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2014: Another Year Of Locust Portfolio Investment

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The year 2014 will remain
    evergreen in the annals of the Nigerian capital market, just like 2008 — the year of the locust or the global financial meltdown.
The key issue in comparison remains that market within the period under review witnessed a major setback, which wiped away the growth posted in 2013.
Investors returned to another locust era, following the tight macroeconomic policies, falling crude oil prices, prolonged security challenges and anxiety on uncertainties in the scheduled 2015 general elections.
Available statistics showed that, in spite of the orchestrated market recovery championed by the capital market regulators, the Nigerian bourse would close for the year as one the worst performing markets across the globe, due largely to sales pressure by panic foreign investors.
The total foreign exchange outflow, as at October 2014, amounted to N101.22 billion as against N92.54 billion posted in September.
Also, a total of N56.56 billion total foreign outflows was recorded in August 2014, due to investment retreat embarked on by foreign investors, occasioned by falling crude oil prices.
The nation’s market scenario, according to many analysts, point to the need for increase in participation by domestic investors in portfolio investment.
Investments in the sector stood at 12.46 per cent as at October, compared to 49.06 per cent recorded as at November 2013.
Records of trading on the Nigerian Stock Exchange (NSE), as at December 5, showed that the equity market dipped by 20 per cent to-date due to massive sell-off, in spite of strong corporate fundamentals of listed companies, against 47.19 per cent achieved in 2013.
Other factors that affected market growth, in spite enhanced regulatory framework embarked upon by regulators, were hike in Cash Reserve Requirement, increase in Monetary Policy Rate and devaluation of the naira by the Central Bank of Nigeria (CBN).
The market was also negatively impacted by the instability in the exchange rate, which led to the exit of more foreign investors, with the nation’s currency losing about 11 per cent of its value against the dollar in the year.
Market data showed that at the close of market on December 5, the All-Share Index of the Exchange dropped by 20 per cent year-to-date, to close trading at 33,228.29 points, against opening year index of 41,329.19 points.
Also, market capitalisation, which opened trading for the year at N13.20 trillion, dipped by N2.23 trillion to close trading on December 5 at N10.970 trillion.
Speaking on the 2014 market performance, the Group Chief Executive Officer, UBA Capital Plc.,Mrs Oluwatoyin Sanni, attributed the development to depressed investor confidence and concerns surrounding the forthcoming general elections.
Sanni said that security challenges in the country led to a ‘wait-and-see’ game by international investors, who wish to ascertain the outcome of the general elections and the sustainability of the nation’s economy.
The UBA Capital boss said the foreign investors’ ‘wait-and-see’ game would likely continue until the second quarter of 2015 when the outcome of the elections would have been ascertained.
Sanni said that persistent oil price drop- a significant contribution to the nation’s Gross Domestic Product (GDP) — added to the lull in the market and the economy in general.
Another major factor in the nation’s negative economic swing that affected the growth of the capital market, she noted, remained the issue of market-based liquidity challenges.
According to her, Nigeria’s retail investors’ apathy at the NSE remains very visible, following poor financial inclusion.
She, however, argued that the persisting challenges were not insurmountable, stressing that the global economic problems necessitated the need for a regulatory operating synergy among the different arms of the financial markets’ regulators to systemic market failure.
To her, the need to avoid duplication of regulatory oversights has made it imperative for the Securities and Exchange Commission (SEC), the CBN, the NSE and the Pension Commission to collaborate towards achieving market development, depth and growth sustainability.
The Federal Government, she said, must move toward the promotion of a National Savings Policy to engender long-term saving culture among Nigerians.
Sanni also insisted that the desired savings culture would only emerge through updating of the Pension Fund Administrators’ (PFAs) investment guidelines, to ensure maximum use of the opportunities in the nation’s capital market.
She also canvassed the need for the listing of the government privatised entities in the market and prompt privatisation of the remaining agencies to strengthen market depth and breadth.
Also, Mr Emeka Madubuike, President, Association of Stockbroking Houses of Nigeria (ASHON), described 2014 as one of the worst years in the history of the nation’s capital market.
Madubuike, the Managing Director of Compass Securities, said that the major lesson in the period was an urgent need for diversifications of the nation’s economy, with less emphasis on crude oil.
The ASHON boss said that the development called for less spending by the Federal Government and the introduction of more economic buffers to reduce the effect of external shocks on the economy.
Madubuike said that government should support the market by ensuring that the bulk of its investment in the transformation agenda would come from the market, instead of concentrating on local and international borrowings.
He said that the infrastructure needs of the country would not be achieved through borrowings, noting that the capital market remained the vehicle for long-term funding of developmental projects.
Madubuike also stressed the need for increased participation of domestic investors in the market, to reduce shocks caused by the exit of foreign investors. He said this could be achieved through strict implementation of the capital market 10-year master plan launched in 2014.
The Managing Director, APT Securities and Funds Ltd., Malam Garba Kurfi, said that the economy would not achieve any meaningful growth and development with the present security challenges.
Kurfi said that the Federal Government should address issues of national security critically, and ensure political stability, since the nation’s economic performance in 2015 would be determined by the outcome of the general elections.
He also called on the government to ensure the investment of the Sovereign Wealth Fund (SWF) in the nation’s bourse, to strengthen market activities.
Kurfi said that certain percentage of the fund should be invested in the market to avoid foreign dominance, noting, however, that, the funds should be invested in blue chip companies.
He said that government should be committed to the development of the stock market, to protect it from being dominated by foreign investors, as they could offload at any given time.
Overall, the contention of most of the stakeholders was that the Government must, and should, demonstrate more than lip-service in the development of the nation’s capital market because of its role in promoting sustainable economic development.
They contended that the nation’s development challenges, especially in infrastructure, major driver and moderate of growth, would be fast tracked if government and sub-national institutions appreciated the dynamics of development seed funds.
They clearly identified the overhaul of the privatisation legal framework that would compel emerging companies from the privatisation programme to be listed at the Exchange.
According to them, the overhaul of the privatisation laws will enable a large segment of Nigerians to benefit from the unbundling of our commonwealth into viable private-driven companies.
To them, the opportunity to own shares of the new companies would engender confidence in the economy and stimulate avenues for Nigerians to sharpen their entrepreneurial skills in transforming a local company into a global concern.

