23 July 2012

Nigeria: FG's Action Slows Stock Market Recovery

The consolidation in the growth expected last week at the stock market was not to be, as the decision by the Federal Government to reinstate the suspended Director-General of the Securities and Exchange Commission (SEC), Ms. Arunma Oteh, slowed the recovery of the market.

Oteh was asked to go on compulsory leave on June 11, by the board of the commission after a committee it set up to investigate Project 50, indicted her.

However, the Federal Government reinstated her last Tuesday saying the report of an independent audit of the project done by PricewaterhouseCoopers (PWC) did not indict her.

But the decision was received by stakeholders with mixed reactions and protests by the members of staff of the commission, who expressed their vehement opposition to her reinstatement.

This development turned the direction of the market from positive to negative on Thursday and Friday. Consequently, the Nigerian Stock Exchange(NSE) All-Share Index, which measure the aggregate growth of the market, appreciated by 1.56 per cent to close at 23,095.31. This is lower than the 2.8 per cent growth recorded the previous week.

The NSE 30 index rose by 2.17 per cent while the NSE Consumer Goods Index also rose by 4.02 per cent. The NSE Banking-10 Index appreciated 1.96 per cent, the NSE Insurance-10 Index appreciated by 0.33 per cent, while the NSE Oil/Gas-5 Index depreciated by 1.96 per cent.

Investors traded 1.634 billion shares worth N11.897 billion in 22,412 deals as against 1.459 billion shares valued at N9.618 billion exchanged in 18,276 deals the previous week.

Also traded during the week were 3,660 units of NewGold Exchange Traded Funds (ETFs) valued at N9.061 million exchanged in 10 deals. Likewise, a total of 200 units of 4.00 per cent FGN APR 2015 valued at N147,100 were exchanged in four deals.

Major transaction volume was driven by activities in the Financial Services sector with 1.217 billion shares valued at N6.881 billion traded in 12,971 deals. This was followed by Conglomerates sector with 130.220 million shares valued at N182.074 million traded in 909 deals.

Market operators said but for the news of Oteh's reinstatement, the market would have witnessed a higher appreciation last week. For the period she was away, the market garnered value of equities rose by N669 billion, while the index appreciated by 9.8 per cent.

Price Gainers/Losers

In all, 39 equities appreciated in prices last week, higher than 32 of the preceding week. Guinness Nigeria Plc led on the gainers with N11.40, followed by Nigerian Breweries Plc with a gain of N5.99.

Conversely, thirty stocks depreciated in prices lower than thirty-three of the preceding week. Mobil Oil Nigeria Plc led on the price losers' table, dropping by N6.00 followed by Seven-Up Bottling Company Plc with a loss of N2.00.

Reactions to Oteh's Recall

While market operators including stockbrokers, registrars condemned the recall of the SEC boss off record, some members of the staff protested openly carrying. A source had alleged that members of staff who were opposed to Oteh's return were those desperate to truncate the reforms she had brought to the commission.

"She was able to plug some big holes used by some people in SEC to siphon money from the commission before her suspension. The government has seen through the process and has realised that Project 50 was a well-conceived idea and it raised the ante in the developmental role of the commission. All these moves are premeditated and they have failed," the source said.

The source also questioned the sudden unionisation of the commission, saying it pointed to the fact that some elements, who are against the reform, have been peddling falsehood and fomenting trouble within the commission.

But some said brokers her recall was premature, considering the fact that the House of Representatives Ad Hoc Committee that investigated the "near collapse of the capital" had just submitted its report, recommending her sack. The House was to later insist on the recommendation that she should be sacked.

"What we are seeing is real confusion and it will only affect the market negatively. This is not good for the market that is beginning to witness gradual return of investors' confidence in the past few days," a broker said.

Another broker pointed out that the SGF acted hastily, saying that he did so because the minister who supervises the commission was away.

The Chairman, Association of Stockbroking Houses of Nigeria (ASHON), Mr. Emeka Madubiuke, said: "There is confusion all over the place. We heard the DG has been recalled and at the same time we heard that staff of the commission are protesting. We are still gathering information. The stockbroker community will meet and take a decision on the current situation very soon."

But an operator, who had spent over 30 years in the market declared: "I am pained. My heart bleeds for Nigeria and the market in particular. See what Bolaji Bello has done within the short time he acted as SEC DG and now the same government that is urging investors to come is taking decision that is retarding the growth of the market."

Conoil Declares Dividends

However, there was soothing news for shareholders of Conoil Plc as the petroleum products marketing firm declared a N2.50 dividend for the year ended December 31, 2012.

The gross dividends declared is N 1.73 billion, which implies an increase of 25 per cent, from N2 per share for the 2010 financial year.

Conoil Plc recorded a turnover's rose by 53 per cent from N102.88 billion in 2010 to N157.51 billion in 2011. It further consolidated its profitability with profit before tax rising from N4.02 billion to N4.4 billion, while profit after tax rose from N2.79 billion to N2.95 billion.

In his comments on the performance, Chairman, Conoil Plc, Dr. Mike Adenuga (Jnr), said the results were indicative of the commitment of the Board and management to growing shareholders' value irrespective of the operating challenges.

He pointed out that the company launched far-reaching initiatives to strengthen its income base in core segments of its business particularly in retail, lubricants, aviation, gas and specialised products.

"We shall continually strive to take advantage of emerging opportunities to repay the faith and confidence that our loyal shareholders have shown in us," Adenuga assured.

He said Conoil would continue to consolidate the progress it has made in the past years and leverage on its unique position as Nigeria's leading oil marketer to continuously improve returns to all stakeholders.

While shareholders of Conoil Plc are to enjoy dividend, the prospects of those of Transnational Corporation of Nigeria (Transcorp) receiving dividends for the first time also brightened last week.

This followed an improved financial performance for the six months ended June 30, 2012, the company reported. It reported a profit before tax of N1.052 billion in 2012, up by 54 per cent from N684 million. Similarly, profit after tax rose by 72 per cent from N547 million to N940 million in 2011.

In his comment on the result, the Chief Executive Officer of Transcorp Plc, Mr. Obinna Ufudo said "We are quite pleased with our half year results which have surpassed the performance of 2011 by N162 million. We are certain that Transcorp is on the right path and will realise the performance targets set at the beginning of the year".

According to him, the performance has confirmed the company is on sound footing. "We are confident that the steps taken so far in each of our business areas will further accelerate our growth. We have an enviable pipeline of deals, opportunities and projects, and are well positioned to take advantage of them and ensure that Transcorp delivers even stronger results for the remaining half of this year," he said.

Notore Chemical for Listing

There was also the good news of the NSE recording another new listing as very soon as Notore Chemical Industries Limited, is said to the be preparing to list its shares.

Notore, which is an agro-allied and chemical company owned by a consortium of private and foreign institutional investors, is currently championing the African green revolution by supporting local food production on the continent.

THISDAY checks revealed the company was planning to list on the NSE as part of its strategies to remain a dominant player in the agric sector and widen its investor base.

Market operators applauded this development, saying it is good for the market. "The market did not record any new listing between 2009 and 2011. Only this year the market has recorded two new listings so far. And if Notore is planning to list, it is good because it would enhance investor's choice of investment in the agric sector of the exchange where we currently have only five companies," a stock dealer, Mr. Ayo Oguntayo, said.

Sources close to Notore confirmed that preparations towards the listing are already on, noting, however, that the whole exercise would be concluded next year.

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