Wednesday, 20 June 2012

The Acting Director-General of the Securities and Exchange Commission (SEC), Mr. Ibrahim Bolaji Bello, has vowed to restore investor confidence and leave a positive legacy in the market. A statement from the Commission Tuesday said Bello, who assumed the new position on Monday, made the declaration while addressing members of staff.
He assured them of fairness to all and stressed the need to close ranks. Bello said: Forget about the past. It is going to be a team work, not me alone and your welfare, especially on outstanding staff matters will be addressed immediately in line with laid down policy and procedure but subject to availability of resources. Just put in your best to ensure that we together move the market forward. We have no time for endless talk; let our work speak for us.
We expect commitment, cooperation, dedication and discipline. We want to leave behind, a SEC that everybody will be proud of and the one that the coming generations would commend us for. We have been given opportunity, lets work together to leave a legacy.
The SEC boss will this week meet with the various operators in the market, including the Nigerian Stock Exchange (NSE), stockbrokers, the Central Securities Clearing System (CSCS), executive officers of the Chartered Institutes of Stockbrokers and Association of Stockbroking Houses (ASHON) among others.
Meanwhile, trading at the stock market ended on a positive note yesterday as the Nigerian Stock Exchange (NSE) All-Share Index appreciated by 0.26 per cent to close at 21,082.11.

Bond Issuance: High Interest Rates Discourage State Govts.

The high interest rate regime is delaying more states from accessing the bond market for funds to finance infrastructural development, THISDAY checks have revealed. While the Federal Government has been frequenting the bond market for funds, only three states-Delta, Ekiti and Ondo have accessed the market for funds recently.
Rivers State and Akwa Ibom State had last year indicated interest to float bonds   and raise funds that would fast-track the infrastructural developments in their various states. Rivers State had planned to access the market in the last quarter of 2011 under its N200 billion bond issuance programme, while Akwa Ibom was to be in market in the second quarter of this year. However, none of the states has accessed the market for bonds.
THISDAY gathered that the high interest rate is one of the reasons delaying the execution of the bond issuance programmes of the states. Market sources said that some of the state governments considered the   interest rates of between 14 and 17 per cent paid on sovereign and sub-sovereign bonds to be on the high side. Ekiti State raised N20.3 billion at rate of 14.5 per cent, while Oando State raised N27 billion at the rate of 14 per cent.
The interest rates paid by the Federal Governments on its bonds are even higher with some as high as 17 per cent. This high interest rates paid on sovereign and sub-sovereign debt instruments are quite on the high side considering the fact   investment in the securities are relatively safer.
Negotiations on the interest rates have kept some state away from accessing the market now, a source close to financial advisers to one of the states said.  While state government is being discouraged by the high interest rate, FG continues to auction bonds in the market. For instance,   FG would be raising N83.91 billion from the market next week.
The bond auction was earlier scheduled to hold today but has been postponed to next Wednesday June 27, 2012.  The bonds to be sold   include: N30 billion each, which will be for five years and seven years maturity while N23.9 billion due for maturity in 10 years. The 7-year bond will be a new issue while the 5-year and 10-year are being re-opened.

AMCON Act Amendment: To Be or Not To Be?

Obinna Chima examines the move by members of the House of Representatives to amend the AMCON Act. The creation of the Asset Management Corporation of Nigeria (AMCON) to clean up the huge amount of toxic assets from banks balance sheets in order to revive both corporate and consumer lending in the economy remains an integral part of the financial stability plan of the banking system.

bad bank, created in the last quarter of 2010, has since completed its non -performing loans (NPLs) purchases mandate, which  reflected in the first quarter 2012 results of commercial banks in the country.
 The corporation is currently involved in the recovery and restructuring of its loans. This is being carried out with a view of also stabilizing the economy and not with the intention of liquidating such businesses.

However, with about 18 months into its operations, indications emerged last Monday that the House of Representatives had set in motion, a process that would lead to the amendment of some sections of the AMCON Act. Of course, the move by the House Committee on Banking and Currency has so far been greeted with mixed reactions.
Most operators argued that such action could affect the gains recorded in the banking sector, even as they said that it might dampen confidence, especially in foreign investors and correspondent banks, which was built by the reform process.

To them, the corporation is a private sector led initiative funded by the banks and the Central Bank of Nigeria (CBN) through the Sinking Fund and as such, any attempt to tamper with its source of funding has the potential to affect the system. They also argued that any attempt to make the federal government shoulder AMCON
s over N5 trillion debts could significantly raise Nigerias debt to Gross Domestic Product (GDP) ratio.

