Access Bank and Diamond Bank Plc will need to await the approval of all regulators concerned in their proposed merger arrangement before they can conclude their merger deal.
According to the banks, all the regulators concerned have already been notified of their plans to merge.
The banks had disclosed their plans to merge, following the approval in principle which they were given by the Central Bank of Nigeria, after notifying the apex bank of their plan.
A top official of Access Bank, who spoke to our correspondent, said, “The announcement of our merger plan was made after the CBN gave us an approval in principle. We have informed the Security and Exchange Commission; they are aware but we have yet to get all the other necessary approvals.
“For the final merger, we need the approval of the Security and Exchange Commission, Nigerian Stock Exchange; we need to hold shareholders meeting, court ordered meeting. All the regulators are aware of the proposed merger while we wait for their final approval.”
In a press briefing recently in Lagos, the Chief Executive Officer, Access Bank, Herbert Wigwe, said the bank had finalised plans to raise $250m Tier 11 capital.
Wigwe said the bank’s customer base would hit 29 million after the merger with Diamond Bank Plc.
He said, “Access Bank has already finalised terms and obtained regulatory approvals for a Tier II capital issuance, which will raise $250m, available for drawdown in January 2019.
“Access Bank has also obtained “No objection” from the Central Bank of Nigeria to undertake a rights issue to raise up to N75bn ($ 207m) in H1 2019. Shareholder and other regulatory approvals will be obtained before the offer opens. This accelerates the capital management plan to support retail growth, previously set out in the bank’s five-year strategy.”
The stock market appreciated further yesterday on continued bargain hunting by investors. As a result the NSE All-Share Index 0.58 per cent to close higher at 30,137.53, while market capitalisation added N64.4 billion to end at N11.2 trillion.
Buying interest in Zenith Bank Plc, Dangote Sugar Refinery Plc and Stanbic IBTC Holdings Plc propelled the positive performance.
However, Cement Company of Northern Nigeria Plc led the price gainers with 10 per cent, trailed by Ikeja Hotel Plc with 9.3 per cent. Royal Exchange Plc and C & I Leasing Plc garnered 9.0 per cent apiece. NEM Insurance Plc, AXA Mansard Insurance Plc and United Capital Plc chalked up 8.6 per cent, 8.3 per cent and 8.0 per cent respectively.
Conversely, Newrest ASL Services Plc led the price losers with 9.4 per cent followed by Veritas Kapital Assurance Plc with 9.0 per cent. Neimeth International Pharmaceuticals Plc shed 8.5 per cent, just as First Aluminum Nigeria Plc went down by 8.3 per cent.
Activity level also strengthened as volume and value traded surged 126.7 per cent to 300.1 million shares and 199.2 per cent to N3.2 billion. Diamond Bank (100.7 million shares), GTBank (39.4 million shares ) and UBA (26.2 million shares ) were the top traded stocks by volume, while GTBank(N1.3 billion), Zenith Bank (N463.0 million) and Diamond Bank (N209.4 million) were the top traded by value.
The Chief Executive Officer of the NSE, Mr. Oscar Onyema on Monday expressed optimism that the market will bounce back in the second half (H2) of this year.
“Domestically, we believe market sentiments in the first half (H1) of the year will be driven by uncertainty in the oil prices as well as the 2019 general elections. Accordingly, we anticipate volatility in equities market in H1 in 2019 with enhanced stability post-elections.
We believe swift approval and implementation of the 2019 budget may have a positive impact on the companies’ earnings as well as consumer spending. Therefore, we anticipate a return of listings during the year with an uptick in market activity during the H2 of 2019,” he said.
Speaking on the protection of domestic investors, Onyema assured that the exchange would ensure that listed companies stick to listing requirements for the benefits of shareholders. He said the stock exchange was also working closely with listed companies to assist them to be able to comply with the listing requirements, saying that delisting by some companies should not be a cause of worry.
The continued dominance of the bond market by the federal government is crowding out corporates as only N31.47 billion was raised by companies in 2018, compared with N1.16 trillion by the government.
Since the 2008 and 2009 market crash that impacted negatively on domestic investors, the primary equities market has remained dormant. Most companies have been raising fresh capital through bond issuance, with few of them opting for rights issues.
However, the bonds raised by corporate have reduced following FG’s funds raising activities. The Chief Executive Officer of the Nigerian Stock Exchange (NSE), Mr. Oscar Onyema on Monday disclosed that in fixed income market in 2018, the Federal Government of Nigeria (FGN) dominated by raising N1.16 trillion in a bid to finance fiscal and infrastructure deficits.
