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Looking beyond market size

Vanguard Markets | Monday, July 28 2014 | Issue 003
RESULTS FORECASTING
Fixed Income & Forex
Inside
Diferent strokes for
diferent stocks
Foreign portfolio
managers are dis-
criminating against
local companies in fa-
vour of multinationals
in the way they pun-
ish and reward argues
Jude Fejogwu.
! Page 3
More than guesswork
What do purchasing
managers think of
the economy? Follow
their expectations
in the FBN Capital
Purchasing Manager
Index due out at the
beginning of August.
! Page 7
Corporate govern-
ance in the DNA
Good governance is
good business. If Ni-
gerian companies aim
to compete globally
they must meet strict
governance standards
writes Soji Apampa
! Page 9
Investors groping
in the dark
0B 10.0 10.0
11/07 14/07 14/07 21/07 22/07 22/07 24/07 25/07 25/07 16/07 17/07 17/07
100B 12.0 15.0
14.0
75B 11.5
13.0
50B 11.0
12.0
25B 10.5
11.0
FGNBonds &TBills NITTY NIBOR
FGN Bonds
Treasury Bills
O/N
1M
3M
6M
161.5
14/07 22/07 25/07 17/07
162.5
162.3
162.1
161.9
161.7
FX ($/N)
Source: FMDQ
Bid
Ask
1M
2M
3M
6M
9M
12M
! page 3
the past week,
27 companies an-
nounced half year re-
sults. A few like Transnational
Corporation of Nigeria have
been outstanding, while others
such as Unilever have caused
dismay among investors. For
most others, results have been
respectable: neither too hot,
nor too cold.
Second quarter results are
coming at a time of palpable
uncertainty. Investors want
to know if vaunted boost in
liquidity due to forthcoming
elections have started to trickle
into corporate cofers.
Analysts, who should be the
most informed group, can also
have sharp diferences in their
outlook numbers. Take for ex-
ample the forecasts for Guin-
ness Nigeria’s 2014 earnings
by analysts at 3 diferent frms.
The variance is even more
when forecasts for other com-
panies are compared. This of-
ten leads to a lot of panic trad-
ing in the run-up to the results
release week.
Investors want to anchor
their projections on authorita-
tive statements of business out-
look communicated as fgures
issued by corporate executives.
Basically, markets want a meas-
ure of predictability around
earnings albeit couched with
the appropriate caveats.
There are several benefts
for companies that make a
commitment to giving these
forecasts. Fore companies that
choose to do so, the forecasts
satisfy investment commu-
nity demands for information,
maintain a channel of com-
munication with investors, in-
tensify management’s focus on
meeting fnancial targets, mod-
erate the volatility of the share
price, build in better clarity
into the valuation process, and
increase liquidity in its shares.
In its Rule book (2013) the
Securities and Exchange’s Rule
B(40) requires all publicly quot-
ed companies to release their
earnings forecast to the public
twenty days before the com-
mencement of a quarter with a
clear statement of the underly-
ing assumptions that form its
bases. Importantly, the SEC
requires companies to notify it
as soon as it is known that the
forecast will not be realized. In
such cases, the onus is on the
company to explain the reason
for the non-realization.
The matter here is not about
fancy predictions and unwar-
ranted optimism as derisorily
described by Warren Bufett.
It is about giving investors an
inkling of management’s ideas
on what the immediate future
holds. Forecasts are reputa-
tional savings booklets for ex-
ecutives to build credibility with
the investment community.
Neither is it about ingenious
earnings management that
can corrode executive ethics
through accounting acrobatics.
Investors simply want to get a
tangible sense of the business
outlook in the near-term.
A good clutch of companies
on the NSE used to give fore-
casts until recently. This no
longer seems to be the case.
Could it be that companies are
reluctant to release guidance in
a strained economic situation?
This could well be.
The NSE and SEC should as
a matter of importance insist
that companies give the mar-
kets sufcient notice on the date
and time when they will publish
their results. This helps inves-
tors to plan around the news. It
would also enable companies to
decide if they want to crowd in
or out when others are releasing
their results. An orderly report-
ing calendar is a sine qua non
for the NSE.
Altogether, regulators and
companies need to do more
to iron out the uncertainties
around the release of company
results. ;
EARNINGS RELEASE DATES IN PAST WEEK
Company Results Release Date
Honeywell Flour July 25
Champion Breweries July 25
UBA PLC July 25
Union Bank Nigeria July 25
DN Meyer July 25
Cadbury Nigeria July 25
Aluminium Extrusion July 25
Chellarams July 25
Sterling Bank July 25
Abbey Building July 25
CCNN July 25
FCMB July 25
Stanbic IBTC July 25
Portland Paints July 25
Seplat July 24
First Aluminium July 23
Tripple Gee July 23
Trans Nationwide Express July 23
Zenith Bank July 23
SCOA Nigeria July 23
CAP July 22
Linkage Assurance July 22
McNichols July 22
International Breweries July 21
Oasis Insurance July 21
Sovereign Trust Insurance July 21
Transcorp July 21
GUINNESS NIGERIA FY 2014 ANALYST FORECASTS
CSP DLM CHP
Income Statement
(N’Mn)
2013 2014E 2014E 2014E
Revenue 131,414 106,429 104,800 114,199
Cost of Sales -70,861 -54,279 56,592 51,155
Gross Proft 60,554 52,150 48,208 63,044
Distri. And Admin
Expenses
-36,280 -28,417 30,916 -34,831
EBIT/Operating
proft
20,614 15,394 18,074 20,315
Interest Expense/
Income
-3,605 -3,211 -3,997 -5,535
Pre-tax earnings 17,009 12,182 14,467 14,941
Taxation -5,145 -2,436 -4,373 -4,082
Proft after tax 11,864 9,746 10,094 10,859
EPS 6.47 6.7 7.21
In
Source: CardinalStone Partners, Dunn Loren Merrifeld, and Chapel Hill Partners
Source: Nigerian Stock Exchange
Investors want to anchor their
projections on authoritative
statements of business outlook
communicated as figures issued
by corporate executives
strategy sessions
and management
meetings, the world’s
biggest companies are ponder-
ing a Nigeria strategy. Those
that do have one are busy
fne-tuning theirs. Those that
do not, are leaving no stone
unturned in a frantic search
for one. In fact, there is a bud-
ding consultancy market has
appeared to profer advice on
the best ways to penetrate and
conquer the wallets of Nige-
rians. It has become a case of
no company left behind. The
painful truth is that some com-
panies will be left behind.
The spotlight on Nigerian
consumers marks a tectonic
shift in the traditional focus
of foreign investment inter-
est in the country. In the past,
most of the attention was from
energy companies jostling for
its energy assets. The focus is
no longer on the marshlands
of the oil-rich Niger Delta re-
gion. It now looks hungrily on
the country’s emergent middle
class.
Purveyors of packaged con-
sumer goods, white goods,
cars, electronics, mobile
phones, alcoholic drinks, and
a bevy of other products are
cracking their heads to fnd the
secret formula. When they do
they guard it jealously. Copy-
cats are always lurking in the
corner. In this part of the world
there is no rest for the success-
ful.
The reality is that the size
of the Nigerian market is a
diferent matter from the size
of incomes that Nigerian con-
sumers have to spend. Seni
Adetu, chief executive ofcer
of Guinness Nigeria noted
during a recent interview that
‘there could be diference be-
tween what the macro econ-
omy says and what actually
happens to the consumer from
a spending stand point. What
we do know is that private con-
sumption declined last year
versus the year before.’ There
is also the issue around which
strategies will work and which
companies can execute best.
This is a lesson that many
companies will have to learn
the hard way. Those few that
can navigate what one execu-
tive at a multinational com-
pany has described as ‘the
treacherous waters of com-
merce in Nigeria’ stand to reap
big rewards.
In its June report, man-
agers for Arisaig’s Africa
Consumer Fund wrote that
for consumer-focused multi-
nationals in its portfolio the
long-term story for Nigeria is
as compelling as ever. This is
INSIGHT 2
JAYWALKER
VM| Monday, July 28, 2014 | Issue 003
Stacking crates of Hero beer at SABMiller depot, Onitsha, Anambra State
The spotlight on Nigerian
consumers marks a tectonic shift
in the traditional focus of foreign
investment interest in the country
For all the challenges of the
Nigerian market, if companies
do not have a Nigeria strategy,
they do not really have an
Africa strategy - Mark Bowman,
SABMiller CEO (2009)
There could be diference between
what the macro economy says
and what actually happens to the
consumer from a spending stand
point - Seni Adetu, managing
director, Guinness Nigeria
Obiora Onyeaso
obiora.onyeaso@customsstreet.com
Strategy, not size, matters
mainly because of their view
that current consumption in
their categories is a tiny frac-
tion of developed market lev-
els. The Singapore-based fund,
which has signifcant holdings
of Guinness Nigeria and Uni-
lever Nigeria shares, calcu-
lates that in the ‘Eat, Drink,
Wash’ category this ratio of
frontier to advanced markets
ratio is about 1:7. Therefore, it
concludes that the surface has
barely been scratched.
For all this insight it is not a
given that the brands of these
multinationals will emerge tops
in the competition. In strait-
ened times, consumers want
value, governments demand lo-
cal production, and sharehold-
ers demand higher profts.
One company is excelling at
the game of balancing these
competing demands.
The Patient Brewer,
and the Fattest
Beer: SABMiller’s
Experience
During a SA-Nigeria Cham-
ber of Commerce event in
2009, Mark Bowman, chief
executive of SABMiller Af-
rica told his audience that its
two main competitors in Nige-
ria, Guinness and Heineken,
make nearly as much in Nige-
ria as it was making in 24 other
African countries, excluding
SA. He went on to state that
for all the challenges of the
Nigerian market, if companies
do not have a Nigeria strategy,
they do not really have an Af-
rica strategy.
All that has changed. The
company, which operates in 15
African countries with partner-
ships in 21 more, made its entry
into Nigeria in the same year
with the purchase of a majority
stake in Pabod Breweries, Riv-
ers State. It wasted little time
in adding International Brew-
eries Plc, Ilesha to its portfo-
lio. In a deft move, SABMiller
has positioned Hero, one of its
brands as a value beer, selling
it by as much as 40 per cent
cheaper than its competitors.
The company took on giants
when entering Nigeria, which
accounted for 15 per cent of the
continent’s beer consumption,
but has a capita consumption
of only a sixth of South Africa’s.
At the time it took a foothold
Nigerian Breweries and Guin-
ness Nigeria had 69 per cent
and 28 per cent market shares
respectively.
