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Uncertainty As Nigerian Equities Hit New Low

28 Nov 2011

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NSE Headquarters

By Goddy Egene and Eromosele Abiodun  

The Nigerian equities market continued its poor run last week, following sustained migration to the money market  by investors and immense sell pressure as majority of investors push to raise funds for the  forthcoming yuletide celebrations.

Hope that the market would return to a positive run on the back of recent strong corporate reports by banks and manufacturing concerns faded at the resumption of trading as news hit the market that the Monetary Policy Committee (MPC) of the Central Bank of Nigerian (CBN) will devalue the naira and leave interest rates at 12 per cent.

At the close of business on Monday, the market went down with equities prices hitting new low. It however regained momentum the following day but relapsed again on Wednesday and Thursday when the benchmark index returned to a month-low of 19, 961.18. But the market appreciated   marginally at the close of business last Friday, returning the benchmark index to 20, 122.14.

The situation notwithstanding, some market watchers said that the market remained the best place to invest as so many quoted companies were reporting impressive results.

Analysis of  the market performance  showed that the All-Share Index depreciated by 189.37 points or 0.9 per cent to close on Friday at 20,122.14, while the market capitalisation of the 186 First -Tier equities declined to N6.33 trillion.
Also, the NSE-30 Index depreciated by 9.29 points or 1.0 per cent to close at 897.16. The previous week, the ASI and the NSE-30 Indices both depreciated by 0.5 per cent each.

In the same vein, three of the four sectoral indices depreciated during the week, same as for the preceding week. While the NSE Food/Beverage Index declined by 4.19 points or 0.7 per cent to close at 564.91, the NSE Banking Index went down by 12.26 points or 4.3 per cent to close at 275.52 and the NSE Insurance Index depreciated by 5.25 points or 3.5 per cent to close at 145.15. However, the NSE Oil/Gas Index appreciated by 1.86 points or 0.8 per cent to close at 244.13.

A further analysis of the NSE trading statistics revealed that investors sold a total of 1.235 billion shares worth N9.360 billion in made 16,529 deals, in contrast to a total of 1.250 billion shares valued at N10.344 billion exchanged the previous week in 17,992 deals.

The banking subsector of the Financial Services sector was the most active during the week (measured by turnover volume) with 579.81 million shares worth N4.3 billion exchanged by investors in 8,562 deals.

The volume of shares sold in the banking sector was largely driven by activity in the shares of Access Bank Plc, First Bank of Nigeria Plc and Zenith Bank Plc.

Trading in the shares of the three banks accounted for 363.8 million shares, representing 62.7 per cent and 29.4 per cent of the sector’s turnover and total volume traded during the week, respectively.

The Beverages – Brewers/Distillers subsector of the Consumer Goods sector, boosted by activity in the shares of International Breweries Plc and Premier Breweries Plc, followed on the week’s activity chart with the subsector’s turnover of 421.2 million shares valued at N3.5 billion traded in 1,124 deals.

The previous week, the banking subsector led on the activity chart and was followed by the Insurance subsector, both of the Financial Services sector.

Gainers and Losers
The price movement chart of the NSE displayed a total of 20 equities that appreciated in price during the week, same for the preceding week.

Dangote Cement Plc led on the gainers’ table with a gain of N2.00 to close at N105.10 per share while Forte Oil Plc followed with a gain of N2.00 or 15.6 per cent to close at N14.79 per share.

Other price gainers’ in the top 10 category included: Okomu Oil Palm Plc (N1.17), Lafarge WAPCO Cement Nigeria Plc (99 kobo), Flour Mills of Nigeria Plc (50 kobo), Ashaka Cement Plc (N0.44), NCR Nigeria Plc (N0.42 kobo), Roads Nigeria Plc (N0.35), Chemical & Allied Products Plc (N0.20) and University Press Plc (N0.14).

On the other hand, 44 stocks depreciated in price, lower than the 45 of the preceding week. Glaxo Smithkline Consumer Nigeria Plc led on the price losers’ table, dropping by N1.35  to close at N25.65 per share while Ecobank Transnational Incorporated followed with a loss of N0.83 to close at N10.42 per share.

Other price losers in the top 10 category included: UAC of Nigeria Plc (N0.78 ), Zenith Bank Plc (N0.74 ), Dangote Flour Mills Plc (N0.54), Ikeja Hotel Plc (53 kobo), Vitafoam Nigeria Plc (N0.48 ), Guaranty Trust Bank Plc (N0.42), United Bank for Africa Plc (N0.38) and Skye Bank Plc (N0.37).

NSE List Dana
Meanwhile, while equities  are not performing well at the moment, the number of corporate bonds listed on the NSE increased to 12 last week as the N8.010 billion Dana Group Plc Bond was admitted on the Exchange’s Daily Official List.

The bond, which has interest rate of Monetary Policy Rate (MPR) plus 7 per cent and maturity date of December 2018,   is part of the N36 billion Debt Issuance Programme of the company.

