After two consecutive weeks of negative performance, the Nigerian equities market rebounded last week as the Nigerian Stock Exchange (NSE) All-Share Index (ASI) rose 1.31 per cent to close at 36,939.59. Despite the improved corporate earnings declared by most companies for the nine months ended September 30, 2017, the market had declined for two straight weeks.
However, sentiments turned positive last week to completely reverse the previous losses. As a result, the NSE ASI ended the week higher by 1.31 per cent at 36,939.59, while market capitalisation appreciated by same margin to be at N12.785 trillion. In addition, all other Indices finished higher during the week with the exception of the NSE-Main Board and NSE Consumer Goods Indices that depreciated by 0.11 per cent and 0.07 per cent respectively. The NSE Insurance Index led with 1.52 per cent, trailed by the NSE Industrial Goods Index with 1.45 per cent. The NSE Oil & Gas Index climbed 1.44 per cent, while the NSE Banking Index closed 0.27 per cent higher. Analysts at Cordros Capital said: “With Q3-17 earnings season now over, activities in the market will be driven by outlook for fourth quarter and full year earnings releases. However, we believe the market fundamentals remain strong, amid improving macroeconomic conditions.”
Daily Market Performance The NSE ASI rose marginally by 0.06 per cent on Monday as the market opened on a positively note. Similarly, the market capitalisation appreciated by same margin to close at N12.63 trillion. The growth was bolstered by gains recorded by Ecobank Transnational Incorporated ( ETI), United Bank for Africa (UBA), Zenith Bank, UAC of Nigeria, and Forte Oil Plc, pushing the year-to-date (YTD) growth to 35.76 per cent as at that day.
However, the total value of stocks traded on the first day of the week fell by 30 per cent to N1.82 billion staked on 174.95 million shares in 3,401 deals. The three most actively sectors were: Financial Services (129.08 million shares), Conglomerates (15.89 million shares), and Consumer Goods (12.47 million shares), while the mostly traded stocks were: FBN Holdings (26.51 million shares), Diamond Bank (26.24 million shares) and UBA (16.12 million shares) In terms of sector, it was mixed with the NSE Industrial Goods Index emerging the biggest loser, down 1.5 per cent largely due to losses in Lafarge Africa Plc (-3.9 per cent). The NSE Insurance Index trailed, declining by 0.09 per cent on the back of losses in AXA Mansard Insurance(-1.9 per cent) and NEM Insurance (-3.1 per cent ) while the NSE Consumer Goods Index closed flat.
On the positive side, the NSE Banking Index and the NSE Oil & Gas Index appreciated by 0.07 per cent and 0.01 per cent in that order. The market rose further on Tuesday the index added 0.54 per cent to close at 36,680.29, while market capitalisation ended higher at N12.69 trillion. Unlike the first day, the value of shares traded rose on Tuesday by 67.47 per cent as investors committed N3.05 billion on 259.07 million shares in 4,503 deals. The three most actively traded sectors were: Financial Services (176.62 million shares ), Consumer Goods (44.36 million shares), and Conglomerates (21.64 million shares), while the three most actively traded stocks were: Diamond Bank (42.94 million shares), Fidelity Bank (31.06 million shares) and FBN Holdings (21.47 million shares).
A further analysis of the market performance showed that the NSE Industrial Goods Index led the sectoral chart. It rose by 1.1 per cent propelled by Dangote Cement Plc. The NSE Oil & Gas Index closed 1.0 per cent higher just as the NSE Insurance Index chalked up 0.9 per cent. Similarly, the NSE Consumer Goods Index gained 0.2 per cent. The lone loser was the NSE Banking Index that shed 0.9 per cent. The positive trend was maintained for the third day running as the index rose 0.56 per cent to be at 36,880.20, just as the market capitalisation added N71.6 billion to close at N12.8 trillion. All the sectoral indices closed the day in the green led by the NSE Industrial Goods Index with 0.9 per cent on the back of gains in Dangote Cement (+1.6 per cent) and Lafarge Cement (+0.1 per cent). The NSE Oil & Gas Index followed, rising 0.4 per cent due to price appreciation in 11 Plc (+3.9 per cent), while the NSE Banking Index and the NSE Insurance Index grew by 0.2 per cent apiece. The NSE Consumer Goods Index gained 0.01 per cent. After three days of gains, profit taking set in to push the index down marginally by 0.03 per cent to close at 36,877.15. The depreciation recorded in the share prices of Dangote Cement, Zenith Bank, Nigerian Breweries, Transcorp, and PZ Cussons was mainly responsible for the decline. In line with the bearish trend, the total value of stocks fell by 24 per cent to N3.95 billion from N5.20 billion.
