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Local investors push Nigerian Stocks to post best monthly gains in over 2 years

Foreign investors have been staying off the Nigerian equities market lately, opposing attractive valuations on some of Nigeria’s blue-chip firms.

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The Nigerian stock market has just had one of its best weeks since January, with the Nigerian Stock Exchange All-Share Index and Market Capitalization gaining by 1.87% to close the week at 23,021.01 and N11.997 trillion, respectively.

Month to date, equities closed 8%, the highest month to date return since January 2018. Stocks also closed at 7.5% month to date in January 2020 before sliding into negative territory in the subsequent months of February (-9.11%), and March (-18.75%). Year to date, the market is still down -14.24%.

Local investors lead

Foreign investors have been staying off the Nigerian equities market lately, despite attractive valuations on some of Nigeria’s blue-chip firms, based on worries that the dollar scarcity might limit their ability to make any profit.

Local investors are presently positioning for dividend payments from Nigerian biggest brands, not worried by the dollar scarcity caused by the plunge in the prices of crude oil and the COVID-19 pandemic.

READ ALSO: Brent crude slides by 8%, as storage fears mount

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Philip Anegbe, Team Lead, CardinalStone Research explained in detail to Nairametrics the trend in the market and how cheap Nigerian banking stocks had become. He said:

“It is likely that market would see some more profit-taking in Q2 and even beyond despite recent upbeat demand, although we think that long term investors can take advantage of bargain hunting opportunities in favorable equity names in anticipation of a post-COVID-19 return to normalcy.

“For instance, on Banking, despite the anticipation of broad weakness in performance in FY’20, we see the potential for resilience in specific names that are better positioned to withstand the crises (we like GUARANTY and ZENITHBANK: better ratios, strong capital buffers).

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He spoke about how consumer goods companies like Nestle, and fiscal policies had helped the agricultural sector.

“On Consumer Goods, we expect the inelastic nature of the demand for some food products to support companies such as NESTLE. While raw material and distribution costs may be a concern, food companies’ ability to pass these on to the final consumers (especially now that there are some panic buying and direct government purchases for distribution) could help them to be defensive during the crisis period.

“We also note that NESTLE’s diversified product portfolio could be a key support to earnings over the long term. Elsewhere, agriculture companies such as PRESCO and OKOMU are likely to be supported by devaluation impact on CPO prices and a larger market share due to border closures.

“All in, we think current market sell-offs present opportunities to enter into some equity names at low prices. Some of the more compelling equity”

READ ALSO: Unilever Nigeria Plc announces closed period for 2020 Q1 unaudited financial accounts

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Foreign investors are wary

Foreign investors’ purchases of Nigerian securities dropped to $266 million in the month of March and the first half of April, the lowest level since the Investors’ and Exporters’ Foreign Fx Window opened in 2017, according to data from the FMDQ OTC Securities Exchange.

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In a note to Bloomberg last month, Johannesburg-based Rand Merchant Bank said that American dollar trading has remained low at Nigeria’s interbank foreign exchange market, while Nigeria’s foreign exchange reserves have dropped by over 12% this year to $33.6 billion.

The prospect for foreign investments in the Nigerian stock market depends on how the Federal Government authorities set about to boost Africa’s biggest economy, and save it from the destructive effect of COVID-19.

Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment Trading. Featured Financial Market Analysis for a Fortune Global 500 Company. Member of the Chartered Financial Analyst Society. Follow Olumide on Twitter @tokunboadesina or email [email protected]

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Companies

Naira devaluation, FX scarcity caused increase in cost of goods – Nigerian Breweries

Nigerian Breweries has revealed that Naira devaluation, FX scarcity caused increase in the cost of its goods in 2020.

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Jordi Borrut Bel, Nigerian Breweries Plc

The Finance Director of Nigerian Breweries Plc, Rob Kleinjan, has revealed that the increase in the brewer’s costs of goods was due to the devaluation in naira and FX scarcity, which led to the increase in the cost of inputs such as sorghum and sugar, as they are not fully produced locally.

This disclosure was made during the Nigerian Breweries’ Fact Behind Figures results presentation today.

However, Kleinjan explained that the increase in cost could not be fully attributed to currency devaluation and foreign exchange scarcity, which exerts pressure on imported input materials.

He said the increase in Nigerian Breweries’ costs of goods sold, as reported in its unaudited financial results, could also be linked to the volume of goods sold, as the company’s sales volume in Q3 increased by almost the same percentage as the cost of goods sold.

However, Mr. Kleinijan reiterated that to mitigate further losses, it was important for the company to focus on the supply chain and seek ways to mitigate price increases.

