Archive for the 'Nigeria' Category
May 10th, 2011 by Tom Minney
The National Pension Commission of Nigeria (www.pencom.gov.ng) regulates over N2 trillion ($12.8 billion) in assets under management. This has been accumulated from 4.7 million people who have opened Retirement Savings Accounts and other pensions since the Pension Reform Act 2004. The assets are up from N1.8 trillion at July 2010 and the rate of contribution is increasing each year.
Africa’s domestic savings institutions are growing fast in many countries. In some capital markets they are growing faster than the demand for capital, the issuing of new shares, bonds and other investments, and they are mopping up available liquidity in the securities markets.
Mr. Muhammad K. Ahmad, Director General of PenCom, gave the figure at the opening of a two-day workshop jointly organized by PenCom and Organisation of Pension Supervisors (IOPS) on 5 May, according to a report in Daily Trust newspaper.
Pencom is the apex authority in the pension industry responsible for regulating and supervising. The website says it aims “to be a world-class organisation that ensures the prompt payment of retirement benefits and promotes a sustainable pension industry that positively impacts on the economic development of Nigeria”. Its regulatory and supervisory activities are risk-based and consultative.
Mr Ahmad explained that pensions are long-term investments which he said are available for “investment, infrastructure and other related investment outlet”, according to the newspaper.
He also talked about capacity building which is a challenge for any industry. It is a continuous process: “We need to change the way we supervise our regulative entities to focus on those areas that form the greatest risk” in order to focus Pencom’s resources. They also want “to clearly understand and identify early warning signals so that we can take appropriate actions.”
In another news report in April, Mr Ahmad said the number of contributors to the scheme is far less than expected given that there are an estimated 42 mn workers. He also said there is only a slow rate of growth in the number of contributors due to: lack of awareness and enlightenment for would-be contributors; poor compliance from the private and informal sectors; and the fact that the scheme is not implemented in some States.
May 4th, 2011 by Tom Minney
Leading Africa private equity firm Kingdom Zephyr Africa Management Company (www.kingdomzephyr.com) today (4 May) announced the opening of its new office in Lagos, Nigeria. It has $615 million under management via its Pan-African Investment Partners (“PAIP”) funds and operates out of offices in Accra, Johannesburg, Lagos, London and New York.
The firm sees expansion into Nigeria as strategic. it is Africa’s most populous country and the second largest economy in sub-Saharan Africa. The IMF forecasts Nigeria will be amongst the world’s top 10 fastest growing economies between 2011-2015, with annual growth rate around 7%.
The new Lagos office boosts Kingdom Zephyr’s ability to source deals in West and Central Africa. The Nigerian economy is set to benefit from the transformation of the banking and financial services, oil and gas and power sectors, all target industries for the firm, which has already invested in United Bank for Africa plc and Ecobank Transnational Incorporated through its PAIP I Fund.
Kingdom Zephyr Partner Seyi Owodunni will head the Lagos office. Prior to joining Kingdom Zephyr, Seyi was the Chief Financial Officer of Starcomms Plc, a Nigerian telecommunications operator and triple-play provider. He said in a press release: “Lagos is a vital location for Kingdom Zephyr’s investment activities within West Africa as we actively look to partner with established, local businesses that have the capabilities to grow and expand across the African continent.”
“Nigeria’s economic growth has recovered from the temporary dip in 2009 on the back of higher oil prices as well as industry and government reforms.. Growth will be further aided by key demographic trends such as an expanding workforce, increasing urbanization and the rapid growth of Nigeria’s middle class; all developments that are consistent with our middle class consumer-focused investment strategy.”
Kofi Bucknor, Kingdom Zephyr’s Managing Partner, added: “Although Nigeria is still dependent on its oil sector, the government is beginning to take the necessary steps towards economic diversification and market liberalisation while, at the same time, corporate governance is steadily improving. This is making Nigeria an increasingly attractive proposition for private equity investors.”