The three most traded sectors were: Financial Services (224.37 million shares), Healthcare (60.58 million shares), and Consumer (15.17 million shares), while the three most actively traded stocks were: FBN Holdings (73.40 million shares), Union Dicon (58 million shares) and UBA (32.02 million shares). Sector performance was mixed on Thursday with the NSE Banking Index and the NSE Insurance Index closed positive, rising 0.7 per cent each. Conversely, the NSE Consumer Goods Index depreciated the most, shedding 1.2 per cent due to profit taking in Nigerian Breweries Plc (-3.2 per cent), Unilever Nigeria (-2.4 per cent) and PZ Cussons (-4.0 per cent). In the same vein, losses in Dangote Cement (-0.2 per cent) dragged the NSE Industrial Goods Index 0.1 per cent lower, while the NSE Oil & Gas Index closed flat.
Market Turnover Apart from closing higher, the market also recorded high volume and value of transactions as investors exchanged 1.363 billion shares worth N17.714 billion in 21,891 deals, compared with 1.394 billion shares valued at N16.403 billion that exchanged hands the previous week in 19,195 deals. The Financial Services Industry remained the most patronised with 1.046 billion shares valued at N9.032 billion traded in 12,847 deals, thus contributing 76.79 per cent and 50.99 per cent to the total equity turnover volume and value respectively. The Consumer Goods Industry followed with 119.907 million shares worth N5.109 billion in 4,827 deals. The third place was occupied by Healthcare Industry with a turnover of 70.587 million shares worth N77.530 million in 349 deals. Trading in the top three equities namely, FBN Holdings Plc, Diamond Bank Plc and United Bank for Africa Plc accounted for 497.016 million shares worth N2.947 billion in 4,205 deals, contributing 36.4 per cent and 16.6 per cent to the total equity turnover volume and value respectively. Also traded during the week were a total of 1,156,439 units of Exchange Traded Products (ETPs) valued at N6.404 million executed in 13 deals compared with a total of 104,544 units valued at N11.506 million transacted the preceding week in seven deals. A total of 2,775 units of federal government bonds valued at N2.770 million were traded this week in 4 deals, compared with a total of 559 units valued at N485, 802.83 transacted the previous week in five deals.
Price Gainers and Losers Meanwhile, 37 stocks appreciated last week higher than 33 of the previous week, while 29 stocks depreciated in price, lower than the 32 equities of the previous week. University Press Plc led the price gainers with 26.3 per cent, trailed by Learn Africa Plc with 19 per cent, just as Flour Mills of Nigeria Plc chalked up 18.2 per cent. Dangote Flour Mills Plc and Eterna Plc appreciated by 15.2 per cent each. Other top price gainers included: FBN Holdings Plc (13.7 per cent); Honeywell Flour Mills Plc (8.9 per cent); AXA Mansard Insurance Plc (7.4 per cent); UBA (6.3 per cent) and NEM Insurance Plc (6.2 per cent). Conversely, Newrest ASL Nigeria Plc led the price losers, shedding 18.3 per cent, followed by Linkage Assurance Plc with a decline of 13.3 per cent. Unilever Nigeria Plc depreciated by 6.5 per cent. Livestock Feeds Plc and C & I Leasing Plc closed 5.6 per cent and 5.4 per cent lower respectively. Custodian and Allied Plc and Beta Glass Plc declined by 5.0 per cent apiece, just as Trans-Nationwide Express Plc shed 4.9 per cent. International Breweries Plc and Morison Industries Plc fell by 4.7 per cent each.
An Italian judge is expected to decide on December 20 whether to send two oil majors, Eni and Shell, to trial over alleged corruption in Nigeria, two legal sources said on Tuesday.
Reuters reported that Milan prosecutors had asked for the two companies and some past and present managers, including the current Chief Executive Officer, Eni, Claudio Descalzi, to be indicted in a case revolving around the purchase of a Nigerian oilfield in 2011.
A judge must now rule whether to press charges or dismiss the case.
The Italian inquiry is one of several under way into the acquisition of the Oil Prospecting Licence 245 field for about $1.3bn, including current cases in the Netherlands and Nigeria.
Under Italian law, a company can be held responsible if it is deemed to have failed to prevent, or attempt to prevent a crime by an employee that benefitted the company.
On Tuesday, a court in Milan decided to wrap a strand of the investigation involving three former Shell managers and the current Shell Foundation Chairman, Malcolm Brinded, into the main inquiry, the sources said.
