…Schools, electricity projects, road construction, Agric among key sectors of focus

…State taps into Sukuk financing to accelerate growth

Rashidat Okunlade Writes

Lagos State has set another record in accessing capital market funds to finance the delivery of key infrastructure projects. Governor Babajide Sanwo-Olu, on Tuesday, presided over a ceremony where the State Government, issuing parties, and trustees signed transaction instruments for the first sets of allotments in the N1 trillion Debt and Hybrid Issuance Programme.

The State issued a 10-year tenure bond valued at N115 billion at 15.25 per cent in its fourth issuance under the Debt and Hybrid Issuance Programme duly approved by the State House of Assembly.

The second instrument is a seven-year tenure bond valued at N19.815 billion at 14.675 per cent Fixed Return Forward-Ijarah Lease Sukuk billed to mature by 2030, which marked the first shariah-compliant instrument to be issued by Lagos.

Lagos State Governor, Mr. Babajide Sanwo-Olu (middle), Deputy Governor, Dr Obafemi Hamzat (left), and Commissioner for Finance, Dr Rabiu Olowo (right) during the official signing ceremony of the State Government Series I (100b Bond) and Series II (up to 20b SUKUK) at the Lagos House, Alausa, Ikeja, on Tuesday, 23 May 2023.

Attorney-General and Commissioner for Justice, Mr. Moyosore Onigbanjo, SAN, formally read out the resolutions of the State Executive Council adopting the issuance of the two bonds before the signing of the instruments by the parties.

Sanwo-Olu described the development as “another significant milestone” recorded by his administration in delivering the

required infrastructure that would catalyse economic growth across the State. The two bond issuances, he said, would provide the impetus for his government to further drive its development agenda in critical sectors of the State.

He said: “As we renew our mandate in the coming days, these two issuances will provide the impetus for my administration to further drive our THEMES agenda. Proceeds from the Bond and Sukuk will enable various Ministries, Departments, and Agencies, including the Ministry of Energy and Mineral Resources, Ministry of Agriculture, the Office of Drainage and Water Resources, Ministry of Works and Infrastructure, Ministry of Education, Ministry of Health, and Ministry of Waterfront and Infrastructure, to execute respective projects that have been pre-inspected by the Securities and Exchange Commission and issuing houses.

“Some of the projects include massive overhaul of 33 public schools in Itolu area of Ajegunle and ongoing road infrastructure projects on the Lekki-Epe corridor. A significant part of the funds will be used for drainage works, sea, and lagoon embarkment to protect the environment from climate issues. In health, we are using part of the proceeds to kick off our Infectious Disease Research Centre at Infectious Disease Hospital in Yaba, because of the experience we had with coronavirus. We are building agricultural capability to feed our people. Part of the proceeds is going to all the activation we have been doing around constructing major food markets.”

Sanwo-Olu said the proceeds from the issuances would not only drive infrastructure development, but also stimulate economic growth, foster job creation, and enhance the quality of life for the residents.

The Governor thanked the investors’ community for believing in “tremendous opportunities” in Lagos, reiterating his commitment to discipline and transparency in the deployment of the funds.

Commissioner for Finance, Dr. Rabiu Olowo, said the Sanwo-Olu administration made stand-out financing decisions that would continue to enhance the State’s ability to deliver needed infrastructure.

Olowo said the issuances demonstrated Lagos’ status as a “Category A Issuer” and a proof of the trust that investors had in the State’s ability to judiciously deploy proceeds to deliver on the government’s projects.

He said: “The transaction reflects the resilience and depth of the domestic debt capital market, which Lagos has been able to rely on in our quest to build a Greater Lagos for generations to come. Aside from democratic process, the validity of a government’s credibility is when discerning, shrewd business people, and investors willingly put their money to support the development agenda of a State.”

A lead issuing house, Chapel Hill Denham, said Lagos raised the N134 billion bond within 14 days of issuance, saying the oversubscription was an indication of investors’ confidence in the State.

Its Managing Director, Mrs. Kemi Awodeyin, said the issuing house remained disciplined and committed to Lagos in its drive to improve economic growth.

Hajara Adeola of Lotus Financial Services, the lead issuing house which facilitated the Sukuk instrument, praised Lagos Government for building faith in non-interest finance.

Rashidat Okunlade Writes

Nigerian Exchange Group Plc (NGX Group) a leading integrated market infrastructure provider in Africa has announced its unaudited results for the period ending 31 March 2023.

