Investors Lose N18.46bn as NSEASI Dips by -0.09%, Maintains Negative Market Sentiment
Equities market closed today on a negative note, as NSEASI depreciated by -0.09% to close at 39,184.18 basis points as against -0.27% depreciation recorded previously. Its Year-to-Date (YTD) returns currently stands at -2.70%.
Market breadth closed negative as AIICO led 9 Gainers as against 15 Losers topped by FTNCOCOA at the end of today’s session – an unimproved performance when compared with previous outlook.
Market turnover closes negative as volume moved down by -60.23% as against +41.41% uptick recorded in the previous session. TRANSCORP, ZENITHBANK and HONYFLOUR were the most active to boost market turnover. ZENITHBANK and SEPLAT topped market value list.
SEPLAT leads the list of active stocks that recorded impressive volume spike at the end of today’s session.
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Out of a total of 46 activity sectors of the Nigerian economy, 17 exited recession (a prolonged period of negative growth) in the second quarter (Q) of 2021, thereby contributing to Nigeria’s Gross Domestic Product (GDP) of 5 percent, the highest since 2014
The sector had been recording negative growth for the past four quarters till it expanded by 0.63 percent in Q2’ 2021 from -24.12 percent in Q2’ 2020.
The sector was among the other sectors that were adversely affected by the impact of COVID-19 pandemic. The lockdown measures to curb the spread of the virus led to school closures, poor learning, unequal access to education opportunities, poor skills, salary cuts, loss of jobs for teachers, and parents’ inability to pay school fees was a loss to school owners leading to debts
The insurance sector grew by 15.68 percent in Q2’ 2021 after contracting since Q1’ 2020 (-29.53%). In 2020, a PwC report cited that for insurers, the fallout from the COVID-19 outbreak included a surge in health, travel and business interruption claims, pressure on sales from reduced business activity for insurers, and less use of face-to-face channels.
“The gathering economic slowdown emanating from the pandemic drove interest rates even lower, and increasing credit risk exposures from businesses facing possible default,” the report stated.
This sector, which can be likened to the barometer of consumer purchasing power, has been in and out of negative growth territory since 2016, but at a marginal level over myriad challenges ranging from unpredictable government policies to weak consumer demand.
But it returned to positive growth in Q2’ 2021, ending eight consecutive quarters of contraction. The positive growth recorded in Q2 (22.49%) is the first one since Q2’ 2019 (-0.25%).
This sector grew by 4.98 percent in Q2 after consecutively recording negative growth since Q2 last year ( -57.38%). Some of the negative impacts of the pandemic on the sector include closure of airports and banning of flights, increasing industry debt profile, negative impact on tourism, increased competitive pricing and severe loss of jobs
ARTS, ENTERTAINMENT AND RECREATION
The sector expanded by 1.22 percent in Q2, after consecutively recording four negatives since Q2’ 2020.
This sector depends on the audience of people for finance, thus making the pandemic impact the sector negatively. The pandemic brought a halt to the performer/audience physical participation and interaction, and a lot of reduction in the socio-economic progress of entertainers and the industry depends on their audience for finance.
Out of all the 17 sectors, road transport had the highest growth of 92.38 percent in Q2’ 2021.
The lockdown measures, restriction on interstate travels, violent kidnappings, robberies and banditry across major highways in Nigeria had impacted the sector.
Education and literacy are the major drivers of the publishing sector in Nigeria. So, it is no surprise that the closure of bookshops and cancellation of book fairs affected the growth of the sector.
According to Gbadega Adedapo, the president, Nigerian Publishers Association, the book industry lost over N10 billion to the pandemic.
The rest of the sectors are textile, apparel & footwear; wood & wood products; pulp, paper & product; electrical and electronics; basic metal, iron & steel; accommodation & food services; water transport, professional; scientific & technical services, administrative & support service, and other services.
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Investors Expectations Following SEC, Oando Settlement
Following a court judgement in favour of Oando Plc and its shareholders, Nigeria’s Security and Exchange Commission (SEC) on 19 July 2021 announced the settlement of outstanding cases against Oando Plc buoyed by the need to protect the interests of shareholders. In a circular signed by the commission, the settlement read Pursuant to the powers conferred on the SEC by the Investments and Securities Act 2007, and the Rules and Regulations made pursuant thereto, the Commission on Thursday, July 15, 2021, entered into a Settlement with Oando Plc (the Company).