The company has followed
a smart strategy and executed
well on it. It aims to reduce the
price of beer for lower-income
consumers, while at the same
time attracting more drinkers
to its premium green bottle
brands. Bowman has publicly
stated that his goal is to bring
the price down to less than two
hours of work for the average
lower-income worker.
This is not to say that SAB-
Miller is ignoring the premium
sector. It keeps a keen eye
trained on that too, ready to
capitalize on new opportuni-
ties thrown up by rises in dis-
posable income.
Elsewhere, SABMiller does
not hide the fact that it actively
engages with governments to of-
fer cheaper beer. By negotiating
lower tax rates the company can
sell cheaper beer to more cus-
tomers. In the process, it earns
more money and can pays high-
er taxes on these volumes.
Bowman explained that ‘we
negotiate with governments to
try and persuade them to drop
the excise regime for a product
that’s made with local grains,
which most governments are
quite supportive of. The idea
here then is to try and create a
win-win proposition, where we
have a strong group of farmers
contracted to producing grains
for us of whatever form. The
government gets a new source
of revenue … And of course we
win in that. We’re able to open
up this category and poten-
tially bring consumers in ear-
lier into the beer category than
they otherwise would.’
In January, the company an-
nounced that it plans to invest
up to $110 million to triple ca-
pacity to 2.1 million hectolitres
per annum.
For SABMiller, life is good.
That is, until the next com-
pany comes to steal your lunch.
Or shall we say drink? ;
In
Hours workedto buy a 500ml beer
Disposable Income per NigerianHouseholdsince 1995
Source: SABMiller
Source: AT Kearney
Source: Stanbic IBTC
Comment
Despite having the lowest income among its BRIC and MINT peers (Brazil,
Russia, India, China, Mexico, Indonesia, and Turkey) in the 20-year period
since 1995, the country’s disposable income growth rate has topped theirs.
Tanzania
Mozambique
Uganda
Kenya
Ethiopia
Zambia
Ghana
Nigeria
Botswana
South Africa
United States
0 1 2 3 4 5 6 7
AVERAGE ANNUAL GROWTH RATES (%)
Analysis GDP Private Consumption
2010-2015 6.1 5.9
2016-2020 1.8 3.7
2012-2025 1.7 5.6
2026-2030 4.3 7.5
2010-2030 3.3 5.7
POPULATION IN THE 15-39 AGE GROUP
Analysis Million % of Total Population
2010 63.3 40.0
2020 80.5 41.6
2030 98.6 43.5
2040 112.3 43.3
0
‘90 ‘95 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12
1000
2000
3000
4000
5000
6000
ude Fejogwu,
principal analyst
at Thaddeus Af-
rica Research, an equity
research and investment ad-
visory frm, has criticised the
excessive weighting of mul-
tinational companies in the
stock portfolios of frontier
markets-focused funds. In
an email sent out last week,
he gave evidence to support
his claims that excluding the
banking sector, these fund
managers demonstrate a
clear bias for multinational
companies in their equities
selection on the Nigerian
Stock Exchange.
The discriminatory prac-
tice does not end there. The
analyst showed that mul-
tinational stock prices are
not penalized at all or only
penalized in little quanta for
earnings disappointments
and strategic missteps. In
contrast, local companies in
comparable situations are
punished when their earnings
fall short. These practices
have adverse selection impli-
cations. Due to massive posi-
tions of the foreign portfolio
managers in the MNC stocks
they have ‘driven up the pric-
es of these stocks to expensive
levels.’ When presented the
data, these managers defend
themselves with the claim
that MNC stocks, being tried,
tested, and true (interpreta-
tion: familiar) ofer a better
guarantee of capital apprecia-
tion.
The fallacy of this circular
argument is what Thaddeus
takes an issue with. In his
missive, Fejogwu dismisses
the self-fulflling prophesy
inherent in the foreign fund
managers’ excuses. According
to him, ‘their repetitive and
persistent actions over time
have led to overly generous
and sincerely undeserving
stock price increases in these
multinational stocks across
African stock markets; this
further strengthens their de-
sire to continue investing in
more multinational compa-
nies.’
The push up in the prices of
these MNC stocks have taken
a life of their own, unfet-
tered from the reality of their
quarterly and annual perfor-
mances. ‘Despite these price
surges that rarely reverse at
a pace anywhere close to how
they rose and disappointing
results in recent years, the
stocks are continually in high
demand by portfolio manag-
ers,’ he observed.
This has perverse impli-
cations on local companies
listed on the bourse. When
compared with their MNC
peers, they are not adequately
rewarded when they perform
well. Worse, they are over-
penalized when they falter.
There is no reason why ‘the
local stocks get punished
more when they disappoint
and get rewarded miserly or
not at all when they perform
creditably.’
He provides facts to back
his position.
The lacklustre perfor-
mance of Unilever Nigeria
is a case in point. In spite of
this, their stock price perfor-
mance does not refect the
reality of submerged net in-
come performance. Its share
price has declined only 7 per
cent, although its net income
dropped sharply by 47 per
cent. Thaddeus’ valuation
estimated that the compa-
ny’s shares should be trad-
ing below N33.22. Instead,
the stock’s 52-week low is
N43.32. This is a 30 per cent
premium over what it should
fairly be worth. This is all
because of its pedigree as a
multinational. If life is unfair,
should markets be too?
Fejogwu blames the MNC-
hugging of most foreign fund
managers of sloth. If it is not
broke, why fx it? If an invest-
ment pattern has consistently
made money in the past, why
change it now? He mentions
the case of Coronation
Funds, the Cape Town based
manager that has $40 billion
in assets under management.
It has $200 million invested
in Nigeria alone, Peter Leger,
the manager of its Africa
Frontiers Portfolio has deliv-
ered benchmark thumping
returns.
Coronation may also be the
closest that the NSE has to
a major activist investor. It
stood up to GSK Consumer
(2,617,002 units held, 0.27%
stake, $7 million estimated
value) last year when the
company tried to railroad
investors to approve a $98
million (321 million shares)
increase in the parent com-
pany’s stake. In the aftermath
of the announcement by La-
farge, the cement company,
that it planned to merge its
Nigerian and South Afri-
can businesses, Coronation,
which claims to have $10 mil-
lion invested across its Africa
funds in the company, went
public with its disapproval.
It questioned why Lafarge
would value the ‘slow grow-
ing’ South African business
at a price earnings multiple of
20.9, while the faster growing
Nigerian business was valued
at 12.5 times earnings.
Looked at from this an-
gle, foreign fund managers
may be seen as vice squads
that follow MNCs to frontier
markets like Nigeria’s to en-
sure that they comply with
the same high standards that
their parent companies meet
in advanced markets. Their
insistence on sound corporate
governance in MNC’s frontier
market subsidiaries, and the
ability to bring pressure to
bear on parent companies,
whose shares other funds
under their frms may also
hold, should not be dismissed
lightly.
Be that as it may, Fe-
jogwu’s fndings revert to a
long-standing debate on the
role of these fund manag-
ers. Are they paid to take risk
and generate alpha or simply
coast their benchmarks and
preserve capital? If the for-
mer, then there is no reason
why they should show a bias
against local Nigerian cham-
pions. If the latter, then regu-
lators like the Nigerian Stock
Exchange must have a rethink
about the benefcial efect of
prioritising foreign investors
over local ones. ;
INVESTMENT 3
PERFORMANCE
SPOTLIGHT
VM| Monday, July 28, 2014 | Issue 003
Source: Thaddeus Investment Advisors & Research
Source: Nigerian Stock Exchange
Thaddeus Research queries MNC-bias
among foreign portfolio managers on NSE
a piece he penned
in April for the In-
ternational Busi-
ness Times, Danladi
Verheijen betrayed his en-
thusiasm for the economy’s
outlook. Nigeria’s future con-
tinues to be bright for Nigeri-
ans as the creation of wealth
escalates to new heights, and
the local economy continues
to prosper as foreign invest-
ment in the country grows.
He threw an open invitation
to investors to jump in right
away because ‘this is just the
beginning of one of the most
exciting growth stories in the
world today.’
The former Citibank vice-
president, who holds an
engineering degree from
Stanford University and an
MBA from Harvard, has
been quietly building one
of Nigeria’s most success-
ful private equity frms. He
co-founded the frm with a
friend, Eric Idiahi, in 2008.
Some of its past investments
include HFP Engineer-
ing, a real estate develop-
ment, construction and civil
engineering company, GZI
Industries, an aluminium
beverage can maker, and Ro-
toptrint, a maker of fexible
plastic packaging for the fast
moving consumer goods sec-
tor. The frm’s investments
across 9 companies in its
portfolio have returned six
times their original fnancial
commitment.
In January 2013, Verod
exited its investment in GZI
Industries through a sale to
Standard Chartered and Ash-
more, a specialist emerging
markets investment man-
ager. Peter Baird, head of
PE at Standard Chartered
gave a ringing endorsement.
‘Verod did an amazing job at
developing GZI into a world-
class business by the time we
entered. I would probably
invest in any Standard Char-
tered client that Verheijen
works with.’
More recently, in May, the
company announced that it is
constructing what will be the
largest fsh farm in Africa in
Epe, Lagos. When complet-
ed, it will have 10,000-tonne
per annum or 30 tonnes per
day capacity.
He is both modest and
proud about the work he is
doing. ‘Some of the work that
I do would be no big deal
in the United States but in
Nigeria, these projects are
transformative. In the States,
people do what I do to in-
crease the proft for a com-
pany by a half of a percent,
that’s the goal. My goal is to
change lives.’
Quite unusual for a PE
frm, Verod does not raise
funds. Instead, it raises
money on a deal-by-deal ba-
sis. This is counter-intuitive
considering that PE frms
around the world have been
advocating for long-term
capital, and complaining
about the stresses of con-
stantly raising money anew
for each opportunity.