Kingdom Zephyr is a joint venture between Zephyr Management, L.P. and Kingdom Holding Company. Headquartered in New York, Zephyr is a global leader in emerging markets private equity, having invested in Africa since the mid-1990s. Kingdom is the investment holding vehicle controlled by HRH Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud of Saudi Arabia, a leading philanthropist and investor in Africa since 1996. Current PAIP Funds investments include Letshego Holdings Limited, a Botswana-based consumer lender, and Consolidated Infrastructure Group Limited, a South Africa-based power infrastructure company.
May 1st, 2011 by Tom Minney
The new management of the Nigerian Stock Exchange (NSE) has taken full charge with effect from 29 April, after interim Administrator Emmanuel Ikhazoboh, appointed in August 2010 by the Securities and Exchange Commission (SEC), bowed out on 28 April.
Chief Executive Officer of the NSE, Mr. Oscar Onyema, had taken up office on 4 April, but the SEC had asked for a one-month transitional period. Onyema had been Senior Vice President and Chief Administrative Officer at the American Stock Exchange, according to a statement.
Adeolu Bajomo, the new Executive Director, Market Operations and Technology, is set to start on 3 May, from his previous job as Head of Replatforming Programmes for Africa and Indian Ocean region for Barclays Bank plc. He is to lead operational and technology transformation of the NSE as it repositions for growth and global leadership through effective exploitation of technology and efficient business and market operations processes.
Ikhazoboh told journalists in Lagos that stakeholders should support the new management headed by Oscar Onyema who is expected to constitute a new management team. Reporting on the 8 months of his administration, equity trading grew from N5 trillion (US$32.4 million) to N8.5 trln while bond and other instruments rose substantially from N6 trln to over N10 trln. He said his task had been to restructure the market which had been in crisis so that the SEC had intervened. His administration was able to bring back credibility and investors’ confidence to the market, enhance its overall attractiveness to both local and foreign investors and to fulfil its mandate of putting a new management in place.
SEC noted that after the transition period, Ikazoboh will continue as deputy to the Interim President of the NSE on the NSE Council.
April 24th, 2011 by Tom Minney
From the blog of Mark Mobius of Templeton Investments:
“While Africa does have challenges, I am encouraged by another side of Africa that is gradually emerging with the development of capital markets, consumerism and technology.
I believe the opportunities for the development of Africa’s markets are appealing primarily because of the strong growth numbers now emerging out of the continent.
Africa is expected to grow more than 7% annually in the next 20 years, due to an improving investment environment, better economic management and China’s rising demand for Africa’s resources. More than 100 African companies have revenues in excess of $1 billion. Africa also has impressive stores of resources, not only in minerals but also in food — 60% of the world’s uncultivated arable land is found in Africa. As global demand for hard and soft commodities continues to grow, I believe Africa is in an enviable position with its vast natural resources. The potential for long-term growth in consumer-related areas is also very attractive, with around 1 billion inhabitants on the African continent. These are people, just like many others all over the world, with aspirations to own their own homes and buy possessions such as cars, refrigerators, washing machines and the like.
Within Africa, Nigeria is one of the frontier markets that I like. The country has a population of about 155 million people. It is rich in oil and gas reserves and raw materials such as iron ore, coal and bauxite. In addition, its climate and large areas of fertile land lend themselves favorably to agriculture. Nigeria’s economy has benefited from strong commodity prices; it is estimated to have grown 7.4% in 2010 and is forecasted to grow 7.4% again in 2011. The highly-anticipated Nigerian presidential election may be seen by many as a measure of the country’s progress and stability despite the clashes and unrest running up to the election. Our local sources remain confident about the elections overall and are not expecting any significant derailing event. We share this sentiment for the most part, given the current positive economic environment, fueled by high oil prices, as well as more tangible reforms in the country. Moreover, banks in Nigeria are particularly interesting. In our view, the government’s recent bailout of banks has made the nation’s bank stocks cheap, creating some very interesting investment opportunities.
