NEPZA Boss calls on organized private sector to use free trade zones as buffers

Esan Bolaji
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NEPZA Boss calls on organized private sector to use free trade zones as buffers

The Managing Director of the Nigeria Export Processing Zones Authority (NEPZA), Prof. Adesoji Adesugba has urged the Organised Private Sector (OPS) to patronise free trade zones across the country to ward-off widespread business uncertainty brought about by Covid-19 pandemic.

Adesugba made the call when he paid a courtesy visit on the President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA, Hajia Saratu Aliyu on Monday in Abuja.

NEPZA Boss calls on organized private sector to use free trade zones as buffers
NACCIMA, Abuja Chamber of Commerce and Industry (ACCI) welcomes their illustrious former member Managing Director Prof. Soji Adesugba earlier today as they pledge their support to NEPZA to help drive industrialisation through private sector partnership. | www.brandspurng.com

Mr Dele Oye, 2nd Deputy President of the association, Prince Adetokunbo Kayode, SAN, President, Abuja Chambers of Commerce and Industry were other officials of the organised private sector at hand to receive the NEPZA boss.

Adesugba was before his appointment the National Legal Adviser of NACCIMA.

The NEPZA boss said the industrialization of the country could be achieved faster if the government and the Private Sector work together, adding that NEPZA will continue to partner with the Private Sector.

NEPZA Boss calls on organized private sector to use free trade zones as buffers
NACCIMA, Abuja Chamber of Commerce and Industry (ACCI) welcomes their illustrious former member Managing Director Prof. Soji Adesugba
earlier today as they pledge their support to NEPZA to help drive industrialisation through private sector partnership. | www.brandspurng.com

“NEPZA holds a double status as a facilitator and promoter of investments’ free business environment and a regulator that ensures compliance to standards.”

“The organization that I head was set up to manage and regulate free trade zones. The free trade zone is the only business enclave now that guarantees nearness to markets dislocated by a strain in global transportation and logistics against devastating effects of the Covid-19 pandemic.”

“The pandemic as we are aware continues to distort business logistics globally and so, global investors are looking for workable free trade zones to move into. Doing so would guarantee the preservation of the supply chains and their investments,’’ Adesugba said.

He, therefore, urged the business community to consider patronizing the country’s 42 free trade zones with a view to reducing the negative impact of the prevailing pandemic on their businesses.

“The supply chain management is going to be critical as Covid-19 has changed business logistics, but if we can take advantage of the various incentives which include tax holiday, absence of customs duties and absence of several other multiple taxes charged outside of the zones then our businesses can stay afloat,’’ Adesugba said.

The NEPZA chief executive further said the Authority was working assiduously to introduce a variety of Economic Special Zones (ESZ), adding that Medical, Solid Mineral, Agriculture and Technology were to be considered.

Adesugba explained that the establishment of Constituency Industrial Parks in the over 300 Federal Constituencies were also been contemplated, adding that the Authority could only achieve the industrialization of the country with the active participation of the organized private sector.

The NEPZA boss, however, expressed delight on the business knowledge and exposure he garnered while being An active member of the association, promising that he will use his experience to deliver positively as head of the agency.

Earlier, the NACCIMA president had thanked President Muhammadu Buhari for appointing a member of the association as NEPZA chief executive as according to her, the president’s eyes have gone for the best in investment promotion and management in the country.

Aliyu said Adesugba’s commitment to excellence, transparency, Due process and probity would make him reposition NEPZA as the pride of the country.

She further explained that members of the association were prepared to collaborate and support the Authority to achieve its mandate, adding that the country’s free trade zone scheme remained secured for investors and should be exploited.

On his part, Prince Adetokunbo Kayode SAN said the Abuja Chambers of Commerce and Industry would support Adesugba to have a successful tenure in NEPZA, adding that the chambers had approved that NEPZA becomes an automatic member of the chambers’ Council.

“We want to broaden our operations, we hope that when we come asking for NEPZA’s partnership and support, it will be there for us. We are indeed grateful to the government for appointing our man as head of this very important agency,’’ the former Minister of Justice and Attorney-General of the Federation said.

Kayode also agreed with Adesugba’s plans towards creating more Special Economic Zones, as according to him, the organized private sector will help by deploying expertise for the actualization of the country’s industrialization.

NEPZA officials were taken on an inspection tour of the association’s Business Entrepreneurship Skills and Technology (BEST) Center, Gemological Institute of Nigeria (GIN) and the Ministry of Mines and Steel Development Jewellery Center respectively.

The highpoint of the visit was the decoration of the NEPZA chief executive as NACCIMA Ambassador.

