Ahead of National Insurance Commission’s (NAICOM) June 30th, 2020 deadline for firms to comply with its new capital regime, shareholders of Wapic Insurance Plc, have given the company approval to increase its capital base to N15 billion from the current N8.5 billion level.
The company, at its 60th Annual General Meeting held in Lagos recently where the approval was given, said having secured the shareholders’ nod to this effect, it has proposed to shore up its capital through creation of 13 billion additional ordinary shares of 50kobo each, to rank pari passu with the existing ordinary shares in the capital of the company.
“That the directors of the company be and are hereby authorised to do all acts and things as may be necessary to give effect to the above resolution, including without limitation, complying with the directives of any regulatory authority,” it stated.
The shareholders, at the meeting, also commended the outgoing Chairman, Mr. Aigboje Aig-Imoukhuede, for manning the affairs of the company positively since 2011.
Speaking on the financial performance of the company, Aig-Imoukhuede, recalled that Wapic grew from just over N4 billion gross premium in 2012 to close at N13.9 billion in 2018.
“During the reporting period, underwriting profit grew by 40 per cent to N2.1 billion as a result of premium growth and improved reinsurance technique. For instance, the negative impact of claims payment in 2018 was dampened by increased reinsurance recoveries.
“We continued to sweat our investments in technology and other assets enabling us to keep expense growth at 11 per cent, which when adjusted for inflation remained flat,” he said.
He, however, pointed out that despite the improved underwriting performance, sharp reversals in the company’s public equities portfolio mirroring the NSE Index’s 2018 negative correction led to significant drop in bottom line performance.
“Our associate company, Coronation Merchant Bank Limited continued to return good earnings, thereby enhancing the value of our private equity portfolio,” adding that the company closed the period with “consolidated net profits of N351 million and that Nigerian business comprising its Life and non-Life franchise accounted for 88 per cent of group revenue.”
Speaking further on the company’s business strategy, the Wapic Insurance Chairman, said between 2012 and 2013, Wapic implemented a merger transaction and rights issue to raise sufficient capital to support its bold transformation agenda.
Also speaking, Chief Executive officer of Wapic, Yinka Adekoya, noted that the year 2018, marked the end of the company’s first five year rolling plan.
According to her, Wapic Insurance, worked with global and reputable consultant Mckinsey and company to develop and launch the second five year rolling plan for the period 2019 to 2023.
According to her, taking learning from the first rolling plan, the new strategic plan defines very bold objectives for the company which includes the trajectory growth for the company’s General and life insurance.
The Debt Management Office (DMO) last Friday, listed the first Eurobonds on the FMDQ Securities Exchange and Nigerian Stock Exchange (NSE) platforms.
The DMO, on behalf of the Federal Republic of Nigeria (FRN), listed dual-tranche $2.50 billion and triple-tranche $2.86 billion Eurobonds on the FMDQ platform and NSE.
Speaking at the listing on the FMDQ in Lagos, Director-General, DMO, Ms Patience Oniha, said that the bonds were raised for refinancing of the country’s domestic debt.
Oniha said that the Eurobonds proceeds would be used to fund the fiscal deficit as well as other financing needs of the country. According to her, the $2.50 billion Eurobonds issued in February 2018 was meant for refinancing of domestic debt, while $2.86 billion dollars Eurobonds floated in November, 2018 was purposely for financing of the capital project of the budget.
The DMO DG noted that listing of foreign currency-denominated debt securities showed the government’s unrelenting commitment to supporting the growth of the debt capital market (DCM) for economic development.
On plans for Eurobond upgrade to finance the 2019 budget, she a large part of it would be funded by new borrowing of N1.649 trillion.
“But this time around, we are trying to explore all the options starting with those that are cheaper, conventional, semi conventional before we now determine in a very short form the balance that we should take to the international market,” Oniha said.
Commenting on the listing of the Eurobonds Managing Director, FMDQ, Mr. Bola Onadele.Koko commended the federal government for the landmark achievement.
Onadele said: “This was yet another highly exemplary and indeed, positive step towards supporting the growth and development of the Nigeria’s DCM. FMDQ will continue to further deepen and effectively position the Nigerian DCM for growth through consistent collaboration with its stakeholders.”
Also speaking, Executive Director & Head, Debt Capital Markets, Stanbic IBTC Capital Limited, Mr. Kobby Bentsi-Enchill, lauded the DMO for strengthening the market with array of products.
“We used to have TBS in the market before but now DMO has brought a lot of products,” he said.
Bentsi-Enchill said that the market had been more functional with the activities of DMO.
He, however, commended the agency for all the achievements recorded both locally and internationally.
On her part, Managing Director, FSDH Merchant Bank Limited, Mrs. Hamba Ambah said that DMO was playing a critical role in deepening the domestic market. Ambah said that DMO ensures that securities were accessible and traded by retail investors.
She also commended FMDQ for providing the needed platform for issuers which had developed and widened the DCM.
The Chief Executive Officer of the Nigerian Stock Exchange, Mr. Oscar Onyema, in this interview on AriseTV clarified issues surrounding the recent listing of MTN Nigeria Communications Plc on the stock exchange and also spoke about efforts to deepen the country’s stock market. Hamid Ayodeji brings the excerpts:
What does the listing of MTN Nigeria on the Nigerian Stock Exchange by way of introduction mean and this issue of free float and obstruction of retail investors from having access to the shares at this point?
Listing by Introduction is a process whereby a company is brought on to the exchange without doing what is called an initial public offer (IPO), that is without raising capital from the company, from the shareholders or selling shares to raise capital. The idea is that they are listed on the platform to allow the existing shareholders who may want to sell their shares in the open market to do so. However, you cannot force them to sell their shares. So, it is like me asking you to sell your house, you will sell it when you want to, either because the price is right or because you need the money immediately. With regards to free float, we have three listing boards for companies on the exchange – the premium board, the main board and alternative securities board and they have different listing standards you must meet to get on to each of these boards. The idea of having these boards is to segment the market and properly service the various segments of the market. The premium board is for companies that hold themselves out for having the highest standards as regards to corporate governance and have a minimum of N200 billion in market capitalisation. For those companies, we say they must have a minimum of 20 per cent in free float of N40 billion. The way we calculate free float, which is available on our website is that the directors, the promoters, their families are not calculated in that free float. That means free float is shares that are available to sell if you want to. In fact, in certain instances we actually lock up 50 per cent of the shares of the promoters for a period of time. For example, if you were coming to do an IPO. So, it is very important to educate the general public that free float means it’s a calculation that allows you to sell if you wanted to sell. In this case, the N40 billion free float was more than double, they met it and so that is not a problem at the exchange.