The role of AMCON in the economy has since been reviewed by various bodies such as the International Monetary Fund (IMF), Standard and Poors Ratings Agency, Fitch Ratings amongst others on several occasions.
The mandate of the corporation was to help sanitize the banking industry. Prior to the creation of AMCON, various reports had indicated that the situation in the banking industry was extremely dangerous such that most people were afraid that the Nigerian financial industry would have completely collapsed. So, AMCON was established as a long-term solution to the perceived crises.

Specifically, AMCON
s job was to reform institutions and stabilize the banking industry. Also, the corporation was given the responsibility of tackling the restructuring of the bad debt, which had been put at a total of 12,000 individual loans.

The collaboration between AMCON and regulators in the banking industry, experts said had succeeded in creating an environment where banks can operate soundly, even as the federal government and taxpayers did not bear the burden.

Since its creation, the corporation had bought Eligible Bank Assets (EBAs) in three tranches in the Nigerian banking industry as well as provided financial accommodation to eights institutions.
  The EBAs comprises of non-performing loans (NPLs) as well as systemically important loans in the Nigerian banking sector.
Executive Director, Finance and Operations, AMCON, Mrs. Mofoluke Dosunmu, had explained that the first purchase, which was done in December 2010 was for the corporation to buy all NPLs that had to do with the capital market as well as in all the then eight rescued banks.

The next set of purchase was done on April 6, 2011 while the last was done on the 28th of December 2011. That last purchase was to finally clean up all the NPLs in the banks
books as well as to take out loans that were systemically important. AMCON purchased total EBAs worth N4.02 trillion at a price of N1.76 trillion. 
Dosumu added: The sources of funds open to AMCON are in three folds. First, is our share capital of N10 billion which was created by the CBN and the Ministry of Finance. Thereafter, AMCON issued N500 million debentures, fully subscribed to by the CBN and then we issued zero coupon bonds, which we used in purchasing all the NPLS, EBAs and the recapitalisation of financial institutions in Nigeria.

The zero coupon bonds are three-year in tenor, guaranteed by the federal government, they qualify as liquid assets and are fully registered on the NSE.  These funds have been used to buy EBAs from financial institutions, recapitalize the three banks presently owned by AMCON and provided financial accommodation to the five banks that have successfully gone into mergers and acquisition arrangement. A small portion of this is used for AMCONs operations.

Lawmakers Stance

THISDAY learnt that the Clerk, House Committee on Banking and Currency, Mr. Yilji Yakubu, had in a letter, invited the management of AMCON to an investigative hearing at the National Assembly Complex on Monday.
The letter also requested that the corporation should produce a memorandum on any area or section of its Act that need to be amended to further "to bring in conformity with the provision of the constitution of the federal republic of Nigeria as amended.

The investigative hearing was also expected to deliberate on the expenditure of public funds by AMCON and had adopted a resolution mandating the committee to conduct an investigating hearing on the sources of funds, expenditures and intervention of the apex bank and the corporation in the various areas and determine whether or not they conform to the constitution of the Federal Republic of NigeriaExperts
The Registrar/Chief Executive Officer (CEO), Institute of Chartered Economists of Nigeria (ICEN), Mr. Peter Ikpamejo, advised the lawmakers not to make any hasty decision on the AMCON Act.

He said:
I think what the House should do is to engage professionals to properly look at the AMCON Act and advise them on what should be done. The AMCON Act should not just be a political issue.
On his part, an analyst at Profund Securities Limited, Mr. Chijioke Obiagwu, advised the lawmakers not to destroy the gains that had been recorded in the banking industry, as a result of the corporations intervention.


Invest in Banking, FCMG Stocks Now, FDC Recommends

The Financial Derivatives Company Limited (FDC) has advised bargain hunters and other stock market investors to take advantage of opportunities in banking and fast-moving consumer goods (FCMG) stocks on the Nigerian Stock Exchange (NSE).
The FDC gave this recommendation in its monthly economic publication for June 2012, insisting that the stock market always provided opportunities for profit, regardless of whether it goes up, down or sideways. The Lagos-based investment and financial advisory firm stated: Just because we are waiting for signs of a bottom forming does not mean investors should sit on their hands. The market always provides opportunities to profit, regardless of whether it goes up, down or sideways. Investment opportunities remain in the banking and consumer goods sector.

FDC predicted that the NSE would witness more long-term rally between September and October. It also argued that
sitting the summer out and letting the dust settle before wading back in is also a strategy that had worked well in the past in similar market condition. Just dont stay out of the pool too long. The bigger-picture data still looks too encouraging to discourage long-term investors.