Nigeria Consumer Goods Sector in H2-2020: Riding the tide of challenges

Esan Bolaji
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0
Nigeria Consumer Goods Sector in H2-2020: Riding the tide of challenges

The outbreak of the COVID-19 pandemic added a new layer of concern for most of the consumer goods players as lockdown in key revenue-generating and industrial states (Lagos, Abuja, and the Ogun States) as well as the ban on inter-state movement depressed performance in Q2-2020.

Also, the disruption in global supply chains, naira adjustment, and FX market illiquidity throughout Q2-2020 added more concerns for companies with sizable import needs.

Looking beyond Q2-2020, we have a moderate outlook for topline performance across the sector in H2-2020. This is as we expect economic activities to pick up from Q2-2020’s low.

Nigeria Consumer Goods Sector in H2-2020: Riding the tide of challenges
Sources: NSE, United Capital Research | Nigeria Consumer Goods Sector in H2-2020: Riding the tide of challenges

Also, predicated on our assumption that the government would not be implementing another round of lockdown in H2-2020 and with earnings of most consumers under pressure, we estimate a moderate growth in demand for essential and non-essential items.

However, we expect cost pressures to remain in H2-2020, mildly cushioned by the impact of low-interest rates as well as administrative charges amid the lay-offs of some non-essential workers earlier in the year.

Overall, we are more bullish on FLOURMIL and DANGSUGAR due to the nature of their product portfolios in essential items. For the brewers, we expect volumes growth to remain depressed, dragged by the continued restrictions on social gatherings and weekend parties.

However, of the three major players in the brewery space, we believe NB is in the best position to ride the tide, given its broader distribution channel and its wide factory footprints across the country.

United Capital Research

Nigeria Equity Market: Review and Outlook

Esan Bolaji
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0
Nigeria Equity Market: Review and Outlook

The Nigeria equity market recovered some lost ground in the month of July-2020, as the NSE-ASI was up by 0.9% m/m to close at 24,693.73 points and YTD loss settled at -8.0%. This was as local investors took position ahead of Q2-2020 earnings publications.

The sectoral analysis showed that four out of five sectors indices under our coverage closed the month in the red territory. The Oil & Gas sector was the hardest hit (-13.3% m/m), followed by the Consumer Goods (-8.9% m/m), Insurance (-5.7% m/m), and Banking (-1.2%) sector indices.

Nigeria Equity Market: Review and Outlook

On the other flip side, the Industrial Goods sector was month sole gainer (+3.9% m/m). In terms of corporate action that occurred during the month, we saw a spree of earnings announcement from most of our coverage companies and the performance was mixed with some few impressive numbers from names like DANGSUGAR, DANGCEM, FBNH, FCMB, and OKOMUOIL that recorded both revenue and PAT growth in H1-2020.

Also, Law Union and Rock Insurance Plc announced that it has received the Securities and Exchange Commission’s ‘No Objection’ to the proposed 100% acquisition by Verod Capital Management. Lastly, Access Bank Plc announced a potential transaction between its Zambian subsidiary and Cavmont Capital Holdings Zambia.

This month, we expect the influx of earnings to continue to sway investors sentiment especially for the Banking names that have the probability of paying an interim dividend.

United Capital Research

Jumia reports Q2 2020 results; Operating loss decreased by 44% year-over-year

Esan Bolaji
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0
Jumia reports Q2 2020 results; Operating loss decreased by 44% year-over-year

Jumia Technologies AG announced today its financial results for the quarter ended June 30, 2020.

Results highlights

  • Usage growth
    • Annual Active Consumers reached 6.8 million, a year-over-year increase of 40%.
    • Orders reached 6.8 million, a year-over-year increase of 8%.
    • GMV was €228 million, a year-over-year decrease of 13% compared to GMV1 in the second quarter of 2019.
  • Monetization development
    • Gross profit reached €23.3 million, a year-over-year increase of 38%.

Jumia reports Q2 2020 results; Operating loss decreased by 44% year-over-year

  • Cost efficiency
    • Gross profit after Fulfillment expense reached a record €6.0 million, compared to a loss of €0.7 million in the second quarter of 2019.
    • Sales & Advertising expense was €7.2 million, the lowest absolute amount since 2017, and a year-over-year decrease of 51%. 12-month Sales & Advertising expense per Annual Active Consumer decreased by 38% from c. €10.8 in the second quarter of 2019 to €6.7 in the second quarter of 2020.
    • Adjusted EBITDA loss reached €32.9 million, decreasing by 26% on a year-over-year basis. Excluding a net expense of €3.6 million related to the class action settlement described below, Adjusted EBITDA loss would have been €29.3 million, decreasing by 34% on a year-over-year basis.
    • Operating loss was €37.6 million, a 44% decrease year-over-year.
  • JumiaPay development
    • TPV reached an all-time high of €53.6 million, a year-over-year increase of 106%, more than doubling on-platform TPV penetration from 9.9% of GMV in the second quarter of 2019 to 23.5% of GMV in the second quarter of 2020.
    • JumiaPay Transactions reached 2.4 million, a year-over-year increase of 36%, representing 35.6% on-platform penetration in terms of Orders.

