You can download the full document here: NSE In January 2010 (18)

In arriving at a fair value for CCNN, we estimated TO, Earning Before Interest Tax Depreciation and Amortization (EBITDA) and PAT for December 2009. We estimated a TO of N13.83bn, based on a growth of 40%, over the previous year. We project EBITDA of N2.966bn based on EBITDA margin of 17.45% and a PAT of N2.42bn based on a PAT margin of 17.50%. We used 1.256bn Ordinary Shares in issue. The estimate Earning Per Share (FEPS) generates N1.93k. We estimated a Total Dividend Per Share (DPS) of N1.25k (having paid an interim of 80k we expect a final of 45k) based on a dividend payout of 65%. Applying Enterprise Value EV/EBITDA multiple of 9.25x, a P/E multiple of 10.5x, we arrived at N20.46k per share using EV/EBITDA multiple and N20.22k per share using price earnings multiple. Applying a weight of 50% each to the valuation results we arrived at 20.34k which is our fair value. The estimate earnings yield and dividend yield based on our fair value generate 9.47% and 5.78% respectively while the estimate P/E ratio generates 10.56x. We therefore place a BUY on Cement Company of Northern Nigeria (CCNN) stock at the current market price for both capital appreciation and dividend payment.

Here are excerpts from FSDH Securities report. I will add excerpts and notes from the others later.

The Nigerian Economy
The current global economic and financial crises had serious implications for the performance of the Nigerian economy in 2009. We observe that the global economic and financial landscapes are improving at a fast pace and the outlook is good. The Nigerian economy, being part of the global economic village should move in line with the rest of the world. Although there are current and potential political issues that need to be resolved in order to move the country forward, we believe the relevant parties will work together to resolve the crisis before it degenerates to an uncontrollable situation that could cause a collapse of the country’s burgeoning democracy.

The recent rising price of crude oil at the international market with the improved oil production in Nigeria following the Amnesty program of the FG to the militants in the Niger Delta area, in addition to the fact that the unspent portion of 2009 capital budget allocation will be added to 2010 fiscal year should improve the fiscal position of the FG in 2010. The current average oil price to date at US$78.25/b is higher than the 2010 budget benchmark oil price of US$57/b. The 2009 budget is predicated on an oil price assumption of US$57/b, oil production of 2.088mb/d an average exchange rate of N150/US$1 (average so far US$148.22/US$1).

In the year 2010 the outlook of inflation rate in Nigeria will be influenced by the expected fiscal expansion, quantitative easing strategy of the CBN to boost outputs & ensure credit creation in the financial system, supply bottleneck inherent in the economy as a result of the infrastructure deficits and expected rise in commodities prices. All these factors will exert inflationary pressure on the consumer price index in 2010, thus our forecast inflation rate is in the range of 12.5% -14.5% to end the year.

The weakening US Dollar as a result of restructuring of international investment from US Dollar denominated financial instruments to other commodities like Gold may help the value of Naira to appreciate in nominal term against the US Dollar. In addition, the rising price of crude oil at the international market, in the face of improving oil production, may improve the foreign exchange earning capacity of the country with its positive impact on the foreign exchange rate. Given these dynamics, we are persuaded to release a forecast exchange rate for 2010 in the region of N140US$1- N145US$.

