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See how VFD Group plans to reposition Nigeria’s economy

VFD Group Limited recently held its 2nd AGM in Lagos, during which the board of directors obtained shareholders’ approval to raise capital for expansion purposes.

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VFD Group Limited, Vbank

VFD Group Limited recently held its 2nd Annual General Meeting in Lagos, during which the board of directors obtained shareholders’ approval to raise capital for expansion purposes. To better understand the situation, Nairametrics visited the company’s corporate headquarters in Marina, where we had a sit down with the Group Managing Director/Chief Executive Officer, Mr Nonso Okpala. Below are the excerpts of our conversation:

Can you tell us what your set targets were for the year, and how many of them you’ve been able to accomplish?

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It seems everyone has been asking me this same question. Most of the interviews I have granted recently contained this particular question. (Laughs lightly)

Just to speak to your question specifically, we set out to achieve a PBT (Profit Before Tax) on the group level, of about a billion. I will say confidently that we are close to it. This year, we set out to achieve total asset in excess of N10 billion. I will say confidently that we’ve achieved that.

This year, we set out to fill up vacancies in key positions of our management team. I will also say that we have significantly achieved that.

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Speaking also to some specific areas of government, we set out this year to enhance our board, enhance the profile of individuals on our board as well as to expand the board; to bring in more hands on deck and also to reflect the diverse holdings and interests that we’ve attracted. We’ve been able to do that with the admittance of predominantly Mr Olatunde Busari (SAN), and Dr Samuel Maduka Onyishi, as well as Jewel Okwechime. We also admitted an Executive Director, Mr Niyi Adenubi, who has been assigned a strategic portfolio to cover institutional business as well as investor relations.

The last on all the objectives that we set out was to look at our capital requirements as well as our status as a private company vis-a-vis a public company. During the last AGM, our board proposed to the shareholders and got approval to convert our company from a limited liability to a public liability company. We also got approval to raise N7 billion; N2 billion via equity and the remaining N5 billion via debt. The equity components will be broken down into two: N1 billion of rights and another N1 billion via a private placement.

So, these are specific things that we set out to achieve. To a large extent, I’m confident that we’ve achieved them.

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In your annual report, you made mention of plans to take up a stake in a national bank. Why not an international bank?

Our history was that we were always short on capital but very long on skillsets. We are a group of individuals well-placed in the financial services industry; good exposure, good skillsets, but limited capital to execute our targets. Over the last nine years or so, we’ve been able to grow capital to match those skillsets. But we are not yet there.

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So, you believe that before you fly, you need crawl, walk, and then run. And that’s the growth process we are going through. But I will assure you that we are not short on ambition. We are quite ambitious as it is.

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And we believe that within the next twenty to thirty years, we will significantly reposition the Nigerian economy and restructure it.

Now, to speak specifically to your question, we believe it’s right to start from a regional perspective so that we can first grow skills and expertise. Because when you look at the capital requirements for a regional bank vis-a-vis a national bank, it’s N10 billion as against N25 billion.

We are very particular about our return on investment that we make to our stakeholders. And we think that in the growth phase, it’s very safe to go for a regional banking license which goes for N10 billion as against a national banking license which requires N25 billion.

It’s also a reflection of the mapping of economic activities within Nigeria. We think that the South West geo-political zone has a great deal of commercial opportunities and we can use that advantage to grow.

We are definitely heading for an international bank status, but the objective is to start from a regional banking perspective.

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Can you mention the bank that you are hoping to take up stake in?

Well it’s difficult for me to mention. But I’ll assure you that we have various options on achieving it. We have option A, option B, option C, as well as an option D. We also have considerations for the greenfield approach, which is to approach the CBN with the capital required and make an application for a regional bank.

So, in view of the role that your organisation plays in the Nigerian economy, would you be willing to venture into the oil and gas and even agriculture space?

I’ll answer this question from two perspectives. As an investor yes, I’m interested in making investments outside of the financial services industry. On that level, there is a holding company that I, as well as some of my colleagues, have put investments in. Ultimately, that company seeks to make investments outside of the financial services space.

But as the GMD of VFD Group, our objective and ambition are restrained within the financial services sector.

But correct me if I’m not wrong, VFD Group has a subsidiary that is into the auto spare parts business. That is not in the financial services sector; is it?

We have an interest in Germaine Autos as well as interests in real estate. Now, those two investments are very strategic. The objective is simple – we believe that the product of the future and products that will be significant to the financial services sector, are mortgage type products, and auto loan type products.