How should stocks be priced based on trailing and plausible for-ward-looking earnings? There are two diametrically opposite schools of thought. One which believes stocks were overpriced at the year high experienced in May as a result of investors over-zealous reaction to full year-end 2011 and first quarter 2012 results, while the other market lows of June reflects nothing about the fundamentals and it is even more compelling to invest now.

Commenting on the recent decline of the naira against the dollar, the report attributed the trend to the dividend pay-out by multinational companies in the country.
This it said had led to an increase in their demand for forex for the purpose of repatriating earnings. It also said that speculators were besieging the forex market to take positions, due to their expectation of a weaker currency as a result of the declining trend in oil prices.


Fortis MFB Lists on NSE, to Raise N7bn Fresh Capital

Barring any last minute change in plans, the Nigerian Stock Exchange (NSE) will today (Wednesday)  list Fortis Microfinance Bank(MFB)  Plc. THISDAY had last week exclusively reported the listing of the Fortis MFB, which has its head office in Abuja. The listing will be the second this year and the second MFB to be listed on the exchange. However, the listing, it was gathered is part of   a three-year strategic growth plan aimed at putting the bank at the lead of the microfinance bank industry when completed.
Part of the plan is a capital raising exercise that will  fetch  about N7 billion fresh funds to the  Fortis MFB and the   hybrid security issuance which is said to have reached advanced stage is being packaged by DEAP Capital Management and Trust Plc as the Issuing House/Financial Advisers.
According to the Managing Director/Chief Executive of Fortis MFB, Mr. Kunle Oketikun,  the bank has in the past four years laid the foundation for a rapid growth aimed at positioning it at the top rung of the microfinance industry in Nigeria.
He noted that the operational strategy that underlined the foundation and success of Fortis is the professionalism and a commitment for best practices which have equally translated to consistently good performance of the company.
Fortis Microfinance Bank Plc, since inception, has committed itself to be a microfinance bank of choice in the Nigerian financial industry.  We adhere strictly to professional standards and international best practice.  We have constantly achieved record pre-tax earnings, earnings per share, free cash flow and improved profit margins, with increased revenues and have continued to deliver superior returns to shareholders most importantly.
He said the bank knew its market  and how best to reach the customers and satisfy them. We operate at the micro level of the economy where we see very huge opportunities and we have modelled our business to exploit this opportunities to a mutual advantage with our customers, he said.
Speaking in the same vein, Executive Director, Investment Banking/Public Sector, DEAP Capital Management and Trust Plc, Mr. Jacob Esan,  said Fortis MFB was poised to be the leading microfinance institution in Africa with the ability to generate outstanding value for all stakeholders.

Shareholders Excited as Transcorp Hits N35bn Capitalization

Some shareholders of Transnational Corporation of Nigeria (Transcorp) Plc   have  said the  170 per cent growth in the market capitalisation  was a  pointer to a good future for their investments in the company. Market capitalisation of a company is the product of  its market price  and total number of issued shares. Transcorp market capitalisation once dipped to N12 .91 billion  in  April   before regaining momentum that  lifted the value to N34.87 billion as at last Monday.
Speaking on the rising fortunes, the President of the Association   for the Advancement of the Rights of Nigerian Shareholders (AARNS), Dr. Faruk Umar, told THISDAY  that   shareholders of the company were very excited because they have been their expectations since Tony Elumelu, through Heirs Holding Limited, bought into the company.
We are excited because we have been waiting for this turnaround in the fortunes of the Transcorp. When Heirs Holding bought into the company, I said Elumelu, who is the chairman of Heirs Holding, would bring his magic touch into the company. I am not surprised that  it has started to happen  because he is known as turnaround expert and this is what we are seeing in Transcorp with a crop of well-focused professionals now managing the place, Umar said.
According to him, all members of   AARNS are really excited that their investments in Transcorp have begun to look up and would continue given business strategies the board and management are putting in place for the company.
The Chief Executive Officer of Transcorp, Mr. Obinna Ufudo recently told shareholders that the company would, for the first time, pay a dividend at the end of the current financial year. Transcorp  has already reported    62 per cent growth in profit after tax for the first quarter (Q1)  ended March 31, 2012.  According to the unaudited results, turnover stood at N857 million   in 2012, up from N664 million in the corresponding period of  2011.
Profit before tax rose from N399 million in the first quarter of 2011 to N610 million in  2012, an increase of 52.9 per cent, while profit after tax rose by 62 per cent from N319 million to N518 million Commenting on the Q1 performance,  Ufudo had said: We are excited by this early and positive indication that our turnaround and transformation initiatives are already taking root and yielding results.

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