- We doubt the ability of the proposed Asset Management Company (AMC) to produce the desired results as we believe a major constraint remains the transfer pricing of toxic assets. We however expect increased acquisition activities in banking industry in 2010.
- Given the structure of the economy which is in favour of Agriculture, and the progress recorded so far in the oil & gas sector, we are comfortable to release a GDP growth rate of between 7% and 8% in 2010.
- As the price of oil improves in the international market and oil output improves in the Niger-Delta area of the country, Nigeria should be able to increase its exports and consequently improve external reserve by about 12.5% to US$53.01bn.
- We expect inter-bank rates to trend downward on account of the expected monetary and fiscal expansion in 2010. Also the CBN guarantee of inter-bank placements and pension funds placements should increase activities in the inter-banks placement and prevent inter-bank liquidity crunch.
- We expect that the FIRS, DMO, FMF and Market Operators will finalize the challenges to the effective take-off of active Corporate Bond issuance and trading before the end of Q1, 2010. This will create another investment outlet for the excess fund in the financial market and reduce excessive oversubscription of the FGN bonds. Thus we expect the prices of FGN Bonds to trend downward and this will improve the yields of the bonds.
- We expect the new FGN Bonds issue for the year 2010 to carry low coupon rates.
Equities Market
Our review of the equities market shows that a number of the highly capitalized stocks across the sectors on the Nigerian Stock Exchange (NSE) are trading at their support prices as their share prices have refused to drop below certain price levels. We are of the opinion that there may still be some unresolved problems in the Nigerian Banking industry, the drastic actions of the CBN, especially in dissolving the board of the troubled banks and making them to make provisions for all non-performing loans have substantially addressed the problems in the sector.
- We expect a dramatic drop in corporate benefits that Nigerian banks will declare for the period ended December 31, 2009. This is expected to improve at the end of the current year as the banks’ profitability improves.
- The commitment of the CBN to guarantee all foreign credit lines to the Nigerian bank will ensure that large companies in Nigeria that have ability to access funds through their banks will continue to enjoy such foreign credits. This will boost the expansion drive of manufacturing companies and petroleum marketing companies and position them for better profitability in the quarters ahead.
As the global economy and financial market improve, we expect a return of some hedge funds and portfolio managers in the Nigerian equities market as we believe it offers some unique opportunities. In addition, the expected drop in interest rate in the money market in 2010 should be a good development for the equities investors.
- Bearing unforeseen circumstances in the nation’s polity that will affect the equities market negatively; we expect the equities market to appreciate in 2010. The factors that should support the expected appreciation in 2010 include: the global recovery that we expect; the improvement we expect at the macroeconomy level in Nigeria and some sectoral recovery prospects that exist for quoted companies. Given these factors, we are persuaded to release a forecast growth rate in the NSE ASI in the region of 15% and 20% to end the year 2010.

Dont forget, you can also read the outlooks from the NSE and Afrinvest here and here.

7Up Bottling Com Plc Q2-09
Afromedia Plc FYE’09
Scoa Nigeria Plc FYE’09
Incar Plc Q3-09

Fidson Healthcare Plc FYE’09
Beco Petroleum Plc Q1-09
United Nig Textiles Plc Q3-09
African Paints Plc Q3-09
Costain West Africa Plc FYE’09

Tripple Gee & Company Plc Q3-09
Wema Bank Plc FYE’08
Wema Bank Plc FYE’09
Unic Insurance Plc Q3-09
Unic Insurance Plc Q2-09
Unic Insurance Plc Q1-09
Studio Press Nigeria Plc FYE’09

You can also download the full results below:

Meristem - Company Results - Jan 18th 2010 (15).

Meristem - Company Results - Jan 25th 2010 (19) ]]> http://www.naijalowa.com/company-results-5/feed/ 0 http://www.naijalowa.com/weekly-nse-report-for-the-week-ended-january-22nd-2010/ http://www.naijalowa.com/weekly-nse-report-for-the-week-ended-january-22nd-2010/#comments Tue, 26 Jan 2010 18:59:16 +0000 donne4real http://www.naijalowa.com/?p=1350 Courtesy of Lead Capital, here is the NSE report for the week ended January 22nd 2010:

NSE ASI Index closes in the negative borders.
The NSE ASI recorded 14 basis points decline at the end of the review period to close at 22,030.18.