“State governments raised N125.59 billion in new debt capital, while corporates raised a total of N31.47 billion,” he said. Market operators and analysts had in the past complained that the federal government was crowding out corporates by accessing the market for funds offering relatively higher coupon.
But the Debt Management Office(DMO) had defended government’s borrowing activities, saying rather than crowding out corporates, government was creating a market that will become accessible to corporates for capital raising.
But some market operators said the dominance of bonds market by the federal government may have led to increased in issuance of commercial papers (CPs) by corporates. Dangote Cement Plc joined the companies that accessed the CPs market last year raising N100 billion under its N150 billion CP programme.
Speaking on the CP programme, the Managing Director of DCP, Mr. Joseph Makoju said the CP issued under the programme was deployed towards capital expenditure, working capital and general corporate purpose.
The corporates’ preference for CPs is partly due to the dominance of the bond market by the government that raised funds at higher interest rate. Investors consider FGN bonds first before looking at those issued by companies. Hence, many of the companies resorted to CPs issuance, which is relatively cheaper to raise,” an operator said.
Also, the unprecedented transparency, governance and integrity brought by FMDA OTC Securities Exchange to the CP market have encouraged corporates to patronise the market.
The Managing Director/Chief Executive Officer of FMDQ OTC Securities Exchange, Mr. Bola Onadele.Koko had said the benefits of transparency and governance offered by FMDQ around its CP quotation process and post issuance of the CPs cannot be over-emphasised as they directly impact, not just the issuers, but investors and the market regulators,” he said.
Some of the firms that have patronised the CPs market are: Stanbic IBTC Bank Plc, Wema Bank Plc, Nigerian Breweries Plc, Guinness Nigeria Plc, Access Bank Plc, FSDH Merchant Bank Limited, Ecobank Nigeria Limited, UACN Property Development Company Plc, Dangote Cement Plc.
A former Chairman of Association of Stockbroking Houses of Nigeria (ASHON), Mr. Emeka Madubuike, yesterday called on the Nigerian Stock Exchange (NSE) and other stakeholders to collaborate more in a bid to attract more retail investors to the nation’s capital market.
Speaking at the exchange in Lagos, during the NSE Chief Executive Officer’s 2018 Market Recap and 2019 outlook presentation, Madubuike, who is the Managing Director of Compass Investment and Securities Limited, said rather than working in silos, the NSE, stockbroking community and other stakeholders should work together and attract more investors to the market.
“Despite assurances of reaching out to more retail investors, the NSE has not done much. I believe the NSE should work with intermediaries such as stockbrokers and organise outreaches throughout the country to get more investors to the market,” he said.
Responding, the CEO of NSE, Mr. Oscar Onyema said while there was the need for collaboration in the market, he said there are better ways to reach the investors using technology.
Meanwhile, reviewing the performance of the stock marketin 2018, said equity market started the year on a high, with the All Share Index (ASI) reaching a 10 -year peak of 45,092.83 in January.
“This was largely driven by the positive performance of the ASI in 2017 which emerged the best in Africa. As we approached the second quarter, political risks, oil price volatility and rising global yields resulted in bearish sentiments that saw the ASI and equity market capitalisation fall by 17.81 per cent and 13.87 per cent to close at 31,430.50 and N11.73trillion respectively.”
According to him, while listing activity remained relatively low during the year, (one listing and four delistings) equity turnover remained relatively stable, marginally declining by 5.45 per cent to N1.20 trillion.
“Turnover velocity inched up 0.91 percentage points to 10.25 per cent and likewise, the size of volumes traded in the period increased by 0.96 per cent to 101.43billion with the Financial Services sector being responsible for the highest traded volume and value. In the year under review, foreign portfolio investments outpaced domestic participation by 1.73 per cent, accounting for 50.87 per cent of total transactions, while domestic transactions accounted for 49.13 per cent. Within Domestic Institutional order flow was 56 per cent while retail order flow was 44 per cent.”
The persistent sell-offs in bellwether stocks pushed the nation’s equities market to 20 months low as the Nigerian Stock Exchange (NSE) All-Share Index (ASI) fell below 30,000 mark to close at 29,830.70 last week.
After losing 1.2 per cent the first week of 2019, the market declined further in the second week, going down by 2.6 per cent following weak sentiments among investors. The political tension has continued to keep investors away as they wait for the outcome of the general elections coming up in February and March.
