2 BUSINESS DAY NEWS
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Wednesday 23 January 2019
Lessons for Nigeria as Saudi plans refinery, petrochemicals plant in S/Africa DIPO OLADEHINDE
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ews of Saudi Arabia’s plans to build an oil refinery and a petrochemicals plant in South Africa as part of $10 billion investments in the country will probably send
L-R: Abimbola Agboluaje, secretary, The Peter Bauer Foundation; Suraj Oyewale, senior tax accountant, Seven Energy; Lois Padonu, lead speaker, Unilag; Lasisi Ibrahim, supporting speaker, Unilag; Adefowope Iyabo Rahmat, lead speaker, Unilorin; Iortsor Nicholas, supporting speaker, Unilorin, and Chude Jideonwo, founder, Joy, Inc, at the Nigerian Fuel Subsidy Debate, organised by The Liberal Forum (aka The Peter Bauer Foundation) at the Freedom Park, Lagos.
Concerns over Access Bank’s proposed N75bn Rights Issue, others ... as publicised Extraordinary General Meeting cancelled IHEANYI NWACHUKWU
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ccess Bank Plc notified the Nigerian Stock Exchange (NSE) of the cancellation of its previously publicised Extraordinary General Meeting (EGM) scheduled to hold on February 1, 2019 in Lagos, giving no clear reasons. Access Bank had on December 20, 2018 issued a formal notification of the now cancelled Extraordinary General Meeting. “We regret any inconvenience that this cancellation may cause our shareholders”, Access Bank said in a Tuesday, January 22 notice at the NSE signed by Sunday Ekwochi, company secretary. Access Bank Plc would have, among other special businesses slated for the now annulled EGM, been seeking for the shareholders’ approval for the directors to raise additional equity capital of up to a maximum of N75 billion by way of a Rights Issue. Other special business/ordinary resolutions meant for the now cancelled EGM includes that the bank’s authorised share capital be increased from N20 billion made up of 38 billion ordinary shares of 50 kobo each and 2 billion preference shares of 50 kobo each to N35 billion
by the creation of 30 billion ordinary shares of 50 kobo each. Access Bank Plc and Diamond Bank Plc last month received “No Objection” from the Central Bank of Nigeria (CBN) regarding a potential merger between the two banks, which is expected to complete in the first half (H1) of 2019. Access Bank said last month it has already finalised terms and obtained regulatory approvals for a Tier-II capital issuance, which will raise $250 million, available for drawdown in January 2019. The tier-1 lender said it has also obtained “No Objection” from the CBN to undertake a Rights Issue to raise up to N75 billion (about $207 million) in H1 2019. Shareholder approvals and other regulatory approvals are to be obtained before the offer opens. “This accelerates the capital management plan to support retail growth, previously set out in the bank’s five-year strategy,” Herbert Wigwe, CEO of Access Bank Plc, had said. Transaction completion is subject to Access Bank and Diamond Bank obtaining shareholder and regulatory approvals – Central Bank of Nigeria, Securities and Exchange Commission (SEC), the Federal High Court (FHC) and the National Pension Commission (PenCom).
The cancelled EGM would have also served as an avenue for the bank shareholders to follow through to the Memorandum of Agreement executed between Access Bank Plc and Diamond Bank Plc on the merger of the two entities. The signed Memorandum of Agreement and announcement of headline terms which valued Diamond Bank at approximately N72.5 billion will see Diamond Bank shareholders receive N3.13 per share in cash and shares. If the Rights Issue contemplated is undertaken prior to the implementation date of the merger, the directors of Access Bank would have at the EGM been seeking the shareholders’ nod by way of a placing and subject to obtaining all requisite regulatory approvals, to offer to Diamond Bank shareholders shares in Access Bank to be purchased after the Implementation Date on the same term as the Rights Issue and in the same proportion that they would be entitled to as if they had already become shareholders of Access Bank. Access Bank had a capital adequacy ratio of 20.1 percent as at September 30, 2018. It is currently concluding a US$250m Tier II capital raising exercise in line with its capital plan to provide a robust capital buffer given the current macro-economic environment.