A turnover of 2.35 billion shares worth N11.8 billion in 160,784 deals was recorded this week, in contrast to a total of 2.2 billion shares valued at N12.8 billion exchanged last week in 34,511 deals. The Banking subsector was the most active during the week (measured by turnover volume), with 1.11 billion shares worth N7.9 billion exchanged by investors in 17,452 deals. Volume in the Banking subsector was largely driven by activity in the shares of Zenith Bank Plc, Finbank Plc and Fidelity Bank Plc. Trading in the shares of the three Banks accounted for 552.13 million shares, representing 49.6% of the subsector’s turnover. The Insurance subsector, boosted by activity in the shares of Unity Kapital Assurance Plc and Guaranty Trust Assurance Plc, followed on the week’s activity chart with a turnover of 412.1 million shares valued at N613.94 million in 1,756 deals. Last week, the Banking subsector led on the activity chart and was followed by the Insurance subsector

Mixed sentiments recorded on the floor of the Nigerian Stock Exchange saw Fifty- Eight (58) stocks appreciate in price during the week, higher than the fifty-two (52) of the preceding week. Cadbury Nigeria Plc led on the gainers’ table with a gain of 26.63% to close at N15.50 per share while Spring bank Nigeria Plc followed with 23.68% to close at N0.94 per share. On the flip side, Forty-Seven (47) stocks depreciated in price during the week, lower than the forty-eight (48) of the preceding week. Goldlink Insurance Plc led on the price losers’ table, dropping by 20% to close at N0.56 per share while Crusader Nig Plc followed with a loss of 16.78% to close at N1.19per share.

Two equity prices were adjusted for dividend payment as recommended by the Board of Directors. IHS Nigeria Plc was adjusted for dividend of N0.05 per share. Fidson Healthcare Plc was adjusted for dividend of N0.22 per share. Supplementary Listings A total of 2,028,347,543 shares were added to the shares outstanding in the name of Cadbury Nigeria Plc on Wednesday, January 20th 2010 following the conclusion of the right Issue. Also, a total of 348,027,267 shares were added to the shares outstanding in the name of Custodian and Allied Insurance Plc on Wednesday, January 20th 2010 following the conversion of US$8 million of the US$10 million Unsecured Variable Coupon Redeemable Convertible Loan Stock. The balance of US$2 million would remain as loan stock.

1. Dr. Adedovin Salami – Macroeconomic Policy
2. John Oshilaia – Financial Markets
3. Prof. Chibuike Uaochukwu Uche – Banking and Finance
4. Dr. Shehu Yahaya Development Economics
5. Abdul-Ganiyu Garba Monetarv & Fiscal Policies

Dr. Adedoyin Salami is a Senior Lecturer and full time member of the Faculty of the Lagos Business School, Pan African University. He is the Head of Research at the Lagos Business School. His academic interest includes Macroeconomic policy and risk management and is a consultant to DFID, World Bank, UNIDO, etc. He is also a member of the National Economic Management Team. John Oshilaja is an expert in Public Finance and Financial Markets Developments in Emerging markets. His working experience spans over 25 years and include Latin America, Eastern Europe, Middle East and Africa. He also possesses significant experience in Public Sector debt restructuring in Brazil. Mexico, Kenya and Nigeria.

John Oshilaja is an expert in Public Finance and Financial Markets Developments in Emerging markets. His working experience spans over 25 years and include Latin America, Eastern Europe, Middle East and Africa. He also possesses significant experience in Public Sector debt restructuring in Brazil. Mexico, Kenya and Nigeria.

Prof. Chibuike Uche is a Professor of Banking and Financial Institutions and full time lecturer in the Department of Banking and Finance, University of Nigeria, Enugu Campus. He is a fellow of the Institute of Chartered Accountants of Nigeria (FCA). His research interest includes Bank Management, Financial Institutions and Markets.

Dr. Shehu Yahaya is currently an Executive Director in African Development Bank and possesses rich and varied experience in development economics, macroeconomics and international economics. He was previously Head of Research Department and Head Projects and Corporate Finance at ADB. He also has valuable experience in banking policies as well as project and program implementation, and previously served as an Executive Director in NEXIM. He brings to the Committee important policy contribution from ADB.

Prof. Abdul-Ganiyu Garbo is a Lecturer in the Department of Economics in Ahmadu Bello University, Zaria and has taught economic theory and econometrics. He has also conducted research in several aspects of monetary & fiscal policies and trade and exchange rates. Prof. Garba is a member of African Economic Research Consortium (AERC), Nairobi-Kenya, Nigeria Economic Society and has over 60 publications, locally and internationally. He has participated actively in several conferences and seminars organized by the Central Bank.