 

Chinyere Joel-Nwokeoma

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Crude Hits Seven-Year High On Recovery Hope … Equity Rally Runs Out

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Crude oil hit a more than seven-year high yesterday on optimism that the global recovery will ramp up demand.
However, concerns about the end of long-running central bank support and rising Treasury yields saw most equity markets reverse early gains.
After an almost uninterrupted rally from the early days of the COVID-19 pandemic, world markets are showing signs of levelling out as global finance chiefs shift from economy-boosting largesse to measures aimed at reining in inflation.
Still, there is an expectation that equities will enjoy further gains this year as countries reopen and people grow more confident about travel, especially as studies suggest the more prevalent Omicron coronavirus variant appears to be milder and as vaccines are rolled out.
Analysts are also watching the corporate earnings season that is underway, with hopes that firms can match their stellar performances last year.
But while Asian markets started the day brightly after Monday’s travails, traders returned to selling, with US Treasury yields surging on expectations the Federal Reserve will have to unveil several interest rate hikes to tackle a worrying spike in inflation. Wall Street was closed Monday.
Tokyo, Hong Kong, Sydney, Seoul, Singapore, Taipei, Mumbai, Bangkok and Jakarta all fell.
There were gains in Shanghai in hopes of fresh economy-boosting measures, while Wellington and Manila also edged up.
London, Paris and Frankfurt all fell at the open.
But oil built on its early promise, with Brent climbing to $88.13 a barrel and WTI hitting $85.74, both levels not seen since October 2014.
The gains came thanks to demand optimism as the world reopens and concerns about Omicron ease. The loosening of travel restrictions in several countries has seen jet fuel costs soar.
Hopes for more monetary easing by major consumer, China, to reinforce its stuttering economy were also seen as key support for the oil market.