“We have made significant progress on our path to profitability in the second quarter of 2020, with Operating loss decreasing 44% year-over-year to €37.6 million. This was achieved thanks to an all-time high Gross Profit after Fulfillment expense of €6.0 million and record levels of marketing efficiency with Sales & Advertising expense decreasing by 51% year-over-year,” commented Jeremy Hodara and Sacha Poignonnec, Co-Chief Executive Officers of Jumia.

“We are navigating these uncertain times of COVID-19 pandemic with strong financial discipline and operational agility which positions us to emerge from this crisis stronger and even more relevant to our consumers, sellers and communities.”

SECOND QUARTER 2020 – SELECTED BUSINESS HIGHLIGHTS

Driving usage and monetization

  • During the second quarter of 2020, we celebrated the 8th Jumia Anniversary with a commercial campaign themed “Stronger Together” aimed at supporting our communities in these challenging times. Our focus was to offer the broadest possible range of relevant products at the best prices, in partnership with a number of high-profile brands who made marketing investments on the Jumia platform as part of the event. Participating brands included: L’Oreal, Unilever, Nestle, Coca-Cola, P&G, Reckitt Benckiser, Henkel, Samsung, Xiaomi, Nokia, Intel, HP, Philips and many more.

Generating cost efficiencies

  • During the second quarter of 2020, we continued implementing a number of cost efficiency initiatives, including the logistics and fulfilment front.
    • Changed the volume pricing model from a price per successfully delivered package to a price per successful stop which led to a c. 8% reduction in cost per order for a given route. Our third-party logistics partners are now paid per successful stop at customer address, regardless of the number of packages included in the delivery.
    • Introduced a network of proximity warehouses (“mother-daughter” warehouse system) dedicated to essential products. This helps bring the assortment closer to customers, thereby reducing the delivery time as well as last-mile delivery costs.

Commitment to community

  • As a number of informal market sellers saw their livelihoods threatened by the onset of the COVID-19 crisis, Jumia partnered with the United Nations Development Programme (“UNDP”) to allow these sellers to reach consumers online. While the UNDP provided smartphones, airtime and data to selected market sellers, Jumia trained these sellers on the basics of selling online. This initiative was piloted in Uganda and brought on board more than 1,000 sellers who are now able to offer fresh produce to consumers via the Jumia Food on-demand delivery app.

Litigation update

  • As previously disclosed, several putative class action lawsuits were filed in the U.S. District Court for the Southern District of New York and the New York County Supreme Court against us and other defendants, including current and former members of our supervisory and management boards. The cases assert claims under federal securities laws based on alleged misstatements and omissions in connection with, and following our initial public offering. On August 11, 2020, we reached an agreement to fully resolve all of the actions, subject to standard conditions including court approval. Under this agreement, in which the defendants do not admit any liability or wrongdoing, Jumia will make a settlement payment of $5 million, $1 million of which will be funded by insurance coverage.