The market hit a new low last seen in May 2017, on January 9, before a rebound on Thursday and Friday helped it to recover some losses. Save for the rebound in the two days, the loss recorded last week would have been higher than the 2.6 per cent. The market capitalisation went down by N301.4 billion to close a N11.1 trillion.
Apart from the NSE ASI that depreciated by 2.6 per cent, other sectoral indicators also closed in the red except the NSE Industrial Goods Index that appreciated 1.0 per cent. The NSE Insurance Index was the biggest loser, down 7.0 per cent, it was followed by the NSE Oil & Gas Index with 6.3 per cent. The NSE Consumer Goods Index dipped by 3.6 per cent decline. The NSE Banking Index closed 0.9 per cent lower.
Despite the bearish performance, some positive news hit the market last week. For instance, ABRAAJ, managers of the Aureos Africa Fund, said they would convert the $10 million loan stock in C & I Leasing Plc to equity. The $10 million was an unsecured, redeemable, convertible loan stock that matured at the end of 2018.
Commenting, the Managing Director/CEO of C & I Leasing, Mr. Andrew Otike-Odibi said: “This development is positive for our business as it improves the capital structure of the company and helps position it favorably for additional capital raise from the market in first quarter of 2019.”
Also, last week, Chairman of Cement Company of Northern Nigeria (CCNN), Alhaji Abdul Samad Rabiu said more companies from BAU Group will be listed on the NSE. CCNN, which is a member of the BUA Group, recently had a successful merger with Kalambaina Cement Company(KCC).
And Rabiu, who is also Chairman of BUA Group said the group was in discussion with the NSE so as to list other companies from the BUA Group.
“As you know BUA Group has other companies apart from CCNN that is already listed. We are discussing with the NSE so that we can list some of the companies on the exchange as well,” he said.
Rabiu thanked the management of the NSE and stockbrokers for their support during merger of CCNN with KCC, saying the new entity is now stronger to produce more products and deliver better returns to investors.
The merger has increased CCNN’s total issued and fully paid shares from 1.257 billion shares to 13.144 billion shares.
Similarly, in a bid to improve the fortunes of MRS Oil Nigeria Plc, the company appointed Mrs. Priscilla Thorpe Apezteguia as Acting managing director(MD) following the resignation of Mr. Adnrew Gbodume.
Although no reason was given for Gbodume’s resignation, it was gathered that he has returned to the head office of MRS African Holdings, which owns 60 per cent of MRS Oil Nigeria Plc.
The petroleum market company recorded a loss N425 million for the nine months ended September 30, 2018, fuelling apprehension the company may end the financial year. The nine months results showed that revenue fell from N81.9 billion in 2017 to N76 billion in 2018. Net financing cost jumped by 484 per cent from N66 million to N386 million. It ended the period with loss after tax of N425 million as against a profit of N809 million in the corresponding period of 2017. MRS Oil Nigeria would have recorded a loss last year but for an income tax credit of N2.3 billion.
It is believed that changed in management is a strategy to rescue the firm from weak performance.
The acting MD, Apezteguia holds a Bachelors of Arts degree in International Studies and Business from University of Coventry, United Kingdom. She has over 17 years’ experience in the oil and gas sector and has held high-level positions in reputable organisations.
Market Turnover
Meanwhile, investors traded 1.265 billion shares worth N14.074 billion in 19,278 deals last week compared with 1.647 billion shares valued at N8.413 billion that exchanged hands in 14,773 deals the previous week.
However, the Financial Services Industry remained the most active, leading others with 1.072 billion shares valued at N8.795 billion traded in 12,287 deals. With this, the sector contributed 84.73 per cent and 62.49 per cent to the total equity turnover volume and value respectively.
The Conglomerates Industry followed with 83.595 million shares worth N155.485 million in 750 deals. The third place was Consumer Goods Industry with a turnover of 50.537 million shares worth N3.432 billion in 2,576 deals.
Trading in the top three equities namely, Diamond Bank Plc, FBN Holdings Plc and Custodian Investment Plc accounted for 465.000 million shares worth N 2.044 billion in 2,448 deals, contributing 36.75 per cent and 14.53 per cent to the total equity turnover volume and value respectively.
Also traded during the review week were a total of 15,288 units of Exchange Traded Products (ETPs) valued at N236,445.40 executed in four deals compared with a total of 395 units valued at N816,344.70 that was transacted in 13 deals the previous week.