The Verod co-founder who
cites his mother, the frst fe-
male professor of Physics in
Africa, as his inspiration at-
tended Hillcrest School, a
private Christian high school
in Jos. He says that he re-
tains the ethics of his reli-
gious faith in business.. The
fnancier was named a Young
Global Leader by the World
Economic Forum in March
2014. ;
Danladi Verheijen, Co-Founder, Verod Capital Management
In
Danladi Verheijen,
managing director,
Verod Capital Management
MNCS VERSUS LOCALS COMPS
Multinational P/E YTD
Year-on-Year
Change in
Net Income
IBL (SABMiller) 46.1 2.79% -9.50%
Nestlé Foods 33.4 -6.25% 0.10%
NB (Heineken) 31.1 5.47% 16%
Guinness 24.9 -16.31% -22%
Unilever Nigeria 39.5 -6.80% -47%
Cadbury 38.7 -18.21% -29%
Lafarge Cement WAPCO 12.6 3.48% 34%
Local Company
Cement Co Northern
Nigeria
10.7 2.47% 87%
Dangote Sugar 10.3 -20.94% 7%
Vitafoam 8.7 -11.22% -4%
CORONATION AFRICAN FRONTIER FUND PERFORMANCE
(GROSS OF FEES)
Fund
FTSE/JSE
Africa
Top30*
Outperform
Since Launch
(cumulative)
162.35% 35.93% 126.42%
Since Launch (p.a.) 18.26% 5.48% 12.78%
Latest 5 years (p.a.) 17.68% 5.33% 12.35%
Latest 3 years (p.a.) 17.19% 5.34% 11.85%
Latest 1 year (p.a.) 31.01% 5.24% 25.77%
Year to date 10.69% 2.62% 8.08%
2013 27.37% 5.27% 22.10%
2012 31.30% 5.42% 25.88%
2011 -14.63% 5.34% -19.98%
*excl. South Africa Source: Coronation African Frontiers Portfolio
J
Historical Trading Split between Foreign
andDomestic Investors on the NSE
0
1000
2007 2008 2009 2010 2011 2012 2013
2000
3000
4000
Foreign Investor (N’ Billion)
Domestic Investor (N’ Billion)