NGX Group serves the largest economy in Africa and is strengthening the competitiveness of African economies to achieve global prosperity. As a key player in the continent’s financial markets, NGX Group takes an active role in shaping the future of the markets through our investment in business innovation and technology.

Group Financial Highlights

Commenting, Mr. Oscar N. Onyema OON, Group Managing Director/Chief Executive Officer, said: Despite the challenging macroeconomic environment during the quarter amidst cash and energy scarcity, and political tension from the 2023 elections, the Group remained resilient. We are pleased to announce a 109% increase in net profit, achieved through the implementation of cost-saving measures that minimised the impact of revenue reduction, just as we are exploring new and innovative ways to capture more market share and appeal to a broader demographic.

The Group will continue investing in innovative marketing strategies to appeal to the changing consumer preferences, as well as explore opportunities to expand the product lines, and portfolio mix, and penetrate new markets. We stay committed to our long-term growth strategy and are confident in our ability to navigate the current challenging environment and create value for our stakeholders.

Group Financial Performance Review

NGX Group recorded a 14.2% year-on-year (YoY) decline in gross earnings to ₦1.6 billion (Q1 2022:₦1.8 billion), driven by a 20.5% dip in revenue following a period of high economic and socio-political uncertainty. On the other hand, other income grew by 57.7%, offsetting the drop in revenue.

The Group’s top-line revenue fell by 20.5% to ₦1.3 billion (Q1 2022:₦1.7 billion), driven primarily by reduced business transactions and consumer spending that resulted from the recently concluded general election and the CBN’s attempt to phase out Nigeria’s old higher denomination of banknotes.

Transaction fees, which accounted for 51.5% of revenue, dropped by 30.6% YoY to ₦685.9 million (Q1 2022:₦988.1 million) due to reduced business activities.

Treasury investment income (31.1% of revenue) also dropped to ₦414.7 million in Q1 2023 (Q1 2022:₦520.5 million), primarily driven by relatively lower yields on the Group’s treasury investment portfolio owing to the unfavourable market conditions and uncertainties during the general election period.

The Group recorded a 44.6% listing fees growth to ₦179.2 million in Q1 2023 from₦123.9 million in Q1 2022. Growth in listing fees was driven by increased demand for listing services by domestic firms.

Rental income (2.7% of revenue) earned from NGX Real Estate, lease of office floor spaces, recorded a 32.2% increase to ₦36.0 million in Q1 2023 from ₦27.2 million recorded in Q1 2022.

Other fees representing rent of trading floor, annual charges from brokers, dealing licenses, and membership fell by 1.2% to ₦16.5 million in Q1 2023 (Q1 2022:₦16.9 million).

Other income (14.9% of gross earnings) grew by 57.7% to ₦233.4 million in Q1 2023 (Q1 2022:₦148.0 million) due to increased earnings from sundry, other subleases, and penalty fees which all combinedly accounted for 65.2% of total other income.

Market data income fell by 38.0% to ₦57.3 million in Q1 2023 relative to ₦92.4 million recorded in Q1 2022.

Technology income recorded as ₦23.9 million accounted for 10.3% of other income.

Total expenses fell YoY by 10.0% to ₦1.7 billion from ₦1.9 billion in Q1 2022, primarily driven by reduced personnel expenses and a fall in finance costs.

Operating expenses grew by 13.9% YoY to ₦390.8 million in Q1 2023 (Q1 2022: ₦343.0 million), generally due to increased operational activities amidst the Group’s preparation for full physical resumption to office.

Personnel expenses were down by 9.95 to ₦629.0 in Q1 2023 (Q1 2022: ₦698.0 million). Salaries and other Staff Benefits (93.4% of personnel expenses) decreased by 8.7% YoY to ₦588.1 million in Q1 2023 (Q1 2022: ₦644.3 million) due to streamlined operations and improved efficiency.

EBITDA fell by 30.3% to ₦545.8 million from ₦783.5 million recorded in Q1 2022.

EBIT for the period was ₦456.1 million, representing a 29.8% decline from ₦649.9 million recorded in Q1 2022.

Profit before income tax expense increased by 21.5% YoY to ₦412.2 million in Q1 2023 from ₦339.2 million in the corresponding period in 2022 due to an improved share of profit-equity accounted investees and a fall in finance cost.