Dana Group has established itself as an integral part of the Nigerian economy with an integrated commercial, industrial and service-orientated organisation, positioning itself as one of the leading business houses in Nigeria.

The Group comprises a diverse range of strategically positioned operating subsidiaries and associate companies with a manufacturing base, structured to give the Group the flexibility and versatility to keep ahead of local competition while keeping pace with the ever-evolving global business scenario.

The company operates in several sectors of the Nigerian economy. Among them are: air/automotive, chemical, electronics, instant foods, paper, pharmaceutical, plastics, rice and steel.

The debt issuance programme, which is to provide additional capital to boost the operations of Dana Group, has Dunn Loren Merrified (DLM) Limited as the financial adviser, issuing house and lead book runner.

DLM has equally assisted Chellarams Plc and Tower Aluminium Group to raise similar capital. The recent one was the N4.63 billion bond by Tower Aluminium under a N9 billion Medium Term Note (MTN) programme.

The N9 billion MTN programme is undertaken by Tower Funding Plc, which is a captive finance vehicle for the Tower Aluminium Group. Documents of the offer showed that the Series 1 bond issuance has two tranches. The first tranche was N3.63billion floating rate bond  with a coupon of Monetary Policy  Rate (MPR) plus 7 per cent ) due September 9, 2018  and  N1 billion  bond with a coupon of MPR  plus 5.25 per cent  due  September 9, 2018.All the bonds were issued at a N1,000 per unit.

According to the Chief Executive Officer (CEO) of DML, Mr. Sonnie Ayere, the proceeds of the bond would be applied towards the funding of the member companies of the Tower Aluminium Group comprising: Tower Aluminium (Nigeria) Plc; Queensway Aluminium Limited; Asaba Aluminium Limited; Tower Roofing Systems Limited; Borno Aluminium Limited and Kolorkote Nigeria Limited.

“The rich history of the Tower Aluminium Group spanning over 50 years in Nigeria contributed in no small measure to the success of the Series 1 bond issuance,” Ayere had said.

Ayere noted that the bond was the first internationally  guaranteed  bond by a real sector corporate entity in Nigeria. The guarantee was given by GuarantCo Limited, a development finance institution regulated by the Financial Services Commission (FSC) of Mauritius with the key objectives of encouraging private sector involvement in the local currency financing of infrastructure projects and promoting local capital market development in low-income countries.

Stimulation of Venture Capital
In a bid to help small companies grow, the Federal Ministry of Finance, Federal Ministry Trade and Investments and the Securities and Exchange Commission (SEC) last week announced they are working on the modalities of how to facilitate better access to venture capital in the country.
The Director-General of SEC, Ms. Arunma Oteh, disclosed this recently in Port Harcourt, Rivers State.

Venture capital could be described as money invested in start-up companies to help them get off the ground. While there are many opportunities for small scale firms, prospective promoters of such firms, most times find it difficult to have access to the needed fund such as venture capital.

However, speaking on how to make funding available for entrepreneurs, Oteh said  venture capital was an area that would soon become very active, stating that the ministries of Finance and  Trade and Investments, and the Commission, were working on package  in that regard.

According to her, for now the capital market remains the best source of medium to long-term funding that could be used to finance infrastructural projects across the country. She urged the Federal and state governments to continue patronising the capital market to raise bonds for the financing of infrastructure.

Oteh noted that investments being made by the federal  and state governments in infrastructure and education now would yield good dividends in the good dividends in the years to come. She said that SEC would always ensure that funds raised by the governments or companies from the capital would be used for the reasons for which they were raised.

The SEC boss restated the Commission’s commitment to a world-class capital market that could be compared with any market in the world.

Retail Sector Growth
In the meantime, the Nigerian economy may be heading for a positive direction as it emerged last week that the Nigerian retail segment had witnessed momentous growth in the last few years as a result of a combination of factors.

The Oxford Business Group (OBG), who stated this in a report said the factors include transparency in the investment atmosphere, which had driven down the costs of doing business- one of the more traditional constraints on growth. OBG is a global publishing and consultancy company producing annual investment and economic reports on more than 30 countries.

OBG noted that the retail sector might see some major investments in the months ahead provided government and its agencies keep up its current campaign against graft – and continue moving towards further easing of the foreign and domestic direct investment climate.

“As the most populous country in Africa and one recently experiencing some of the highest and most sustained Gross Domestic Product (GDP) growth anywhere in the world, Nigeria is going through the early days of a major boom in its retail sector. This is affecting everyone, from white goods manufacturers to commercial real estate developers; as the country’s 160 million people play catch up with the world of consumer products.

“This process was recently highlighted in a report from Renaissance Capital, which pointed out that while many of the citizens may be on low incomes, a recent period of stability and economic growth – 7.4 per cent in the first quarter of 2011, after seeing 7.85 per cent in all of 2010 – has created a pool of some 37 million middle-class citizens.

Tags: Business, Featured, Nigeria, Nigerian equities, NSE

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