You can download the announcement here.

1. Chief Executive Officers, CEO of banks shall serve a maximum tenure of ten years.
2. All CEOs who would have served for ten years by July 31, 2010 shall cease to function in that capacity and shall hand over to their successors.
3. Where a bank is a product of merger, acquisition, take-over or any other form of combination, the ten–year period shall include the pre and post combination service years of a CEO provided that the bank in which he previously served as CEO was part of the new bank that emerged after the combination.
4. Any person who has served as CEO for the maximum tenure in a bank shall not qualify for appointment in his former bank or subsidiaries in any capacity until after a period of three years after the expiration of his tenure as CEO.
5. The Governor/Deputy Governors of the CBN and the Managing Director/CEO and Executive Directors of the Nigeria Deposit Insurance Corporation, NDIC shall not be eligible for appointment in any capacity in banks until after the expiration of five years from the date of their exit from the CBN or NDIC as the case may be.
6. The Departmental Directors of the CBN and the NDIC shall not be eligible for appointment in any capacity in banks and their subsidiaries under the supervision of the CBN and NDIC until after the expiration of three years from the date of their exit from the CBN or NDIC as the case may be.
7. Henceforth, all banks shall reflect the provisions of these guidelines in the terms of engagement of their CEOs.

You can download the CBN release here.

Top Gainers:

Top Losers:

A turnover of 2.2 billion shares worth N12.8 billion in 34,511 deals was recorded this week, in contrast to a total of 1.8 billion shares valued at N9.97 billion exchanged last week in 35,987 deals. There were no transactions in the Federal Government Development Stocks, State Government Bonds and Industrial Loans/Preference Stocks sectors.

The Banking subsector was the most active during the week (measured by turnover volume), with 1.13 billion shares worth N8.14 billion exchanged by investors in 17,571 deals. Volume in the Banking subsector was largely driven by activity in the shares of FinBank Plc, First Bank of Nigeria Plc and Zenith Bank Plc. Trading in the shares of the three Banks accounted for 574.55 million shares, representing 50.8% of the subsector’s turnover. The Insurance subsector, boosted by activity in the shares of Goldlink Insurance Plc and International Energy Insurance Plc, followed on the week’s activity chart with a turnover of 280.0 million shares valued at N240.45million in 2,043 deals. Last week, the Banking subsector led on the activity chart and was followed by the Insurance subsector.

Price Movement
The NSE All-Share Index appreciated by 1.85% to close on Friday at 22,060.36. The market capitalization of the 200 First -Tier equities closed higher at N5.28 trillion. Also, The NSE-30 Index appreciated by 2.1% to close at 878.07. Three of the four sectoral indices appreciated – The NSE Food/Beverages Index appreciated by 2.1% to close at 555.98, the NSE Banking Index appreciated by 1.22% to close at 358.13 and the NSE Oil/Gas Index appreciated by 2.33% to close at 299.26. However, the NSE Insurance Index depreciated by 2.82% to close at 231.50.

Fifty-Two (52) stocks appreciated in price during the week, lower than the sixty-eight (68) of the preceding week. Nestle Nigeria Plc led on the gainers’ table with a gain of N12.50 to close at N252.00 per share while Benue Cement Company Plc followed with N3.50 to close at N50.00 per share. Other price gainers’ in the Top 10 category include:
+ Conoil Plc -N3.11
+ African Petroleum Plc -N2.59
+ Unilever Nigeria Plc -N2.45
+ UAC of Nigeria Plc -N2.32
+ Julius Berger Nigeria Plc -N2.13
+ Cadbury Nigeria Plc -N1.59
+ Nigerian Bottling Co. Plc -N1.18
+ Zenith Bank Plc -N1.13