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NPA, MWUN, Others Synergise On Labour

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President General of Maritime Workers Union of Nigeria (MWUN), Comrade Adewale Adeyanju, has reaffirmed commitment to ensuring smooth working relationship with  management, Tin Can Island Port Complex (TCIPC) of the Nigerian Ports Authority (NPA) on labour related issues.
Adeyanju, who made the commitment during a working visit to the Port Manager, TCIPC, Mr. Buba Jubril, in Lagos, noted that the union will continue to promote industrial peace and harmony in the  operational activities at seaports.
Noting that synergy among all the maritime stakeholders was key for port efficiency, he hinted that the union has changed the narrative from being tagged as hooligans to a more responsible and civil Institution in the maritime industry.
Earlier, the Port Manager, TCIPC, Buba Jubril, thanked the  PG of MWUN for the systematic approach on labour related issues at the port level
Disclosing that the PG has been instrumental to the existing peace in port operations, Jubril assured on the existing synergy the port authority and all the unions.
Jubril further said that “ Myself and the President General MWUN has come a long in the industry.
“I have known him (PG) for over 33years and that will tell you that he is my friend and friend to management of the Nigeria port authority”, he said.

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Osinbajo Wants More Stakeholders’ Involvement In Blue Economy … Inaugurates Committee

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Vice President Yemi Osinbajo has sought for wider participation of relevant stakeholders in the blue economy project to deepen participation and benefits of Nigerians from the country’s marine resources.
Making the call at the  inaugural meeting of an Expanded Committee on Sustainable Blue Economy in Nigeria at the Presidential Villa yesterday, the Vice President said “a viable blue economy project will offer vista of opportunities not only for littoral states where there are bodies of waters, but for the entire country”.
He identified areas to be exploited to include ports, terminals, fishing, training, environment, tourism, power,oil and gas.
While identifying possible challenges of sustainability, the VP urged all the ministries, departments and agencies to strengthen their collaborations in an atmosphere of inter ministerial working groups and advised all members to attend the meetings faithfully for maximum results.
Osinbajo , who formally inaugurated the expanded committee, identified the need for a legal framework that will be more robust than other international maritime conventions on blue economy, which Nigeria has been signatory to.
He said the scope and participation of the committee will be further improved upon to accommodate more members from government agencies and relevant private sector stakeholders
“There is no doubt that the blue economy is a new frontier for economic development and a means of diversifying the economy through the use of resources from oceans, seas, rivers and lakes for the well being of the people.
“It also provides positive contribution to the achievement of the Sustainable Development Goals(SDGs) 2052 Africa Integrated Maritime Strategy (2052AIM) and the UN 2030 agenda
“This concept for economic diversification is promoted by the international community and provides friendly means of livelihood in line with this administration’s agenda on job creation’, he said.
He continued that “the ocean economy as an emerging economic frontier applies to ocean-based industry activities and the assets, goods and services of marine ecosystems.
“Countries have to define the scope of their blue economy based on their priorities. For example, in Bangladesh, the ocean economy consists of the following broad and growing economic sectors; living resources, minerals, energy, transport, trade, tourism and recreation, carbon sequestration and coastal protection.
“These industries and ecosystem services do not develop in isolation, but rather interact as an economic ecosystem”, the VP said.
Earlier in his remark,Transportation Minister, Rotimi Amaechi said the blue economy is capable of improving government revenue, create employments and grow the gross domestic product of Nigeria.
Amaechi, who was represented by the Permanent Secretary of the ministry, Dr Magdalene Ajani, also expressed optimism in the benefits derivable from a well exploited marine environment
Speaking at the event,  Dr. Paul Adalikwu, Secretary General of Maritime Organisation of West and Central Africa (MOWCA) lauded the initiative of the expansion while recommending inclusion of financial institutions such as the Central Bank of Nigeria (CBN) and African Development Bank (AfDB), as well as key financial institutions that will contribute meaningfully to realizing Nigeria’s Blue Economy objective.
In addition to  maritime agencies such as the Nigeria Ports Authority, Nigerian Maritime Administration and Safety Agency, and Maritime Academy of Nigeria, the expanded committee also include ten state governors.
They the Governors of Rivers, Lagos, Delta, Akwa Ibom, Borno, Ogun, Ondo, Cross River, Bayelsa and Edo States.
Other members are Ministers of Foreign Affairs, Power, Finance, Environment, Trade and Investment, Agriculture and Water Resources , Chief of Naval Staff, Comptroller General of Customs, Lake Chad Basin Commission, Nigeria Economic Summit Group, etc.

By: Nkpemenyie Mcdominic, Lagos

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