Let us talk about the waiver that was granted to MTN, it is not exclusive to MTN as you have granted such waivers to others in the past. But why did MTN deviate from its initial public offer?
MTN did not get a waiver on free float. The minimum free float is N40 billion for premium board companies and when they came in, they came in with 82 billion in free float, so there was no waiver there. Have we granted exemptions before? Yes, we have and we have given a compliance plan to such companies to meet those standards. So, again the exchange has authority to grant such waivers. But in this particular case, that waiver was not granted because they met the standards. So with regards to an IPO, the company has publicly stated that they want to do an IPO and they would do it when market conditions are right and when they have dealt with present issues they have with the Office of the Attorney General of the country, that will then allow them to get a proper evaluation. We don’t typically speak on behalf of companies. So, in terms of the company’s plan, you would need to speak with the company. But this was what they presented to us and the public. It wasn’t an exemption; there are many ways to be listed on the stock exchange. You can do an IPO, you can do Listing by Introduction, mergers and acquisition, you can do deposit receipt; so there are multiple ways and they are not exemptions, but avenues to attract people to bring their companies to list on the market.
Do you think it was right for the Economic and Financial Crimes Commission to have invaded MTN Nigeria’s office?
I don’t think it is my place to comment on what security agencies and various financial regulators, do but at the exchange we hold ourselves to international standards. The first thing I want to make clear is that our market works the way it was designed to work, our market is a place that you come to of your own free will to buy and sell, depending on sentiments, price, analyses that you have done. We don’t conduct investigation in the public. So we look at market activities on a daily basis not to the second level, but to the micro second level, so we can actually replay everything that has happened in the market on a given day. So we look at market activity when there is noise to make sure nothing has happened, and if we do not do that, the system we have which is called Smart and is one of the best surveillance in the world was programmed to automatically kick out exceptions if certain parameters are not met. The reason why I said that is in international markets it is rear for the FBI to raid a company because there is negative news in the press about them. So, we should wait for the result of the investigation. I am sure the EFCC has their own operating methodology and they must have something they are looking at, so I am not competent to talk about what triggered their investigation. I can only talk about our own activity and ours is to make sure we have a fair and orderly market which we try to do using global standards.
The point raised about the EFCC intervening, if there are infractions should that not be the responsibility of the Securities and Exchange Tribunal (IST)?
I think there is a lot of educating that needs to happen on the way the market works. The exchange is a self-regulatory organisation. That means we do front line regulation pursuant to delegated authority from the Securities and Exchange Commission, which has the responsibility to make sure we have a market place that works the way the law orders. If there are criminal activities, the NSE and SEC do not pursue such cases. We have relationship with organisations that have such authority. For instance, we have an MoU with the EFCC. So, if there are cases we looking at with criminal aspects we pass them on to the EFCC based on our MoU which also allows for a number of other things including capacity building which they train us twice a year and we also train them twice a year so that we can operate together smoothly. When there is a case brought up that is not criminal we do have our administrative processes that goes from the exchange level to the SEC level, to their own administrative proceedings and to the IST, which is like a court with people that sit as judges almost equivalent to the High Court. So, what they did is not usually the first line of approach, it is usually when you have established that there is something and you are going through dispute resolution mechanism in the capital market.
What has been the effect on the market?
I think it has been very bad for the market. We have worked very hard to create a market place that is credible and people can have trust in; the only thing that makes the market works is trust and the noise that this listing has generated has been such that with initial activities in the market you saw various companies benefit from the renewed interest investors had in the market. The All Share Index rose up and post the raid, we have seen it go back into negative territory. One of the reasons we hold ourselves to high esteem is because 52 per cent of market activities is international, while about 48 per cent is domestic in terms of market activity. It is very important we view these things from the lenses of the national economy, the capital market and the impact they could have on millions of investors that participate in the market on a daily basis.
Airtel has also indicated its intention to list on the NSE. What are you doing to attract institutional investors such Pension Fund Administrators who are holding N9 trillion pension funds according to recent report?
The first thing is there is a lot of work that goes into getting any company to come to list. To be listed, they must find value in the listing proposition and it must meet their strategic business objectives before they are listed. So, we are in conversation with hundreds of companies in different industries that are operating inside and outside of Nigeria, but have some Nigerian linkage to list. So, I cannot comment on a particular company, but I can give you the general feedback. In regards to attracting institutional investors such as pension fund administrators into the market, it is based on trust and other things, with the first being country risk whereby you ask if you would be able to make more money in country A versus country B, based on the policies, how easy it is to do business and the competitiveness of the country. Once you have passed that hurdle the next thing is industry risk; which industries are growing fast and competitive and also gives you the highest form of return you are looking for. For PFAs, the most important for them is to protect the principal because these are money they are holding in trust for people that are contributing towards their retirement, so 30 years from now, when people that are in their 30s start getting to retirement age, they should be able to have money in their retirement account to spend to maintain their lifestyles. So they run through those types of analysis to decide whether they want to put money in equities or fixed income or other asset classes. They must have diversified financial portfolios because we know from modern financial theories that a diversified portfolio gives you the best return in the long run. You can put all your money in one stock, but it is highly volatile; so you want to maintain a number of asset classes that are not highly correlated but would give you good risk adjusted returns. So for us, we are always engaging with the PFAs and other institutional investors such as asset managers and insurance companies to continue to make the case for them to use our platform which is a multi-asset platform. We offer equities, fixed income, exchange traded funds and now we are working on derivatives so they can have multiple channels from which they can invest in and they do use.
In developed and developing economies, pension funds contributes a large amount to the stock exchange, unlike in Nigeria. Can the relationship between the NSE and PenCom become profitable so that we generate a higher percentage on the NSE?
