” that is
eating the development status Nigeria should have attained.

“I see no reason why Nigeria at 50 years old cannot achieve some
serious level of developments like other nations, since we have both human and
natural resources,” Mr Ibisiola said.

“The only problem here is that a country like ours, where
different governments keep awarding the same project at different cost, can
never see significant improvement in infrastructure, the basic tool for any
economic development,” he said.

Afrinvest West Africa Limited, an investment management company,
in a report last month, also noted that the past government seemed to have lost
its grip on Nigeria’s anti-corruption war, as the successes achieved by the
Economic and Financial Crimes Commission (EFCC) have been eroded.

“Prior to Ribadu’s removal, the fear of arrest and conviction by
the EFCC was an ever growing consciousness in the minds of Nigerians,
especially within the political class. Under his leadership, the
anti-corruption war led to the prosecution of several high profile individuals
including former state governors, cabinet ministers, and senators, a scenario
that was hitherto unprecedented,” the report said, adding that despite
criticism that the EFCC was selective in its approach to fighting corruption,
there was noticeable change in the conduct of public officials.

“Nigeria made such significant strides in the war against
corruption that it climbed out of the bottom of global rankings in the
corruption perception index,” the report said.

Hopeless case?

According to the report, the current state of affairs in Nigeria
is “extremely disheartening” and leaves one with a feeling of hopelessness.

“Where an agency of government loses direction, following a
change of guard, shows inherent weaknesses in the nation’s governance and
institutional structures. A situation in which a contract for the construction
of a second runway at the Abuja international airport was awarded at the sum of
N64 billion ($400m) indicates a brazen proclivity towards misappropriation of
funds.Though this contract was only recently revoked, it is indicative of the scale
of abuse present within all three tiers of government across the nation,” it
said.

The report said the 48.4 percent in the 2010 budget over 2009,
which, according to government figures, was only 39 percent implemented, also
follows a similar trend of gross inflationary provisions for both recurring and
capital expenditure, without sufficient justifiable explanation.

Experts said for the government to deliver its goals of vision
2020 projects, making Nigeria one of the developed countries, President Goodluck
Jonathan has to find the political will to fight corruption headlong, as the
obvious slide down the corruption perception index will continue to impede
Nigeria’s quest for sustained economic growth.

On banking reform

In the same development, Kingsley Moghalu, Central Bank’s deputy
governor on financial system stability, recently said Nigeria has a lot to
learn from the developed nations, especially on the reformation of the banking
industry.

Citing an example, Mr. Moghalu said Nigeria needs to learn from
the new financial law, the Dodd-Frank Wall Street Reform Consumer Act, which
has just been signed into law by President Barrack Obama in the United States
(US).

“That Act is very important because of the dominant position of
the US in global finance. The banking reform exercise in Nigeria has some
similar characteristics with the Dodd-Frank Act,” he said, adding that “when
you see the characteristics, you’ll discover that there are strong parallels in
what is happening in Nigeria today and what the Central Bank is trying to do.
That makes it very clear that the reforms the CBN is setting out are not just
isolated idiosyncratic reaction to financial crisis, but are part of global
best practice adapted to the Nigerian condition,” he said.

Mr. Moghalu said one of the characteristics of the Act is that
it increases the authority of regulators to resolve systemic threats.
“Regulators can now break up threat financial firms whose capital collapsed and
has negative system life implication,” he added.

He also said that the Dodd-Frank Act contains the Volcker Rule,
which is important to the Nigerian economy.

“The Volcker Rule prohibits large banks from making speculative
propriety trades with their own funds. It limits banks, investment of banking,
edge funds and private equity funds to a maximum of three percent of every bank
capital, and it requires banks to spinoff non-core banking businesses and
financial derivatives.

“I think this is exactly what is happening in Nigeria. We have come to see
that it is time to split core banking out of non-banking business. We have our
own Volcker Rule, and it will be coming out very shortly,” he said.