A total of 17,996 units of Federal Government Bonds valued at N18.426 million were traded in 10 deals compared with a total of 7,209 units valued at N6.958 million transacted the preceding week in eight deals.
Price Gainers and Losers
The price movement chart showed that 22 equities appreciated in price last week the same number of losers the previous week, while 44 equities depreciated in price, lower than 45 of the previous week.
Julius Berger Nigeria Plc led the price gainers with 22.1 per cent, trailed by Diamond Bank Plc with 12.2 per cent. Transcorp Plc chalked up 11.2 per cent, while WAPIC Insurance Plc and Cornerstone Insurance Plc garnered 10 per cent each.
Other top price gainers included: John Holt Plc (9.0 per cent); Lafarge Africa Plc (8.4 per cent); CCNN (8.4 per cent); A.G Leventis Nigeria Plc (7.4 per cent) and FCMB Group Plc (4.9 per cent).
Conversely, NEM Insurance Plc led the price losers with 33.4 per cent, trailed by Resort Savings & Loans Plc with 26 per cent. Unity Bank Plc shed 17 per cent, just as Custodian Investment Plc and Flour Mills of Nigeria Plc shed 13.1 per cent and 11.6 per cent respectively.
Neimeth International Pharmaceuticals Plc and Seplat went down by 10.2 per cent and 10 per cent in that order. Other top price losers included: MRS Oil Nigeria Plc (9.9 per cent); Champion Breweries Plc and UPDC Real Estate (9.8 per cent apiece).
The bond market recorded moderate activities in both the primary and secondary markets last week as investors continued to show preference for short-dated instruments.
Nonetheless, the yields on treasury bonds pared moderately by four basis points last week to settle at 15.3 per cent.
This, was due to increased buy interest on the final trading day of the week, before which yields had increased moderately by one basis points, analysts at Afrinvest Securities stated in their latest report.
They noted that the yield differential between Treasury bills would likely result in a persistence of the trend witnessed over second half 2018 to date. “Although we expect yields on FGN bonds to trend upwards over the short-term. In the Sub-Saharan Eurobond market, demand levels were sustained into this week, as the average yield declined by 36 basis points to settle at 7.8 per cent.
“There were yield declines witnessed across all bonds, save for the Mozambique Eurobond, which recorded an eight basis points increase to settle at 14.1 per cent.
“On the flip side, the largest declines in yields were recorded on the Ghana and Kenya Eurobonds, which recorded average declines in Ask-yields of 45 basis points and 40 basis points respectively, to settle at 7.8 per cent and 7.7 per cent,” it added.
Similarly, the report showed that average yield on Nigeria’s Eurobonds pared in the week’s trading by 47 basis points to settle at 7.5 per cent.
“The resurgence in interest in assets is in line with our expectations and trend in election years. We expect continued interest in US Dollar assets through to H2:2019 as investors remain wary of risk factors on the horizon that could potentially affect the value of the naira,” the report added.
In addition, it noted that the trend in the corporate Eurobonds space closely mirrored that of Sub-saharan Eurobonds, as the average yield pared by 20 basis points to settle at 7.6 per cent. There were also yield declines across all bonds save for the Diamond Bank 2019 bond, which recorded a yield increase of 162 basis points to settle at 13.1 per cent.
This was expected as investors were anticipated to take profit on the instrument given the decline in the yield of the bond following the announcement of the bank’s merger with Access Bank Plc. Also, there was significant demand for the FBNH 2021 Eurobond during the week, as the Ask-yield on the bond declined by 1.5 per cent to settle at 6.3 per cent.
“Similar to our expectations for Nigeria Sovereign Eurobonds, we project the yields on these bonds to pare over the short-term given factors stated.”
Interbank Naira Market
Activities in the money market last week were somewhat muted as system liquidity remained in the negative region.
This followed the aggressive pace of open market auctions (OMO) by the Central Bank of Nigeria (CBN) last Tuesday and Thursday in its bid to prevent speculative sentiments in the market ahead of the upcoming presidential elections.
Tuesday’s auction saw the CBN offer OMO bills worth N60 billion, although it was largely undersubscribed, at N10.7 billion despite attractive rates on the offer: 107-day (11.9%), 170-day (13.5%) and 317-day (15.0%). Furthermore, maturity expectations on OMO instruments worth N375.4 billion saw the issuance of another OMO tranche on Thursday in an offer worth N400 billion, which was also largely undersubscribed.
