Review: Nigeria’s capital market with different shades in  2017

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By Ebenezer Adaramodu

The Nigerian capital market has undergone different shades of bearish and bullish run in 2017, just upon the face of an economy which exited global economic meltdown in the second quarter (Q2) of the year, this report documents how the stock market has fared in 12 months.

Market’s positive performance With a market decline of 6.17 percent in 2016 (the third consecutive year of negative performance), majority of the stakeholders in the stock market had already assumed that the market would experience positive trend in 2017.

The Chief Executive Officer, NSE, Oscar Onyema, in his assumptions, said the nation’s economic growth of 0.55 percent as reported by the Nigerian Bureau of Statistics (NBS) would improve the market, and should also propel the market’s essence and value to foreign and domestic investors.

“Monetary policy will continue to play a vital role in determining activity in the market. With forecasts for inflation expected to moderate due to the base effect, we believe that all things being equal, monetary authorities will have more flexibility with respect to interest rates and FX regime. Hence, good coordination between fiscal and monetary policy should result in resolution of aforementioned structural deficiencies and drive economic growth,” Onyema said.

So far in 2017, the Nigerian stock market has overseen a bullish run with NSE All-share index at an average positive of 3.49 percent to close at 27,812. 50 basis points as reported by analysts at Meristem Securities Limited (MSL), an investment banking firm in a special report entitled; “In Murky Waters…Wading through Uncertainties”, the analysts gave an expected account of the stock market bullish run.

MSL analysts said: “However, we note that market recovery is partly hinged on stability in the FX market and moderation in exchange rate gap between the interbank and parallel markets. Based on our mix of methodologies, we arrived at a 2017 index level of 27,812, 50, indicating a +3.49 per cent potential market return by December 31, 2017.”

Although, the market declined by 5.1 percent in the first quarter (Q1) of 2017 but it recorded a growth of 23.2 percent in the first half (H1) of the year and 7.01 percent growth in third quarter (Q3) of 2017.

These are the positive shades of the stock market in the year under review but on a different shade, the market witnessed frivolity that almost dented the positive year.

 

Suspended stocks

At the start of  Q3, no fewer than 17 companies were suspended by the NSE for non submission of yearly results. The NSE claimed that the suspension was in line with its guidelines which gives it the powers to suspend any quoted company that did not release its results within a stipulated period.

The suspension took effect from July 5, 2017 and it includes a list of 17 companies out of which 7 are insurance firms. The NSE revealed that the suspension will remain in place until the submission and approval of the required results by the exchange.

These are the suspended companies listed below:

African Alliance Insurance Plc

Equity Assurance Plc

Fortis Microfinance Bank Plc

Guinea Insurance Plc

Premier Paints Plc

Resort Savings & Loans

Sovereign Trust Insurance Plc

African Paints (Nigeria) Plc

Aso Savings & Loans Plc

Ekocorp Plc

Evans Medical Plc

Goldlink Insurance Plc

Great Nigeria Insurance Plc

Omatek Ventures Plc

Union Dicon Salt Plc

Union Homes Savings & Loans Plc

Universal Insurance Company Plc

Verdict: Despite taking too long to  wield the big axe on the law rebuffing firms, but in the end, the suspension was needed and it served as warning to other stocks.

 

Oando’s Never-ending crisis

The crisis rocking Oando Plc was initiated when two of the company’s shareholders, Dahiru Mangal and Gabriele Volpi, through Mr. Volpi’s company, Ansbury Incorporated, filed petitions against the authority of the company over alleged ‘insider dealings’ and ‘manipulation of the company’s shareholding structure’ in breach of the Investments & Securities Act 2007 and the SEC Code of Corporate Governance for Public Companies.

Oando came out to disregard the allegations and claimed that they are unsubstantiated with a statement which read: “This petitioner is not a shareholder of the Company, but a shareholder in a company domiciled in a jurisdiction outside Nigeria which in turn holds shares in a Nigerian investment company that is a shareholder in Oando; and Alhaji Dahiru Mangal (“Alhaji Mangal”): Alhaji Mangal is an individual who requested clarification from the SEC on issues which he could easily have obtained from the Company and indicated in his petition to the SEC that he holds a 17.9% interest in Oando.”

Despite the crisis, Oando held its annual general meeting in Uyo while the company’s financial statement by the auditing firm of Ernst & Young for the year ended December 31, 2016, presented at the meeting corroborated the fears of the concerned shareholders, who wanted the resignation of the Group Chief Executive Officer, Wale Tinubu.

Apart from a comprehensive loss for the year of N33.9 billion, against N56.6 billion in 2015, the statement said the company’s current asset exceeded current liabilities by about N14.6 billion (N32.8 billion net current liability in 2015).

On the group’s performance, the statement said Oando had a comprehensive income of N112.4 billion for the year, against net loss of N37.8 billion in 2015, with its current assets at N263.8 billion, against N260.4 billion in 2015.

However, the Securities & Exchange Commission, SEC, at the time of Alhaji Gwarzo Mounir as the Director General (DG), waded into this crisis and ordered a forensic audit of the company’s affairs.

Concurrently,  a full technical suspension in trading on Oando Plc shares kicked off on the floor of the Nigerian Stock Exchange and the Johannesburg Stock Exchange (JSE).

Verdict: Sooner or later, the outcome of the forensic audit of Oando’s account will determine the integrity of Wale Tinubu and by so doing put shareholders’ trust on a high.

 

Gwarzo’s Suspension

The suspension of Alhaji Mounir Gwarzo has been linked with the Oando’s crisis and coincidentally, it happened at a time when the former SEC’s DG ordered the forensic audit of the company’s account.

Few weeks ago, the finance ministry in a statement signed by Patricia Deworitshe, Deputy Director, Press, announced that Gwarzo with two officials of SEC, Abdulsalam Habu, Head of Media Division, and Anastasia Braimoh, Head of Legal Department were suspended based on corruption allegations levelled against them.

Gwarzo was reported to have allegedly collected N104m from SEC shortly after assuming the post of the Director General in 2015.

“The Honourable Minister has set up an Administrative Panel of Inquiry (API) to investigate and determine the culpability of the Director-General”, Ms. Deworitshe announced.

However, report has it that the sack was prompted by a letter written by Gwarzo and addressed to the Finance Minister, Kemi Adeosun.

“Furthermore, as you may be aware, the activities around the investigation of Oando Plc are being monitored by the local and global investment community and they eagerly expect the outcome of the exercise. It is, therefore, not in the best interest of our recovering economy that the forensic audit is not seen to be conducted in an independent and transparent manner as proposed by the commission,” Mr. Gwarzo wrote.

Verdict: Will Gwarzo keep fighting for his reinstatement? Only time will tell when the truth will be revealed.

In different shades of positives and infractions, the stock market ended the year with a bullish run.

 

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