The Great Future Of Investment

The Great Future Of Investment

Investors, both foreign and local, are now having faith in our economy. This simply means that they are bringing in money to invest knowing that they’ll reap what they’ve sown. ACTIS, a leading private equity investment firm in emerging markets had a deal with Diamond Bank with an offer of $130 million. This was to enable them take about 20% stake in Diamond Bank. They did the same in UAC PIc, where they invested $25 milion, acquiring a 20% stake in the company. In May June 2008, they divested and made returns exceeding
450%. They also invested $33 million in The Palms Mall in Lagos. Of note is the fact that they have a good shareholding percentage in Starcomms.
Capitalists don’t invest to make you happy, not also because they like your face; they invest where returns are optimal.

In the last 3 years I captured some important moves made by some investors. Here is a litany of some:

International Finance Corporation, the private sector investment arm of the World Bank, had in June 2005 increased its loan facility to Diamond Bank from $20 million to S 50 million. It also did that to Access Bank Pc by providing a $15 million loan facility in June 2006. IFC also in February 2007 made an equity investment of $14 million to Leadway Assurance Company Limited. Guarantee Trust Bank PIc and IBTC PIc were at different times given $20 million each to finance SMEs in the country. According to Businessday Newspaper of February 13, 2007, “IFC portfolio in Nigeria is now one-third of Sub-Saharan Africa’s. Having committed $266 million in 2006 to 10 projects in Nigeria, representing an increase of almost 30 percent from the previous year, the International Finance Corporation (IFC) portfolio in Nigeria has risen to about a third of our entire portfolio in Sub-Saharan Africa.” On IFC’s website is the statement,
“One of IFC’s fastest-growing client countries, Nigeria is the Corporation’s ninth-largest portfolio and its largest exposure in Africa. In 2006, IFC committed $266 million in 10 projects in Nigeria, bringing the committed portfolio for its own account to $544 million, a jump of almost 30 percent from $419 million from a year earlier.” Presently IFC has 6 Nigerian banks, all quoted in the stock exchange, in their Global Trade Finance programme.

International Finance Corporation (IFC), has also announced a $155 million loan agreement to support Indorama Group’s 75 per cent equity in the Eleme Petrochemical Company and for comprehensive turnaround programme designed to enhance its full-capacity operation and profitability. It even extended a $50 million loan to UBA in March 2007.

Capital Alliance, another private equity group, did inject $26 million into the operations of Cornerstone Insurance. The investment gave CAN a 51 percent stake in Cornerstone Insurance, a leading insurance firm offering life and non-life services in Nigeria. CAN’s current investment portfolio in Nigeria includes equity participation in MTN Nigeria (telecom firm), Businessday (newspaper), Virgin Nigeria (airline), ABC Transport Company and Oakwood Park, a hotel managed by the Protea Group of South Africa.

Standard Bank on February 2007 made a successful bid for 50-55% shareholding in IBTC Chartered Bank PIc. The deal from my personal calculation will be worth about NGN 100 billion in total. A statement in their corporate website said
“Standard Bank’s existing investment in Nigeria is approximately $225 million.” Noteworthy is the fact that Standard Bank had failed previously in three attempts to gain a foothold in the Nigerian banking sector. It had tried to acquire UBA, Afribank and oflate Oceanic Bank. Finally, after the fourth attempt they were successful with IBTC Chartered Bank. The merger has given birth to Stanbic IBTC Plc, a member of the Standard Bank group. Have you ever wondered why they had been frantically trying to gain access into the Nigerian market? It’s because they see a gold mine and they want to take a piece of the pie.

South African businesses have done all that is in their powers to gain a foothold in the Nigerian business landscape, all in a bid to make the most of the financial and business opportunities our nation presents. Many eateries in Lagos are of South African brand, so waking up some of the local entrepreneur and investors. South African Airlines tried all they could to be the preferred bidder for Nigerian Airways. Virgin Nigeria was formed on the heels of this. Richard Branson came in with his Virgin brand to partner with local institutional investors to make the dream a reality.

United States Agency for International Development (USAID) had in partnership with Zenith Bank launched a $10 million mortgage scheme for middle and low income Nigerians. It had earlier given Fidelity bank $5 million to fund SMEs in the country.

GI Bank went to Europe, with Standard Bank of London and Afrinvest WA Limited, as lead arrangers, in late January 2007 to issue Eurobonds worth $300 million. They realized S521 million.
They did this without the guarantee of the Federal government or any international financial institution.
“Obviously there is long term
confidence in our bank” says Mr. Segun Agbaje, Deputy Managing Director of the bank. It’s not just the bank, it is the confidence of the international community that Nigeria is the new place to reap from and so they are sowing. In July 2007, they did a Global Depository Receipt (GDR) raising $250 million locally and $500 million in the international arena to be listed on the London Stock Exchange. The listing took place as planned on the LSE.