Only the 364-day OMO bill was 1.13x subscribed while the 91-day (11.9%) and the 189-day (13.5%) were both undersubscribed by 0.12x and 0.02x. Direction of rates in the secondary market saw money market rates – OBB (Open Buy Back) and OVN (Overnight) – rise further from 20 per cent and 23.8 per cent at close of the preceding week to 22.7 per cent and 24.7 per cent last week.
Notably, rates surged to 26.67 per cent (OBB) and 27.67 per cent (OVN) on Wednesday, following Tuesday’s surprise OMO auction as system liquidity worsened to the negative region. In the secondary T-bills market, bullish sentiment, especially for long tenor instruments, saw average yields decline 56 basis points to 13.52 per cent on Friday from 14.1 the preceding week. This week, central bank is scheduled to repay N429.6 billion maturing treasury bills with the same sum rolled over.
“We expect rates at the auction to remain at attractive levels in line with recent trend while we anticipate a near muted activity in the secondary market.
“Also, in line with its tight system liquidity posture, we expect conduct of OMO auctions by the CBN next week to offset maturities worth N560.9 billion.”
Forex Market
In its first intervention in 2019, the CBN injected a total of US$210 across various market segments – US$100.0m in the Wholesale and US$55.0m each in the SME and Invisibles (tuition fees, medical payments and BTA) segments. Also, the CBN injected the sum of $263 million into the Retail Secondary Market Intervention Sales (SMIS), being its first intervention in that segment of the the market this year.
This was in addition to the sum CNY 39 million consummated through a combination of spot and short-tenored forwards, arising from bids received from authorised dealers.
The figures obtained from the CBN revealed that the US dollar-denominated interventions were for requests in the agricultural and raw materials sectors while the Yuan sale was for payment of Renminbi-denominated Letters of Credit for agriculture as well as raw materials.
In the parallel market, naira closed the week flat at N362/$1 due to CBN’s forex injection on Monday to boost sales in the wholesale segment of the market. Similarly, the CBN’s spot rate appreciated by five kobo from N306.95/$1 to close at N306.90/$1; while in the Investors’ & Exporters’ (I&E) FX Window, the naira opened the week at N365.30/$1 but appreciated 18 kobo to close the week at N365.12/$1.
The share price of Access Bank Plc has declined by 32.52 per cent since the bank confirmed its plans to merge with Diamond Bank Plc.
The share price of the bank, which stood at N7.45 on December 14, 2018, gained 9.4 per cent to close at N8.15 on December 17, 2018, after the announcement of the proposed merger with Diamond Bank.
However, the share price has been steadily declining, dropping to N5.50 at the end of trading on the floor of the Nigerian Stock Exchange on Wednesday.
Analysts, who spoke in separate interviews with our correspondent after the announcement of the merger in December, explained that the decline in the bank’s share price could be attributed to the dilutive effect the merger would have on the shareholders.
The Head, Research and Strategy, Cordros Capital Limited, Christian Orajekwe, noted that the merger would have a dilutive effect on the existing shareholders of Access Bank and that the percentage holding of people’s shares in the bank would drop because the merger would create new shares to a new set of investors.
The Managing Director, Afrinvest Securities Limited, Ayodeji Ebo, stated that a lot of investors sold off shares in Access Bank because they might not see gains in a long time.
He said, “In actual fact, the impact of the acquisition will not come into play until the last quarter of 2019. If you are not a very long-term investor, it will not transfer to capital acquisition. That is why people are selling off their shares in Access Bank.”
Access Bank, in its memorandum of agreement with Diamond Bank, offered a cash consideration of N1 per Diamond Bank share, representing a total cash amount of N23.160bn, and the allotment of 6.62 billion new Access Bank ordinary shares, representing the two new Access Bank ordinary shares for every seven Diamond Bank shares.
The bank said the offer represented a premium of 260 per cent to the closing market price of N0.87 per share of Diamond Bank on the Nigerian Stock Exchange as of December 13, 2018, the date of the final binding offer.
Analysts said the outstanding shares of the company, which currently stands at 28.93 billion, might go up further following the conclusion of a planned rights issue as the bank intends to raise N75bn through a rights issue.
“The implication of this development is that if the stock continues to decline, the bank may be forced to review the terms it has offered Diamond Bank shareholders. It would either have to issue a larger number of additional shares or a bigger cash payment,” analysts on Nairametrics said.
They added that an increased number of shares in issue could mean that the bank’s earnings per share and dividend payment might drop.