Forty-eight (48) stocks depreciated in price during the week, higher than the thirty-five (35) of the preceding week. Nigerian Enamelware Company Plc led on the price losers’ table, dropping by N2.78 to close at N52.85 per share while Flour Mills of Nigeria Plc followed with a loss of N1.20 to close at N37.80 per share. Other price losers in the Top 10 category include:
- Ashaka Cement Plc -N0.90
- First Bank of Nigeria Plc -N0.50
- Cement Co. of Northern Nig. Plc -N0.40
- National Sports Lottery Plc -N0.37
- Nigerian Aviation Handling Co. Plc -N0.35
- Costain (WA) Plc -N0.33
- Incar Nigeria Plc -N0.32
- Afribank Nigeria Plc -N0.28

The price of SCOA Nigeria Plc was adjusted for dividend of N0.10 per share as recommended by the Board of Directors.

Company news
NIGERIAN BREWERIES PLC: Announcement of interim dividend. The Board of Directors is recommending an interim dividend of N1.50 per share. The date of closure of register of members is 27th January 2010 while payment date is 8th February 2010.

FIDSON HEALTHCARE PLC: Audited result for the year ended 30th June 2009 shows Turnover of N5,019.8 million as against N4,503.64 million in 2008. Profit after tax stood at N429.1 million compared with N189.3 million in 2008. The Board of Directors is recommending a dividend of N0.22 per share. The date of closure of register of members is 19th January 2010 while payment date is 25th February 2010. The Annual General Meeting is scheduled to hold at Banquet Hall, Sheraton Hotels & Towers, 30 Mobolaji Bank-Anthony Way, Ikeja, Lagos on Thursday, February 11, 2010 by 12.00noon.

COSTAIN (WA) PLC: Audited result for the year ended 31st March 2009 shows Turnover of N6,274.11 million as against N3,814.9 million in 2008. Loss after tax stood at N615.12 million compared with profit after tax of N353.22 million in 2008. The date of closure of register of members is 9th February 2010. The Annual General Meeting is scheduled to hold at Federal Palace Hotel, Ahmadu Bello Way, Victoria Island, Lagos on Tuesday, February 23, 2010 by 11.00a.m.

BECO PETROLEUM PLC: Unaudited result for the first quarter ended 31st October 20009 shows Gross Income of N825.94 million, as against N998.85 million in the comparable period of 2008. Profit after tax stood at N75 million compared with N44.2 million in 2008.

UNITED NIGERIAN TEXTILES PLC: Unaudited result for the third quarter ended 30th September 2009 shows Turnover of N6,544.7 million, as against N8,838.42 million in the comparable period of 2008. Loss after tax stood at N956.04 million compared with N659.63 million in 2008.

AFRICAN PAINTS NIGERIA PLC: Unaudited result for the third quarter ended 30th September 2009 shows Turnover of N34.91 million, as against N26.4 million in the comparable period of 2008. Loss after tax stood at N32.02 million compared with N36.6 million in 2008.

Company Forecasts
LAFARGE CEMENT WAPCO NIGERIA PLC: The Company forecasts Turnover of N15,624 million and profit after tax of N3,146 million during the first quarter ending March 31, 2010.

TRANS-NATIONWIDE EXPRESS PLC: The Company forecasts Turnover of N151.5million and profit after tax of N17.6 million during the first quarter ending March 31, 2010.

VITAFOAM NIGERIA PLC: The Company forecasts Turnover of N5,777.12 million and profit after tax of N313.02 million during the half year ending March 31, 2010.

Report On The OTC Market For FGN Bonds
A turnover of 346.63 million units worth N399,488.01 million in 4,516 deals was recorded this week, in contrast to a total of 86.7 million units valued at N101,105.6 million exchanged in 1164 deals during the week ended Thursday, January 7, 2010. The most active bond (measured by turnover volume) was the 6th FGN Bond 2012 Series 1 with a traded volume of 57.0 million units valued at N63,017.9 million in 569 deals. This was followed by the 4th FGN Bond 2014 Series 3 with a traded volume of
50.9 million units valued at N60,476.44 million in 1,019 deals. Twenty-Two (22) of the available forty-one (41) FGN Bonds were traded during the week, compared to seventeen (17) in the preceding week.