SELECTED OPERATIONAL KPIs

  • Annual Active Consumers reached 6.8 million in the second quarter of 2020, up 40% compared to the second quarter of 2019, Orders reached 6.8 million up 8%, while GMV was €228.3 million, down 13% on a year-over-year basis.
  • There were a number of drivers behind the usage performance during the quarter:
    • We decided to reduce our Sales & Advertising expense by 51% year-over-year in light of the macro uncertainty and to support our path to profitability, allowing us to drive usage with a high level of marketing efficiency.
    • The effects of the business mix rebalancing continued playing out during the second quarter of 2020, affecting GMV in particular. To support our path to profitability, we decreased promotional intensity and consumer incentives on lower consumer lifetime value business while increasing our focus on every-day product categories to drive consumer adoption and usage. In the second quarter of 2020, the sharpest year-over-year GMV contraction was registered in the phones category. The fastest-growing categories in GMV terms were beauty & personal care, which includes hygiene products sold as part of the fight against COVID-19, alongside Fast Moving Consumers Goods (“FMCG”) and digital services which are every-day services such as airtime recharge or utility bills payments offered on our JumiaPay app. The strong momentum of essential, every-day categories on our platform speaks to the relevance of Jumia as part of the every-day life of consumers in Africa.
    • The COVID-19 pandemic continued to affect the business and its impact varied greatly from one country to the other:
      • In Nigeria and South Africa, we faced significant disruption as a result of movement restriction. This disruption persisted during the early part of the second quarter of 2020, before gradually easing towards the later part of the quarter. Our food delivery business, Jumia Food, which was negatively impacted by restaurant shutdowns starting mid-March, resumed normal operations in late May / early June in most cities where we operate the service.
      • Across the majority of our addressable market, we experienced no meaningful change in consumer behaviour, aside from increased demand for essential and every-day products and reduced appetite for higher ticket size, discretionary purchases. The nature of lockdown measures put in place consisted mostly of localized restrictions of movement and partial curfews rather than nationwide lockdowns, with the former leading to less drastic changes in consumer lifestyles and behaviour than all-encompassing, nationwide lockdowns. In selected countries, including in Morocco and Tunisia, where nationwide lockdowns were implemented, we experienced a surge in volumes starting mid-March with sustained momentum throughout the second quarter of 2020.
      • Across all geographies, we have seen increased demand from brands and sellers to join and expand their business on our platform as the COVID-19 crisis further established e-commerce as an important route to market.
  • TPV accelerated by 106% from €26.0 million in the second quarter of 2019 to an all-time high of €53.6 million in the second quarter of 2020, surpassing the record set during the fourth quarter of 2019 of €45.6 million. On-platform penetration of JumiaPay as a percentage of GMV increased to 23.5% in the second quarter of 2020, more than twice the level of penetration in the second quarter of 2019 of 9.9%.
  • JumiaPay Transactions increased by 36% from 1.8 million in the second quarter of 2019 to 2.4 million in the second quarter of 2020, with triple-digit growth of Transactions above €10, including prepaid purchases on the Jumia physical goods marketplace and Jumia Food platforms. Overall, 35.6% of Orders placed on the Jumia platform in the second quarter of 2020 were paid for using JumiaPay, compared to 28.3% in the second quarter of 2019.

Revenue

  • Marketplace revenue reached €23.6 million in the second quarter of 2020, up 38% compared to the second quarter of 2019. This was mostly driven by an acceleration in Commissions and Marketing & Advertising revenue which increased by 68% and 50% year-over-year respectively. Commissions grew despite a decrease in GMV as a result of increased proportion in the mix of higher commission rate categories including fashion, beauty or FMCG. Marketing & Advertising continues to experience robust momentum as advertisers shift an increasing share of their spend from offline to online, favouring direct response formats.
  • First Party revenue decreased by 49% in the second quarter of 2020 compared to the second quarter of 2019. As our marketplace continues to gain depth, we are able to undertake fewer sales on a first-party basis. Shifts in the mix between first-party and marketplace activities trigger substantial variations in our Revenue as we record the full sales price net of returns as First Party revenue and only commissions and fees in the case of Marketplace revenue. Accordingly, we steer our operations not on the basis of our total revenue, but rather on the basis of Gross profit, as changes between third-party and first-party sales are largely eliminated at the Gross profit level.

Gross Profit

Gross profit increased by 38% to €23.3 million in the second quarter of 2020 from €16.8 million in the second quarter of 2019 as a result of the increase in Marketplace revenue

Fulfilment Expense

  • Fulfilment expense decreased by 2% in the second quarter of 2020 on a year-over-year basis while Orders increased by 8% over the same period. A number of operational improvements drove fulfilment expense efficiencies, including a change in the volume pricing model from a cost per package to a cost per stop as well as productivity enhancements in our fulfilment centres. Another contributing factor was a change in our mix of packages, with a reduced proportion of cross-border packages and packages shipped outside primary cities.
  • During the second quarter of 2020, Gross profit after Fulfillment expense reached a record €6.0 million compared to a loss of €0.7 million in the second quarter of 2019, demonstrating continued unit economics improvement as we grow usage on our platform.

Sales & Advertising Expense

  • Sales & Advertising expense decreased by 51% from €14.9 million in the second quarter of 2019 to €7.2 million in the second quarter of 2020, its lowest level in more than 3 years. This is driving strong marketing efficiency with Sales & Advertising expense per Annual Active Consumer decreasing by 38%, from €10.8 per Annual Active Consumer in the second quarter of 2019 to €6.7 in the second quarter of 2020.
  • This development is partly attributable to continued enhancements to our performance marketing strategy across search and social media channels, notably through more granular segmentation of our target market with differentiated campaigns and content for each segment.

General and Administrative Expense

  • General & Administrative expense excluding SBC reached €28.5 million, up 17% on a year-over-year basis. The increase was due to a settlement provision of €4.5 million.
  • Excluding the settlement provision, General & Administrative expense excluding SBC would have reached €24.0 million, down 2% on a year-over-year basis, mostly attributable to the cost rationalization initiatives undertaken to start from the end of 2019.