Notwithstanding a 17.8 per cent decline recorded by the stock market in 2018, the Nigerian bourse is expected to perform better this year, writes Goddy Egene
The stock market recorded a performance that sent mixed feelings among stakeholders in 2018. To some, it was a disappointment that the market could not sustain the gain recorded in 2017. But to others, given the various headwinds witnessed in 2018, the decline of 17.8 per cent was a not a very bad performance after all. Contrary to high expectations that the Nigerian equities market will sustain the 2017 positive performance in 2018, the market closed the year with a decline of N1.898 trillion while the Nigerian Stock Exchange (NSE) All-Share Index (ASI) depreciated by 17.8 per cent. While 2018 started on a positive note with the NSE ASI rallying 15.95 per cent in the first month, the bearish trend set in the following months, which persisted to the end of the year.
Early optimism Following the recovery in 2017 and sustained rally in the first weeks of January, 2018, operators were highly optimistic that the market would remain bullish in early part of 2018. According to them, many investors would take position ahead of positive results and dividends expected from companies for the year ended December 31, 2017.
Analysts at Meristem Securities Limited, said: “Given that we expect the Nigerian economy to maintain its steady growth, we do not expect the market to deviate from its current trend, hence, we opine that this positive momentum will be sustained in 2018, albeit at a slower pace on the back of the high base effect in 2017.”
Also speaking, analysts at FSDH Research had said the performance of market in 2017, was driven by: the increase in the price of crude oil; introduction of the Investors’ and Exporters’ (I &E) foreign exchange window leading to stability in the foreign exchange market; improved corporate earnings and the drop in the yields on the Nigerian Treasury Bills (NTBs). ”
They therefore said they expected the factors to support the market rally in 2018. Similarly, analysts at Cordros Capital Limited (CCL), said the 2018 economic outlook favour the equities market.
Although the firm made a strong case for equities upside potential, it also considered the number of possible risks that could trigger a bear market. “We have considered five possible triggers of the rally. The probability of the triggers is low to moderate. The possible triggers, in order of importance to Nigerian equities are: significantly favourable macroeconomic and political backdrop; strong corporate earnings growth; strong portfolio inflows; mergers and acquisition (M&A) activities; and strong moderation of fixed income and treasury yields,” he said.
Bears take over Although the strong rally recorded in January made the market to close first quarter (Q1) with a growth, sustained bear run in the subsequent months led the market to close the second quarter (Q2) with a decline.
However, the negative sentiments that prevailed in Q2 did not come as a surprise to many operators and analysts. According to them, they had expected profit taking by investors in most stocks that had been overbought in the beginning of year. Also, analysts said the exit of foreign from emerging and frontier markets and political uncertainties in the country fuelled the negative performance. The foreign investors were said to be moving their funds into Western countries, especially United States, following rate hike. The bear run continued until of the year.
Stakeholders’ assessment Looking at the performance of the market in 2018, analysts at analysts at CSL Stockbrokers Limited, said the downtrend in the stock market, which was initially triggered by rising yields in the United States(US) due to hike in interest rates by the Fed, was exacerbated by escalating trade war between the US and China, investor fears surrounding a “contagion effect” on the back of the turmoil in emerging markets (Turkey and Argentina in particular).
“In addition, the political uncertainties in the domestic economy in the build up to the 2019 elections amidst a sluggish growth in gross domestic product (GDP) (which slowed from 2.1 per cent in Q4 2017 to 1.95 per cent in Q1 2018 and then to 1.5 per cent in Q2 2018) from the economic recession led foreign investors to flee the equities market in search of high-quality lower-risk assets in developed economies notably the US,” they said.
A stockbroker, Mr. David Adonri of Highcap Securities Limited said the fixed income market predominated in the 2018 due to high interest rate. Another broker, Mr. Kasimu Garba Kurfi of APT Securities & Funds Limited, said the performance of the stock market in 2018 was poor with a negative of about 18 per cent compared with 42 per cent gained the previous year.
According to him, globally the capital market closed in red, including Dow Jones, NASDAQ, FTSE, Nikkei, JSE among others. “But our performance was worst. This could be due to election year coming which brings uncertainty in the mind of foreign investors that mostly exit to wait after elections. The issue that related to non-compliance with MTN remittance of dividend and the approach by Central Bank of Nigeria (CBN) not only affected MTN listing but also discouraged foreign investors coming into the country. The results declared by some of the companies such as Lafarge Africa Plc, PZ Cussons Nigeria Plc, and UAC of Nigeria Plc among others, did not help matters,” he said.