Source: Nigerian Stock Exchange

Our Overall Expectations: 2010 Will be A Bag of Mixed Blessings

On the whole, we expect a tale of mixed fortunes for Nigeria in 2010. With commodity prices having somewhat stabilized driven largely by widespread signs of better than expected growth in global economic output, the current outlook for resource rich African countries is indeed much better than a year ago. This view is reinforced by global market conditions which seem to suggest that the United States and other major western economies are effectively out of recession, with leading emerging markets (Brazil, Russia, India, China) way ahead of the pack. Nigeria is therefore poised to derive significant benefits from the impending period of growth given its disproportionate reliance on crude oil receipts for government income and foreign exchange inflows (assuming prices hold steady above the $70.0 mark). However, one key risk to Nigeria’s revenue profile remains the amnesty deal brokered by the President with the militants in the troubled Niger Delta region. Should hostilities resume, production volume will plunge and drive a hole in the 2010 revenue forecast.

The Nigerian banking sector as the conduit for intermediating government spending should be positively impacted by increased government revenues. By Q2 2010, we would expect the reforms by the CBN to have reached an advanced stage: the Asset Management Company of Nigeria (AMCON) finally set-up, fully operational and in ownership and control of banks toxic assets; a number of M&A activities well beyond the exploratory talks and nearing completion; and the gradual return of new credit expansion as banks begin to lend once again. However, as current market conditions seem to suggest, credit availability in 2010 would be more constrained, and targeted only at borrowers with excellent credit ratings: governments, blue-chip corporates and ‘select’ high net worth individuals (given the name-and-shame strategy of the CBN). Retail consumers who have borne the brunt of a near total credit freeze will still remain largely frozen out for much of 2010 in our view. We also expect to see sparse volumes of credit-financed speculative inflows into real estate markets.

Given the current market preference for safety and fixed income, we expect money market instruments, government treasuries and sovereign bonds to continue to receive heavier weightings in investor portfolios. While we estimate the risk of further devaluation of the naira to be minimal, we however expect to see continued diversification into non-naira based assets as naira hedging continues to be fashionable in the near term. Within this scenario, we see scope for stable earnings performance for many large corporates, particularly in traditionally defensive sectors with limited dependence on financial market stability/liquidity for revenues and profitability.

2010 Equity Strategy: Wanted: High Cash Generative, Low Debt Businesses
Given the overall outlook on Nigeria’s macroeconomic scenario and financial market conditions in 2010, our focus remains on seeking strong companies with fundamentally sound competitive positions and revenue profiles, as well as a healthy degree of cash revenues, low debt dependence and strong management teams. Given the degree of uncertainty going into 2010, Afrinvest Research believes that market participants will pay a premium for competent corporate leadership, that is able to demonstrate a clear strategy for navigating the expected turbulence of 2010, and thriving over the longer term. Our focus is more heavily skewed towards companies with stable revenue sources.

On that note, we are most favorably inclined towards businesses with significant retail/consumer exposure, dominant market positions, high cash-based revenue components and with low links to sectors that are dependent on financial market liquidity. On the cost side, we expect the onset in 2010 of the planned de-regulation to the downstream sector of the petroleum industry to adversely impact energy and fuel costs. We also expect the continued , albeit modest, recovery of the global economy to exert an upward pressure on freight and commodities costs. This may result in slight increases in the import bill for Nigeria’s heavily import dependent businesses. While there is little to suggest any major devaluation risk to the naira, we highlight the potential downside risk to this scenario which the political uncertainty presents to fragile successes recorded by the amnesty. We seek businesses with low levels of recurring debt balances, relative to total financing structure as we expect a continuation of the constriction in bank credit to the private sector, with the sole exception of companies with the best credit profiles.