Profit for the period recorded a 109.0% increase to ₦310.0 million in Q1 2023 from ₦148.3 billion in Q1 2022, resulting in significant growth in profit after tax margin to 23.3% in Q1 2023 from 8.9% recorded in Q1 2022.

Total assets fell marginally by 4.2% year-to-date (YTD) to ₦54.7 billion from ₦57.1 billion as of FY 2022. Investment in associates, which accounted for 55.3% of the Group’s total assets, grew by 1.7% to ₦30.2 billion at the end of Q1 2023 (Q1 2022: ₦29.7 billion)

Total liabilities recorded a 12.8% YTD drop to ₦17.7 billion at the end of Q1 2023 from ₦20.3 billion as of FY 2022 due to a 53.6% and 74.7% fall in other liabilities and deferred tax liabilities, respectively.

Net assets increased marginally by 0.5%, driven by the 1.0% YTD increase in retained earnings (86.6% of Total Equity) to ₦37.0 billion at the end of Q1 2023 (Q1 2022: 36.8 billion).

NGX Group provides a wide range of services including listing and trading securities, licensing, market data solutions, ancillary technology, regulation, real estate, and more through its wholly-owned subsidiaries – NGX Exchange, NGX REGCO, and NGX RELCO.

The Group is also involved in the financial infrastructure space with investments in NG Clearing Limited, Central Securities and Clearing Systems (CSCS), and OTC platforms.

Nigerian Exchange Group is committed to the highest international standards. To support this commitment, NGX Group belongs to several international and regional organisations that promote the development and integration of global best practices.

NGX Group continues to evolve to meet the needs of its valued customers and to achieve the highest level of competitiveness.

For further information, please refer to our website www.ngxgroup.com

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Rashidat Okunlade Writes

The Chief Executive Officer, Nigerian Exchange Limited (NGX), Mr. Temi Popoola, said that the market would see a renewal in Exchange Traded Fund listings as four new ETFs were in the pipeline.

This was echoed by Popoola at the recently completed ETFs conference themed “ETFs in the Nigerian Capital Market: Opportunities and Challenges” held on Wednesday, 19 April 2023. Giving his remarks, the CEO explained that the Exchange is leading the ETFs market in West Africa with a market capitalisation of N8.87bn ($19.25m), noting that the market is still in its nascent state, compared to the South African ETF market with a $7.11bn capitalization.

“There has been a dearth of new ETFs listings on the NGX in recent years, however, there are bright spots on the horizon with 4 new ETFs listings in the pipeline. It is incumbent to state that current macroeconomic challenges resulting in the exit of Foreign Investors, impacted the ETFs space, resulting in a sharp dip in the ETFs market Cap from 2020 highs of N24.5bn. We are hopeful that the new administration’s policy tilt would positively impact our market.”

Also speaking at the event was the Executive Commissioner, Operations, Securities and Exchanges Commission (SEC), Mr. Dayo Obisan, who also touched on the challenges in the market but expressed confidence in the ability of experts to proffer solutions. He urged all stakeholders including the Fund Managers Association, NGX, and other institutional investors to extend the message of ETFs in order to deepen the market and make the asset class more vibrant, thereby driving growth in the capital market.

Adeyinka Shonekan, the Executive Director, Central Securities and Clearing System (CSCS) Plc spoke on the CSCS’s developmental efforts in the ETFs market. He explained how the CSCS was using technology to improve the onboarding of retail investors into ETFs. “CSCS has been driving the initiative to reduce the settlement cycle from T+3 to T+2 or T+1 and we have been engaging stakeholders to make sure we make this a reality,” he added.

Adele Hattingh, Manager, Business Development and Exchange Traded Products at the Johannesburg Stock Exchange, JSE, gave an overview of the South African ETFs market including why investors should consider investing in the asset class. The Managing Director, Vetiva Fund Managers Limited, Oyelade Eigbe, on her part also spoke on how retail investors could access the ETFs market in Nigeria and monitor their investments.

During the panel session, capital market experts further addressed the opportunities and challenges of the market, with liquidity as a central topic of discussion. Featuring were Mr Aigbovbiose Aig-Imoukuede, President, FMAN, Oladele Sotubo, CEO, Stanbic IBTC Asset Managers, FBN Quest Capital and Nornah Awoh, Chief Equity Analyst/CEO, Palesa Capital Markets Associates.