Adjusted EBITDA

  • Adjusted EBITDA loss was €32.9 million in the second quarter of 2020, decreasing 26% on a year-over-year basis, demonstrating meaningful progress on our path to profitability.
  • Net settlement expense included in the Adjusted EBITDA amounted to €3.6 million and is calculated as a settlement provision of €4.5 million accounted for in G&A, net of insurance reimbursement of €0.9 million accounted for in Other Income. Excluding the net settlement expense of €3.6 million, Adjusted EBITDA loss would have been €29.3 million, decreasing by 34% on a year-over-year basis.

Operating loss

Operating loss was €37.6 million in the second quarter of 2020, decreasing 44% on a year-over-year basis, demonstrating meaningful progress on our path to profitability.

Cash Position

At the end of June 30, 2020, we had €174.3 million of cash on our balance sheet. During the second quarter of 2020, our cash utilization, which corresponds to the change in Cash & cash equivalents taking into account exchange rate effects, was €16.8 million, a 69% decrease year-over-year. Cash utilization during the second quarter of 2020 was supported by a working capital inflow of €13.0 million resulting mainly from a longer payables cycle and improved accounts receivable management.

GUIDANCE

The ongoing COVID-19 pandemic, as well as the ensuing economic challenges, result in substantial uncertainty concerning our business and financial outlook.

We expect the effects of the business mix rebalancing to continue to play out over the course of 2020. Any supply and logistics challenges that we may encounter as a result of the COVID-19 pandemic may further exacerbate such effects. As a result, we currently expect continued GMV softness over the course of 2020, with better Order and Annual Active Consumers growth, on a year-over-year basis.

We remain committed to reducing our Adjusted EBITDA loss in absolute terms in 2020 compared to 2019.

FCMB denies sending N573m to Prophet Omale

Esan Bolaji
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0
FCMB denies sending N573m to Prophet Omale

First City Monument Bank (FCMB) has clarified that there was no transfer of N573 million into the account of the general overseer of Divine Hand of God Prophetic Ministries International, Emmanuel Omale.

In a statement on Wednesday (Below), FCMB made the clarification that there was a system error that affected Omale’s account but no transfer was made.

“Our attention has been drawn to widely circulating stories incorrectly stating that our Managing Director, during a recent presidential hearing in Abuja, testified that the bank mistakenly transferred N573m to the account of a church and the said error was not discovered for 4 years. We feel it is in the public interest to state emphatically that there was no transfer of N573m into this account, mistakenly or otherwise.”

“To provide further clarity, during a maintenance upgrade of our systems in 2016, a defective file led to the aggregation of multiple unrelated entries into a single balance under the affected customer’s name in one of our reports. This aggregation occurred only in the weekly automated report to the Nigerian Financial Intelligence Unit.”

FCMB denies sending N573m to Prophet Omale

Adam Nuru, managing director of First City Monument Bank (FCMB), was invited by the presidential investigation commission of inquiry last Thursday, following an allegation that Omale had received N573 million to purchase a property in Dubai for Ibrahim Magu, suspended chairman of the Economic and Financial Crimes Commission (EFCC).

“It had no effect on any customer account balance or statements and therefore was not immediately identified. Our Managing Director clarified to the Presidential panel that the system generated report was incorrect and that there was no mistaken transfer of N573 million. He also submitted comprehensive documentary evidence to this effect.”

“We appreciate that comments may have been misconstrued and therefore believe it is important to emphatically clarify the position that there was no mistaken transfer whatsoever, as stated above. FCMB continues to fully cooperate with the panel and has been entirely transparent in its reporting. We remain committed to ethical and professional conduct at all times.”

Magu is currently being investigated by the committee headed by Ayo Salami, former president of the appeal court, for allegedly mismanaging loot recovered by the anti-graft agency.

Testifying before the panel, Nuru had said there was an error on the alleged money credited to Omale.

 

FGN Bonds: DMO Offers N150 Billion for Subscription

Esan Bolaji
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0
FGN Bonds: DMO Offers N150 Billion for Subscription

The Central Bank of Nigeria on the authority of The Debt Management Office (DMO) on behalf of the Federal Government Of Nigeria Offers for Subscription by Auction and is authorized to receive applications for the following FGN Bonds:

  • N25,000,000,000 – 12.50% FGN JAN 2026 (10-Yr Re-opening)*
  • N40,000,000,000 – 12.50% FGN MAR 2035 (15-Yr Re-opening)*
  • N45,000,000,000 – 9.80% FGN JUL 2045 (25-Yr Re-opening)*
  • N40,000,000,000 – 12.98% FGN MAR 2050 (30-Yr Re-opening)*

Auction Date: August 19, 2020

Settlement Date: August 21, 2020

For a clear understanding of what FBN Bonds is all about, please check here…

Summary Of The Offer

Issuer:

Federal Government of Nigeria (“FGN”) 

Units Of Sale:

N1,000 per unit subject to a minimum subscription of N10,000 and in multiples of N1,000 thereafter

Interest rate:

For Re-openings of previously issued bonds, (where the coupon is already set), successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus accrued interest from the original issue date.