I also see a lot of potential in markets such as Ghana and Kenya. Ghana was the first sub-Saharan country in colonial Africa to gain independence. Although it endured an extended period of military rule, a new constitution and multi-party politics were introduced in 1992. Currently, Ghana is seen by many as one of the most politically stable democracies in sub-Saharan Africa. We are excited about the prospects for consumer-related sectors in this market, given its relatively young and dynamic population of more than 20 million. The country is also rich in natural resources such as oil and gold. Oil production in the offshore Jubilee field commenced in December 2010 and is likely to make a significant contribution to the country’s economic growth going forward. Of course, related investment in infrastructure is also likely to require financing, so we are looking closely at the financial sector as well.
The Kenyan economy appears to be doing well at the moment. The post-election violence in late 2007 and early 2008 took many by surprise, but it culminated in the establishment of a coalition government and the adoption of a new constitution in 2010, creating a solid foundation for future stability and growth. Kenya’s position on the east coast of Africa allows it to act as a hub for trade and investment flows from the east into the rest of the continent. Exports, predominantly tea and horticultural products, have recovered strongly, and the tourism sector is also seeing a strong rebound in the form of incoming foreigners.
There are also many challenges to investing in Africa.”
April 11th, 2011 by Tom Minney
So far, South Africa’s JSE Ltd (www.jse.co.za) securities exchange has achieved limited success with its Africa Board, aimed to encourage dual-listing of leading African equities on the JSE as part of a strategy to help capital markets development. On 8 April the JSE Executive appointed an advisory committee (Africa Board Advisory Committee) to boost the JSE Africa Board, part of the main equities market, to achieve its mission and strategic objective to provide a world-class stock exchange platform and help attract capital to the African continent.
The committee was launched in Accra, Ghana, and comprises 9 members from several African countries. Membership of the Advisory Committee will also grow and change over time. The chair is Nathan Mintah, previously a partner at private equity firm Kingdom Zephyr Africa Management Company and having over 18 years’ of investment banking and operating experience. Bolaji Balogun, CEO of Chapel Hill Denham Group, Nigeria is another member.
The task of the committee is to promote the business, goals and objectives of the JSE Africa Board to the main stakeholders of the investment community, including issuers, investors, service providers (i.e. banks, auditing firms, legal firms etc), governments and regulators. The committee is also mandated to advise on operational matters relating to the Africa Board, including reviewing the strategy and development of relevant new products that facilitate capital flows into Africa; advise from time to time on any proposed amendments and/or improvements to the JSE Africa Board model; assist business development efforts by facilitating key meetings in jurisdictions where Advisory Committee members have influence; offer advice on protocol, regulatory interpretation in different jurisdictions and assist in sourcing funding for the operations of the Africa Board.
Speaking at a media briefing in Accra on 8 April, Maureen Dlamini, Executive Head of the JSE Africa Board said: “The Africa Board Advisory Committee will help us achieve the objectives espoused by the JSE Africa Board that include attracting foreign direct investment to Africa in order to provide the finance necessary for development, and to allow the people of Africa to share in the African growth story.”
Mr Mintah said his appointment as Chairperson of the advisory committee is a timely and important challenge: “We need a concerted effort to successfully promote the growth of capital markets on the African continent and the JSE Africa Board is the ideal platform to achieve this goal.”
Dlamini said the world has become aware of the business opportunities in Africa. “The JSE Africa Board is ready and able to provide African companies that have pan-African strategies with a springboard to increase their footprint in Africa, using a trading platform that is widely respected,” she says.
The JSE, which operates Africa’s largest stock exchange, has had two listings since creating its Africa board in 2009. Trustco, a micro financial services group, has seen a 20% boost in its share price since it was listed in February 2009. Wilderness Holdings, a Botswana-based ecotourism company, has climbed 8.7% since it listed in April 2010. Both companies have primary listings in their home markets.