We have some structural challenges concerning the way we run some things in the country. If you look at some countries, that have well developed pension system and well developed capital markets that would have been achievable because the assets they are holding are for a long period of time and those assets would be invested so as to generate the highest returns over a long period of time. Secondly, they would also invest in equities market as the foundation of their holdings because empirical studies show that over long period of time, equities give you the highest risk adjusted returns. Things do not function that way in Nigeria. But consider the fact that our stock exchange has only been in existence since 1960; it is relatively new compared to more developed markets. We have discovered that when you do the analysis on an inflation adjustment bases you are beating inflation by just a margin, if it was done on a dollar basis so as to compare your performance with other countries, you lose all those gains. So, we have a lot of work to do to become a very competitive market and not from only the equities perspective, but every other instruments pension funds can put their money into. The reason why I said we have structural challenges is that If you look at inflation rate and you look at rates that we are paying for treasury bills, bonds, and then look at the people borrowing, it is mostly the government. So you could argue that there is a crowding out effect. The size of government’s spending is actually small compared to the private sector. So, so we need to channel funds to the private sector to allow for a more inclusive economy that would drive higher valuation because the profit sector knows how to do business and the private sector tends to give high returns.
All of these issues have exposed a lack of transactional activities between the equities market, but the NSE has an investors education programme. So is it safe to say the programme has failed or needs to be revamped?
On an average we do have face to face contact with 20,000 people annually across the country in our various investors programme. In a country with 190 million people and with about 65 per cent of that population under the age of thirty; we need to find new ways to reach these potential investors. So we are deploying technology to reach people in ways they are used to being communicated to. So, the answer to your question is that it has not achieved its objective but we understand that we need to keep evolving with our approach methods, using technology as a key tool. We also know that not everyone is technologically savvy, so we are also making use of the traditional methods of approach, which includes face to face interactions, radio stations, newspapers, television stations. Clearly, one of the things that struck us is that there seems to be lack of understanding of how the market works.
Earlier you mentioned compliance framework, how strong is that compliance framework at the NSE? For example, in 2010, when Dangote Cement came into the market, they did offer for sale instead of Listing by Introduction and they have been getting waivers annually from the exchange, why haven’t you compelled Dangote Cement to offload more shares to the retail investors. You have rules about timely declaration of results and still these companies break these rules, and the NSE has been very lenient with pursuing these cases, why is that so?
I do not think that is how it is, we deserve some credits for the work we have done concerning compliance. Generally, we have revamped compliance framework since 2011 and we have focused on a number of things consistent with international standards. The first thing is transparency. If you look at the reports we put out on our website, it shows you the compliance status of companies that we have issued fines to and have not met their reporting timelines, companies that have one deficiency or another. Secondly, we introduced the companies’ status indicator symbols, an eleven symbols that show companies below the listing standards, even on the ticket tape it is almost like a buyers’ beware, stating that the company is below listing standard as you try to make a decision concerning buying the stocks of that particular company. We have actively engaged with the issuer committee who make it a lot easier for them to report too various distribution platforms that we have. We also started proactively engaging the companies reminding them when the deadline is about due and for them to inform us if they are having challenges and we changed an aspect of rules making sure that a company that will file late puts up press release in the newspapers stating why. Having worked with such companies up to the point of the deadline for reporting, if they miss those deadlines, we issue fines. In fact, we have been accused of issuing too many fines. So because of our activities concerning compliance, we issue out fines, delist companies, suspend companies for lack of regulatory compliance and again we were criticised for delisting companies.
Yes, that is because of the investors’ rights. What happens to the investors?
The investors have the responsibility to protect their investments and the law provides for that, which is why investors have the right to attend Annual General Meetings, they have the right to ask members of the board questions. You cannot put your money on the table and walk away; your eyes need to be on your money. That is the first line. As an investor, the law allows you certain rights to make sure you are holding your directors and management to account. The NSE now has a wrap around that to make sure the companies continue to make their listing standards; so they have to file quarterly financials, market-moving information and then there is the apex regulator in the capital market which is the Securities and Exchange Commission, which has its own rules and regulations around investor protection. So, there are so many layers to protecting investors. It is like driving because the first responsibility in driving is for you, making sure that you abide by the rules of driving. In addition to that, you have the police to make sure that other drivers keep to the rules and don’t drive into you.
One of the greatest issues that has come up concerning cost of transactions on the NSE is that it is on the high side. Is this something you are going to look into to deepen market participation?
We did a transaction cost analysis years ago where we looked at the entire cost of listing and trading in Nigeria. The first thing to highlight is that there are many players involved in the listing process. There are statutory fees you have to pay SEC, then listing fees to pay NSE, eligibility fees to pay the CSCS, you would also pay your advisers, investment bank, brokers, lawyers. So looking at the entire value chain I agree we are not competitive from a pricing perspective so there has been an effort led by the SEC and NSE to see how we can make the market more competitive in terms of pricing. Changing prices does not necessarily mean more listing or volume in the market, we have tried that before. There are a number of things that need to be put in place, in our alternative securities market where we slashed the prices such that listing fee is N100,000 and we have not seen companies knocking at our offices that they want to list. One of our challenges concerning this is the feedback we get from companies are bigger issues around what kind of incentives do we get for being a listed company? So those companies say can we get some tax break? Considering all the regulatory weight that has been placed on them. They want to know the kind of tax incentives they can get from being listed. Another feedback we got from them was that, once they are listed the feasibility of the company is high, everyone sees the activities of the company; however, the feasibility can be positive or negative. For example, all the agencies go after them for sign levy and other fees, so I think we need to get the environment working right. Given the feedback from companies, we also decided to make it sharper for them to understand the value proposition for listing which is when you become a listing company it shows you have gone through a rigorous process on whichever of the boards you decide to list. It means people can give you the benefit of the doubt because your transaction activities are more transparent, even getting loans from banks becomes cheaper, raising capital you have the flexibility of raising either equity or debt on the same platform. Thus, strategic investors find you more attractive for investments and if there are multiple companies listed in that industry you have a peer group you can be compared to. For companies that have founders, you have to think about how the company can transition into one generation and the other and listing gives you the best opportunity for your company to continue surviving. Studies have shown that coming to list gives your company credibility.
The NSE has been talking a lot about demutualization, what does that mean?