All the parties involved have denied any wrongdoing.
Last week, the Attorney General of the Federation and Minister of Justice, Mr. Abubakar Malami, said the sum of $85m had been recovered from the controversial $1.6bn Malabu deal from the United Kingdom.
Courts in Nigeria and Italy are investigating the purchase of the block by Shell and Eni. Shell said in April that it knew that some of the payments it made to Nigeria for the rights to the oil field would go to Malabu Oil and Gas, a company associated with a former Minister of Petroleum Resources and convicted money launderer, Dan Etete
Eni has said neither the company nor Descalzi were involved in any allegedly illicit conduct.
A Nigerian court ordered the asset temporarily seized in January at the request of the Economic and Financial Crimes Commission, but the move was overturned.
But a Federal High Court in Abuja in March discharged its interim forfeiture order on the controversial OPL 245.
The OPL 245, believed to be the largest in Africa, was said to have been fraudulently acquired from the Federal Government by Malabu Oil and Gas Limited in 1998.
The oil block, which was awarded by Etete to Malabu Oil and Gas, a company in which he was a shareholder, was sold to Shell and Eni in what has been described as a shady transaction.
Global oil benchmark, Brent crude, rose above $61 per barrels on Tuesday after a week of gains as the prospect of increasing United States exports dampened bullish sentiment that has driven Brent crude to more than two-year highs above $60 per barrel.
Brent, against which half of the world’s oil is priced, increased to $61.32 a barrel by 8:00pm, up around 37 per cent from its 2017 lows hit in June.
The United States West Texas Intermediate crude was seven cents or 0.1 per cent higher at $54.21, still near its highest since February and close to its highest for more than two years.
Traders and brokers said investors were adjusting positions after price rises of around five per cent in October.
The US crude exports have jumped close to two million bpd and production has risen almost 13 per cent since mid-2016 to 9.5 million bpd.
“The problem is as soon as prices move up it’s too easy for the US producers to add another rig or another completion crew,” said Stewart Glickman, energy equity analyst at CFRA Research in New York, “Then they increase production and you’re back where you started.”
Six analysts polled by Reuters ahead of inventory reports estimated, on average, that crude stocks were forecast to have fallen by 2.6 million barrels in the week ended October 27.
Iraq’s move to increase oil exports from its southern ports by 220,000 bpd to 3.45 million bpd to make up for supply disruptions from its northern Kirkuk fields also weighed on prices, traders said.
The Disciplinary Committee of the National Council of the Nigerian Stock Exchange has summoned Mr. Victor Ogiemwonyi, Mr. Mathew Ojo, Mr. Alex Adeusi, Mr. Fisayo Jassey-Jabarr and Partnership Securities Limited, a dealing member of the NSE, to appear before it to answer for allegations of fraud.
The appearance of the aforementioned persons is scheduled for November 14 at the NSE building in Lagos, according to a document obtained by our correspondent on Tuesday.
The Exchange said the summons was for the purpose of hearing a complaint by Mr. Arnold Ekpe against Partnership Securities Limited and Ogiemwonyi for misappropriation of proceeds of shares; and complaint against Ojo, Adeusi and Jassey-Jabarr regarding their actions, which allegedly assisted/facilitated Partnership Securities and Ogiemwonyi to misappropriate the proceeds of the sale of Ekpe’s shares.
According to the NSE, there will be a hearing on the life ban of Ogiemwonyi and the cancellation of the certificate of registration of Partnership Securities Limited by the Securities and Exchange Commission; and the suspension of Adeusi for a period of five years from engaging in any capital market activities in the Nigerian capital market by SEC.
The document signed by the council’s secretary, Mojisola Adeola, read in part, “At the hearing, Mr. Victor Ogiemwonyi, Mr. Mathew Sunday Ojo, Mr. Alex Adeusi, and Mr. Fisayo Ibrahim Jassey-Jabarr, and Partnership Securities Limited will be required to give reasons why disciplinary action should not be taken against them.
“Any documents they wish to rely upon during the hearing should be provided to the Nigerian Stock Exchange by noon on Tuesday, November 7, 2017.
“Kindly note that the chief executive officer or any director and/or official of Partnership Securities Limited may attend this hearing. Note further that in the event of a failure to honour this invitation, the committee shall proceed with the hearing and make such decisions and issue such directives as it deems fit.”
A new report by Wood Mackenzie has revealed that the oil and gas industry in Nigeria, Angola and other countries in the sub-Saharan African cut $133 billion capital expenditure (CAPEX) between 2015 and 2020 as a result of the crash in crude oil prices.