We think that you can’t successfully and sustainably deploy those products without having these operational components that can support it. So, the real estate company will support your mortgage payment while the auto company will support your auto loan payment. To put it in a very simplistic manner, if you are advising significant auto loans and you have the interest that sell that to your customers, that’s an added advantage for you. If you have a company that in case of default can repossess your vehicle and refurbish it, that is an added advantage. Yes, they are not financial services companies, but on a strategic basis, they serve the group’s interests in the financial services space.

Does VFD Group have any plans to play in the Pension Fund Administration space?

We definitely have plans for that. However, it’s not immediate. I think that will come up during the next AGM. Part of our plan is to have presence in every sector of the financial services industry, and the PFA is one of them. So yes, we have plans to go into it.

Would we see a listing of sub units of VFD such as Germaine or VFD Microfinance Bank?

Based on our current understanding of the opportunities that exist, we think that the first step in respect to listing should be the listing of the group. We think that it’s more aligned with the interests of minority and majority shareholders alike for the group to be the main source of funding of the activities of the subsidiaries. Once that’s done, the next stage of growth would be spinning off these subsidiaries to a point where our stakes are significantly diluted and then given the status to run as independent companies so to speak. At that point, we can consider listing our subsidiaries.

What is your outlook for the coming years, especially being an election year?

Well, most pundits would say that the elections require some form of conservative estimation and forecast. But here in VFD Group, we are quite bullish about next year. We think that with the flexibility of our structure and our partnership, that every situation in itself provides a unique opportunity. So, I would say that we are quite bullish. And depending on how the elections go, I think there will be a revival of the capital market. We also think that the volatility will provide certain opportunities for us. We also think that fixed income instruments might significantly appreciate and for us it’s a good thing because it means increased yield for our investors. It is also worthy to mention that most of the restructuring and developments of our subsidiaries will gain maturity in 2019. So, we are looking at a company like Germaine Auto Centre pushing towards a PBT of a billion naira per annum and our lending business pushing towards a PBT of N20 billion per annum. These are opportunities we see and think will manifest in 2019 and we are delighted about it.

Do you have any Pan African ambitions, expansion-wise?

Part of our thirteen-year strategy — which is broken down into three years, five years and another five years — is to build capacity for an enduring and a maturing company. That first three years will end on the 31st of December 2018. The next five years will be focused on growing our interests within the Nigerian economy while the remaining five years will be focused on exporting the successes that we have recorded to other African countries. That said, we definitely do have ambitions on the continental level. We are excited about the future.

Emmanuel holds an MSc. in International Relations and a B.A in Philosophy & Logic, both from the University of Ibadan. He is a communications professional. As a Lead Business Analyst at Nairametrics, he focuses mostly on quoted companies, their products/services, and the economy in which they operate. Emmanuel is also experienced in the areas of corporate communication, brand communication, corporate storytelling, public relations, business research, management/strategy, etc. You may contact him via his email- emmanuel.abara@nairametrics.com.

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Economy & Politics

President Buhari directs Ministries of Power, Finance, BPE to seal Siemens deal

Presidency has approved the release of funding for the first part of Phase 1 of the PPI, to kick-off the pre-engineering and concession financing workstreams.

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Nigeria-Siemens power deal get N61 billion allocation 

President Muhammadu Buhari has directed the Ministries of Power, Finance, and the Bureau of Public Enterprise (BPE) to conclude the nation’s engagement with Siemens AG over regular power supply.

The directive, which was issued via the Presidency’s Twitter handle on Wednesday, was to start the pre-engineering & concessionary financing aspects of the Presidential Power Initiative (PPI).

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PPI is a power infrastructure upgrade and modernization Programme agreed to by the Federal Government and Siemens AG of Germany, with the support of the German Government. The ultimate goal of the initiative, according to the government, is to modernize and increase the Nigerian electricity grid capacity from its current capacity of  about 5 GW to 25 GW, over three phases.

How it works: Under the PPI, Nigeria on behalf of the other shareholders in the Electricity Distribution Companies (DisCos), will invest in infrastructure upgrades in the form of improved payment systems, distribution substations, transformers, protection devices, smart meters, and transmission lines among others.

The President explained that all DisCos have, directly and through the BPE, been diligently carried along over the last 15 months to understand in detail the challenges in the electricity systems.