It means you are transforming from a company that is limited by guaranty to a company that is limited by shares. And in other for you to demutualise you need to have a framework that is supported by law. By the way stock exchanges all over the world have already demutualised. In the world federation of stock exchanges, out of the 65 board members there are only eight that are not demutualised and Nigeria is one of them. In Africa we have 11 that have already demutualised so that is the way to go because it allows you to unlock various potential with regards to the growth of the capital market and exchange market. In Nigeria, the company law did not have a clear path to go from a company that is limited by guaranty to one that is limited by shares. It is not bullet proof so we to create the Demutualisation Act. We thank the National Assembly for passing that bill and also the President for signing the bill into law. We now have a framework that allows us to move through the demutualisation process. There is also the need to mention the SEC rules concerning it, there is a demutualisation rule that we follow. Putting together documentation, we all already had a whole team which includes lawyers and financial advisers. We are also working on the ecosystem to make sure we put in place all the mechanisms that would allow us to transition seamlessly from a company limited by guaranty to one that is limited by shares. We are not demutualising for the sake of it, we are doing it so we can unlock certain values for the economy and capital market. It is also not just about following the rules of SEC and the Demutualisation Act, it is also about critically examining your business. And there are certain requirements for demutualising and eventually going to the public market. One of them is separating your business activities from your regulatory activities and there are three models for doing that.
As the CEO of NSE, what should we expect at the end of your tenure?
My legacy would be that we have been able to prove to the international market that this is a preferable option for investment that facilitates the durability of millions that are potential investors in the market.
Presco Plc has recommended a dividend of 200 kobo per share for the year ended December 31, 2018, despite a decline of 25 per cent in its profit.
The dividend, which was same amount paid in 2017, would be paid to shareholders whose names appear on the company’s register as at the close business on July 5, 2019.
Details of the audited results of palm oil producing firm showed that it recorded a revenue of N21.344 billion in 2018, down from N22.365 billion in 2017. Cost sale was reduced from N5.941 billion to N4.753 billion, brining gross profit to N16.591 billion, compared with N16.424 billion in 2017.
Selling and general administrative expenses were reduced to N6.384 billion from N7.184 billion. However, loss on biological asset revaluation rose from N347 million in 2017 to N2.632 billion in 2018. Also, financing cost rose from N973 million to N1.276 billion.
Consequently, the company ended the year with a profit of N4.284 billion, down from N5.726 billion the previous year. In terms of earning per share, it fell from 568 kobo to 430 kobo. But the board of directors recommended a dividend of 200 kobo in 2018, same as in 2017.
Meanwhile, the company has also recorded a decline in bottom-line for the first quarter(Q1) ended March 31, 2019. The unaudited Q1 results showed a revenue of N5.506 billion in 2019, indicating a decline of 16 per cent compared to N6.590 billion in the corresponding period of 2018.
Net financing cost rose 86 per cent from N289 million to N539 million, while profit after tax fell 17.6 per cent from N2.597 billion in 2018 to N2.140 billion in 2019.
Commenting on the Q1 performance, analysts at Cordros Capital Limited said Presco recorded a 16.4 per cent in decline in to N5.5 billion, driven by the combination of lower local refined crude palm oil (CPO) price, which declined by 11 per cent together with moderate volume growth.
“However, since cost of sales (-44 per cent ) tapered faster than revenue growth, gross margin improved to 85 per cent from 78 per cent in the preceding year.
Also in Q4-18, total OPEX declined by 53 per cent to N2.17 billion, on account of material moderation in selling, general and administrative expenses (-54 per cent) which masked the expansion in distribution expenses (+5 per cent to N87 million). Consequently, EBIT printed N2.20 billion (vs. loss of N221 million in Q4-17), with related margin at 43 per cent,” they said.
The Nigerian equities recorded a growth of 6.5 per cent in May, compared with a decline of 6.06 posted in April.
The market, which had been bearish for the most part of year, was heading for another negative close in May, before the listing of MTN Nigeria Communications Plc came to the rescue.
Prior to the listing of MTN on May 16, the market had recorded a month-to-date decline of 2.9 per cent as the Nigerian Stock Exchange (NSE) All-Share Index fell to 28,286.08, while market capitalisation stood at N10.627 trillion, as against N29,159.74 and N10.96 trillion at the beginning of the month.
However, the listing of the telco supported by gains recorded by Dangote Cement Plc, boosted the market to close the month on a positive note. Specifically, the NSE All-Share Index rose to close the month at 31,069.37 last Friday, while market capitalisation ended at N13.685trillion. Last week accounted for 0.61 per cent of the gain posted for the month. The 6.5 per cent gain, has moderated the year-to-date decline to 1.15 per cent.
An analysis of sectoral performance showed that all five sectors tracked appreciated led by the NSE Banking Index with 3.94 per cent. The NSE Insurance Index followed with 3.28 per cent, while NSE Oil & Gas Index gained 2.14 per cent. The NSE Consumer Index rose 1.31 per cent, while NSE Industrial Goods Index chalked up 1.30 per cent.
NSE Launches Sustainability Report
Another positive development in the market last week was NSE’s launch of ‘Facts behind the sustainability report(FBSR)’ in its quest to continually champion sustainable practices in the African capital markets.
Styled after the NSE’s flagship ‘Facts behind the listing’ and ‘Facts behind the figures’ event series, the FBSR was designed to further promote the adoption of Environmental, Social and Governance (ESG) practices, reporting, and disclosure and encourage responsible long-term approaches to investment. It provides a platform for listed companies to address stakeholders with in-depth analysis of their sustainability initiatives, as well as spotlight stakeholder engagements, materiality, standardisation and overall disclosures.
Dangote Cement Plc (DCP) presented at the maiden edition of the FBSR. Commenting on the launch of the FBSR, the Chief Executive Officer of the NSE, Mr. Oscar Onyema, said: “Better ESG reporting is key to strengthening capital markets and achieving a sustainable global economy. The exchange is strategically positioned to influence the adoption of globally recognised sustainability standards by Nigerian businesses and we continue to highlight the importance of sustainable business practices in delivering value to our listed companies and investing public to support economic growth.
“We welcome the Executive Management of DCP for the maiden edition of FBSR to brief the investing community on details of their first ever stand-alone sustainability report. It is our belief that this giant step taken by DCP will encourage other listed companies, especially those on the Premium Board, to come for their FBSR at The Exchange.