The report titled: “sub-Saharan Africa Investment and Cost Trends – Have Costs fallen enough?” further revealed that 87 per cent of oil and gas projects were downgraded, deferred or cancelled in Nigeria and Angola. Wood Mackenzie noted that in 2017 the operating expenditure (OPEX) fell by 10 per cent as a result of lower costs, project optimisation and deferred Final Investment Decisions (FIDs).
The report, however, added that “stubborn fixed costs have pushed up the spend per barrel in some locations.” The new report highlighted that it Nigeria, crude oil production dropped by 12 per cent, thus increasing the cost per barrel equivalent, despite the six per cent OPEX savings.
The report noted that OPEX for 2016 marked the lowest point for total spend, while operators slashed seven per cent spend between 2014 and 2017, with deepwater Angola cutting OPEX by as much as 30 per cent. Wood Mackenzie argued that exploration is at historic low, despite the fact that it is now cheaper to hire rigs, while spend has shift from CAPEX to OPEX.
According to the report, drilling spend halved between 2014 and 2016, reflecting the oil price crash, adding that low rig utilisation contributed to the 60 per cent drop in the cost average day rates of hiring rigs. The report also cited a drop in exploration and appraisal drilling since 2014, stressing that funding constraints with the NNPC could deter recovery in drilling.
Wood Mackenzie also noted that oil companies have focused capital investments on few key projects, with the FID for Ghana’s Greater Jubilee expected in January 2018, while FID for Nigeria’s Oil Mining Leases (OMLs) 83 and 85 is also scheduled for the same period.
Wood Mack also stated that the Nigerian operators would prioritise low cost work-overs in the short term. “Long term production will depend on the successful transition to new funding methods and fiscal terms. Operators will focus on low cost work-overs in the near term; this alone cannot grow long term production,” the report added. According to Wood Mackenzie, production has been hard hit by the reduced investments with militancy and project deferrals impacting heavily on Nigerian output.
“Investment outlook – an uptick in project sanctions is expected over the next two to three years as costs have fallen. These new developments will commercialize 13 billion barrels of oil equivalent of reserves before 2020,” the report added.
The Central Bank of Nigeria has injected $285.7m into the Inter-Bank Foreign Exchange Market to meet requests in four sectors of the economy.
This came just the naira closed at 363 per United States dollar on Friday, the same rate it had closed in the past one week.
Details obtained from the CBN indicated that firms in the agricultural, airline, petroleum and raw materials space received various sums of forex allocation based on requests put forward by their respective banks.
The Acting Director, Corporate Communications Department, CBN, Isaac Okorafor, said the releases underlined the high level of transparency at the bank in forex management.
According to him, the CBN will continue to play its role in easing the foreign exchange pressure on the manufacturing and agricultural sectors through sales under the new flexible foreign exchange regime.
The naira is expected to remain stable across the various windows as the currency hit a resistance level for investors, Reuters reports.
Meanwhile, the Governor, Central Bank of Nigeria, Mr. Godwin Emefiele, has urged investors to come to Nigeria, stating that the nation’s return on investment in all sectors of the economy are among the best in the world.
Addressing a gathering of capital and money market players, investment bankers, treasurers and other fund managers at the London Stock Exchange on Friday, Emefiele’s said, “Nigeria is ready for business”, telling the story of how Nigeria emerged from what was its worst recession in decades.
The forum was organised by the London Stock Exchange, in collaboration with the Nigerian Stock Exchange and Afrinvest.
In a statement by the CBN, Emefiele was quoted as citing the ongoing reforms and the huge opportunities available to investors in several sectors notably agriculture, solid minerals and infrastructure.
Present at the occasion were the British Minister for International Development, Priti Patel; Governor Godwin Obaseki of Edo State; Minister of Solid Minerals, Dr. Kayode Fayemi; CEO of the London Stock Exchange, Mr. Nikhil Rathi; CEO of the Nigerian Stock Exchange, Mr. Oscar Onyema; DG of Nigeria’s Debt Management Office, Ms. Patience Oniha; and Group CEO of Afrinvest, Mr. Ike Chioke.
Also at the occasion, the Nigerian Banking sector report conducted by Afrinvest was launched and it shows that Nigerian banks remain resilient and profitable in spite of the headwinds emanating from the current economic situation in the country.
Nigerian Breweries Plc has announced an interim dividend of N7.997 billion for the nine months ended September 30, 2017. The dividend, which translates to N1.00 per share, was recommended following improved performance recorded by the leading brewing firm for the nine months.