MARKET DATA 4
MARKET SNAPSHOT
3-MONTH PRICE TREND OF BELLWETHER STOCKS
LEGEND
ACCESS 9.72
11.14 7.22
1YtD
0.12
1.25%
1.29
15.30%
-0.08
-0.82%
3M 1W
PE 6.19
0.08
May June July
21/07
M T W T F
25/07
ASHAKACEM 30.23
34.17 13.87
1YtD
8.35
38.16%
13.73
83.21%
-2.79
-8.45%
3M 1W
PE 37.84
2.79
May June July
21/07
M T W T F
25/07
CADBURY 70.54
110.00 67.80
1YtD
-26.64
-27.42%
-5.46
-7.18%
-1.47
-2.04%
3M 1W
PE 47.29
1.47
May June July
21/07
M T W T F
25/07
CAP 40.00
51.66 35.96
1YtD
-7.98
-16.63%
-1.98
-4.72%
0.48
1.21%
3M 1W
PE 24.49
0.48
May June July
21/07
M T W T F
25/07
CCNN 14.17
14.17 8.00
1YtD
2.18
18.18%
5.32
60.11%
2.35
19.88%
3M 1W
PE 12.65
2.35
May June July
21/07
M T W T F
25/07
CONOIL 58.90
79.80 25.92
1YtD
-2.42
-3.95%
12.15
25.99%
-3.42
-5.49%
3M 1W
PE 18.68
3.42
May June July
21/07
M T W T F
25/07
FBNH 15.22
17.49 11.50
1YtD
-1.08
-6.63%
2.03
15.39%
-0.68
-4.28%
3M 1W
PE 7.05
0.68
May June July
21/07
M T W T F
25/07
GLAXOSMITH 65.71
74.97 58.50
1YtD
-4.29
-6.13%
-4.29
-6.13%
-0.40
-0.61%
3M 1W
PE 23.01
0.40
May June July
21/07
M T W T F
25/07
JBERGER 64.01
76.45 59.18
1YtD
0.94
1.49%
2.87
4.70%
1.32
2.11%
3M 1W
PE 9.35
1.32
May June July
21/07
M T W T F
25/07
NB 178.00
189.00 140.00
1YtD
12.99
7.87%
29.60
19.95%
2.39
1.36%
3M 1W
PE 33.99
2.39
May June July
21/07
M T W T F
25/07
PZ 37.60
45.98 30.08
1YtD
0.60
1.63%
0.80
2.17%
-2.20
-5.53%
3M 1W
PE 29.10
2.20
May June July
21/07
M T W T F
25/07
UBA 7.90
9.60 6.65
1YtD
-1.25
-13.66%
1.00
14.49%
-0.16
-1.99%
3M 1W
PE 4.65
0.16
May June July
21/07
M T W T F
25/07
CONTINSURE 1.13
1.33 0.93
1YtD
-0.07
-5.83%
0.14
14.14%
-0.02
-1.74%
3M 1W
PE 7.06
0.02
May June July
21/07
M T W T F
25/07
FCMB 4.20
4.90 3.01
1YtD
0.36
9.38%
0.65
18.31%
-0.06
-1.41%
3M 1W
PE 4.78
-0.06
May June July
21/07
M T W T F
25/07
GUARANTY 31.00
31.80 22.67
1YtD
3.25
11.71%
3.70
13.55%
1.05
3.51%
3M 1W
PE 9.49
1.05
May June July
21/07
M T W T F
25/07
MANSARD 2.55
2.73 1.95
1YtD
0.05
2.00%
0.16
6.69%
-0.13
-4.85%
3M 1W
PE 16.68
0.13
May June July
21/07
M T W T F
25/07
NESTLE 1105.00
1250.01 916.00
1YtD
-77.00
-6.51%
23.91
2.21%
-19.30
-1.72%
3M 1W
PE 38.86
19.30
May June July
21/07
M T W T F
25/07
TOTAL 176.45
195.50 146.26
1YtD
3.15
1.82%
13.45
8.25%
-10.94
-5.84%
3M 1W
PE 13.67
10.94
May June July
21/07
M T W T F
25/07
UNILEVER 47.63
65.00 42.50
1YtD
-5.37
-10.13%
-0.42
-0.87%
-5.14
-9.74%
3M 1W
PE 35.76
5.14
May June July
21/07
M T W T F
25/07
DANGCEM 231.99
250.02 185.00
1YtD
15.83
7.32%
4.16
1.83%
-8.06
-3.36%
3M 1W
PE 19.67
8.06
May June July
21/07
M T W T F
25/07
FIDELITYBK 1.98
3.08 1.85
1YtD
-0.72
-26.67%
0.03
1.54%
0.04
2.06%
3M 1W
PE 2.91
0.04
May June July
21/07
M T W T F
25/07
GUINNESS 197.15
266.70 162.00
1YtD
-38.86
-16.47%
7.15
3.76%
-0.90
-0.45%
3M 1W
PE 25.02
0.90
May June July
21/07
M T W T F
25/07
MOBIL 161.41
178.84 102.00
1YtD
45.41
39.15%
36.41
29.13%
-0.81
-0.50%
3M 1W
PE 15.46
0.81
May June July
21/07
M T W T F
25/07
OANDO 25.47
36.89 9.32
1YtD
-1.26
-4.71%
9.49
59.39%
0.48
1.92%
3M 1W
PE 22.85
0.48
May June July
21/07
M T W T F
25/07
UACN 62.00
67.85 42.58
1YtD
6.01
10.73%
15.88
34.43%
-0.06
-0.10%
3M 1W
PE 29.13
0.06
May June July
21/07
M T W T F
25/07
WAPCO 118.90
136.73 87.50
1YtD
3.90
3.39%
6.75
6.02%
-0.11
-0.09%
3M 1W
PE 14.68
0.11
May June July
21/07
M T W T F
25/07
DIAMONDBNK 6.70
8.20 5.86
1YtD
-0.80
-10.67%
0.56
9.12%
0.40
6.35%
3M 1W
PE 4.05
0.40
May June July
21/07
M T W T F
25/07
FLOURMILL 74.00
92.00 63.91
1YtD
-16.00
-17.78%
6.18
9.11%
-1.30
-1.73%
3M 1W
PE 21.89
1.30
May June July
21/07
M T W T F
25/07
HONYFLOUR 4.26
4.50 2.56
1YtD
0.41
10.65%
0.26
6.50%
-0.04
-0.93%
3M 1W
PE 12.50
0.04
May June July
21/07
M T W T F
25/07
MRS 58.90
70.00 32.53
1YtD
7.18
13.88%
9.76
19.86%
2.55
4.53%
3M 1W
PE 59.61
2.55
May June July
21/07
M T W T F
25/07
OKOMUOIL 33.06
48.05 32.15
1YtD
-11.77
-26.25%
-2.94
-8.17%
-0.02
-0.06%
3M 1W
PE 14.41
0.02
May June July
21/07
M T W T F
25/07
UAC-PROP 17.60
21.31 11.95
1YtD
2.22
14.46%
-2.27
-11.43%
0.12
0.69%
3M 1W
PE 7.94
0.12
May June July
21/07
M T W T F
25/07
ZENITHBANK 25.23
27.40 19.23
1YtD
0.23
0.92%
2.90
12.99%
0.01
0.04%
3M 1W
PE 7.29
0.01
May June July
21/07
M T W T F
25/07
TICKER 25.23
27.40 19.23
1YtD
0.23
0.92%
2.90
12.99%
0.01
0.04%
3M 1W
PE 7.29
0.01
May June July
21/07
M T W T F
25/07
ETI 16.90
18.52 12.40
1YtD
0.51
3.11%
3.30
24.26%
0.02
0.12%
3M 1W
PE 4.61
0.02
May June July
21/07
M T W T F
25/07
FO 216.00
259.94 35.00
1YtD
123.13
132.58%
74.45
52.60%
-21.90
-9.21%
3M 1W
PE 46.63
21.90
May June July
21/07
M T W T F
25/07
INTBREW 26.65
31.50 17.98
1YtD
-1.67
-5.90%
0.65
2.50%
-2.33
-8.04%
3M 1W
PE 44.51
2.33
May June July
21/07
M T W T F
25/07
NASCON 10.59
15.10 10.15
1YtD
-4.26
-28.69%
-0.73
-6.45%
-0.13
-1.21%
3M 1W
PE 10.09
0.13
May June July
21/07
M T W T F
25/07
PRESCO 38.01
49.00 32.00
1YtD
-0.99
-2.54%
-4.99
-11.60%
0.01
0.03%
3M 1W
PE 4.54
0.01
May June July
21/07
M T W T F
25/07
3 4 5
9
13
10 11
12
6
8
14
7
2 1
1. 52-week low price
2. Year low price
3. Current price
4. Year high price
5. 52-week high price
6. Current price
7. 5-day price change
8. PE ratio
9. 1-year price change
10. 3-months price change
11. 1-week price change
12. Daily price movement over 3 months.
13. 30-day moving average
14. Daily price movement over last week
VM| Monday, July 28, 2014 | Issue 003
MARKET SNAPSHOT
MARKET DATA 5
# TICKER WTD YTD
1 DANGCEM -3.36 7.32
2 NB 1.36 7.87
3 GUARANTY 3.51 11.71
4 NESTLE -1.72 -6.51
5 ZENITHBANK 0.04 0.92
6 FBNH -4.28 -6.63
7 WAPCO -0.09 3.39
8 GUINNESS -0.45 -16.47
9 STANBIC 6.56 30.21
10 ETI 0.12 3.11
11 UBA -1.99 -13.66
12 FO -9.21 132.58
13 OANDO 1.92 -4.71
14 ACCESS -0.82 1.25
15 TRANSCORP -7.08 26.96
16 UNILEVER -9.74 -10.13
17 FLOURMILL -1.73 -17.78
18 UBN -0.96 -3.75
19 PZ -5.53 1.63
20 CADBURY -2.04 -27.42
21 UACN -0.10 10.73
22 DANGSUGAR 0.00 -18.58
23 DIAMONDBNK 6.35 -10.67
24 INTBREW -8.04 -5.90
25 JBERGER 2.11 1.49
26 FCMB -1.41 9.38
27 ASHAKACEM -8.45 38.16
28 7UP 0.45 47.70
29 GLAXOSMITH -0.61 -6.13
30 TOTAL -5.84 1.82
31 MOBIL -0.50 39.15
32 FIDELITYBK 2.06 -26.67
33 STERLNBANK -4.64 -9.60
34 SKYEBANK -5.88 -29.05
35 CONOIL -5.49 -3.95
36 PRESCO 0.03 -2.54
37 OKOMUOIL -0.06 -26.25
38 CAP 1.21 -16.63
39 NEIMETH 2.54 10.00
40 MAYBAKER -2.86 -33.33
WEEK-TO-DATE RETURN
-15% -10%
-40%
-20%
-30%
-10%
0%
+10%
+20%
+30%
+40%
+50%
+60%
+70%
+80%
+100%
+90%
+120%
+130%
+140%
+110%
+150%
-5% 0% +10% +5%
Y
E
A
R
-
T
O
-
D
A
T
E

R
E
T
U
R
N
LAGGING
SLIPPING LEADING
IMPROVING
1 2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
The relative size of each individual stock’s bubble
chart is determined by its market capitalization.
For indices, the relative size of each bubble chart
is the total value of the capitalization modifed
values of each constituent stock.
Pink bubbles represent individual stocks, and grey
bubbles represent indexes.