We believe that companies which fall within the fast-moving consumer goods segment would exhibit the characteristics we have outlined above. On a sectoral basis therefore, we are OVERWEIGHT consumer goods sector for 2010. Despite our outlook and thus UNDERWEIGHT stance on the financial services sector, a selection of banks and insurers continue to evince valuable propositions. Among banks, we see value in a few top-tier and in more mid-sized institutions with greater levels of disclosure on risk assets, diversified and well balanced funding sources and strong management teams that are able to provide a credible degree of visibility on near term business prospects. We remain OVERWEIGHT downstream construction sector as we see scope for upside given the continued emphasis on capital expenditure to bridge Nigeria’s infrastructure deficit by Governments across the federation.

Overall, we believe that a cautious increase in exposure levels to equities in 2010 is to be expected as current valuation levels would suggest a major buying opportunity across specific sectors. Afrinvest Research however expects that factors such as the banking sector overhang on the stock market will reduce the scope for near term price appreciation most equities. Further, with significant amounts of deficit financing anticipated by both Federal and State Governments in 2010 as well as the rush of corporate bond issuances still on the table, we anticipate lower levels of capital availability for private sector operators. We would look to buy into dips, skewed in favour of long term positions in traditionally defensive businesses, as against taking opportunistic positioning to benefit from short term appreciation driven largely by technical factors and favorable news flow.

They also provided a quick analysis of the following companies which they think have potentials, documenting their risks, rewards, etc.

ACCESS BANK PLC
BENUE CEMENT COMPANY PLC
CONTINENTAL REINSURANCE PLC
CUSTODIAN & ALLIED INSURANCE PLC
DANGOTE SUGAR PLC
DIAMOND BANK PLC
GLAXO SMITHKLINE PLC
GUARANTY TRUST ASSURANCE PLC
GUARANTY TRUST BANK PLC
GUINNESS NIGERIA PLC
LAFARGE WAPCO PLC
NIGERIAN BOTTLING COMPANY
NIGERIAN BREWERIES
OANDO
SKYE BANK
TOTAL
UAC of NIGERIA PLC
UBA
UNILEVER
Zenith Bank

Outlook for 2010
There are positive prospects for the Nigerian economy for 2010. The World Bank and IMF believe that the global economy would emerge from recession to record positive growth rates in 2010. Specifically, IMF said it expected the world economy to grow by 3.1%, while the Nigerian economy is expected to grow by 5%. The Economist anticipates a GDP growth rate of 5.2% in 2010 while the Federal government targets 6.1%. By OPEC estimates, global crude oil demand in 2010 would reach 85.13mbd, increasing by 0.82mbd or 0.98% compared to 2009. Demand for OPEC crude oil is expected to be 28.61mbd in 2010, up from 28.58mbd in 2009 attributed to the expected global economic recovery. US-based Energy Information Administration (EIA) forecast that increased crude oil prices and output would boost OPEC member countries income by $184 billion (about N27.6 trillion) in 2010, after tumbling nearly 1/3 in 2009. OPEC countries were projected to net about $575 billion in 2009 – far below its record 2008 income of $965 billion.

NNPC disclosed that barring any serious disruptions in the oil industry, Nigeria’s crude oil production level is expected to peak at 2.506mbd in the 2010, 20% higher than the 2.088mbd on which revenue projections for the year were based. The optimism is based on the successful completion of the first phase of the amnesty programme. NNPC foresees an upsurge in oil production activities as the various oil firms seize the opportunity to execute major repairs on their facilities hitherto vandalized, as well as to re-enter previous no-go areas.

Commodity prices were surprisingly buoyant in 2009, and are expected to increase further in 2010 as world activity expands after the global crisis. But rising demand will require extra capacity in many commodity sectors. However, the ability to impact on the economy depends on the institution of policies and programmes to boost output.

Despite the optimistic views, there are fundamental challenges to be faced during the year. The expected growth rate in 2010 would be defined by the economy‘s ability to sustain the amnesty programme in the Niger Delta, the provision of basic infrastructure, management of inflationary risks from fuel price deregulation, and the prevention of labour unrest. We are confident the current uncertainty in the political environment would settle soon and refrain from impacting the economy and stock market negatively.