Nigerian Breweries posted revenue of N254.7 billion in 2017, up from N222.7 billion in the corresponding period of 2016. Cost of sale rose from N125 billion to N148 billion, while gross profit stood at N106.6 billion as against N97.4 billion in 2016. Marketing and distribution expenses rose from N43.35 billion to N49.4 billion, while administrative grew from N16.48 billion to N17 billion in line with rising inflationary trend.
However, net finance charges (NFC) fell from N10.2 billion in 2016 to N7.9 billion in 2017. As a result, Nigerian Breweries ended the period with profit before tax (PBT) of N34.42 billion, showing an increase of 24 per cent above the N27.79 billion in 2016, just as profit after tax rose from N20.1 billion in 2016 to N24 billion in 2017.
Commenting on the results, the Company Secretary/Legal Adviser, Nigerian Breweries Plc, Mr. Uaboi Agbebaku said: “Despite the continued challenging business environment, revenue in the first nine months of the year grew compared to the corresponding period in 2016.” According to him, following the company’s continued focus on internal efficiencies under its Cost Leadership programme, results from operating activities improved, which combined with lower NFC resulted in increased profitability in the period.
Agbebaku explained that the interim dividend is payable subject to deduction of withholding tax at the appropriate rates, on Thursday, 23rd November, 2017 to all shareholders registered in the books of the company at the close of business on Wednesday, 15th November, 2017.
The company maintained that whilst the operating environment for the remainder of the year is expected to remain challenging, it is confident that, barring unforeseen circumstances, the company is well placed to deliver a good return on investment to shareholders.
Shareholders of Nigerian Breweries Plc had last May commended the board and management of the company when the company paid a total dividend of N28.8 billion for the 2016 financial year.
The shareholders, who spoke at the 71st annual general meeting (AGM) of the company held in Lagos, noted that the company’s performance in spite of the challenging operating environment, showed the resilience of the company.
Following the technical suspension placed on its shares and the decision to undertake a forensic audit into its affairs, Oando Plc has claimed it has obtained an interim injunction from a Federal High Court restraining the Nigerian Stock Exchange (NSE) and any other parties working on its behalf from giving effect to the directive of the Securities and Exchange Commission (SEC) to implement the suspension, pending the hearing and determination of the motion for injunction.
The court, Oando further claimed, has also issued an order restraining SEC and any other parties claiming to or working on behalf of the commission from conducting any forensic audit into the affairs of Oando, pending the hearing and determination of the motion for injunction. Oando, in a statement Tuesday, said it obtained the interim injunction and restraining order from a Federal High Court, but failed to indicate the jurisdiction of the court.
Given the absence of the court’s interim injunction and restraining order to support Oando’s claims, THISDAY was unable to independently verify the decision of the court. SEC last week had placed the company’s shares on full suspension for two days, then a technical suspension thereafter, pending the forensic audit into the affairs of the company.
The decision followed its investigation into two petitions sent to the commission by Mr. Dahiru Mangal and Ansbury Incorporated respectively, a shareholder and an indirect shareholder of the energy firm. SEC’s probe threw up several regulatory infractions committed by Oando, which has dual listings on the Nigerian and Johannesburg Stock Exchanges (JSE), and the commission’s instruction to the firm that it must bear the N160 million cost of the forensic audit to be handled by a team of independent experts to be led by the audit firm, Akintola Williams Deloitte.
But in a statement Tuesday on SEC’s findings, Oando’s Chief Compliance Officer and Company Secretary, Ayotola Jagun, provided clarifications to all the points raised in the commission’s findings as outlined in their correspondence to Oando’s Group Chief Executive (GCE) Mr. Wale Tinubu, on October 17, 2017. Oando also noted that SEC had announced that a forensic audit into the affairs of the company will be conducted by a team of independent professional firms. But Oando described SEC’s directives as illegal, invalid and calculated to prejudice its business. To safeguard the interests of the company and its shareholders, Oando said it took the step to file an action against SEC and NSE.
“The NSE and SEC were served with the enrolled court order today Tuesday, October 24, 2017 after the technical suspension was carried out by the NSE on Monday, October 23, 2017. “In our view both the NSE and the SEC are legally obliged to comply with the interim order, pending the substantive determination of the suit,” the company added.
Oando said it resorted to the court action because having declared to the public that SEC had ordered the suspension of its shares as a result of its “weighty” findings in the course of its investigations, SEC further concluded that a forensic audit was necessary in order to investigate whether its findings were true.