TRADING BREAKDOWN
BY SECTOR
Sector %
Financial Services 56 \ 73
Conglomerates 17 \ 8
Oil & Gas 8 \ 8
Others 19 \ 11
21/07 25/07 23/06
12.5
12.6
12.7
12.8
12.9
2910
2915
2920
2925
2930
FGNBond Index
Market Value
YTD Return
VM| Monday, July 28, 2014 | Issue 003
INDEX PERFORMANCE
Index
Week
Opening
Week
Close
Change WtD MtD QtD YtD
1 All Shares Index 42,784.30 42,285.82 -606 -1.41 -0.46 -0.46 2.31
2 NSE 30 Index 1,944.33 1,933.21 -15.53 -0.8 0.07 0.07 1.37
3 NSE Banking Index 436.56 441.72 3.01 0.69 2.04 2.04 -1.37
4 NSE Insurance Index 148.35 148.73 -1.68 -1.12 1.29 1.29 -2.71
5 NSE Consumer Goods Index 1,060.41 1,054.31 -5.47 -0.52 -0.37 -0.37 -4.18
6 NSE Oil/Gas Index 470.24 453.72 -15.37 -3.28 -3.1 -3.1 33.49
7 NSE Lotus Islamic Index 2,848.70 2,813.19 -40.19 -1.41 -2.14 -2.14 -1.74
8 NSE Industrial Index 2,770.47 2,714.02 -53.09 -1.92 1.77 1.77 6.57
MARKET SNAPSHOT
Date Deals
Turnover
Volume
Turnover Value Traded Stocks
Advanced
Stocks
Declined
Stocks
Unchanged
Stocks
All Shares
Index Value
1 21.07.2014 5,862 535,076,684 4,374,954,616.87 113 \ 125 22 \ 27 39 \ 29 52 \ 69 42,930.60
2 22.07.2014 6,323 430,136,315 4,019,168,972.53 113 \ 114 25 \ 33 30 \ 27 58 \ 54 42,971.56
3 23.07.2014 4,766 273,484,128 3,076,614,373.12 112 \ 120 29 \ 22 36 \ 26 47 \ 72 43,030.27
4 24.07.2014 187 2,607,903 13,731,313.39 51 \ 114 5 \ 27 1 \ 25 45 \ 62 42,918.52
5 25.07.2014 7,048 536,869,982 26,618,591,033.33 116 \ 117 23 \ 34 40 \ 21 53 \ 62 42,891.82
The \ arrow signifes week-on-week change in value. This week’s value is shown on the left of the \ sign, and last week’s value on the right.
GLOBAL INTEREST RATES & INFLATION TARGETS
Central
Bank
Rate
Last Date
Change
%
Change
Infation
Target
China 6.00% 05.07.2012 -0.31 4.00%
Japan 0-0.10% 05.10.2010 -0.20 2.00%
UK 0.50% 05.03.2009 -0.50 2.00%
USA 0-0.25% 16.12.2008 -0.75 2.00%
Eurozone 0.15% 05.06.2014 -0.10 <2.00%
Brazil 11.00% 02.04.201 +0.25 4.5% +/-2.0%
Canada 1.00% 20.07.2010 +0.25 2.0% +/-1.0%
Egypt 8.25% 05.12.2013 -0.50
India 8.00% 28.01.2014 +0.25
Indonesia 7.50% 12.11.2013 +0.25 4.5% +/-1.0%
Malaysia 3.25% 10.06.2014 +0.25
Mexico 3.00% 06.06.2014 -0.50 3.00% +/-1.0%
Morocco 3.00% 28.03.2012 -0.25
Nigeria 12.00% 10.10.2011 +2.75 6.00% - 9.00%
Qatar 4.50% 10.08.2011 -0.50
Russia 7.50% 25.04.2014 +0.50 5%*
Thailand 2.00% 12.03.2014 -0.25 0.5% - 3.0%
Turkey 8.75% 24.06.2014 -0.75 5.00%
* +/- 1.5 pct point uncertainty band
Indices
ASI
NSE30
NSEBNK
NSEINS
NSECNSMRGDS
NSEOILGAS
NSELOTUSISLM
NSEINDUSTR
-1.41%
-0.57%
-0.80%
-0.16%
0.69%
0.90%
-1.12%
-1.02%
-0.52%
-0.40%
-3.28%
-3.01%
-1.41%
-0.42%
-1.92%
-0.40%
2.31%
YtD, % WtD, % DtD, %
1.37%
-1.37%
-2.71%
-4.18%
33.49%
-1.74%
6.57%
-5% -3% 0% 7% 5% 3%
Mo Fr
1,970
1,975
1,985
1,980
1,990
1,978.34
Tu We Th Fr
S&P 500
Mo Fr
6,725
6,750
6,800
6,775
6,825
6,791.55
Tu We Th Fr
FTSE 100
Mo Fr
42.20
42.40
43.80
42.60
43.00
42,285.82
Tu We Th Fr
NSEASI
MARKET SNAPSHOT
MARKETS DATA 6
VM| Monday, July 28, 2014 | Issue 003
INTERNATIONAL STOCK INDICES
Region/
Country
Index
LAST CHANGE
PERFOR-
MANCE (%)
Close
Net
Change
%
change
YtD
52-
wk
EUROPE Stoxx Europe 600 344.33 1.47 0.43 4.90 0.14
Stoxx Europe 50 3050.27 12.48 0.41 4.5 12.20
Euro Zone Euro Stoxx 325.08 2.91 0.9 3.4 16.70
Euro Euro Stoxx 50 3220.07 26.94 0.84 3.6 17.00
Austria ATX 2372.87 -3.73 0.16 -6.8 1.90
Belgium Bel-20 3195.53 18.53 0.58 9.3 19.90
Czech Republic PX 952.73 1.45 0.15 -3.7 5.30
Denmark OMX Copenhagen 671.65 -1.26 -0.19 18.7 34.80
Finland OMX Helsinki 7757.39 59.04 0.77 5.7 25.10
France CAC-40 4410.65 34.33 0.78 2.7 11.30
Germany DAX 9794.06 40.5 0.42 2.5 16.90
Hungary BUX 17952.63 -51.88 -0.29 -3.3 -3.10
Ireland ISEQ 4740.77 -1.72 -0.04 4.4 15.20
Italy FTSE MIB 21255.6 424.34 2.04 12.1 29.30
Netherlands AEX 409.98 1.45 0.35 2 10.20
Norway All-Shares 699.29 -0.56 -0.08 16 28.80
Poland WIG 51613.47 72.66 0.14 0.6 10.20
Portugal PSI 20 6467.83 90.4 1.42 -1.4 12.70
Russia RTSI 1266.72 -5.3 0.42 -12.2 -6.40
Spain IBEX 35 10860.7 201.6 1.89 9.5 32.6
Sweden OMX Stockholm 454.54 2.11 0.47 7.3 17.6
Switzerland SMI 8637.01 31.91 0.37 5.3 9.8
Turkey BIST 100 83824.65 970 1.17 23.6 13.3
U.K. FTSE 100 6821.46 23.31 0.34 1.1 3
ASIA-PACIFIC
DJ Asia-Pacifc
TSM
1532.23 -1.59 -0.1 5.8 10.1
Australia SPX/ASX 200 5587.8 11.1 0.2 4.4 11
China
Shanghai
Composite
2105.06 26.57 1.28 -0.5 4.2
Hong Kong Hang Seng 24141.5 169.63 0.71 3.6 10.2
India S&P BSE Sensex 26271.85 124.52 0.48 24.1 32.7
Japan
Nikkei Stock
Average
15284.42 -44.14 -0.29 -6.2 5
Singapore Straits Times 3353.89 13.19 0.39 5.9 3.7
South Korea Kospi 2026.62 -1.7 -0.08 0.8 6.1
AMERICAS DJ Americas 501.88 0.75 0.15 7.8 17.5
Brazil Bovespa 57895.64 475.68 0.83 12.4 19.7
Mexico IPC 44405.21 206.2 0.47 3.9 8.7
COMMODITIES
Commodity Exchange
1-DAY CHANGE
Year High Year Low
Last price Net Change % change
Corn (cents/bu.) CBOT 369.25 -1.5 -0.40% 517 364.25
Soybeans (cents/bu.) CBOT 1085.75 9.25 0.86% 1,279.25 1,055.00
Wheat (cents/bu.) CBOT 529 -1.75 -0.33 751.5 520.25
Live cattle (cents/lb.) CME 158.15 0.15 0.09 159.85 130.9
Cocoa ($/ton) ICE-US 3,202 17 0.53 3,234 2,650
Coffee (cents/lb.) ICE-US 178.35 1.75 0.99 220.6 116.7
Sugar (cents/lb.) ICE-US 17.06 0.1 0.59 18.91 15.72
Cotton (cents/lb.) ICE-US 66.23 -1.85 -2.72 84.74 65.66
Rapeseed (euro/ton) LIFFE 327.75 -1.5 -0.46 386 301
Cocoa (pounds/ton) LIFFE 1,944 6 0.31 1,952 1,651
Robusta coffee ($/ton) LIFFE 2,034 41 2.06 2,216 1,568
Copper ($/lb.) COMEX 3.263 0.056 1.75 3.3855 2.878
Gold ($/troy oz.) COMEX 1294 -12.5 -0.96 1,390.80 1,207.00
Silver ($/troy oz.) COMEX 20.41 -0.585 -2.79 22.16 18.65
Aluminum ($/ton)* LME 2,030.50 -8.5 -0.42 2,039.00 1,686.50
Tin ($/ton)* LME 22,200.00 40 0.18 23,770.00 21,410.00
Copper ($/ton)* LME 7,070.50 5.5 0.08 7,422.00 6,430.00
Lead ($/ton)* LME 2,210.50 -15.5 -0.7 2,242.00 2,033.00
Zinc ($/ton)* LME 2,366.00 -4 -0.17 2,370.00 1,948.00
Nickel ($/ton)* LME 19,065 65 0.34 21,100 13,425
Crude oil ($/bbl.) NYMEX 101.94 -1.18 -1.14 106.64 88.93
Heating oil ($/gal.) NYMEX 2.8798 -0.0059 -0.2 3.0848 2.8405
RBOB gasoline ($/gal.) NYMEX 2.8199 -0.0189 -0.67 3.0732 2.6607
Natural gas ($/mmBtu) NYMEX 3.843 0.067 1.77 4.885 3.759
Brent crude ($/bbl.) ICE-EU 107.12 -0.91 -0.84 115.09 102.75
Gas oil ($/ton) ICE-EU 888.5 -2 -0.22 949.25 874
Exchange Legend: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures,
U.S.MDEX: Bursa Malaysia, Derivatives Berhad; LIFFE: London International Financial Futures Exchange;
COMEX: Commodity Exchange; LME: London Metals Exchange; NYMEX: New York Mercantile Exchange;
ICE-EU: ICE Futures Europe *Data as of July 23, 2014
CURRENCY CROSS RATES
Currency
codes/
names
United
Kingdom
Pound
Euro
Japanese
Yen
Swiss Franc US Dollar
CFA Franc
BCEAO
CFA Franc
BEAC
Chinese
Yuan
Renminbi
Ghanaian
New Cedi
Hong Kong
Dollar
Nigerian
Naira
Saudi Riyal
South
African
Rand
US Dollar
Utd. Arab
Emir.