Kurfi explained that the introduction of Federal Government of Nigeria Sukuk with high yield encourage investors to diversify from equity into bond. However, he said the outlook for 2019 look bright in view of low prices of most blue chip stocks. “Peaceful conduct of the election will boost the performance of the market. The possible listing of MTN will increase the depth of the market. The introduction of Funds 1 which allow Pension Funds Administrators to invest as much as 70 per cent of the funds into the capital market will also impact the market positively,” he said.
Looking ahead, analysts said: “Although, we acknowledge that the broad sell off in the market has led to a significant moderation in the share prices of stocks providing opportunities for bargain hunting, we think that the argument for “Buying the dip” frequently advanced by money managers and traders is still too early to call for.
“With growing concerns about a weakening global economy, the U.S Fed providing guidance for two rate hikes in 2019 and more importantly, the elevated political risk in the domestic economy, we expect foreign investors to remain on the sidelines. Hence, we still expect a choppy theme to characterize the nation’s bourse over the short term.”
Some positive developments Despite the decline recorded in 2018, the market recorded some positive developments. Apart from the fact some investors still went home with gains of between 101 per cent and 20 per cent, regulators equally introduced some policies that would enhance investors’ stakes in the market going forward.
For instance, the Securities and Exchange Commission (SEC), extended the forbearance period for investors with multiple applications to December 31, 2019. The commission therefore urged investors to regularise their positions, saying no punishment for investors who used multi applications to acquire shares in the past.
According to the Acting Director General of SEC, during the banking and insurance sector consolidation between 2004-2007, there were a lot of issues in the primary market because the banks or insurance companies came to the market to raise funds and because a lot of people were coming to the capital market for the first time, they saw the market as a place where they can make a lot of money so a lot of them bought shares in different names.
“Today those shares are not in the system because if you are unable to identify yourself properly those shares cannot be properly captured in the system. We are saying come and regularize that situation and get back your shares which are being warehoused somewhere. There is absolutely no punishment attached to it, the SEC is not punishing anybody. We just want such individuals to come and regularise that transaction between now and 31st December 2019,” she said.
Also, the NSE introduced some innovations in 2018. For instance, it launched the X-Bot, which is the first African securities exchange Chatbot designed to provide market participants, especially retail investors, convenient, faster and real-time access to data and information from the Exchange.
Commenting on X-Bot, the Chief Executive Officer of NSE, Mr. Oscar Onyema, noted that the introduction of X-Bot is in line with the exchange’s drive to improve market participation through greater access to market information. “We aim for an exchange that is easily accessible and actively matches investors’ increased thirst for information and detailed disclosure information to make sound investment decisions. With X-Bot, investors in our market can access on-demand market information, news and events on the activities of the Exchange and the various products and instruments that are listed and traded on it.”
The NSE, in collaboration with London Stock Exchange (LSE) hosted the 5th edition of the NSE-LSE Dual Listing Conference. Themed: “Attracting Global Capital to Drive Nigeria’s Economic Reforms and Sustainable Growth Development,” the conference brought together companies keen to explore a London/Lagos dual listing, corporate finance experts, lawyers, capital market operators, regulators, government officials, media and thought leaders to discuss investment opportunities in Nigeria.
“This event came at a time when Nigeria has turned a corner from its worst recession in over two decades to have the best performing stock exchange in Africa and third best performing globally. I have no doubt that the insightful deliberations at this conference would drive the level of engagement and idea generation that will solidify and strengthen our capital markets partnership and reinforce the drive of Federal, States and Corporates in accessing the deep pool of capital inherent in the Nigerian capital market and on the London Bourse. I encourage us to utilise the opportunities that exist between our exchanges to enhance capacity in our markets and promote diversity of investment products to meet the needs of a wide range of investors and issuers,” Onyema said.
Similarly, last year, the NSE migrated Access Bank Plc, Lafarge Africa Plc, Seplat Petroleum Development Company Plc and United Bank for Africa Plc to its Premium Board. The Premium Board is the listing segment for the elite group of issuers that meet the exchange’s most stringent corporate governance and listing standards. The board is a platform for showcasing companies who are industry leaders in their sectors. Premium Board features companies that adhere to international best practices on corporate governance and meet the exchange’s highest standards of capitalization and liquidity. The board gives a company access to a global pool of investors who are focused on companies managed in conformity to the highest standards in their target markets.