Oando described SEC’s position on the matter as a clear contradiction. “How did SEC arrive at its findings if it cannot be sure of the veracity or otherwise of those findings and how did it ascribe the appropriate level of weight to be given to those findings, enough to warrant an immediate suspension, followed by a technical suspension of the shares of the company, if those findings are still mere allegations at this point?” Oando wondered.
Oando said it had fully co-operated with SEC since the commencement of this investigation in May 2017 and had provided all the information requested. According to the company, it was evident that the submissions made to SEC had not been duly considered due to the conclusions reached and actions taken, as all of the matters raised had been responded to in great detail with all supporting documents requested by SEC.
Oando alleged that its chairman had requested audience with SEC to enable it present its case before the commission but to date, no invitation has been extended to the company. “Each of the alleged infractions has a penalty as prescribed by the respective provisions of the ISA, SEC Code, SEC Rules and Regulations, NSE Listing Rules and CAMA; none of them whether singularly or together warrant the suspension of free trading in the securities of the company or the institution of a forensic audit. “The latest actions taken by the SEC are prejudicial to the business of the company as it would hinder the ability of the company to enter into new business transactions and affect the confidence that existing stakeholders (lenders, JV partners, vendors, etc.) have in transacting business with the company.
“The company has received numerous queries from critical stakeholders, including its lenders as a result of SEC’s actions and an indefinite technical suspension of its shares, as well as an open-ended forensic audit that will negatively impact the ability of the company to conduct its day-to-day business and meet the expectations of all its stakeholders,” Oando stated. Oando added that by issuing the two letters dated August 24 and August 28, its chairman had petitioned the Director General of SEC alleging bias and lack of due process in the way and manner in which SEC has conducted this investigation.
According to the company, the current action by SEC, despite its internal findings, confirmed that SEC appeared to be working to its own conclusion rather than looking at the facts before it and acting in the best interest of the company and the minority shareholders whom it claimed it sought to protect. Oando further alleged that in its most recent communication to the Group Chief Executive (GCE) dated October 17, SEC unilaterally qualified one of the petitioners, Ansbury Inc. as a whistleblower despite the fact that Ansbury brought its petition to SEC as an indirect “shareholder” of the company.
The company argued that it had from the date of its earliest communication to SEC on this matter, challenged both the legal capacity of Ansbury to bring a petition against the company and SEC’s jurisdiction to consider the petition. “This is because Ansbury is not in fact a shareholder of the company and furthermore, there is an on-going arbitration in the United Kingdom in respect of its indirect investment in the company.
“Under SEC’s Complaints Management Framework, it shall not consider any matter which is currently in arbitration. The unilateral and arbitrary re-classification by the SEC of the basis upon which Ansbury wrote its petition at this late stage is at odds with accepted principles of fairness and due process. “It is also difficult to understand how Ansbury can be a whistleblower when the information and allegations contained in its petition were obtained from the publicly disclosed 2016 audited financial statements of Oando and based on Ansbury’s own interpretation of those financial statements,” Oando said.
The company further alleged that the two petitioners, Alhaji Mangal and Ansbury Inc., were copied in SEC’s most recent communication to the company’s GCE on October 17, stressing that it was unheard of and prejudicial to the company’s case for petitioners to be copied on correspondence to the investigated party on findings yet to be concluded.
Oando also described as onerous and unnecessary, the cost implication of the forensic audit — N160, 000,000.00 — which it is to bear, saying “it is not the best use of shareholders’ funds at this time”. Responding to SEC’s findings, as outlined in its correspondence to the company’s GCE on October 17, Oando stated that SEC accused it of breach of corporate governance code.
The commission had informed Oando that it found from the corporate governance return submitted by the company for the period ended December 31, 2016, that the remunerations of the GCEO and the Deputy GCEO were approved by the board, while the GCEO was responsible for fixing the remuneration of other executive directors, which was in violation of Part B, 14.3 of the SEC Code of Corporate Governance. SEC also found out that the last board evaluation of Oando was done by KPMG in 2012, which was a violation of Part B, 15.1 of the SEC Code of Corporate Governance. Responding to the two charges, Oando stated that it wrote to SEC on July 21, informing it that the remuneration of all executive directors of the company was last reviewed prior to May 2014 before the SEC Code of Corporate Governance was made mandatory.
Oando also admitted that its 2016 Corporate Governance Report filing dated January 31, 2017 contained an error which was evident when compared to its previous filings, including the H2 2015 report sent to SEC under cover dated August 31, 2016. On the board evaluation, Oando stated that its understanding was that the SEC Code of Corporate Governance was made mandatory on May 12, 2014, adding that prior to that date, the recommendation for an annual board evaluation was not mandatory.