“This will provide them the platform to showcase their efforts in sustainability and corporate governance as well as address investors’ requirements on ESG issues.”
Presenting its sustainability report, DCP said it aimed to make the culture of sustainability a business imperative through its 7-Pillar approach to sustainability, called “The Dangote Way”.
The Group Managing Director, DCPPlc, Joseph Makoju said: “We have identified and are leveraging sustainability to drive regulatory compliance, proactive risk management and building trust and goodwill in the countries, markets and communities where we operate.”
He said with major operations in three locations in Nigeria and across 14 African countries, DCP is enhancing its positive impact on the economy, environment and society through an integrated approach that mainstreams sustainability across the entire business. This process includes publishing its maiden Global Reporting Initiative (GRI)-Standards compliant sustainability report.
He added that DCP is also committed to aligning its operations with the group-wide sustainability vision, driven by its 7-Sustainability Pillars, through extensive engagements with internal and external stakeholders.
“The 2018 DCP sustainability report is structured according to these Pillars and covers the financial and non-financial performance in four countries, namely Nigeria, Ethiopia, Senegal and South Africa. By aligning with the 7 Pillars(institutional, cultural, operational and environmental, economic, social, financial), the company ensures that every aspect of its business is run in line with global sustainability principles; thereby embedding sustainability – beyond issues of risk management and compliance – in its day-to-day business operations,” he said.
Also speaking, the Group Managing Director, Dangote Industries Limited, Olakunle Alake said: “At Dangote Group, the vision of the business from the outset is to create value for all stakeholders and positively impact and transform the economies where we operate.
“This is what we call ‘The Dangote Way’. If our experiences in the last three decades are anything to go by, we can say with utmost confidence that this sustainable business model has been a win-win. Our people and economy-centric approach to business has no doubt been the fact behind the great success that the Dangote business story has become, and the anchor on which our continued growth, expansion and longevity is anchored.”
Market turnover
Meanwhile, a total turnover of 1.082 billion shares worth N18.111 billion in 16,400 deals were traded this week by investors in contrast to a total of 1.698 billion shares valued at N57.895 billion that exchanged hands last week in 24,328 deals. The Financial Services Industry led the activity chart with 809.990 million shares valued at N8.495 billion traded in 8,969 deals, thus contributing 74.8 per cent and 46.9 per cent to the total equity turnover volume and value respectively.
The ICT Industry followed with 69.705 million shares worth N5.411 billion in 1,754deals. The third place was Healthcare Industry with a turnover of 45.971 million shares worth N14.262 million in 139 deals. Trading in the top three equities namely, United Bank for Africa Plc, Access Bank Plc and Zenith Bank Plc accounted for 351.014 million shares worth N3.737 billion in 4,088 deals, contributing 32.4 per cent and 20.6 per cent to the total equity turnover volume and value respectively.
Also traded during the week were a total of 290,130 units of Exchange Traded Products (ETPs) valued at N3.935 million executed in 16 deals compared with a total of 7,832 units valued at N48,890.00 transacted the previous week in six deals.
A total of 1,057 units of Federal Government Bonds valued at N1.060 million were traded last week in seven deals compared with a total of 1,389 units valued at N1.440 million transacted two weeks ago in 14 deals.
Price Gainers and Losers
A look at the price movement chart showed that 35 equities appreciated in price during the week, higher than 30 in the previous week, while 24 equities depreciated in price, lower than 40 equities of the previous week. Chams Plc led the price gainers with 15.1 per cent, trailed by Sterling Bank Plc with 11.1 per cent. Ecobank Transnational Incorporated gained 10.9 per cent. AXAMansard Insurance Plc chalked up 10 per cent, just as Learn Africa Plc and Neimeth International Pharmaceuticals Plc garnered 9.8 per cent apiece.
Other top price gainers included: Livestock Feeds Plc, Unity Bank Plc (9.2 per cent each), Law Union & Rock Insurance Plc and Courteville Business Solutions Plc (9.0 per cent).
Conversely, Berger Paints Nigeria Plc led the price losers with 9.5 per cent, trailed by R.T Briscoe Nigeria Plc with 9.3 per cent. Eterna Plc shed 8.5 per cent. CAP Plc went down by 8.5 per cent, just as Champion Breweries Plc and Fidelity Bank Plc lost 8.1 per cent and 7.1 per cent in that order.
Other top price losers included: Jaiz Bank Plc (6.1 per cent); Veritas Kapital Assurance Plc,PZ Cussons Nigeria Plc(4.7 per cent)and Oando Plc (4.4 per cent).
The Securities and Exchange Commission (SEC) has warned some operators in the Nigerian capital market to desist from practices that violate rules and regulations in the market.
The commission in a statement on Monday, said its attention had been drawn to an emerging trend of unethical conduct by brokers, issuing houses/book runners and other receiving agents in primary and secondary market transactions.
The SEC said the concerned operators carry out their activities by inducing investment through the sharing of brokerage fees or receiving agents commission with private banking officers, asset/fund managers, pension fund administrators (PFA)s and other institutional investor classes who are not duly registered or recognised by the Commission as being eligible to be paid commission.
The commission therefore warned: “Notice is hereby issued that only capital market operators duly registered by the commission are eligible to be paid brokerage fee/receiving agents’ commission and such operators shall not pay or offer a percentage of the commission earned from services provided in a transaction as an incentive for investment.
“Any capital market operator found to engage in this practice or similar acts shall be subject to strict regulatory actions in accordance with the rules and regulations of the commission.”
The SEC has enjoined the public to utilise its whistle blowing mechanism to provide information on any known or suspected case for necessary action.
Meanwhile, the stock market opened for the week on a negative note as investors booked profit in bellwethers. The Nigerian Stock Exchange (NSE) All-Share Index (NSE) ASI fell 2.2 per cent to close at 30,199.32, while market capitalisation shed N302.4 billion to close at N13.3 trillion. Activity level weakened as volume and value traded shed 50.6 per cent and 74 per cent to 145.2 million units and N1.7 billion respectively. The top traded stocks by volume were Fidelity Bank (28.3 million units), Access Bank Plc (20.3 million units) and United Bank for Africa Plc (20.1 million units) while MTN Nigeria Plc (N948.2 million), Zenith Bank Plc (N168.3 million) and Access Bank (N117.4 million) led the top traded stocks by value.