The NSE said the Access Bank Plc, Lafarge Africa Plc, Seplat Petroleum Development Company Plc and United Bank for Africa Plc have all passed the Corporate Governance Rating System (CGRS). “This migration affirms the strides our listed companies are making towards meeting the highest standards of corporate governance and underpins the robustness of our market. The new companies have consistently demonstrated their inherent values to be globally competitive brands and we congratulate them on the attainment of this migration,” Onyema said.
Bright outlook
Although the market remained bearish in the first week of 2019, analysts are optimistic that a positive performance should be expected at the end of the year. Analysts at WSTC Securities Limited said: “The equities market closed in red in 2018, declining by 17.81 per cent. We expect the bearish trend to extend to 2019, on the back of heightened risk in the Nigerian political environment. However, we posit a reverse direction of the market in the second quarter, as we expect political stability to support sentiment.”
In their own outlook, analysts at FSDH Research said although a number of factors may limit the growth of the equity market in 2019, they believe it will record a modest recovery. “The election activities that will dominate the first quarter of the year may deter investors throughout Q1 2019. However, informed investors usually make money from the equity market when other investors are cautious. Therefore, we expect some strategic positioning in the equity market in Q1 2019 ahead of a recovery in Q2 2019,” they said.
The Debt Management Office (DMO) has commenced the 2019 savings bonds sales by offering for subscription two-year savings bond at 12.12 per cent and three-year savings bond at 13.12 per cent.
According to the offer circular obtained from the DMO website on Monday, the two-year bond will be due in Jan. 2021, while the three-year bond will be due in Jan. 2022.
It, however, did not state how much was offered, but added that the maximum subscription was N50 million at N1, 000 per unit, subject to minimum subscription of N5, 000 and in multiples of N1,000.
The News Agency of Nigeria (NAN) quoted the DMO to have stated that the bond was fully backed by the full faith and credit of the federal government, with quarterly coupon payments to bondholders.
The savings bond issuance is expected to help finance the nation’s budget deficit.
It is also part of the federal government’s programme targeted at the lower income earners to encourage savings and also earn more interest, compared to their savings accounts with banks.
The circular also said that the offer would close on Friday.
The stock market continued its bearish trend as the Nigerian Stock Exchange (NSE) All-Share Index fell 0.78 per cent to close lower at 30,400.28 yesterday.
Similarly, the market capitalisation shed N89 billion to close at N11.3 trillion, following losses by 24 equities as against the gain by only 14 stocks.
Although notable stocks such as Nestle Nigeria Plc, Zenith Bank Plc, Forte Oil Plc were among the losers, NEM Insurance Plc and Resort Savings and Loans Plc led the bears with 10 per cent apiece.
MRS Oil Nigeria Plc and UAC of Nigeria Plc went down by 9.9 per cent, just as Flour Mills of Nigeria Plc and Ikeja Hotel Plc shed 9.8 per cent 9.0 per cent in that order among others.
Commenting on the market performance, analysts at Cordros Capital Limited reiterated their negative outlook for the market in the short to medium term, amidst political concerns ahead of the 2019 elections, and the absence of a positive market trigger.
“However, positive macroeconomic fundamentals remain supportive of recovery in the long term,” they said.
Meanwhile, Diamond Bank Plc returning to its gaining streak after a short period of profit taking by investors. The stock led the price gainers with 10 per cent. Also, WAPIC Insurance Plc went up by 10 per cent, just as A.G Leventis Plc added 7.4 per cent.
Diamond Bank Plc has become investors’ toast since the announcement of its merger with Access Bank Plc.
Some market analysts said the deal favours Diamond Bank and investors having buying the shares as way of entering Access Bank Plc, which shares are higher in price.
The Chief Executive Officer of Diamond Bank, Uzoma Dozie, had the combination with Access Bank would create one of Africa’s leading financial institutions.
He said: “There is clear strategic rationale for the proposed merger and strong complementarities between the two institutions. While Diamond Bank has pioneered Nigeria’s largest technology led retail banking platform, Access Bank is one of Nigeria’s leading full-service commercial banks. Consolidation in the Nigerian banking industry is an inevitable, natural progression in a sector where the gap between Tier 1 and Tier 2 banks has been widening and scale has become critical; where technology will disrupt the traditional business model while enabling broader financial inclusion.
The board of Diamond Bank believes that the proposed combination of the two operations provides an exciting prospect for all stakeholders in both businesses and will create a financial institution with the scale, strength and expertise to capitalise on the significant opportunities in Nigeria and sub-Saharan Africa more broadly.”