The company added that even if it had breached provisions of the SEC Code, the commission was under obligation under s.1.3 (d) of the said Code to notify the company “specifying the areas of non-compliance or non-observance and the specific action or actions needed to remedy the non-compliance or non-observance”. “The company only received such formal notification from SEC requiring compliance with the SEC Code on these matters on October 17, 2017, five months after the commencement of its investigation.
“The company has since put remedial actions in place to cure this breach,” Oando added. SEC in its finding further stated that Oando breached ISA 2007 on the disposal of Oando Exploration & Production Limited (OEPL), stressing that the disposal of OEPL to Green Park Management Limited was done without the prior approval of SEC.
SEC had also charged that following the structuring of the OEPL transaction in contravention of ISA 2007, Oando Plc recorded a profit of about N6 billion from the sale of OEPL that erased the operating loss of N4.68 billion, leading to a profit of N1.4 billion for the year 2013. The company subsequently declared dividends from the profit. According to SEC, having admitted that the action was in breach of the ISA 2007, Oando Plc restarted its 2013 & 2014 audited financial statements, which contained material false and misleading information contrary to Section 60(2) of the ISA 2007.
But in its response to the disposal of OEPL and its treatment of the proceeds from the sale, Oando stated that this breach flowed from the allegations regarding the accounting treatment on the disposal of OEPL, adding that there was no misstatement of profits in the 2013 and 2014 audited financial statements as the accounting treatment for the transaction was in full compliance with the IFRS standards both in the 2013 financial statement when the sale occurred and was recorded in the 2015 financial statement when the reversal occurred. SEC further informed the GCEO in the October 17 correspondence that the 2014 Rights Issue Circular of Oando contained information relating to the profit reported by Oando in 2013 arising from the sale of OEPL.
“Consequently, the said Rights Issue Circular contained material misleading information. This action amounts to a violation as contained in Section 85(1), 86(1) and 87(1) of the ISA 2007,” SEC observed. However, Oando stated that SEC did not confirm what portion of the ISA was breached, adding that it acted appropriately in the way it reported the OEPL transaction, stressing that there was no breach of the ISA in respect of providing misleading information in Oando’s 2014 Rights Issue Circular.
On SEC’s observation that Oando in 2014, remitted dividends to the registrar in piecemeal in violation of Rule 44(1) of the SEC Rules and Regulations, which provide that “dividends declared shall be paid en-bloc by the issuance of a cheque or transfer of funds to the registrar not later than seven working days after the annual general meeting where the dividend was declared,” Oando said this was the first time that SEC was making such an allegation.
The company added that it was not given an opportunity to respond to this allegation. Oando noted that the penalties for breach of the provisions relating to payment of dividends are prescribed in Rule 44 (4) (a) and (b) of the SEC Rules, adding that these do not require a forensic audit. On SEC’s findings that Ernest & Young had raised concerns on the going concern status of the company, Oando said it was unclear how this issue on the going concern status was a SEC finding or how it amounted to a breach.
SEC had further observed that certain persons classified as insiders within the provisions of Section 315 of ISA 2007 and who were in possession of confidential price sensitive information not generally available to the public, had between January and October 2015 traded on Oando’s shares prior to the release of the company’s 2014 financial statement, where the company reported a loss of N183 billion.
On the allegation of insider dealing made by Oando against Mangal, the company stated that it has clear and robust insider trading policies which it had communicated to all known insiders of the company. The company also noted that the penalties for insider dealing include the voiding of the affected transactions at the instance of the commission. Oando also argued that there are further penalties contained in ISA –Section 115 – criminal liability for dealing in securities by insiders (Section 111).
“The company has clear and robust insider trading policies which it has communicated to all known insiders of the company. The company also operates a well-defined and articulated Closed Period/Blackout process relating to trading in the securities of the company by insiders, in line with corporate governance best practice. “The question as to whether insider dealing occurred in the shares of the company is a matter for SEC to raise with any affected insider; it is also important to note that the company cannot be guilty of insider dealing since it only issues securities and is not involved in the trading of its own securities.
“Furthermore, as a public company with fully dematerialized shares, listed on both the Nigerian Stock Exchange and the Johannesburg Stock Exchanges all trading in the securities of the company takes place on the floor of both exchanges through the respective Depository, Clearing and Settlement Agencies. “Any investigation into whether or not there has been a breach of insider trading rules is a question of fact which would be better addressed through an inspection of trading records of the exchange rather than through a forensic audit of the company.