March 14th, 2011 by Tom Minney
LIVE FROM SECURITIES AFRICA CONFERENCE (BNY Mellon, London)
African exchanges could grow dramatically in both market capitalization and turnover, following the explosive trends already charted by the Indian and Chinese markets. This was the view of Sunil Benimadhu, President of the African Stock Exchanges Association (ASEA – www.africansea.org), speaking at an African investment conference organized by stockbroker Securities Africa (www.securitiesafrica.com) in London today (14 March).
According to his projections, by 2020 leading African exchanges including Nigeria, Egypt, Kenya, Botswana and Mauritius could see giant growth. He says that based on an assumption of economic growth (GDP) of 5% a year and if African markets continue to follow trends seen elsewhere in terms of their share their economies (GDP) then both turnover (the value of shares traded) and market capitalization (the value of the shares listed on the exchange for trading) could increase many times during the coming decade. Already in the last 10 years Kenya has seen its market capitalization grow 12x, while the market capitalization of the Mauritian market has risen from 30% to 80% of GDP even as the economy has also grown by 5% a year. This has also been seen in other markets, for instance in China where turnover has risen 5x to $2.7 trillion and India where turnover is up from $148 bn to $1.6 trn. African markets could achieve similar growth in the coming years.
Sunil dubs his continent “the final growth frontier of the world” and says it is attracting a lot of interest, despite a slowdown this year due to political upheaval in Tunisia, Egypt and Cote d’Ivoire. As global economic power shifts to China and India, demand for commodities will continue to soar in order to support their growth, and this will continue to boost African economies. In addition, many countries have successfully introduced structural adjustment programmes. There has been huge growth in many African countries and a new and numerous middle class is emerging, likely to push consumption at 10% a year for coming years.
Investors deterred by “anaemic” growth in developed markets are turning to Africa. Despite the prospects, African markets are currently trading at less than 11x trailing Price-Earnings ratio (a measure of valuing a share price compared to last year’s net profits), compared to a trailing PE ratio of 16x in developed markets. This is despite developed markets only growing by 0%-0.5% a year, compared with African growth forecast at least at 5% in most major markets, and more in many countries. Despite delivering double-digit returns and providing some of the world’s top performing markets, even after factoring in risk perceptions “African markets are much cheaper”, says Sunil.
Challenges for macro-economic policy-makers include more improvements in the business climate including further opening of markets, inclusive growth that spreads the benefits to a middle class who will in turn spur consumption and bring large numbers of the population into the forefront of the growth story. He also said the continent needs good, democratic governance, as indicated in North African countries which had been deemed to be success stories until governance problems came to the fore. There also needs to be substantial investment in infrastructure, including roads, railways and airports to link African markets. However, Afridan capital markets could supply the investment funds for this, provided policy-makers understand and actively support the development of security exchanges.
Exchanges also have to play their part. He says they should focus on “the 4Ps: products, players, participants and partnerships”. The markets need new products, they need new players including dramatic increases in the proportion of the local population who trade on capital markets and activity levels by international investors. Top companies – for instance oil companies in Nigeria – may not even be listed and there is plenty of potential to put leading companies onto the radar screen of the international investors. African stock exchanges also need to seek new partnerships with each other. Links between markets in East and Southern Africa are advancing.
How the African Stock Exchanges Association (ASEA) aims to shape the future of African capital markets:
1. Emerge as the organization of reference and choice for investors to obtain first-hand information on African stock markets, increase the visibility of the African markets
2. Revamp the website to give up-to-date information to investors who want to understand the performance of African markets and to become a major source of real-time information, including the changes exchanges are going through.
3. ASEA will work a major index provider to come up with an investigate African index that will be jointly owned and should serve 2 key functions: as a benchmark for investors and to be used as reference for the creation of an African Exchange-Traded Fund. It will track ASEA’s 22 member exchanges, although have not yet decided the weighting of the JSE.
4. ASEA should become mouthpiece of African exchanges with African governments and regional organizations as well as the African Union, the African Development Bank and the World Bank.