To give a bit of context, the commission had in its letter to the company dated May 31, 2019, gave certain directives and imposed sanctions on the company, following investigations conducted pursuant to two petitions filed with the commission in 2017.
Recall that in 2017, the commission had received two petitions concerning gross corporate governance misconduct and financial mismanagement in Oando Plc. In response, SEC in 2019 barred the company’s top management from the boards of public companies for 5 years, prohibited the directors from holding an annual general meeting, and later fired the directors.
The recent victory of Oando Plc on the matter was predicated on a few court cases filed by shareholders including Engr. Patrick Ajudua in Abuja and Alhaji Yakubu Gumel and in Kano, challenging the directive of the SEC in suspending the company’s AGM which they said breached their rights to freedom of association. The court favoured the cases filed, translating to victory for the company.
The trading sessions after the settlement saw investors responded with a mixed bag to the company’s victory. In the earliest days following the settlement, investors responded with buying interests in the company’s shares. The share price increased by +29.5% in the three consecutive trading sessions following the settlement and topped the gainers’ chart on the third day-February 24, 2021. The price remains elevated few weeks following the settlement but has since declined to trade at lower prices in recent weeks (See Table 1 below).
Nonetheless, the share price has risen by +29.7% YTD and sells currently for N4.80 as at the close of the trading session on 27 August 2021. Also, Oando achieved its highest trading volume at 56.3million on 29 July 2021, few days after the settlement with SEC.
Table 1: Oando Share Price Changes as of 27 August 2021
The lingering crisis between Oando and SEC has been a thorn to investors given its negative effect on the company performance. Stakeholders are relieved that the lingering crisis has finally been resolved and hope for better performance for the company.
The company shareholders believed that the suspension period was a bad omen for them. Currently, the consensus seems to rally around the excitement about the settlement of the Oando SEC crisis. Shareholders noted that the means of settlement corresponded with their previous position that there was a need for out-of-court settlement between both parties.
A shareholder of the company commended both SEC and Oando for playing their respective roles to ensure that the dispute was put to rest. In his word, SEC should be commended for having the interest of investors in settling its case with Oando. The management of Oando also deserves commendation for taking steps to resolve their issues with SEC.
Speaking on the expectation of shareholders following the court settlement, another investor noted that, the resolution is a good development for the Nigerian capital market. There is an expectation that Oando Plc will continue as a going concern and make their financials available as at when due. Shareholders expect Oando to stabilize as a company and return to the path of sustainability.
Another shareholder noted that the company’s stock had benefitted from the settlement as the share price has stabilized between N4.5ok and N5. However, he believed that the forthcoming Annual General Meeting and the release of the company’s financial results will have a significant effect on the company’s share price.
Commenting on what is expected from the company in the near term, a shareholder emphasised the need for Oando’s Board to cooperate and align with corporate governance principles in the near term. He noted that there is also a need for barring political intrusion from disrupting the effective execution of the regulator’s duties, especially on the resolution of issues in the corporate world.
Meanwhile, another investor also warned that caution must be taken to ensure the company adheres to corporate governance principles going forward.
Oando’s Lines of Action for H2
As shareholders and investors watch out for the company’s earnings and the signalling effect of the court ruling and SEC action on Oando share price, the company’s shares may yet be viewed with keen scepticism till the ripple effect is much clearer. Analysts expect the company to leverage few activities to foster its rebound.
First, Oando may need to deliver sound successive financial statements in Q3 and Q4 2021 to boost investors’ confidence in the company.
Second, the company may need to strengthen its corporate governance structure to enhance governance oversight, regulate risk, and block the leakages that induce financial management challenges. This would strengthen the company’s culture of integrity and reduce the possibility of future sanctions.
Third, the company may need to deploy resources and time to deliver the all-desired Annual General Meeting (AGM) to reassure shareholders of the protection of their rights, the transparency of the management, and to resolve all outstanding issues of the stakeholders.