Interest payment:

Payable semi-annually

Redemption:

Bullet repayment on the maturity date

Status:
  1. Qualifies as securities in which trustees can invest under the Trustee Investment Act
  2. Qualifies as Government securities within the meaning of Company Income Tax Act (“CITA”) and Personal Income Tax Act (“PITA”) for Tax Exemption for Pension Funds amongst other investors
  3. Listed on the Nigerian Stock Exchange
  4. All FGN Bonds qualify as liquid assets for liquidity ratio calculation for banks
Security:

FGN Bonds are backed by the full faith and credit of the Federal Government of Nigeria and are charged upon the general assets of Nigeria

How To Invest

Investors are to subscribe through stockbroking firms trading on the floor of The Nigerian Stock Exchange (NSE) and accredited by the DMO to act as Distribution Agents. (Please visit www.dmo.gov.ng for the list of accredited Stockbroking Firms).

President Buhari finalises Nigeria’s membership in African Trade Insurance Agency (ATI)

Esan Bolaji
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2
President Buhari finalises Nigeria’s membership in African Trade Insurance Agency (ATI)

Membership in African Trade Insurance Agency (ATI) allows Nigeria to attract additional insurance capacity to help attract investments

Nigeria becomes a full member country at an opportune time. It joins ahead of others that are fast-tracking membership given the trade and investment insurance challenges during the COVID-19 pandemic and also recognizing the potential post-pandemic opportunities.

President Buhari finalises Nigeria’s membership in African Trade Insurance Agency (ATI)
President Buhari | www.brandspurng.com
  • Nigeria contributed US$14.1 million to ATI’s capital in 2019 with African Development Bank’s (AfDB) financial support and fully completed its membership process through the ratification of the ATI’s Treaty.
  • Membership in ATI provides African countries with additional trade and investment insurance capacity, which helps cushion against the negative economic impacts of COVID-19.
  • ATI expects an estimated US$138 million in additional capital from prospective new shareholders in the coming months.

This week, H.E. President Buhari signed the instrument of ratification to the African Trade Insurance Agency’s (ATI) treaty. This finalises Nigeria’s membership in ATI in a process that began some years ago. Membership in ATI allows Nigeria to attract additional insurance capacity to help attract investments and it also increases ATI’s capacity to support sovereign and commercial transactions in the country.

Ultimately, Nigeria benefits because effective risk mitigation is vital to increasing investments and trade flows.

Nigeria’s membership comes at a critical time for the economy as a sharp drop in oil prices due to a COVID-related one-third decrease in demand has impacted the country’s spending plans. The IMF predicts that falling oil prices will halve Nigeria’s export earnings to US$26 billion, which traditionally accounts for 90% of the government’s budget.

African Trade Insurance Agency is well-positioned to support African countries through the pandemic. In the last three years, ATI has helped crowd-in nearly US$3 billion of investments to several African countries. With ATI’s sovereign and sub-sovereign credit wrap solutions, governments and state-owned enterprises have been able to obtain competitively priced and longer-term financing.

In Nigeria, ATI has already provided significant support in the country’s oil and gas sector covering oil traders as well as in the financial sector insuring financial institutions.

“As one of the largest economies in Africa with a vibrant private sector, ATI looks forward to working with the Ministry of Finance, the Central Bank, local financial institutions and corporate traders to support Nigeria’s economic diversification plans and its post-COVID recover,” noted Benjamin Mugisha, ATI’s Chief Underwriting Officer.

As an important strategic partner, the African Development Bank (AfDB) has played a significant role in funding the membership participation of several African countries. Between 2010 and 2020, AfDB has provided US$70 million to fund the shareholding of seven African governments – Benin, Côte d’Ivoire, Ethiopia, Mali, Nigeria, South Sudan and Zimbabwe.

In the coming months, five countries are expected to become fully-fledged members while an existing member state indicated its intention to increase its capital contribution. These countries will cumulatively benefit from US$91 million in financial support from the African Development Bank and the European Investment Bank, which is the African Trade Insurance Agency’s other strategic partner.

Furthermore, the recently held General Meeting approved three new membership applications worth US$47 million, demonstrating ATI’s ability to mobilize international support to implement its development mandate and support African countries’ economic recovery from the COVID-19 global pandemic.

ATI was founded in 2001 by the African States to cover the trade and investment risks of companies doing business in Africa. ATI predominantly provides Political Risk, Credit Insurance and, Surety Insurance.