“The company forwarded to the SEC, copies of the company’s Insider Trading and Closed Period policies during the process of its investigation,” Oando said. It went further to highlight the prescribed sanctions for a person or corporate body discovered to have engaged in insider dealing as prescribed by ISA, which did not include suspension of trading in a company’s shares or the requirement for a forensic audit. SEC had also informed the company in the October 17 letter that it identified certain related party transactions and observed that they were not conducted at arm’s length.
But Oando claimed that all related party transactions are disclosed by it in accordance with the SEC Code of Corporate Governance, the NSE Listing Rules as applicable, IAS 24 under the IFRS accounting standards, and the company itself has an extensive Related Party Policy which was made available to the SEC and is available on the company’s website. SEC also found that Oando declared dividends in 2013 and 2014 from unrealised profits. In its response, Oando stated that it has repeatedly denied this claim and provided evidence to SEC in its defence.
“The interim dividend declared in September 2014 and paid by Oando PLC in November 2014 was paid from the H1 2014 profits of Oando PLC. “At that point in time, the company had sufficient distributable reserves and it is acceptable under the law to pay out dividends if reserves exist at the point of declaration. “The restatement of the OEPL sale was done in 2015 and would not have affected the 2014 declaration of the interim dividend, which was declared from H1 current period profit in 2014.
“Thus, the declaration of the interim dividend on the basis of reserves available at the point of declaration, complied fully with the provisions of Section 379 (2) of the Companies and Allied Matters Act. “At all material times that dividends were declared, same were paid out of the available distributable reserves in the relevant period,” Oando explained. The company insisted that even if there was an infraction, the penalty is as laid down in Rule 44 (4) (a) and (b) of the SEC Rules.
On SEC’s observation of discrepancies in the shareholding structure of Oando Plc, the commission had pointed out that while Alhaji Mangal’s status as a shareholder in Oando Plc was not in contention or dispute, the exact units of shares held by him required reconciliation. But Oando argued that Mangal has not contested the contents of the register of members maintained by the company’s registrars — First Registrars & Investors Services Limited — or even made a request to the registrars to reconcile the register.
“We are therefore unclear as to what discrepancies SEC is referring to here. If Alhaji Mangal claims he holds more shares in the company than is stated in the Register of Members, then it is for him, directly, or through his brokers to seek a reconciliation of the register, providing evidence of the number of shares that he acquired in the company and when he acquired those shares. “We do not see how this ‘discrepancy’ should therefore require a forensic audit to ascertain its veracity when the burden is on Alhaji Mangal to show that he acquired those shares,” the company said.
The Central Bank of Nigeria (CBN) on Monday injected the sum of $195 million into the interbank foreign exchange (forex) market.
Figures obtained from the Bank indicated that the central bank offered $100 million to authorised dealers in the wholesale segment of the market, while the small and medium scale enterprises (SMEs) segment received the sum of $50 million.
Those requiring foreign exchange for invisibles such as tuition fees, medical payments and basic travel allowance (BTA), among others, were allocated the sum of $45 million.
The central bank’s acting Director in charge of Corporate Communications, Mr. Isaac Okorafor, confirmed the figures, saying that the Bank was confident that the level of transparency it had entrenched in the market would help the naira to sustain its steady run against the dollar and other major currencies around the world.
According to him, “the market will remain very stable as long as every player sticks to the forex guidelines.” The CBN had last week intervened in the various segments of the forex market with the sum of $195 million. Meanwhile, the naira continued to maintain its stability in the forex market, exchanging at an average of N360/$1 in the BDC segment of the market on Monday, October 23, 2017.
In pursuit of the federal government’s objective of financial inclusion by attracting retail investors into the bond market, the government on Monday disclosed that it has raised a total of N6.69 billion through the monthly issuance of the Federal Government of Nigeria Savings Bond (FGNSB) since March this year.
The amount raised since inception, according to a report, grew to N6.69 billion following the conclusion of the FGNSB Offer for October 2017.
Out of the N6.69 billion, N3.71 billion was for the 2-year Bond while N2.98 billion was for the 3-year bond. The Debt Management Office (DMO), which issues the FGNSB on behalf of the federal government said the high level of subscription by investors since the debut offer in March 2017, showed that the product appealed widely to investors.
According to the DMO, 9,103 subscriptions have been received so far from investors across the county. The report stated that analysts praised the DMO for introducing the savings bond into the securities market for retail investors and taking the instrument to the grassroots.
The DMO plans to sustain investor interest in the product through sensitization of the public about the gains of investing in the bond which has a competitive fixed interest rate with its income exempted from taxes.