In terms of price movement, 19 stocks depreciated compared with appreciated. R.T Briscoe Nigeria Plc led the price losers with 9.3 per cent, followed by MTN Nigeria Plc with 7.1 per cent, while Veritas Kapital Assurance Plc shed 4.7 per cent.
Investors in the nation’s stock market gained N885bn last week as the market capitalisation of equities rose to N13.601tn.
The All-Share Index of the Nigerian Stock Exchange appreciated by 6.96 per cent to close the week at 30,881.29 basis points.
A total turnover of1.698 billion shares worth N57.895 billion in 24,328 deals were traded by investors on the floor of the NSE last week in contrast to a total of 1.172billion shares valued at N17.887 billion that exchanged hands in 18,380 deals the previous week.
The financial services industry (measured by volume) led the activity chart with 1.121 billion shares valued at N8.708bn traded in 13,380 deals, thus contributing 66.01 per cent and15.04 per cent to the total equity turnover volume and value respectively.
The Information and Communications Technology Industry followed with 324.332 millionshares worthN40.717 billion in 3,330 deals.
The third place was occupied by the consumer goods industry with a turnover of75.831 million shares worth N2.948bn in 2,957 deals.
Trading in the top three equities, namely MTN Nigeria Communications Plc, Sovereign Trust Insurance Plc (measured by volume) accounted for 726.103 million shares worth N41.622bn in 4,972 deals, contributing 42.75 per cent and 71.89 per cent to the total equity turnover volume and value respectively.
Thirty equities appreciated in price during the week, higher than 16 in the previous week; 40equities depreciated in price, lower than 42 equities of the previous week; and 98 equities remained unchanged, lower than 109 equities in the preceding week.
Analysts at Afrinvest Securities Limited said building on the momentum from MTN Nigeria’s listing, the local bourse sustained a positive performance last week as the ASI recorded gains on four of five trading sessions, closing above the psychological benchmark of 30,000bps for the first time in six weeks.
They said, “The equities market has recently received a boost from the listing of MTN, but investor sentiment remains weak. We believe the lack of reforms and broad economic weakness continue to be drawbacks to an upturn in performance despite cheap valuation relative to emerging and frontier market peers.
“Following a bullish performance this (last) week, we expect sell pressures next (this) week as investors look to take profits on stocks that have recorded strong gains.”
Analysts at Cordros Capital Limited noted that a rally in the shares of market heavyweights, MTN Nigeria (+28.6 per cent) and Dangote Cement Plc (+13.6 per cent) drove the market to its highest weekly gain since January 12, 2018.
“Clearly, the gain was not broad-based, at such we reiterate our cautious trading pattern. Meanwhile, we believe that the blend of positive macroeconomic fundamentals and compelling valuations still supports a near-term recovery,” they added.
AIICO Insurance Plc says it will pay N415.81m dividend to its shareholders for 2018 financial period.
During its 49th annual general meeting in Lagos, the company’s Chairman, Bukola Oluwadiya, said the dividend payment was 20 per cent higher than the corresponding period of 2017.
He said that the board had decided to move to a progressive dividend policy to deliver superior returns to its shareholders.
“Our plan is to maintain or grow the ordinary dividend per share over time, depending on business performance, growth projections and regulatory solvency requirement,” he said.
According to the chairman, the company during the period under review recorded growth in major business lines.
He said that its net asset value increased by 39.4 per cent to N15.2bn from N10.9bn in the corresponding period of 2017.
The chairman disclosed that total assets rose by 19 per cent to N109bn against N92bn in 2017.
“We will continue to strengthen our balance sheet and build a strong financial base needed to propel our company to the next phase of growth,” he added.
The Managing Director, AIICO Insurance, Edwin Igbiti, said that the strategic intent of the company over the next five years was to regain market leadership through rapid and profitable growth.
Igbiti added that the company had redesigned its go-to-market strategy and realigned organisational structure to reflect customer-centric strategy.
He said that the company would streamline and leverage capabilities across the group to grow market share, increase shareholder value and build customer-centric capabilities for superior service delivery.
The Founder, Independent Shareholders Association of Nigeria, Mr Sunny Nwosu, who commended the company for the performance and dividend declared during the period under review, urged it to improve on the dividend payout in the years ahead.
He said that the company should strengthen strategies to sustain growth to ensure enhanced return.
Since the stock market downturn of 2018 and 2009, when investors recorded huge losses, it has been difficult for the market to witness high patronage. Regulators have been trying to restore investor confidence to the market.
The Securities and Exchange Commission (SEC) has, in recent times, introduced various strategies and policies to ensure that more investors return to the nation’s capital market. Apart from ensuring that more investors return to the market, SEC believes that investors should equally enjoy significant returns on their investments. Hence, they have been introducing policies that enable shareholders receive their dividends regularly. And in line with its determination to ensure that companies deliver higher returns to shareholders, SEC, penultimate week exposed new rules and sundry amendments to some of the existing rules to the market operators before they are implemented.
The New Rule SEC is seeking to create a new sub rule to regulate the conduct of Annual General Meetings (AGMs) and make some amendments to some existing rules. Specifically, the new sub-rule specifically seeks to reduce the cost of organising shareholder meetings, by making illegal the distribution of gifts to shareholders, observers and any other persons at AGM and extraordinary general meetings (EGMs).
Should the rule be agreed on, “public companies shall not convene any meeting with select group(s) of shareholders prior to an AGM/EGM.” Justifying the proposed rules, the SEC observed: “that some companies arrange meetings with select groups of shareholders ahead of general meetings to discuss proposed resolutions and agree on strategies which are often detrimental to the interest of other shareholders.”
According to SEC companies that violate these provisions, “shall be liable to a penalty of not less than N10 million.” SEC decried the huge amount spent by such public companies on corporate gifts at AGMs/EGMs, which greatly impact their profitability. It argued that at a time when few companies are making reasonable profits and even fewer can afford to pay dividends, the latest move would positively impact on earnings per share of many if the amount “budgeted for gifts at AGMs/EGMs can be reserved for other relevant operational or administrative expenses.”