Sustained recovery now requires effective reform of financial markets. As only a more ethical and responsible financial sector can properly serve the needs of the economy. Effective regulation is in the interest of financial institutions. One step in this direction has been the issue of the adoption of International Financial Reporting Standards (IFRS) which the Nigerian Stock Exchange proposes to adopt this year. Another crucial factor for a sustained recovery is the role of the proposed Asset Management Company (AMC). The proposed Asset Management Company (AMC) offers the Nigerian financial markets the opportunity of a life time to strengthen our infrastructure and put us in a better position to deal with contingencies as experienced by the market in 2008/2009.

The regulatory authorities have met to decide on a proposed structure and the President has sent the bill to the National Assembly. It is important that the bill is passed as soon as possible in order that the AMC can come into existence and remove a large chunk of the non-performing loans from the books of the banks thereby freeing up credit that can be used to drive economic growth. The concept of the AMC must be got right and if for want of time far-reaching corrections cannot be made in the bill, the guidelines for the operation of the AMC must be formulated to take care of the important details not covered by the bill when it eventually becomes an Act.

The Nigerian Stock Exchange commends the Federal Government for sustaining the issuance of bonds through the Debt Management Office (DMO), however, for the purpose of transparency and pricing efficiency, The Exchange should make the request that the DMO consider migrating trading on the OTC to The Nigerian Stock Exchange trading platform, which has the technology to deliver on transparency and efficiency. It is significant that, contrary to local argument that bonds are better traded OTC, last year the London Stock Exchange launched a new retail bond market for the UK. Also, the market would be order-driven, as against the contention in certain quarters here that a liquid bond market must be quote-driven.

Furthermore, since the original intention in the organization of the government bond market was to replicate the bond market of South Africa, in spite of advice to the contrary, the acquisition of Bond Exchange of South Africa by the JSE Securities Exchange should cause the DMO and SEC to review the extant strategy for reactivating the Nigerian bond market.

The issue of bond trading and investing has taken on more importance recently as a result of the problems suffered in Dubai. As a result of the near default by DubaiWorld, bond investors worldwide are starting to review their exposure to sovereign and quasi-sovereign debt in order to avoid any potential default or liquidation issues. Along with our recent classification by the USA, Nigeria may likely experience a lesser participation by international investors in its bond market going forward. This makes it even more important to open this segment to the retail investors, especially at a time when we anticipate several Sovereign, State and Corporate bond issues coming to the market in the near future. This is another reason we hope DMO will review its decision about migrating trading from the OTC to the Exchange platform.

Over time, The Exchange has brought to the fore, challenges militating against stock market development in Nigeria. These challenges include the incidence of multiple tax regimes on businesses and investors, and the slow pace in the implementation of the privatization programme, especially those earmarked to be consummated through the stock market. The Exchange urges the National Assembly to expedite action on all bills on Tax, Oil and Gas reforms, Privatization, and Capital Market reforms currently before it. The Exchange appeals to government to review the tax structure holistically, with a view to streamlining the tax system and remove incidence of multiplicity of taxes by the three tiers of government

The Primary Market promises to be busy during 2010 as many banks and corporate entities consider recapitalizing through combinations of bond and equity issues. The Exchange awaits execution of the decision, by the Bureau of Public Enterprises (BPE), for the National Council of Privatization to sell government‘s interests in six public corporations on the Exchange. These corporations are Transcorp Hilton Hotel, NNPC, NITEL, Nigerian Reinsurance Corporation, NICON Insurance and Nigerian Security, Printing and Minting Corporation.

The Secondary Market also promises to be busy with many companies that executed Private Placements in 2008 take advantage of the window of opportunity offered by the recently-created AIM/PRIPEX, to list their shares. Through public awareness programmes, The Exchange plans to sensitize the investing public on the various opportunities available in the stock market.
The Exchange will continuously work to support government and its agencies towards the realization of Nigeria‘s economic development and growth objectives, working closely with the Federal Ministry of Finance, CBN, SEC and other members of the Financial Sector Regulation Coordinating Committee (FSRCC), while maintaining relationships with operators in the international arena, with a view to facilitating the flow of international investment capital to Nigeria. In taking such pro-active measures, the intent is to enhance the quality of the overall market.