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What they are saying

The Managing Director of Nigerian Breweries, Mr. Jordi Borrut, while speaking at the virtual event said:

In 2020, the results of Nigerian Breweries were adversely impacted by COVID, VAT increase, FX devaluation and scarcity of foreign exchange. The year started with a promising 1st quarter, which was heavily impacted in Q2. The Nigerian market, however, rebounded in Q3.”

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Mr. Rob Kleinjan, while explaining the factors behind the increase in Nigerian Breweries’ cost of goods sold in the first nine months of 2020, said:

It is also clear that the increase in cost is due to the devaluation and the FX scarcity which has put pressure on our input cost. If you look into the main elements we use, which are sorghum and sugar – they are not fully produced locally, so when the currency is devalued, the prices of these inputs will soar.

That’s why it’s important that we are focused on the supply chain, and seek for ways we can mitigate any of the price increases, because the increase in cost comes from the input prices, which come from FX scarcity.”

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Companies

United Securities Limited changes name to Coronation Registrars Limited

United Securities Limited formally notifies its numerous customers and stakeholders of a change of name to Coronation Registrars Limited.

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In line with section 30(3) of the Companies and Allied Matters Act 2020 (CAMA), United Securities Limited has formally notified its numerous customers and stakeholders that it has obtained regulatory approval from the Corporate Affairs Commission to change its name to Coronation Registrars Limited.

The disclosure is contained in a verified post on Linkedln, signed by the firm’s Secretary, Omotoyosi Kola-Ojo, and seen by Nairametrics.

What this means

In line with the recent corporate action and according to section 30(5) of the Companies and Allied Matters Act, the company has been issued a new Certificate of Incorporation by the Registrar General of the commission, evidencing the change of name.

What they are saying

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A verified post by the Firm read thus: “The Public is hereby informed that United Securities Limited having passed the necessary Special Resolutions in line with Section 30(3) of Companies and Allied Matters Act 2020 (CAMA) and obtained the necessary regulatory approval of the Corporate Affairs Commission, has changed its name to CORONATION REGISTRARS LIMITED.

The public is further informed that pursuant to Section 30(5) of the Companies and Allied Matters Act, the company has been issued a new certificate of incorporation by the Registrar General of the Commission evidencing the change of name. All stakeholders are requested to take note of the above information.”

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Companies

We have exported 7 clinker vessels to other African countries since June – Dangote Cement

Dangote Cement says it has exported 7 clinker vessels to other African countries since June.

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Dangote Cement reveals share buyback plans, DANGOTE CEMENT records loses as ASI decline by 0.39%

The Group Executive Director of Dangote Cement, Michel Pucheros, announced that Dangote Cement, Africa’s leading cement producer with nearly 48.6Mta (Million Metric Tonnes Annually) capacity across Africa, has exported 7 clinker vessels to date to other African countries.

This statement was disclosed by Mr. Pucheros in a press release issued on the Group’s performance in the third quarter.

  • The cement maker exported 2 vessels of clinker per month to Cameroon in the third quarter of 2020 via the Apapa export terminal, which takes the Group’s clinker export for the quarter to 6 vessels.
  • In addition to its maiden shipment vessel to Senegal, which is a total of 27.8Kt of clinker, took its clinker exports to other African countries from June to date to 7 vessels.

In his statement, Mr. Pucheros said, “We continue to focus on our export strategy and are on track to ensure West and Central Africa become cement and clinker independent, with Nigeria as the main supply hub.

“Clinker exports have steadily been ramping up in Q3 after our maiden shipment in June 2020, whilst land exports have also resumed.”

However, as the Group ramp-up production across all segments and regions to reach its cement production and bagging capacity of 48.55 Mta, he said,

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“Dangote Cement’s strategy to offer high-quality products at competitive prices is meeting customers’ expectations in Nigeria and across the continent, where we continue to deploy excellent marketing initiatives and operational excellence across the continent.”

About Clinker

  • Clinker is a nodular material which is used as the binder in cement products. Clinker is produced inside the kiln during the cement manufacturing process.
  • The primary use of clinker is to manufacture cement, as cement is produced by grinding clinker.

What you should know

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Nairametrics had reported that Dangote Cement Acting CFO, Guillaume Moyen, during a virtual event in September disclosed that the cement producer is set to commence clinker export to other African countries within the next few weeks.

He reiterated that the Management of the company is on course to sell more clinker across West Africa, and commence shipment to Central Africa in H2 2020.

Why it matters

The export of clinker to countries where limestones are not available in huge quantities gives these countries a chance to produce its cement for construction purposes.

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