January 14th, 2011 by Tom Minney
The Nigerian Stock Exchange (www.nigerianstockexchange.com) will suspend stock brokers that do not meet the capital adequacy requirements. The NSE interim administrator Emmanuel Ikazoboh said this during a press conference on 10 January in Lagos to review of market activities in 2010 and preview 2011.
Dealing members and stockbroking firms require a capital base of N1.5 billion (US$9.8 million), while issuing houses are required to have N5 bn. Recapitalisation was put on hold by the previous NSE management in 2009 after capital markets crashed in the first quarter of 2008. When the issue was raised a few years ago, complaining stockbrokers claimed the London Stock Exchange requires £1 mn ($1.6 mn) and the US requires only US$1 mn. At that time there were 246 registered Nigerian stockbrokers, dealing in only 213 equities listed on the NSE and since then the number of brokers has risen to 254. The recapitalization requirement may lead to consolidation.
Ikazoboh said stockbrokers are heavily exposed to margin loans and in some case have made losses and are in negative equity. He said the NSE wants to protect investors whose accounts were being used by some dealing member firms to continue to operate because they do not have enough money. Some stockbrokers have asked the NSE to save them with recapitalization, but he said this would not be possible.
The NSE is working with South Africa’s JSE Ltd (www.jse.co.za) to fulfil requirements to ratify its membership of the World Federation of Exchanges (www.world-exchanges.org). This is part of Nigeria’s plans to become the world’s 20th most developed economy by the year 2020. Challenges include improving the governance structure of the NSE and the wider market.
January 14th, 2011 by Tom Minney
According to recent local news reports, the Nigerian Stock Exchange (www.nigerianstockexchange.com) reports that a total volume of 93.3 billion shares valued at N797.6 billion (US$5.2 bn or 3.2% of gross domestic product) were traded in 2010, with volume down 9% and value up 16% compared to 2009 when 102.8 billion shares were traded, valued at N685.72 billion (2.9% of GDP). Compared to 2008, the 2009 figures represented a 46.8% in number of shares traded (volume) and 71.4% in value.
At a press conference on 19 January, interim administrator of the NSE, Emmanuel Ikazoboh, said average daily activity was down from 414.7 mn shares worth to 377.9 mn shares, with daily value up from N2.8 billion in 2009 to N3.2 billion in 2010. The turnover ratio dropped to 12.5% from 23.3% in 2009, partly because of a decline in share prices.
Equity trading was N797.5 bn or 99.99% of the turnover value. Only 13,000 units of State Government bonds were traded, valued at N14.14 mn. Trading in Industrial bonds and preference stocks was inactive compared to N412.8 million traded in 2009. Trading in Federal Government bonds on the NSE was also inactive in 2009 and 2010, compared to turnover of 13.8 billion units valued at N15.34 trillion in 137,080 deals on an Over-the-Counter (OTC) market for Federal Government bonds (2009 figures for the OTC were 17.1 billion units valued at N10.44 billion in 78,248 deals). In equities, the banking sector was most active and accounted for N432.1 bn of trading, followed by insurance with N15.1 bn.
The NSE received 366 complaints, up from 249 in 2009, and of these 291 were against dealing members’ firms, 66 against non-dealing members while 9 were against inactive operators. Only 135 complaints were resolved and 231 are still being investigated. A total of 74 dealing firms (up from 6 in 2009) were suspended for failing to submit audited accounts for 2008, 2009 and 2010.
January 5th, 2011 by Tom Minney
Nigerian media have reported that Mr. Oscar Onyeama has been approved by the Council of the Nigerian Stock Exchange (www.nigerianstockexchange.com) to be Chief Executive Officer. Accenture Nigeria had guided the process to find a replacement for former Director General Dr Ndi Okereke-Onyiuke, who was dismissed on 4 Aug, 2010.
His name has been given to the Securities and Exchange Commission (www.sec.gov.ng), which is still conducting its own search.
Onyeama is the Nigerian-born chief administrative officer of the former American Stock Exchange (AMEX), which was bought in October 2008 by NYSE Euronext and became NYSE Amex Equities.
