Sub-Saharan Africa Stock Markets 2010 Review & 2011 ... - Imara

EQUITY RESEARCH
NIGERIA
FEBRUARY 2011
2010 REVIEW AND 2011 OUTLOOK
2010 proved to be a year of reform for the Nigerian
Stock Exchange, precipitated by the banking sector shake
up undertaken by the Central Bank of Nigeria (CBN) that
began in 2009.
The CBN injected nearly USD 2.6bn into five troubled banks
and dismissed the institutions' top executives, in a
dramatic move aimed at rescuing the firms from what the
government said was chronic mismanagement. A key
reason for the banks finding themselves undercapitalised
was that they lent heavily during the boom year for the
stock market that was 2007, to speculators in the stock
market. This left many banks overexposed when
commodities prices turned around, the world sank into the
‘GFC’ and Nigerian shares fell.
With the banking sector making up such a large proportion
of the exchange’s market cap, the negative sentiment
towards that sector spread a pall over the market in
general, as did the overhang created by uncertainty over
what would happen to the equities held as security for the
margin loans.
In 2010, the market awaited the passing of the Asset
Management Corporation of Nigeria (AMCON) establishment
bill. The AMCON was established by the CBN as the
principal vehicle for the resolution of the asset quality
problems that had risked the banking system in the last
two years and it provided an alternative to the liquidation
of distressed banks. In addition to purchasing
non-performing loans from the banks, AMCON is also a
vehicle for recapitalizing these institutions. Once the bill
was approved, a deadline of 31 December 2010 was
announced by AMCON for it to acquire NPLs from the
banks, and this was achieved with the institution executing
loan purchase and service agreements with 21 participating
banks to acquire NPLs with a face value of NGN 2.04tn for
just under NGN 800bn, with 92.5% of the purchased NPLs
coming from the ten banks that had required direct CBN
intervention.
The events in the banking sector and the negative impact
this had on investor perceptions of the NSE led to an
investigation by the SEC into the exchanges operations.
The end result of those investigations was the removal by
the SEC of Dr. Ndi Okereke- Onyiuke as Director-General of
the NSE, as well as dissolving the NSE Council. The reasons
given were the NSE’s, “inadequate oversight function of
the Exchange; ongoing litigations; allegations of financial
mismanagement; governance challenges; and the
inordinate delays in the implementation of the succession
plan for the Exchange.” The SEC appointed the former CEO
of audit firm Deloitte in West and Central Africa,
Emmanuel Ikazaboh, as interim manager, and a substantive
head has since been appointed in January 2011.
Top 5 Gainers and Losers - 2010 Opening Closing % Change % Change
Company Price Price (LC) (USD)
NSE ASI 20 827.17 24 770.52 18.93 17.17
Vono Products Plc 0.69 2.86 314.49 308.36
International Breweries Plc 2.27 6.42 182.82 178.63
Berger Paints (Nig) Plc 3.2 8.36 161.25 157.38
Cadbury Nigeria Plc 10.49 25.62 144.23 140.62
Capital Hotels Plc 1.38 3.3 139.13 135.59
Crusader (Nig) Plc 1.57 0.53 -66.24 -66.74
Oasis Insurance Plc 1.49 0.5 -66.44 -66.94
Aluminium Manufacturing Co. Plc 27.71 7.75 -72.03 -72.45
Beco Petroleum Products Plc 2.53 0.6 -76.28 -76.64
Unity Kapital Assurance Plc 2.26 0.5 -77.89 -78.20
Source: NSE
Top Ten Shares by Market Cap.
Company
(NGN bn) (USD bn) % of Total
Dangote Cement Plc 1 859.28 12.33 23.47
Nigerian Breweries Plc 583.07 3.87 7.36
Zenith Bank Plc 471.26 3.13 5.95
First Bank of Nigeria Plc 448.04 2.97 5.66
Guaranty Trust Bank Plc 414.11 2.75 5.23
Guinness Nigeria Plc 281.06 1.86 3.55
Nestle Nigeria Plc 243.44 1.61 3.07
United Bank for Africa Plc 236.69 1.57 2.99
Dangote Sugar Refinery Plc 192.00 1.27 2.42
Stanbic IBTC Bank Plc 172.50 1.14 2.18
Source: NSE
NSE-ASI relative to S&P African Frontier
Index
1.40
1.35
1.30
1.25
1.20
1.15
1.10
1.05
1.00
0.95
0.90
S&P African Frontier NSE-ASI
Source: IAS
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