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Funding: The funding for the PPI will be secured under concessionary terms (up to 3-year moratorium and 12-year repayment at concessionary interest rates) through the German Euler Hermes cover, which Nigeria will on-lend as a convertible loan to the other shareholders in the DisCos.

According to the statement, President Buhari has approved the release of funding for the first part of Phase 1 of the PPI, to kick-off the pre-engineering and concession financing workstreams.

“To ensure fairness and transparency of the intervention, the President has also directed that the nation engage the International Finance Corporation (‘IFC’) to assist in developing the commercial structure of the intervention…

“The President has also directed that to ensure value for money and preserve the integrity & transparency of the procurement process under the Govt-to-Govt framework, Siemens AG shall be solely responsible for nominating its EPC partners to perform all onshore works; NO middlemen.

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“Our goal is simply to deliver electricity to Nigerian businesses and homes… Our intention is to ensure that our cooperation is structured under a Govt-to-Govt framework. No middlemen will be involved, so that we can achieve value for money for Nigerians,” President Buhari added.

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The PPI journey started on August 31, 2018, when Chancellor Angela Merkel visited Nigeria and met with President Buhari. Then the Chancellor brought along with her a business delegation that included the Global CEO of Siemens.

Nigeria and Germany agreed to explore cooperation in a number of areas, including Power.

PPI was designed to deliver improved power supply nationwide, with attendant results in job creation, investor confidence, cost and ease of doing business and economic growth. The partnership is also  expected to guarantee training & capacity building for thousands of young Nigerians (non-graduates, students & graduates).

Other goals include the creation of economic opportunities for Nigerian engineering companies that will serve as local vendors for the provision of manpower and equipment. Overall, the partnership will guarantee inflow of additional investment into the power sector.

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Companies

Endeavour honours founders of Kobo360

Fixing Africa’s supply chain is clearly important for commerce on the continent.

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Kobo360

Endeavour, a leading global movement for high-impact entrepreneurship, has honoured the founders of Kobo360, Obi Ozor and Ife Oyedele as Endeavor Entrepreneurs.

Kobo360 is a digital logistics platform that uses big data and agile technology to reduce friction and improve efficiency in the African logistics ecosystem.

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Managing Director, Endeavor in Nigeria, Gihan-Mbelu, explained that the company is excited to welcome Kobo360 into Endeavor’s network which includes some of the world’s most exciting scale-up entrepreneurs and most experienced mentors and investors.

He said, “Fixing Africa’s supply chain is clearly important for commerce on the continent, and Kobo360’s rapid growth over the past 3 years is evidence that the company’s valuable services are in critical demand. Obi and Ife are inspiring founders and their relentless focus on scaling Kobo360 serves as an inspiration to high-impact entrepreneurs everywhere.”

Meanwhile, since launching in 2017, Kobo360 has surpassed several milestones, including a $30 million Series A in August 2019.

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“It’s an honour to be joining this global network of high-impact entrepreneurs and to have Endeavor recognise our efforts to transform Africa’s logistics sector using technology. As entrepreneurs, we wanted to turn African problems into African opportunities.

“Focusing on logistics, Ife and I started Kobo360 to not only fix the inefficiencies that exist, but to build opportunities for the businesses we serve and most importantly, the hundreds of thousands of truck drivers across Africa. This is a fundamental milestone in Kobo360’s journey; our Global Logistics Operating System [GLOS] will revolutionize supply chain across emerging markets, Ozor, Co-founder & CEO of Kobo360.

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Companies

Why these companies remain on NSE’s delisting radar

The Regulation Committee of the National Council of The Exchange (RegCom) has given approval to The Exchange to proceed with the delisting process.

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NSE moves to protect investors’ data , Ekiti, Osun, Delta, Imo, 9 others raise over N500 billion bonds in 10 years, Equities: Foreign investors remain net sellers of Nigerian equities, Top 10 stockbroking firms traded N1.35 trillion on stocks in 2019, Equities: A bullish run to start the year, NSE to sustain growth in 2020, CEO assures, Commodities , NSE PUBLISHES GUIDANCE TO FACILITATE EFFECTIVE VIRTUAL MEETINGS FOR STAKEHOLDERS AMIDST COVID-19

Data obtained from the Nigerian Stock Exchange (NSE) has revealed that about seven companies have been on the delisting radar of the Exchange since December 2019.

They have been either in the process of delisting their issued shares from the bourse or on the delisting watchlist of the Exchange. This was stated in the Exchange’s X-Compliance report.