and gas legislation and better business environment. South Africa currently has six refineries. Two of these use synthetic fuels as feedstock and four others use crude oil, with Royal Dutch Shell, BP, Total and Sasol being the major op-
ANALYSIS
shivers down the spines of Nigeria’s economy managers. For many of these managers, the economy has taken a backseat, no thanks to distractions from next month’s general election to which they have exposed themselves. When it comes to investment in Africa’s oil and gas sector, one would predict the frontrunner to be the continent’s biggest oil-producing country. Though Nigeria has the requisite production capacity, huge oil reserves and massive gas reserve, it is not, sadly, the first-choice country for investment. This is understandable as Nigeria is fast losing its competitiveness to other countries with lower oil productions but simpler oil
erators. However, for about a decade,
South Africa has been making plans to build an extra refinery but has been unable to agree on commercial terms with investors. Khalid Al-Falih, Saudi energy minister, commenting after a meeting with South African Energy Minister Jeff Radebe few days ago in Pretoria, said the planned refinery would be run by state-owned energy firm Saudi Aramco using Saudi’s oil. Ministers Radebe and Al-Falih have already signed a Memorandum of Understanding (MoU) to cooperate on oil and gas undertakings. Under the MoU, projects will be launched in South Africa, managed
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Amid rising correlation, fund managers express views on 2019 asset allocation BALA AUGIE
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und managers have expressed a divergence of opinions over the best asset allocation strategy that minimises losses and maximises returns in a volatile and unpredictable macroeconomic environment. This means correlation is rising and investors will have to work harder to achieve diversification. Portfolio managers prefer assets that go up as others go down – a negative correlation – since bond and stocks move in opposite directions. Analysts at CSL Stock Brokers Ltd, intheir2019macroeconomicsoutlook, haverecommendedabalancedportfolio allocation of 40 percent to equities, 40 percent to fixed income securities, and 20 percent to alternative assets as a hedge against a rise in inflation and a projected depreciation of the naira. “For the equities market, we envisage H1’19 will be more turbulent than H2’19 as it will be characterised by political noise,” said analysts at CSL Stock Brokers. “Given limited downside potential in the currency and high potential upside in stock prices, we believe it makes sense for US dollar-based investors to take positions on a oneyear view now,” said the analysts. What the recent selloff may illustrate is that the industry standard of
60/40 model, where a fund manager holds a portfolio of 60 percent in stocks and 40 percent in bonds, can no longer protect volatility in all scenarios. But analysts at United Capital Asset Management are of the view that alternative assets such as real estate and private equity are better pledges against inflation than fixed income. They prefer an allocation of 30 percent to equity, 30 percent, bonds and 40 percent alternative asset. “You need something above what inflation will give you. I am still bullish on equities after the election. Investors need to get exposure to Naira. I think the wise thing is to keep cash,” said Kayode Tinuoye, fund manager, United Capital Asset Management. However, Wale Okunrinboye, investment analyst at Sigma Pensions Ltd, thinks fixed income is probably the best way to go this year, but he is optimistic the market may normalise after the elections. On the global front, Okunrinboye said the continued rate hike by the United States Federal Reserve means frontier and developing markets will be impacted. “With the decline in oil prices since last year, it is negative for the Central Bank of Nigeria (CBN) to keep interest rate low,” said Okunrinboye said. Nigeria faces a challenging 2019 amid a slowing global economy,
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Sanwo-Olu excites Swiss investors with opportunities in Lagos ... Secures $5bn trade commitment ENDURANCE OKAFOR
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head of the World Economic Forum (WEF) holding in Davos, Switzerland 22nd to 25th January, 2019, the All Progressives Congress (APC) governorship candidate in Lagos State, Babajide Sanwo-Olu reinforced the enormous investment opportunities in the state at an exclusive session with selected Swiss investors in Geneva. At the event held at the Mandarin Oriental Hotel, the business interaction triggered commitments of $5 billion investment in infrastructure
and capital projects in the state. While the array of investors comprising commodity traders, equity managers, investment bankers, Fintech and IT experts, infrastructure builders, international donors, energy and power companies unanimously agreed that Lagos is a fertile ground for investments, they cited political risk as a more disturbing consideration over economic risk. In reassuring them, Sanwo-Olu told theinvestorsthatNigeriaissafeforinvestment and Lagos State as the economic nerve-centre of the country presents the bestenvironmentforglobalinvestments.
“There is progressive leadership and stability in the governance of Lagos State since 1999. The state has been under the administration of a party, my party, which is the All Progressives Congress, for more than 16 years. The state has remained a reference point for infrastructural development and economic prosperity in Nigeria and West Africa,” Sanwo-Olu said. “On investors’ protection, I think that should be the least of your worries. Lagos has a comprehensive regulation that protects and shields investors. The scope of the regulation covers disputes resolution and commitment to ease of
doing business,” he said. Earlier, the APC governorship candidate informed the investors about his determination to transform Lagos into a 21st century economy. “Lagos economy is adjudged to be the 5th largest in Africa and is not yet a 24-hour economy, where you can do every transaction roundthe-clock. Do you think we have really maximised the potentials of that economy? We are saying it is a large and growing economy, and you are not playing in it yet,” Sanwo-Olu said. “This THEME agenda, beyond being the focus areas of our government, is also indicative of areas of possible collaborationbetweenyouandourgov-
ernment. As I said, Transportation and Traffic Management, Health and Environment, Education and Technology, Making Lagos a 21st century economy, andEntertainmentandTourismarethe topline agenda our government will pursue upon election in 2019,” he said. While assuring Sanwo-Olu of investors’ and multilateral institutions’ commitment to Lagos and Nigeria, Ibrahim Faria, country portfolio manager, High Impact Africa 1 Grant Management Division of Global Fund, pledged the commitment to support health system in Lagos State if Sanwo-Olu won the election. •Continues online at www.businessday.ng