Dirham
GBP 1 0.7915 0.005784 0.6514 0.5878 0.001207 0.001207 0.09547 0.174 0.07584 0.003662 0.1567 0.05591 0.5878 0.1601
EUR 1.2637 1 0.007309 0.8231 0.7427 0.001524 0.001524 0.1206 0.2199 0.09584 0.004627 0.1981 0.07065 0.7427 0.2022
JPY 172.913 136.845 1 112.633 101.632 0.2086 0.2086 16.5074 30.0842 13.1133 0.6331 27.1012 9.6677 101.632 27.6755
CHF 1.5354 1.2151 0.00888 1 0.9024 0.001853 0.001853 0.1466 0.2671 0.1164 0.005622 0.2406 0.08585 0.9024 0.2457
USD 1.7014 1.3465 0.009841 1.1083 1 0.002053 0.002053 0.1624 0.296 0.129 0.00623 0.2667 0.09512 1 0.2723
XOF 828.778 655.957 4.7934 539.853 487.104 1 1 79.117 144.189 62.8498 3.0344 129.891 46.3356 487.104 132.644
XAF 828.778 655.957 4.7934 539.853 487.104 1 1 79.117 144.189 62.8498 3.0344 129.891 46.3356 487.104 132.644
CNY 10.4833 8.2965 0.06063 6.8287 6.1615 0.01265 0.01265 1 1.8239 0.795 0.03838 1.643 0.5861 6.1615 1.6778
GHS 5.8181 4.6044 0.03365 3.7898 3.4195 0.00702 0.00702 0.5554 1 0.4412 0.0213 0.9118 0.3253 3.4195 0.9312
HKD 13.1872 10.4374 0.07627 8.59 7.7506 0.01591 0.01591 1.2589 2.2943 1 0.04828 2.0668 0.7373 7.7506 2.1106
NGN 278.565 220.456 1.6111 181.453 163.723 0.3361 0.3361 26.5924 48.464 21.1248 1 43.6584 15.5741 163.723 44.5836
SAR 6.3818 5.0505 0.03691 4.157 3.7508 0.0077 0.0077 0.6092 1.1103 0.484 0.02337 1 0.3568 3.7508 1.0214
ZAR 17.902 14.169 0.1035 11.6611 10.5217 0.0216 0.0216 1.709 3.1145 1.3576 0.06555 2.8057 1 10.5217 2.8652
USD 1.7014 1.3465 0.009841 1.1083 1 0.002053 0.002053 0.1624 0.296 0.129 0.00623 0.2667 0.09512 1 0.2723
AED 6.2508 4.9469 0.03615 4.0717 3.6738 0.007542 0.007542 0.5967 1.0875 0.474 0.02289 0.9797 0.3495 3.6738 1
Mo Su
101.5
102.0
103.0
102.5
103.5
101.97
Tu We Th Fr
CLU4
Mo Mo Su Fr
3.700 3,080
3.750 3,115
3.850 3,185
3.800 3,150
3.900 3,220
3.781 3.781
Tu Tu We We Th Th Fr Fr
NGQ4 CCU4
Unit 1 Barrel
Contract Size 1,000 Barrels
52 wk Range 91.24 - 112.24
1-Year Return -3.34%
Currency USD
Unit 1 Mmbtu
Contract Size 10,000 MMBtu
52 wk Range 3.129 - 6.493
1-Year Return 3.76%
Currency USD
Unit 1 Metric Ton
Contract Size 10 Metric Tons
52 wk Range 2265.00 - 3232.00
1-Year Return 36.24%
Currency USD
Natural Gas F. US Cocoa F. Crude Oil F.
RESEARCH
REGULATION
COMMENTARIAT 7
VM| Monday, July 28, 2014 | Issue 003
The end of cheap money
for Zenith Bank?
Flash Crash on the NSE
Less than a year after it was
rolled out, X-GEN, the trad-
ing platform of the Nigerian
Stock Exchange failed on
Thursday, July 24. This was
due to ‘network challeng-
es’ according to Nwando
Ajene, The Exchange’s head
of corporate communica-
tions. At its launch, the plat-
form, which cost the $10 mil-
lion was billed as ‘potentially
the fastest in Africa.’
By afternoon the problem
was fxed but the damage had
been done.
Stockbrokers have com-
plained about the lost income
and opportunities the crash
caused investors. Average
daily trading on the NSE
ranges from N3 billion to
N3.5 billion. This being the
peak of the earnings season,
a few have whispered that the
crash may have been due to
sabotage. A new dimension
to conspiracy speculation
about possible causes was
introduced by Sunny Nwo-
su, national coordinator of
the Independent Sharehold-
ers Association of Nigeria
(ISAN), who was reported to
have threatened that ‘inves-
tors would seek redress if the
non-trading was as a result of
power tussle by NSE manage-
ment.’
Ade Ewuosho, the NSE’s
head of market operations,
explained that trading was
extended from 2:30 p.m. to
3:15 p.m. to enable brokers
make up for the lost time. The
market needed no prodding.
On Friday, investors traded a
total of 453.1 million units of
stocks worth N8.7 billion.
The inconvenient truth
is that complex technology
being complex technology
would occasionally sufer out-
ages of this kind. It is in the
nature of the beast. The NSE
deserves commendation for
fxing the problem in record
time.
Primus inter pares
In the past week the Nige-
rian Stock Exchange has re-
leased a raft of new and draft
rules for both dealing mem-
bers and quoted companies.
One of these, a Premium
Board, deserves all the atten-
tion it can receive. The idea is
to create an aspirational list-
ing category for companies
that meet stringent corporate
governance, capitalisation
and liquidity standards. Re-
quirements for eligibility in-
clude a minimum score of 70
per cent on the NSE and the
Convention for Business
Integrity’s Corporate
Governance Rating Sys-
tem (CGRS), have a consist-
ent market capitalization that
is equal to or in excess of $1
billion prior to admission to
the Premium Board, and have
a minimum free foat of 20%
or value of shares foated is
equal to or above US$1 Bil-
lion and the number of shares
representing its issued share
capital is equal to or above
10 billion unit. This would
efectively create a new and
visible set of NSE champions
that would become its show-
case companies. It would
also give investors the assur-
ance of liquidity in addition
to other benefts. However,
three concerns are that these
issuers may suck up all the
liquidity in the market when
they do oferings, it may lead
to a discount for companies
not on the Premium Board,
and inversely, it could cause
an undeserved premium, no
pun intended, for those on it.
This good initiative must not
be allowed to turn into a case
of the rich getting richer and
the poor getting poorer.
CORPORATES
Investment Banking Outlook
On July 23, Toyin Sanni,
managing director of UBA
Capital, an investment bank,
was a guest on CNBC Africa to
discuss the outlook for invest-
ment banking in the second
half of 2014. When asked by
CNBC’s Esther Ugbodaga to
name the defning transac-
tion of the frst half she did
not hesitate to mention Se-
plat. The company raised
$500 million in April in a
dual Lagos-London listing.
She opined that there would
be interest in that kind of is-
suance going forward.’ Her
interviewer did not follow up
on this to allow her expatiate
on exactly what kind of issu-
ance she meant. Would the
characterization be based on
size, sector, dual listing, pedi-
gree of sponsors, or assets?
She did say that the market
response was ‘very encourag-
ing’.
She was cautious about
investor appetite for new
listings and thought it early
to call an end to the drought
of new issues. There are still
concerns about the depth
of liquidity on the NSE, and
whether investors can soak
up several issues at this time,
she said. She was not con-
vinced that investor apathy,
especially among the general
public has been overcome, al-
though institutional investors
are more enlightened.
Sanni was optimistic about
the bill to compel companies
to list on the NSE. This would
create a queue of listings that
would boost the market. She
said the law would be ‘good
for the market, and a wel-
come development.’
She was asked about the
extent of contribution by Ni-
gerian investment banks to
infrastructure development.