In 2019, ATI closed the year with exposures of US$6.4 billion and continued to post record results for the eighth consecutive year with 132% growth on the net profit over 2018 owing to strong demand for ATI’s insurance solutions from the international financial sector and from African governments.

Since its inception, ATI has supported US$62 billion worth of investments and trade into Africa. And for over a decade, ATI has maintained an ‘A/Stable’ rating for Financial Strength and Counterparty Credit by Standard & Poor’s, and in 2019, ATI obtained an A3/Stable rating from Moody’s.

Lafarge Africa Plc. (WAPCO): Basking in Restructuring Gains

George Martins
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Lafarge Africa Plc. (WAPCO): Basking in Restructuring Gains

First Quarter Performance Overshadows Q2:2020 Slip

In the just-released H1:2020 financial scorecard, Lafarge Africa Plc. (WAPCO) recorded a topline growth of 2.25% (NGN120.54bn vs. NGN117.89bn in H1:2019) powered by higher cement sales (+3.47%), which offset the sharp drop (-40.22%) in revenue from aggregates and concrete.

The growth of Lafarge Africa also masked the weaker performance in Q2:2020 with sales volume for the quarter dropping by 3.72% (due to the economic lockdown and as realized prices remained flat). This mirrored the performance of its peers, with half-year performances boosted by the strong showings in the first quarter.

Lafarge Africa showed resilience during the quarter as construction activities were not completely halted and lockdown measures to contain the spread of COVID-19 were eased subsequently.

Hence, we revise our revenue projection from NGN190.70bn to NGN216.48bn. This represents a year on year growth of only 1.63% as expectations of lower public CAPEX remain as downside risks.

Cost Optimization Initiative Support Operating Margin

In our Q1:2020 report on the company, we had alluded to its cost optimization efforts as a tailwind despite concerns around the cost implications of the FX devaluation by the CBN.

H1:2020 results show that although energy costs (+19.41%) maintained its uptrend, the cost to sales ratio was lower at 65.40% (vs 66.53% in H1:2019) reflecting efforts at improved quarry management to bring down raw material costs and inventory management. Given the further FX adjustment by the CBN, we expect to see FX induced pressures on direct costs in subsequent quarters.

Similarly, operating expenses fell sharply by 27.91% in H1:2020 as the company reined in administrative costs (most notably on office and general expenses) under its Health, Cost and Cash initiative. Consequently, operating margin was higher at 27.22% in H1:2020 (vs 23.62% in H1:2019).

Lafarge Africa continues to enjoy benefits of lower debt obligations (a result of divesting from the highly leveraged subsidiary and redemption of its Series 1 bonds) as lower finance costs (-66.77%) ensured a 47.29% growth in profit after tax to NGN23.33bn (vs NGN15.84bn in H1:2019).

Thus, widening the net margin to 19.35% (vs. 13.44% in H1:2019). We maintain our expectation of exchange gains on the company’s USD denominated financial assets owing to the FX adjustment while bottom-line should be supported by the tax credit from its pioneer plants.

Balance Sheet Metrics Signals an “All-Clear”

Lafarge Africa’s deleveraged balance sheet continues to yield gains evidenced in decent return to shareholders. In H1:2020, annualized ROE stood at 34.81%- 1.44 percentage points higher than 33.37% in 2019FY. Similarly, we note an improvement in return on asset- 24.73% (Trailing) vs 23.15% in 2019FY.

Also, the company maintains decent liquidity standing with a current and cash ratio of
0.72x and 0.33x respectively (vs. DANGCEM: 0.55x & 0.13x and BUACEMENT: 0.70x & 0.37x).

Outlook and Recommendation

Given our reassessment of the company’s topline performance and cost drivers, we revise our EBITDA forecast from NGN61.33bn to NGN65.97bn and maintain a target EV/EBITDA of 4.51x.

We thereby arrived at a 2020FY price target of NGN17.53. At the current price of NGN11.75, the implied upside of 49.19% (relative to our 2020TP of NGN17.53) informed our BUY rating on the counter.

Lafarge Africa Plc. (WAPCO): Basking in Restructuring Gains

Lafarge Africa Plc. (WAPCO): Basking in Restructuring Gains

Meristem Research

SUNU Assurances reports 30% profit growth to N1.2billion

George Martins
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SUNU Assurances reports 30% profit growth to N1.2billion

SUNU Assurances Nigeria Plc has increased its profit by 30%

It went up from N914 million in the 2018 financial year to N1.189 billion in 2019. This is due to a decrease in net claims by 24 per cent from N.868 billion in 2018 to N.658 billion in 2019.