“Public companies spend a significant amount of money on corporate gifts at AGMs/EGMs and this has a great impact on their profitability. Few of the companies are making reasonable profits and even fewer can afford to pay dividends. If the amount budgeted for gifts at AGMs/EGMs can be reserved for other relevant operational or administrative expenses, it would positively impact on their earnings per share,” SEC said.
Apart from the rule of the conduct of AGM/EGMs, the commission also proposed amendment to Rule 42 that will lead to the creation of Sub-rule 190 (3) which states that “public companies shall disclose some minimum corporate governance information on their websites including governance structure, composition and structure of the board, shareholding and dividend analysis among others.
Justifying this amendment, SEC said as part of the Corporate Governance Scorecard implementation strategy, companies are expected to disclose a Minimum Corporate Governance Report on their websites. The information is expected to be structured to contain reasonable corporate governance information on the public companies.
In another proposed new rule, SEC is moving to reinstate the individual sub-broker function to the market. Individual sub-broker function was removed in November 2017. However, SEC said the deletion of that rule generated a lot of comments from the Nigerian Stock Exchange (NSE) and Association of Stock Broking Houses (ASHON), who thereafter requested for the reinstatement of the function.
“The Rules Committee revisited the issue and the commission agrees that reinstatement of Individual Sub – broker function will help in enhancing financial inclusion, deepening the market, and attracting more retail investors as well as enable the Sub – brokers have more presence at the grass root level,” SEC explained.
Shareholders React While SEC may have been pushed by the rowdy nature of some AGMs during the sharing of gifts and is trying to check the situation, shareholders said rather than stop companies from providing gifts, the regulator should find a better way to manage the situation. A legal practitioner and shareholder activist, Mrs. Oludewa Thorpe, said although it is true that some retail shareholders have become nuisance to companies, the relationship is mutually beneficial.
“Stopping distribution of gifts and pre-AGM meetings is like throwing the baby away with the bath water. The financial outlay (for gifts) is minimal compared to the benefit derived by the company. Rather than stopping it, the process should be fine-tuned,” Thorpe said. The founding National Coordinator, Independent Shareholders Association of Nigeria (ISAN), Sunny Nwosu, said shareholders could be properly managed even though some of them, sometimes, behave unruly.
“In some cases, shareholders don’t go home with any money(dividend). It is that gift that they take home. If it a souvenir, it tells them that they are shareholders of the company. The gifts also keep them happy that they are also enjoying from their company and that is very important. For SEC to be interfering, it is never by force. If the companies are capable of doing this, they should be allowed to do so. There are companies that do not come with any gift to AGM. There are so many other things that SEC ought to interfere and not gifts that cost little to the companies,” Nwosu said.
On pre-AGM meetings, he said it was the prerogative of the management and not even the board because they use that to call stakeholders , agents, key distributors and others to explain to them how the business is being managed and receive advice when necessary.
“SEC should have a rethink and leave management and board to decide whether or not to distribute gifts. If SEC is asking for N10 million, indirectly they are trying to make money from the companies. I don’t think that draconian rules should be introduced now,” he said. In his reaction, Chairman, Ibadan Zonal Shareholders Association, Mr. Eric Akinduro, said the move was to short change retail investors in the market. According to him, the gifts are at the discretion of individual company, noting that the amount they spend on gifts is very small compared to what companies spend as end of year appreciation to regulators and others.
“What is the total value of gifts companies are giving to shareholders. Did the company complain? I have never seen an AGM where shareholders compelled companies to distribute gifts. It is at the discretion of the companies. Again, these gifts, particularly souvenirs, can go a long way as marketing strategy to sell the company’s products,” Akinduro said.
He explained that pre-AGM meetings are not bad as far discussions at such meeting will help to improve companies’ performance. “Most of the pre-AGM meetings, as far as I know, are to update leaders of shareholders group, who care to attend to keep them abreast of operations of the companies. The shareholders leaders will then pass such information to their members who are at grass root level because they may not be able to attend the AGM proper,” he added.
He noted that SEC may be looking at the budget reported in annual reports, hence the assumption that huge amount is being spent on gifts at AGMs. “AGM expenditure is not only on corporate gifts. Other expenses like printing and distribution of annual reports, payment for venue, lodging and feeding of board members in hotels, provision of security and other logistics are included. Corporate gift is just small fraction of the expenses,” he said.
Also speaking, the National Chairman, Progressive Shareholders Association of Nigeria (PSAN), Mr. Boniface Okezie said he supported the banning of distribution of the gifts if it will bring sanity to the venue of AGMs. According to him, some of shareholders come to AGM because of the gifts and not to listen to how their companies are performing or to contribute meaningfully to the progress of the company.
“This is not palatable. But pre-AGM meetings should be allowed to be handled by the companies’ boards of directors and management with their shareholders. It is not the duty of regulator to decide how the companies run their affairs. SEC can only play advisory role but not to threatening to impose fine of N10 million on any company that did not comply.
“The truth is that SEC cannot regulate the conduct of AGMs. That is why we have boards made of experienced men and women who can take best decisions in that respect .SEC should look into why many companies are no longer posting annual reports with in 21days allowed by the law only to bring them at venue of the meeting. In some cases, the annual reports are not even enough for the shareholders.
“Pre-AGMs should be allowed to continue by the companies that wish to do so provided they do it orderly because on the AGM meeting we don’t have enough time to ask many questions. “l think SEC need to apply wisdom in dealing with the delicate issues like this so that the good intention would not be ruined.”
On her part, the National Coordinator of PSAN, Mrs. Bisi Bakare said the gifts shared at AGMs should not be stopped by the commission, saying the gifts have created a kind of bond among shareholders who meet one every year.
“The gifts at AGM is a smile to an annual birthday which you mark in appreciation of another successful business year. Apart from the statutory requirements to approve the accounts and all others, it is a celebration between the company and its shareholders. The abuses will definitely be checked not that the shareholders should be denied their delights,” she said.