Right of the bat she respond-
ed that they have ‘supported
infrastructure development
tremendously.’ She listed
UBA Capital’s role in arrang-
ing fnancing for the power
sector privatization, and state
governments as two areas
where the frm’s eforts touch
the lives of average Nigerian
citizens. She did admit that
there is still ‘a lot of room
for investment banks to do
more.’
In parting, the managing
director said she was bullish
about power, construction,
real estate, and agribusiness.
Each of these sectors, in her
opinion, hold attractive op-
portunities if companies and
investors can navigate the
challenges with the guidance
of the right investment bank.
Toyin Sanni, managing
director, UBA Capital
Like Christmas, everyone looks forward to earnings season with
excitement, and like it, most people feel underwhelmed at the end of
the day. According to Ayodeji Ebo, head of research at Afrinvest, ‘the
second quarter earnings scorecards have been mixed overall with a few
impressive performances.’
A few months ago, an exec-
utive director at a second-tier
bank quipped that the days
of ‘advantageous funding by
the golden three is coming to
an end.’ Those three are First
Bank, GT Bank, and Zenith
Bank. It looks like his proph-
esy is coming true. Analysts
at Chapel Hill Denham
write that while ‘a low fund-
ing cost has historically been
a major strength of Zenith,
its frst half results were chal-
lenged by high funding cost.’
The bank’s funding costs has
risen from 3.8 per cent in
H1 2013 to 4.2 per cent in
the latest reporting period.
Add to this a ‘moderate op-
erating income growth’ and
‘concerns about the interest
spread on the back of costly
time deposits and borrowed
funds.’ Its net interest spread
was 5.6 per cent set against
6.6 per cent in the frst half
of 2013. The analysts rate Ze-
nith Bank’s asset quality an
A, describing it as ‘enviable,
despite robust loan growth.’
While gross loans grew by
29.1 per cent, impairment
charges fell by 18.3 per cent
to N2.9 billion from N3.6 bil-
lion in the same period last
year. They place a HOLD
recommendation on the
bank’s stock, and set a target
price of N25.17 on it.
Peter Amangbo,
CEO, Zenith Bank
The shine,
shine bobo maintains lustre
Analysts at Dunn Loren
Merrifeld write that Nige-
rian Breweries fell short of
the investment bank’s quar-
terly sales forecast of N75.47
billion by 3.9 per cent. The
drinks company reported
fgures of N72.52 billion in
its second quarter sales rev-
enues, which is up 5.1 per
cent on frst quarter fgures.
One number to watch is the
company’s rising cost of
sales. The company in which
Holland-based Heineken
N.V. owns a 54.09 per cent
stake recorded a 5.8 per cent
rise in cost of sales to N71.35
billion. One consolation is its
efciency drive is showing
results. Operating expenses
at the Iganmu-based com-
pany increased by only 1.1
per cent.
The crystal ball
One week from now, FBN
Capital will publish its
monthly Purchasing Man-
ager Index (PMI). The in-
dex, which is released at the
beginning of each month, is
an eagerly watched indica-
tor of business and consumer
confdence. The survey in-
dicates companies’ views
on core variables in their
business. Matched with the
company results being re-
leased it should give inves-
tors a good idea of what to
expect in the third quarter.
Purchasing managers have
three response choices to the
questionnaire: better, un-
changed or worse than the
previous month. Under the
adopted methodology, 50
indicates a neutral reading.
Higher scores suggest that
the manufacturing economy
is expanding.
Source: FBN Capital
FBNCapital Manufacturing PMI readings (50 = neutral)
30
40
Output Workforce New Orders Delivery
Times
Stock of
Purchases
50
60
70
March 2014
April 2014
May 2014
June 2014
EARNINGS GLANCE
RESULTS REVIEW 8
VM| Monday, July 28, 2014 | Issue 003
TRANSNATIONAL CORPORATION OF NIGERIA PLC
6M:2014 Result - Financial Highlights (NGN Billion)
Statement of
Comprehensive Income
6M2014 6M2013
Y-o-Y
Growth
FY2013
Gross Revenue 21.2 7.7 175.3% 18.8
Cost of Sales (6.2) (1.7) 264.7% (4.4)
Gross proft 15.0 6.0 150.0% 14.3
Other Operating
Income
0.9 2.6 -65.4% 5.1
OPEX (7.8) (5.0) 56.0% (9.2)
PBT 8.0 3.6 122.2% 9.0
Taxation (1.1) (1.1) 0.0% (2.0)
PAT 6.9 2.5 176.0% 6.9
Per share data TRANSCORP
Current Price 5.70
Trailing EPS 0.29
Book Value Per Share 2.4
Price multiples/Ratios
Shares
Outstanding(bn)
38.7
Trailing P/E 19.5x
P/BV 2.4x
RoAE (Annualised) 12.7%
RoAA (Annualised) 7.3%
Gross Proft Margin 70.8%
NET Margin 32.5%
OPEX Margin 36.8%
Cost of Sales Margin 29.2%
Leverage 2.1
Statement of
Financial Position
6M2014 FY2013 Growth
Inventories 1.6 1.4 14.3%
Trade and Other
Receivables
24.2 8.4 188.1%
Cash and Cash
equivalents
4.2 9.2 -54.3%
Total Assets 158.2 149.5 5.8%
Total Equity 91.7 86.7 5.8%
Total Borrowings 43.2 43.1 0.2%
Total Liabilities 66.5 62.8 5.9%
CEMENT COMPANY OF NORTHERN NIGERIA PLC
6M:2014 Result - Financial Highlights (NGN Billion)
Statement of
Comprehensive Income
6M2014 6M2013
Y-o-Y
Growth
FY2013
Gross Revenue 9.4 8.8 6.6% 15.8
Cost of Sales (5.7) (5.7) -0.6% (10.8)
Gross proft 3.7 3.1 20.1% 5.0
Other Operating
Income
0.0 0.6 -95.0% 0.7
OPEX (1.4) (2.4) -43.2% (3.6)
PBT 2.3 1.2 90.8% 2.0
Taxation 0.7 0.4 90.8% (0.6)
PAT 1.6 0.8 90.9% 1.4
Per share data CCNN
Current Price 13.27
Trailing EPS 1.71
Book Value Per Share 7.8
Price multiples/Ratios
Shares
Outstanding(bn)
1.3
Trailing P/E 7.8x
P/BV 1.7x
RoAE (Annualised) 22.9%
RoAA (Annualised) 13.2%
Gross Proft Margin 39.2%
NET Margin 16.9%
OPEX Margin 14.7%
Cost of Sales Margin 60.8%
Leverage 9.3
Statement of
Financial Position
6M2014 FY2013 Growth
Inventories 6.5 6.0 7.5%
Trade and Other
Receivables
0.9 0.8 16.7%
Cash and Cash
equivalents
2.5 1.1 124.8%
Total Assets 17.6 15.1 17.1%
Total Equity 9.8 9.1 7.8%
Total Borrowings 1.0 0.9 23.4%
Total Liabilities 7.9 6.0 31.4%
SEPLAT PLC
6M:2014 Result - Financial Highlights (NGN Billion)
Statement of
Comprehensive Income
6M2014 6M2013
Y-o-Y
Growth
FY2013
Gross Revenue 60.3 65.1 -7.4% 137.1
Cost of Sales (21.9) (26.3) -16.7% (51.5)
Gross proft 38.4 38.8 -1.0% 85.6
Other Operating
Income
2.1 0.2 950.0% 0.4
OPEX (16.4) (6.4) 156.3% (14.7)
PBT 24.2 32.7 -26.0% 71.2
Taxation - (14.4) -100.0% (14.4)
PAT 24.2 47.1 -71.8% 85.7
Per share data SEPLAT
Current Price 675.05
Trailing EPS 113.50
Book Value Per Share 373.6
Price multiples/Ratios
Shares
Outstanding(bn)
0.6
Trailing P/E 5.9x
P/BV 1.8x
RoAE (Annualised) 44.9%
RoAA (Annualised) 24.1%
Gross Proft Margin 63.7%
NET Margin 40.1%
OPEX Margin 27.2%
Cost of Sales Margin 36.3%
Leverage 2.1
Statement of
Financial Position
6M2014 FY2013 Growth
Inventories 10.0 3.7 170.3% 6.7
Trade and Other
Receivables
60.0 81.9 -26.7% 63.9
Cash and Cash
equivalents
90.1 4.5 1902.2% 26.4
Total Assets 351.4 169.3 107.6% 202.6
Total Equity 206.7 73.0 183.0% 111.5
Total Borrowings 97.6 46.5 109.8% 48.4
Total Liabilities 144.7 96.3 50.3% 91.1
ZENITH BANK PLC
6M:2014 Result - Financial Highlights (NGN Billion)
Statement of
Comprehensive Income
6M2014 6M2013
Y-o-Y
Growth
FY2013
Gross Earnings 184.0 171.0 7.6% 351.4
Interest Income 140.0 128.0 9.4% 260.1
Interest Expense (49.0) (37.0) 32.4% (70.8)
Net Interest income 91.0 91.0 0.0% 189.3
Impairment charge for
credit losses
(3.0) (4.0) -25.0% (11.0)
Net Fees and
Commission Income
26.0 24.0 8.3% 52.5
Other Operating
Income
19.2 10.6 81.1% 22.7
OPEX (75.1) (70.4) 6.7% (147.2)
PBT 57.9 54.1 7.0% 110.6
Taxation (10.4) (8.7) 19.5% (15.3)
PAT 47.4 45.4 4.4% 95.3
Per share data ZENITHBANK
Current Price 25.00
Trailing EPS 3.10
Book Value Per Share 15.7
Price multiples/Ratios
Shares outstanding(bn) 31.4
Trailing P/E 8.1x
P/BV 1.6x
RoAE (Annualised) 19.4%
RoAA (Annualised) 3.1%
Net Interest Margin
(Annualised)
8.6%
Cost of Funds
(Annualised)
3.6%
Cost to Income 56.4%
Loan to Deposit Ratio 60.1%
Net Margin 25.8%
Statement of
Financial Position
6M2014 FY2013 Growth
Cash and Bank Balances 556.4 603.9 -7.9%
Total Loans and
advances
1,386.0 1,251.4 10.8%
Investment Securities 295.6 303.1 -2.5%
Total Assets 3,203.8 3,143.0 1.9%
Total Equity 492.4 509.3 -3.3%
Total Deposits 2,305.0 2,276.7 1.2%
Borrowings 142.1 60.2 136.0%
Total Liabilities 2,711.4 2,633.9 2.9%
STANBIC IBTC HOLDINGS PLC
6M:2014 Result - Financial Highlights (NGN Billion)
Statement of
Comprehensive Income
6M2014 6M2013
Y-o-Y
Growth
FY2013
Gross Earnings 61.5 54.5 12.8% 111.2
Interest Income 34.0 30.3 12.2% 62.6
Interest Expense (11.0) (12.4) -11.1% (25.6)
Net Interest income 23.0 17.9 28.4% 37.0
Credit impairment
charges
(1.4) (2.4) 59.6% (2.7)
Non-Interest
Income
27.3 24.1 13.3% 48.2
Other Operating
Income
0.2 0.3 -34.8% 0.4
OPEX (29.2) (26.5) 10.2% (57.9)
PBT 19.6 13.1 49.6% 24.6
Taxation (3.7) (2.9) 27.1% (3.8)
PAT 15.9 10.2 55.9% 20.8
Per share data STANBIC Corporate Actions
Current Price 27.50 Proposed Dividend N1.10
Trailing EPS 2.65
Book Value Per Share 11.2 Dividend Yield 4.0%
Price multiples/Ratios
Shares outstanding(bn) 10.0
Trailing P/E 10.4x
P/BV 2.4x
RoAE (Annualised) 25.3%
RoAA (Annualised) 3.2%
Net Interest Margin
(Annualised)
5.4%
Cost of Funds
(Annualised)
4.7%
Cost to Income 57.9%
Loan to Deposit Ratio 63.3%
Net Margin 25.9%
Statement of
Financial Position
6M2014 FY2013 Growth
Cash and Bank Balances 167.3 120.3 39.1%
Total Loans and
advances
351.0 383.9 -8.6%
Investment Securities 330.6 206.2 60.3%
Total Assets 906.8 763.0 18.8%
Total Equity 112.3 97.6 15.1%
Total Deposits 554.4 468.0 18.5%
Borrowings 63.6 48.8 30.3%
Total Liabilities 794.5 665.4 19.4%
STERLING BANK PLC
6M:2014 Result - Financial Highlights (NGN Billion)
Statement of
Comprehensive Income
6M2014 6M2013
Y-o-Y
Growth
FY2013
Gross Earnings 48.7 41.9 16.2% 91.6
Interest Income 37.4 31.1 20.3% 70.0
Interest Expense (16.2) (15.9) 1.9% (34.1)
Net Interest income 21.3 15.2 40.1% 35.8
Credit impairment
charges
2.4 1.1 218.2% (8.3)
Non-Interest
Income
na na na
Other Operating
Income
11.3 10.8 4.6% 21.7
OPEX (23.8) (18.5) 28.6% (39.9)
PBT 6.3 6.2 1.6% 9.3
Taxation (0.8) (0.3) 166.7% (1.0)
PAT 5.5 5.9 -6.8% 8.3
Per share data STERLNBANK
Gross Earnings 48.7
Interest Income 37.4
Interest Expense (16.2)
Price multiples/Ratios
Shares outstanding(bn) 21.6
Trailing P/E 6.3x
P/BV 0.8x
RoAE (Annualised) 12.4%
RoAA (Annualised) 1.1%
Net Interest Margin
(Annualised)
6.1%
Cost of Funds (An-
nualised)
6.1%
Cost to Income 73.0%
Loan to Deposit Ratio 57.8%
Net Margin 11.3%
Statement of
Financial Position
6M2014 FY2013 Growth
Cash and Bank Balances 183.4 193.1 -5.0%
Total Loans and
advances
321.8 321.7 0.0%
Investment Securities 192.4 167.0 15.2%
Total Assets 731.1 707.8 3.3%
Total Equity 63.8 63.5 0.5%
Total Deposits 556.3 570.5 -2.5%
Borrowings 60.2 43.4 38.7%
Total Liabilities 667.4 644.3 3.6%
COMPLIANCE
BUSINESS 9
VM| Monday, July 28, 2014 | Issue 003
Soji Apampa
is the co-founder of The Con-
vention on Business Integrity,
which sponsors the Corporate
Governance Rating System in
partnership with the Nigerian
Stock Exchange.
Soji.apampa@cbinigeria.com
orporate govern-
ance is at the heart of
how businesses are
run. According to the Organi-
zation for Economic Coop-
erative Development (OECD),
‘corporate governance in-
volves a set of relationships
between a company’s man-
agement, its board, its share-
holders and other stakehold-
ers’. Corporate governance,
broadly speaking, includes
board efciency, transpar-
ency, reporting requirements,
investor communications and
sustainability.
Corporate governance
standards in an organization
are typically based on macro
factors at play in the country
where it operates. These
include the country’s legal and
fnancial system, ownership
structures, and cultural,
economic and political
realities. In Nigeria, where
corruption is rife and endemic,
corporate governance practices
are usually lax. However,
current economic realities like
the globalization of capital
fows has rendered ethical
relativism, the doctrine that
morality exists in relation to
culture or society, an unsound
basis for setting corporate
governance standards.
Nigerian companies must
decide if they want corporate
governance standards that lie
in the eye of the beholder or
those that lie in the eye of any
beholder?
There are a good number of
reasons why Nigerian compa-
nies need to upgrade the ba-
sis of their corporate govern-
ance standards to match good
international practice.
First, because of the high
cost of capital in Nigeria,
companies that seek to com-
pete on a larger scale are
seeking capital from foreign
capital markets or through
the participation of interna-
tional investors in local mar-
kets. Given the mainstream-
ing of corporate governance
issues, fnancial markets all
over the world have instituted
either mandatory or recom-
mended codes to guide the
conduct of publicly quoted
companies.
Till date, there are 7 Ni-
gerian companies listed on
the London Stock Exchange.
Although some are on the Al-
ternative Investment Market
(AIM), the LSE’s growth mar-
ket, which has fewer guide-
lines, those companies who
wish to be listed on the Main
Market, must comply with
stricter admission and disclo-
sure standards. Seplat, the oil
company, which went public
in May has successfully done
so. Companies with aspira-
tions to list there are also re-
quired to comply with the UK
Corporate Governance Code
or explain why they do not.
Failure to do so invites vari-
ous sanctions. Therefore, to
compete globally and attract
the quantity and quality of
capital they require to operate
at that level of market access,
Nigerian companies need to
adopt more stringent stand-
ards of corporate governance
than the domestic environ-
ment necessitates. Good cor-
porate governance practices
demonstrates to global inves-
tors that their investments
will be safe and managed in
their best interest.
It is not only the big com-
panies that can beneft from
adopting good and interna-
tionally acceptable corpo-
rate governance practices.
Small- and medium-sized
enterprises (SMEs) stand to
beneft as well. For example,
it can win them entry to the
value chain of multinational
companies or even big local
companies that demand simi-
lar standards from their busi-
ness partners. For example, it
will constitute a reputational
risk for a big international
brand like Shoprite, which
just opened its 1oth Nigerian
store in Ibadan, to associate
with suppliers that do not
have clear reporting and good
management practices. Sup-
pliers that pose reputational
risks to their brands and eth-
ics are unwelcome. In an age
when the Internet and social
media rule, the reverbera-
tions from one critical tweet
or negative online review in
Lagos or Lusaka can be felt in
London.
Furthermore, organiza-
tions need to practice good
corporate governance to
guard against other risks that
threaten the going concern of
the organization. Such risks
include the liability or as-
set damage that may occur if
managers enter into transac-
tions that are self-serving and
destroy the value of share-
holders’ equity. In extreme
cases, it could lead to a loss
of trust from customers that
may lead to product boycotts
and in the case of a bank, a
run. Setting high governance
standards is a business sus-
tainability necessity because
even codifed global corpo-
rate standards usually consti-
tute the minimum acceptable
standard and may be insuf-
fcient.
In sum, good corporate
governance is germane to the
going concern of an organi-
zation because it determines
the strategic direction of
the frm in terms of the mis-
sion and values, culture, risk
management and processes.
Businesses in Nigeria have to
move beyond mouthing the
buzzword of corporate gov-
ernance to adopting sound
corporate governance prac-
tices. It makes good business
sense to do so. ;
GOVERNANCE
Businesses in Nigeria have
to move beyond mouthing the
buzzword of corporate governance
to adopting sound corporate
governance practices. It makes
good business sense to do so.
The Corporate Governance
Imperative
Next question please. Alhaji Aliko Dangote beckons for questions at the 8th AGM of Dangote Sugar Company Plc.
Central banks are clamping
down on financial institutions
that abet money laundering.
C
one of her last acts
as the acting gover-
nor of the Central
Bank of Nigeria, Dr. Sarah
Alade directed all banks and
discount houses in the country
to ensure that no chief compli-
ance ofcer is below the grade
of general manager. The apex
bank also insisted that the of-
fcer who heads the function
reports to the institution’s
board with dotted lines in the
org chart to the chief execu-
tive. On July 21, the Nigerian
Stock Exchange also issued its
Rules Governing Compliance
Ofcers at Dealing Firms. It
asked stock broking frms to
‘sufciently empower Com-
pliance Ofcers and prescribe
ways of ensuring that they are
adequately protected to efec-
tively carry out their duties.’
These point to a recognition
that the role of compliance
chief requires both technical
credibility, and importantly,
managerial seasoning that
only experience, and seniority
within organization can con-
fer. There is no use appointing
novices who lack the organiza-
tional clout to command the
CEO’s attention.
A general description of
the responsibilities of compli-
ance departments would fall
into three categories namely
the identifcation and analysis
of rules guiding the fnancial
institution’s operations, the
design and implementation of
adequate controls to ensure
compliance with extant rules,
and fnally, oversight functions
as regards the efectiveness of
controls-in-place. The main fo-
cus of the compliance function
is to ensure that banks, dis-
count houses, issuing houses
and stock broking frms do not
serve as conduits for ill-gotten
funds, and monies intended
for anti-social purposes.
It is naïve to think that the
grade of general manager by
itself would give CCOs the le-
gitimacy and authority to sway
corporate behaviour. It is vital
that in the upper echelons of
these fnancial institutions
the compliance, risk manage-
ment, and control functions
receive sufcient resources to
perform their jobs without let
or hindrance, and that their
authority is enshrined in the
corporate structure.
According to Donna Boe-
hme of Compliance Strate-
gists, ‘just throwing the CCO
out there with a badge and a
title is not enough to make a
programme work. The busi-
ness will not simply ‘get in
line’ just because the CCO asks
it to do so. Boards and senior
management need to take fur-
ther action to empower their
CCOs and programmes, and
part of that is realising that the
business ‘owns’ compliance,
not the CCO.’
This is true. Of equal impor-
tance as the ofcer’s grade is
the budget at his disposal and
the stafng of the department.