The Daily Champion paper (www.champion.com.ng) quotes “a source” that he was among 131 applicants, and that other top contenders included Yvonne Ike, a former JP Morgan staffer and Bola Onadele, head of Datanet Limited. The selection panel included a representative of South Africa’s JSE Ltd, Accenture, a council member of the NSE and Emmanuel Ikhazoboh, current Interim administrator of the Exchange.
Nominations are still to be passed on to the SEC for 3 other Executive Director posts at the NSE.
Leadership news (www.leadershipeditors.com) reported a statement from the NSE administrator, Emmanuel Ikazoboh: “The Council is currently awaiting approval of its choice in the SEC. Further, the Council has reached an advanced stage in the selection process for each of the 3 Executive Director positions. It is expected that this process will be completed in January 2011. The Exchange expects that the persons engaged for all four positions will assume duties no later than 1 April 2011.
“The position of The Exchange to get the approval of SEC is in accordance with previously agreed procedures, that the apex capital market regulator should give its approval to any candidates the Exchange intends to hire prior to their engagement by The NSE.
“The Exchange has adopted an entirely auditable, thorough, and transparent multi-stage process to ensure that the best talents are recruited for the four available top management positions. The positions are: Chief Executive Officer; Executive Directors for Listings; Strategy and Business Development, as well as Market Operations and Information Technology”.
Okereke-Onyiuke is still suing over her dismissal, according to the Daily Champion report, and a Senate Committee on Capital Market at the National Assembly recently called for her reinstatement.
The SEC reportedly says the NSE should be demutualised in future and is examining the best model for reform towards a more focused, transparent and efficient capital market.
According to the staff listings of the AMEX,: “Oscar Onyema (sic) is Senior Vice President and Chief Administrative Officer of the American Stock Exchange. Mr. Onyema serves as a primary liaison among various Amex operating divisions, the trading floor community, and external constituents. In addition, he is responsible for strategy and competitive analysis, Membership and Registration Department and Market Data Services Department. Mr. Onyema has been instrumental in Amex’s preparation for Regulation NMS, and serves on several industry committees including CTA Operating Committee, NASDAQ UTP Plan Operating Committee, and SIFMA / FIF Regulation NMS working group.
Mr. Onyema joined the Amex in January 2001, and has served in various positions, most recently as Vice President and Chief Administrative Officer. Before joining the Amex, Mr. Onyema worked at the New York Mercantile Exchange (NYMEX) as Senior Analyst, Business Planning and Development. He also worked at DPMS (IBM Business Partner) as a Marketing Executive marketing IBM mid-range systems.
Mr. Onyema received an MBA in Finance and Investments from Baruch College in New York City. He served as an adjunct lecturer at the Economics Department of Pace University for five years, and is a frequent public speaker on market structure and market data issues.”
Interestingly his predecessor, Ms Okereke-Onyiuke, came to the Nigerian Bourse from the New York Stock Exchange and is also an alumnus of Baruch College of the City University of New York.
December 16th, 2010 by Tom Minney
Citigroup (www.citigroup.com) expects to see strong demand for Nigeria’s $500 million debut Eurobond despite volatility in global capital markets, Chief Executive Vikram Pandit told reporters in Lagos on 8 December, according to a report on Reuters: “We believe that there will be significant demand for a bond offering from Nigeria and it is evidenced by demand from not only from investors … in developed markets but also emerging markets”.
Citi is the lead book-runner for the 10-year bond, which aims to establish a benchmark for Nigeria in the global market and allow local companies to follow suit, enabling them to raise long-term funding more cheaply than at home.
Pandit declined to comment on the timing of the issue.
Reuters says “banking sources” have said Nigeria plans a roadshow to the U.S. this week (the week starting 13 Dec) and may talk to some European investors directly in a bid to complete the deal before the end of the year, though the timing will depend on market conditions.
Pandit said “It will be a question of how you price the bond so that it is not only priced to create the right benchmark at the tightest price but also trades well in the after-market.”