Bakare said such rules and proposal from SEC show that the commission has lost focus in the capital market. “What is the cost of the gifts being distributed at AGM to shareholders whom are owners of the companies with CSR and donations recorded by companies each year. If owners of the business cannot benefit from their hard earned money they invested, who else should do so. Again, the issue of rowdiness is caused by staff of some stockbroking firms who give names of investors to fake shareholders to attend AGMs, collect the gifts and share with the staff at the end of the meeting,” she said.
On the pre-AGM special meetings, Bakare said this is part of shareholders’ right which they should not be denied. “How many hours do we spend on the floor of AGM. But pre-AGM gives enough opportunity to ask cogent questions and give advice that will enable company to move forward. There are question/ advice that cannot handled on the floor of AGM for the sake of the company image. We, at PSAN are totally against SEC’s proposal and it will never work,” she said.
The Central Bank of Nigeria (CBN) is to limit Deposit Money Banks (DMBs) access to government securities to redirect their lending focus to the private sector.
CBN Governor, Mr. Godwin Emefiele, said yesterday in Abuja that the intention was to stimulate growth in the economy.
The CBN unfolded its new policy direction on banks’ access to investing in treasury bills and bonds just as the apex bank further resolved to hold all parameters of monetary policy constant by retaining the Monetary Policy Rate (MPR), otherwise known as interest rate, at 13.5 per cent.
The MPR is the rate at which the CBN lends to commercial banks and often determines the cost of borrowing in the economy.
It also retained the asymmetric corridor of +200/-500 basis points around the MPR; left both the Cash Reserve Ratio (CRR) at 22.5 per cent and Liquidity Ratio at 30 per cent.
Emefiele, who read the committee’s communiqué at the end of the two-day Monetary Policy Committee (MPC) meeting in Abuja, said in arriving at the decision to hold all rates at current levels, nine members out of 11, voted to hold all parameters of monetary policy constant. Two members voted, however, to reduce the MPR by 25 basis points.
He said: “As in the past, the committee considered the options of whether to be more accommodative, tighten or hold its position. The committee felt that although the slight inflation uptick should result in tightening, it felt that doing this will limit the ability of DMBs to increase credit at this time, given the need to support or redirect the focus of DMBs to new credit in support of consumer, mortgage and other priority sectors of the economy, including, SMEs, agriculture and manufacturing.
“It also felt that given the fragile state of the economy, increasing the cost of credit would further diminish investment flow and impact negatively on output growth.
“As regards loosening, some members felt that it was desirable to aggressively stimulate growth, restart the capital market activities and increase lending at lower rates; which would ultimately stimulate domestic aggregate demand.
“Those against loosening felt that given that there was a marginal increase in headline inflation for April 2019, there is need to restrain from loosening in order not to exacerbate inflationary pressures.
“They also felt the economy would experience liquidity surfeit and without corresponding increase in real sector output, inflationary pressures could be elevated; resulting in likely exchange rate pressures.
“As for members who favoured a hold position, maintaining monetary policy rate at its present level was essential for better understanding of the momentum of growth before determining any possible modifications.
“They also felt that retaining the current policy stance provides an avenue for evaluating the impact of the Bank’s intervention policies to support lending to the priority sectors of the economy.”
The CBN urged government to ensure increase in tax revenue to enable it to fund its budget adequately.
Emefiele said the MPC particularly expressed concern at the development whereby banks abandoned their key roles of stimulating growth by investing in government instruments at the detriment of the economy.
He also highlighted some measures to address the situation.
He said: “The truth is that yes, according to our own regulations, there is a particular minimum percentage of treasury bills or government securities that the banks must invest in, in order to remain liquid. But again, we have observed and unfortunately and increasingly so, that the banks, rather than even focusing on granting credit to the private sector, they tend to direct their focus mainly on buying government securities.
“The MPC has frowned on that and has directed the management of the CBN to put in place policies or regulations that would restrict the banks from unlimited access to government securities.
“It is important and expedient that the committee gives this directive to management because this country badly needs growth. For us to achieve growth, those whose primary responsibility that it is to provide credit, who act as intermediaries in providing credit and are called catalysts to credit and growth in the economy must be seen to perform that responsibility.”
According to him, it is unfortunate that rather than perform their responsibility to the private sector that is the engine of growth in the economy, banks are directing liquidity to other sectors of the economy.
The CBN governor said the apex bank would implement the directive of the MPC.
On the issues that have discouraged banks from lending to the real sector as well as the Non-Performing Loans (NPLs) in the industry, Emefiele said measures would be taken to mitigate losses.
Providing update on the level of bad debts in the industry, the CBN boss said: “If you recall, the prudential is that banks should have maximum of five percent in NPLs. I must say at this time it is about 19 per cent on the average which is a significant improvement from where it was a year or two ago.
“About a year or two ago, it was close to 15 to 17 per cent and moderating to 10 per cent I would say is a substantial and significant and encouraging improvement in the level of NPLs.
“And I do think that with the steps that would be taken by the CBN to support the bank through administrative, legal and regulatory framework, that certainly we would see to it that NPLs are brought down so that deposit money banks can be encouraged to go back and begin to lend more aggressively to those sectors that they consider to be risky.”
Commenting on the MPC decision, an analyst at Ecobank Nigeria Limited, Mr. Kunle Ezun, backed the decision of the MPC.
He, however, called for a reduction of the MPR at the next meeting to support real sector growth.
Speaking in a telephone interview, Ezun said: “For me, I think what the MPC did was the best thing by keeping the rate for 13.5 per cent points for the policy rate and keeping the asymmetric corridor at +200/-500 basis points.
“If you cut the rates in an environment where you have exchange rate as a monster, it becomes a big issue because the idea is that the rate becomes so low that people could get naira at a cheap rate to purchase forex. So keeping the rate at 13.5 per cent is the best in the interim.”
On his part, the CEO of Stanbic IBTC Nominees Limited, Mr. Akeem Oyewale, said: “From the information the MPC provided, it means that right now there is still need to observe the impact of the transmission mechanism of the recent cut in MPR earlier this year.
“They still want to observe the market. There are usually lags in cutting rates and the intended impacts in the economy. You could recall that the MPC just cut the MPR this year.
“The MPC is privileged to have access to a lot of information and in reaching the decision that it took, I believe that it must have been the optimal decision in the views of the MPC.
“The market likes stability, so if there is stability in the MPR, then investors can at least plan as against having massive swings in rates.”