The chairman, Kyari Abba Bukar, who made this known at the physical/virtual 33rd Annual General Meeting (AGM) of the company, said its Audited Financial Statements and that of its subsidiaries for the year ended December 31, 2019, were approved by National Insurance Commission (NAICOM) via its letter dated March 9, 2020, within the deadline.

The SUNU Assurances Group increased its Gross Written Premium (GWP) by 0.4 per cent from N3.049 billion in 2018 to N3.060 billion in 2019.

This, according to the company, was due to its teams’ hard work, despite declining to underwrite some class of businesses because of regulatory pronouncements.

Also, the company’s investment income grew from N519.57 million in 2018 to N719.52 million.

SUNU Assurances showed paid claims worth N657.9million in the year under review.

He stated that despite the challenges facing the company, ranging from the bonds debt with its attendant huge financial cost, NAICOM’s previous penalty on offshore transactions, which has a yearly payment of N86.6 million till 2021, they were able to achieve a modest result in 2019 financial year.

He said: “During the year, we were able to increase significantly our processes through improved operating efficiency, optimising our current assets and improving operating efficiency which is part of our strategy.

We also sought to create further value by developing the opportunities embedded in our existing operations which present the most attractive options for growth. We are always looking beyond our current operations for sustainable growth opportunities.

SUNU Assurances reports 30% profit growth to N1.2billion

“Going forward, we shall strive to operate our business with a sharp focus on efficiency, transparency and sustainable cost improvements,” he added. Shareholders lauded the Board and management for doing well.

Executive Chairman, GF Investment Group, Mr Ralph Osayameh who represented a shareholder, Dr Adelani Oniwinde, said the management had done well, especially in investment.

Another shareholder, Mr Mathew Akinlade said he was impressed with the level of disclosure which is more than what the Code of Corporate Governance requires, noting that other companies should share this as a model.

LASG Empowers 1,100 Vulnerable Women, Residents with Working Tools

George Martins
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LASG Empowers 1,100 Vulnerable Women, Residents with Working Tools

Lagos State Government today provided economic support in the form of working tools to 1,100 vulnerable women and residents, who have been affected by the effects of the COVID-19 pandemic, in order to get them back on their feet to provide for their families.

Speaking today at the Y2020 Mega Empowerment Programme held at the Skills Acquisition and Vocational Training Centre, Isheri, Governor Babajide Olusola Sanwo-Olu, represented by his deputy, Dr Kadri Obafemi Hamzat, stated that the programme is a significant step forward as the current administration continues to deliver palliatives for the economic empowerment of the most vulnerable and indigent residents across the five administrative divisions of the State.

LASG Empowers 1,100 Vulnerable Women, Residents with Working Tools

The Governor said, “We shall be distributing economic and material inputs including sewing machines, pepper grinders, pop-corn machines, hairdryers, barbing sets, generators and other essentials to support 1,100 vulnerable women and indigent residents”.

“These items will enable the beneficiaries leverage on the various skills acquired and other vocational training support which has been offered to guide them in the transition period of post-COVID-19 pandemic towards adjusting to life in a new ‘normal’ situation”, he said.

Sanwo-Olu stated further that the government would continue to support the Lagos State Employment Trust Fund so that it can be more impactful, especially in alleviating the effects of poverty through the provision of critical financial and other support that will enable a significant number of the youths, including unemployed graduates, vulnerable women and pensioners fulfil their entrepreneurial dreams.

Emphasising that the Ministry of Women Affairs and Poverty Alleviation will continue to receive support from the State, Sanwo-Olu gave assurance the skills acquisition centres will always be enhanced to meet the yearnings of the target population.

In his words: “We will also not relent in developing strategies that will ensure the economic empowerment and social integration of our people into the wealth basket. I enjoin you all to continue to support our administration by complying with established safety protocols, even as we gradually lift social restrictions that have altered the way we have been living in the last few months.”

The Governor, therefore, commended Lagosians for their resilience and fighting spirit in joining the State government in its quest at containing the spread and fatality of the COVID-19 pandemic.

Earlier, the Commissioner for Women Affairs and Poverty Alleviation, Mrs Cecilia Dada disclosed that 17,752 persons have so far benefitted from the empowerment programme since the inception of the Governor Babajide-led administration in Lagos State.

LASG Empowers 1,100 Vulnerable Women, Residents with Working Tools

She stated that the programme was in fulfilment of the promise by Governor Sanwo-Olu at the maiden edition of the empowerment programme to make it a continuous one in order to meet the 20,000 targets of the administration.

Dada restated the government’s belief that women empowerment is a crucial pillar of sustainable development and poverty alleviation, hence all efforts are geared towards accelerating the economic empowerment of women in Lagos.

She added that the Ministry will continue to initiate and sustain programmes and activities within its ministerial mandate to raise the living standard of women and all others in the State.

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