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The report, which is released by the Exchange every Friday and seen by Nairametrics, stated that the Regulation Committee of the National Council of The Exchange (RegCom) has approved for the Exchange to proceed with the delisting process of Evans Medical Plc, Tourist Company of Nigeria, Anino International Plc, Nigerian German Chemicals Plc, and Roads Nigeria Plc since last December.

On the other hand, Omatek Ventures and Deap Capital Management & Trust have been placed on the NSE’s delisting watch-list over their failure to comply with some post-listing requirements, including failure to file their quarterly and annual reports within a stipulated time.

Why companies delist 

There are two main reasons why companies delist from the NSE or are forced to delist from the market. The first one entails punishment for companies that violate NSE’s listing rules.

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The NSE periodically fines defaulting companies, whilst demanding that such companies address their corporate governance lapses. As Nairametrics reported recently, the latest X-Compliance report showed that the NSE made as much as N154 million by imposing fines on defaulting companies.

But sometimes, fines are not enough. The NSE is often forced to voluntarily delist companies whose infractions have become persistent.

On the other hand, a good number of companies have also voluntarily delisted from the NSE for various reasons, including the desire to become privately owned entities.

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What you should know

In the case of Omatek Ventures, the company’s fate has been dwindling since the departure of its founder, Dr Florence Seriki. Nairametrics reported when it was accused of defaulting on its credit facility agreement with the Bank of Industry (BOI).

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According to the development bank, the company has refused to service the N5.81 billion which it obtained in 2012. The bank disclosed that several measures had been employed to ensure that Omatek kept to the loan agreement, all to no avail. One of such efforts was the appointment of Ade Oyebanji as a receiver, who took inventory of all items located at Omatek’s premises at Plot 11, Kudirat Abiola Way, Oregun,  Ikeja, Lagos, in January 2017.

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Summary of the loan detail

In December 2012, the Bank of Industry loaned Omatek Ventures N5,808,429,033.95 in a term loan and working capital facilities agreement. The loan was disbursed to finance the procurement of assembly components for the production of laptops.

Also, as part of the requirements for obtaining the loan, the development finance bank said that it requested an Irrevocable Standing Payment Order arrangement with the defunct Skye Bank Plc in favour of BoI, all assets debenture, and an Irrevocable Personal Guarantee of the late Seriki.

Evans Medical Plc is a Nigerian pharmaceutical company that was established in 1954 and listed on the Nigerian Stock Exchange in 1979. Over the years, the company has been plagued by many challenges, ranging from increasing competition to corporate governance lapses. The latest NSE X-Compliance report indicated that the company has not submitted any quarterly financial statement from 2016 to 2019. At this rate, the NSE may have no choice but to forcefully delist the company.

Nigeria-German Chemicals Plc has also not been obeying the listing rules of the NSE. The latest NSE X-Compliance report also noted that the company had not filed any financial statement since Q3 2014 till date. It will not come as a surprise if the company is delisted from the Nigerian bourse any moment from now due to regulatory reasons.

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Note that the company is a chemical/healthcare company which was incorporated in 1964. It was initially known as Nigerian Hoechst Plc before it rebranded and changed to its name in 1995. It was listed on the NSE in 1979.

Amino International Plc is also in the process of delisting, primarily because it abused NSE rules by not disclosing its quarterly financial statements from 2015 till date. The company, which engages in manufacturing different kinds of personal and industrial products, was incorporated in 1981 and listed on the NSE in 1990.

Roads Nigeria Plc is a civil engineering firm that is in the business of construction of roads, bridges, dams, airfields, and real estate. The company was incorporated in 1974 and is headquartered in the Northern Nigerian city of Sokoto.

Unfortunately, the company has not released its quarterly financial statements since 2014. This is a major violation of the NSE listing rules, which could result in the company being delisted soon.

The delisting of the Tourist Company of Nigeria Plc from the Nigerian Stock Exchange may be a voluntary move by the company’s owners. The company has recently been plagued by ownership tussles, with some shareholders calling for it to be liquidated. The hospitality company was incorporated in 1964.

DEAP Capital Management Trust Plc was incorporated in 2002 and listed on the NSE in 2007. Though Nairametrics had reported earlier that it was unclear whether its delisting was voluntary or regulatory with the recent X-Compliance report, it appears that the company is struggling financially as it has failed to turn in its quarterly reports to the Exchange.

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