In Europe, for example, Andy
Haldane, head of fnancial sta-
bility at the Bank of England,
has estimated that banks in
the EU area will need to go on
a hiring spree to the tune of
70,000 new jobs to meet the
demands of Basel III. Generals
need foot soldiers to prosecute
wars.
Weak compliance can be ru-
inously expensive. In the US,
JP Morgan has been fned $20
billion in the past year alone
for various infractions, and
only last month, Credit Suisse
was penalized with $2.5 billion
for straying from the law in
the tax shelters it set up for its
wealthy clients. BNP Paribas
SA, the French bank has been
fned $8.9 billion for breaking
U.S. trade sanctions on Cuba,
Iran, and Sudan. These are not
mere slaps on the wrist.
Therefore, it comes as little
surprise the importance that
the Nigerian central bank and
NSE are attaching to compli-
ance, and those charged with
discharging roles in that func-
tion. It does remain to be seen
whether these institutions will
follow both the letter and the
spirit of the law in the altitude
and latitude given CCOs. ;
Compliance
moves to
centre stage
In
Source: thesecuritiesedge.com
size of the Nige-
rian market and its
economic potential
is palpable. One index of ris-
ing afuence is the domestic
consumption of Scotch whisky.
According the Scotch Whisky
Association, exports to Nigeria
increased by 43% in 2013. This
demand is attributed to a grow-
ing and sophisticated middle
class. Last year, sales of Scotch
whisky generated almost $6
billion dollars in revenue from
imports. These fgures sparked
my curiosity about Scotch and
other types of whiskies piques.
I have always associated
Scotch whisky with success. An
investment banker friend used
to recount stories of deal clos-
ings celebrated by drinking rare
bottles of Scotch. But until re-
cently, my knowledge was lim-
ited to the odd bottle of Johnnie
Walker in the cupboard of most
Nigerian homes. I was familiar
with brands like Dewars, Glen-
morangie and Glenlivet that
have made eforts to increase
their visibility in Nigeria. I
have since learnt that there are
many varieties of Scotch. For as
many varieties are there are of
Scotch whiskies there are dif-
ferent tastes and preferences by
drinkers. My journey to unlock
the mysteries of Scotch’s appeal
is an adventurous one.
For starters, I will demystify
the terms. We have all heard of
whisky, Bourbon, and Scotch.
An American friend, who is a
whisky enthusiast helped me
draw the distinctions. I en-
listed him as my frst tutor. He
explained that whisky is the
collective term for Bourbon,
Scotch, Canadian rye, and Irish
whiskey. It is an alcoholic bev-
erage distilled from fermented
grain mash that has been aged
in wooden casks. Each type of
whisky difers in its produc-
tion. Bourbon, for example, is
distilled from corn mash and
largely associated with the US
state of Kentucky. A famous
but reluctant brand of bourbon
is Jack Daniels. I deduce its
reluctance because the Brown-
Forman Corporation, owners
of the label, refuse to market it
as bourbon. Instead, they main-
tain that it is ‘Tennessee Whis-
ky’. Here is an interesting fact.
Jack Daniels is manufactured
in Lynchburg, Moore County,
Tennessee. This is one of the
few ‘dry counties’ in the United
States, a relic model of the Pro-
hibition era. Most towns in the
US are ‘wet’ due to the Twenty
First Amendment repeal in the
country’s Constitution. There-
fore, even though the county
manufactures a healthy propor-
tion of the Bourbon consumed
in the US, drinkers cannot buy
Jack Daniels in the county
where it is produced. My tutor
fnds this irony hard to contain
and bursts into extended fts of
laughter at the retelling. I con-
clude that his whisky consump-
tion aids in the longevity of his
laughter.
After learning about Bour-
bon, I move on to Scotches,
the reason I am writing this
article. As mentioned earlier I
have never really been a spir-
its drinker. To fll the void of
knowledge I surround myself
with the most passionate peo-
ple on the subject to get a better
insight.
None are more passionate
than the Scots. An invitation
to the Lagos Caledonian Soci-
ety’s Chieftain’s Ball gives me
the opportunity to investigate
further. Here I fnd my second
tutor. A little background of
the Caledonian Society Balls
is in order. The Society holds
three balls each year. These are
considered the cornerstone of
the expatriate social scene in
Lagos. The Chieftain’s Ball is
the least attended because it
falls during the summer vaca-
tion when most families are
away on holiday. This works
in my favour because my tu-
tor while waiting for guests
to turn up spends a dispro-
portionate amount of time
teaching me about Scotch. He
takes pride in explaining that
Scotch is more regulated than
champagne. It turns out that
he is correct evidenced by the
Scotch Whisky Regulations
2009. My tutor explains that
Scotch whiskies are mostly
made from malted barley. He
pours a ‘wee dram’ of whisky
puts in a few drops of water to
“unlock the favor” and further
explains the diference be-
tween single malt scotch whis-
ky and blended grain scotch
whisky, ofering me a single
malt scotch to sample. Actu-
ally, I sample three: Glenlivet
(18-year old), followed by a sip
of Bowmore (12-year old), and
topped of by a sip of Glenmo-
rangie (12-year old). The key
distinctions between the three
are negligible to my developing
palate. The clearer distinction
is between the single malt and
blended grain Scotch whisky
which is less intense and prob-
ably more commercial.
At the end of his tutelage,
he and his wife begin another
session and teach us diferent
Scottish reels (group dances).
Nearly all invited guests par-
ticipate in this. After the Gay
Gordons, a popular Highland
dance, I summarize that reeling
and scotch are not necessarily
the best combination and retire
early eager to write this article.
This water of life literally took
the life out of me. ;
ART AS AN ALTERNATIVE INVESTMENT
EDITOR: MIDENO BAYAGBON
GROUP BUSINESS EDITOR:
OMOH GABRIEL
CONTENT DIRECTION:
OBIORA TABANSI ONYEASO
DESIGN & ILLUSTRATION:
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Published by
In Association With
is no longer news
that photography has
become an acceptable
and collectable genre of the vis-
ual arts, thus overcoming the
skepticisms that it is created by
mechanical means and easily
replicated, underscoring issues
of exclusivity. African photog-
raphers continue to be at the
center of global attention with
their works featuring promi-
nently at notable international
fairs and in exhibitions at ma-
jor museums.
Recently on view at leading
London-based auction house,
Bonhams, is The Nigerian
Centenary Photography exhi-
bition, dedicated to celebrated
Nigerian photographer, ‘Okhai
Ojeikere who passed on early
this year. Indeed, several in-
ternational auction houses fea-
ture prominently, modern and
contemporary African photog-
raphy through the work of ear-
ly pioneers like Malick Sidibe’,
Seydou Keita and Ojeikere,
as well as mid-career artists
and emerging names such as
Raphael Leonce Agbodjelou,
Mario Macilau, Gideon Men-
del, Sammy Baloji, Samuel
Fosso, George Osodi, Uche
James-Iroha, Ade Adekola
and Francois-Xavier Gbré. In
October 2012, prestigious Brit-
ish auction house, Christies,
in its Paris auction themed
Rendez-vous Interieurs con-
temporains included a work
by Sidibé from Mali, Le deux
amis (1971) which was sold for
€3,250 from a starting esti-
mate of € 2,500.
This article sheds light on
this growing interest in pho-
tography as a collectable me-
dium with particular focus on
Africa. Many experts advise
that now may be a good time to
collect photography from the
continent as the success of the
market may be attributable to
its afordability and undervalu-
ation.
The Auction Room is an
online auction house based in
London. An analysis of its Oc-
tober auctions of contempo-
rary African art reveals that the
majority of lots entered were
sold approximately 20% above
their initial estimates. This in-
cludes notable photographs
like; A Woman Recovers
Building Materials from Her
Shack That Had Been Burnt
Down the Previous Day (1986)
by South African artist, Gideon
Mendel with a pre-sales esti-
mate of £2,000 that was sold
for £2,350; Hercule Africain
(1970) by Sidibé with a pre-
sales estimate of £2,000 and
sold for £2,233; and A Young
Girl with Toy (2011) by Mario
Macilau from Mozambique,
estimated at £1,000 and sold
for £1,310. This continued suc-
cess of African photography on
the international market has
led to the establishment of the
world’s frst African Contem-
porary Photography Auction
by the auction house.
Arguably, photography’s
frst inclusion on the Nigerian
secondary market was at the
Arthouse Contemporary sale in
Lagos of May 9, 2011, where the
single work sold, Argungun by
George Osodi fetched the sum
of N605, 000 ($ 3,781.25). The
November 21 sale, the same
year also featured photography
with 3 works ofered. Again, a
single work, Beating Room by
Adolphus Opara was sold for
N396,000 ($ 2,475).
With a 100 per cent success
sales rate, the May 2012 sale
is perhaps Arthouse’s most
successful inclusion of pho-
tography till date. The 6 works
ofered realized a total sum of
N3,740,000($23,375) with the
top-selling photograph on the
evening, Adekola Adeleke’s The
Charge, sold for N2,200,000
($13,750), establishing a re-
cord for the artist. Yetunde
Babaeko also set a personal
record at N220,000 ($1,375),
with The Pretty Stranger Who
Killed the King I, selling above a
pre-sale estimate of N150,000-
N180,000 ($ 937.5 -1,125).
The November 2012 auction
by Arthouse Contemporary
recorded a dip in sales from
photography as only N2, 123,
000 ($13,268.75) was achieved
with a 50 per cent success rate
as only 4 of the 8 works ofered
sold. The highest sold photo-
graph was George Osodi’s Eyo
at N1,320,00 ($8,250) which
established an individual best.
However, the auction house’s
sale of May 13, 2013 recorded
another 100% sale. The 3 con-
temporary photographs of-
fered, collectively achieved
N3,366,000 ($21,037.50, in-
cluding premium) against a pre-
sales estimate of N2,280,000-
2,920,000 ($1,425-1,8250).
Hopefully, these early suc-
cesses recorded for photogra-
phy will boost confdence in
collectors to accept the me-
dium’s potential investment
value. ;
The growing market
for African photography
A Young Girl with Toy (2011) by Mario Macilau from Mozambique
Macallan makes some of the most storied single malt Scotch whiskies
ARENA 10
VM| Monday, July 28, 2014 | Issue 003
Oliver Enwonwu
is the director of leading Lagos
gallery, Omenka and president of
the Society of Nigerian Artists.
oliver@omenkamagazine.com
It
HIGH TABLE
Ify Oji
is a lawyer, writer and food
lover. She is the creator of the
GidiTang.com (synonym: Lagos
Flavour) blog on food and drink
in Lagos.
teamlogiclimited@gmail.com
Tastes like success
The
Source: Rockstarcocktails.com