Nigeria International Bank, a subsidiary of Citi Bank and 8 other banks signed an agreement to syndicate a loan of $205 million to United Cement Company of Nigeria (UNICEM) for the development of a green field cement plant in Calabar. This deal won the Euromoney 2006 African Industrial Deal of the year award. It is worthy of note that Flour Mills has a good stake as per shareholding in UNICEM.

Early March 2007, Shoreline Energy International Limited acquired controlling stakes in Costain WA Plc. The same company acquired the manufacturing arm of ABB Nigeria, ABB Electrical Systems Limited, making it the only Original Equipment Manufacturer (OEM) for ABB products in Sub-Saharan Africa. As the year went by, it extended it’s investment into Premier Paints and Nigerian Ropes PIc. These companies have become the toast of investors because they believe the Shoreline Energy management team will add value to the companies that they have bought.

At about the same time, This day and many other national dailies reported in their headlines on March 12, 2007, that ten Nigerian banks raised $1.5 billion for Zenon Oil run by Femi Otedola for its numerous projects. Earlier in the year, precisely on Valentine’s Day 2007, Nigerians woke up to hear that twelve (12) financial houses were able to raise $222 million for Notore Chemical Industries to revamp the comatose fertilizer company, formerly NAFCON, under private ownership. By June 2008, Notore was warming up to start production in the first quarter of 2009 and was signing up dealers and transporters for it goods.

Businesssday Newspaper of March 26, 2007
announced that “A club of leading international institutional investors led by Helios Investment Partners have crossed a block trade in the shares of First City Monument Bank Ple (FCMB), acquiring 1.5 billion shares, representing 15.81 percent of the bank’s shareholdings.” Those involved in the Helios deal were Soros Private Equity Partners, UK based Commonwealth Development Corporation and Helios Investment Partners. This is some good cheery news for our economic climate. Also on the same day, the Guardian Newspaper reported thus:
“Zenith Bank Pic at the weekend led five other banks including GT Bank, First Bank of Nigeria PIc, Oceanic Bank, Access Bank and FCMB Pl, to arrange NGN20 billion loan for the completion of the Aviation Terminal II at the local wing of the Murtala Mohammed International Airport, Lagos.”

Intercontinental Bank PIc on April 2, 2007
announced that it had reached an agreement with a consortium of five international financial institutions to invest US$161 million (NGN 20.25 billion) of convertible preferred equity into the bank. The highly reputable institutions investing in Intercontinental include Vectis Capital, EMP Africa Fund II, AIG Global Emerging Markets Fund Il, L.P., Rand Merchant Bank and RICO.

These institutions, which will provide both capital as well as operational and strategic assistance to Intercontinental Bank, are demonstrating a high degree of confidence in the bank, its growth strategy and the overall Nigerian banking market.
This groundbreaking transaction was arranged by New York based investment bank, Nova Capital Partners, LLC. Two days after, HSBC Bank PIc executed a privately placed, non-secured structured debt instrument totaling $100-million (INGN 12.7-billion) with First City Monument Bank (FCMB) Nigeria.

This is the first agreement of its kind with an African bank in the international capital market. Zain Latif of HSBC said: “HSBC is delighted to have been involved in this landmark and innovative transaction for FCMB. This deal allows FCMB to enter the international capital markets with a bespoke financing structure. We look forward to working with FCMB as it embarks on its ambitious growth strategy for Nigeria and the broader region.”

At a point in 2007, almost all the public offers and private placement were massively oversubscribed. CHAMS Pc, Tantalizers, Food Concepts all did their private with big hush – hush because they were overwhelmed with the level of subscription. These private placements were done in days instead of the weeks that they were supposed to run.

These figures tell a story. After the rounds of raising funds via the capital market in 2004 and 2005, many companies are back raising capital.
The NSE reported that over NGN1.9 trillion was raised in new issues in 2007. Between January 2006 and April 2007, Zenith Bank, Dangote Sugar Refinery Pl, Transcorp, Intercontinental Bank, UBA and Oceanic Bank has raised in excess of NGN 450 billion.

This was almost inconceivable four years ago. In the whole of 2004, NGN227.383 billion was raised. In fact it was estimated that from January to April 2007, an inflow of NGN620 billion was injected into the banking sector either as syndicated loans or equity investments.

Also The Central Bank of Nigeria (CBN) in July 2007 reported that remittance from Nigerians in Diaspora to the country from January to June 2007 stood at $8 billion. This was more than 100% jump from the previous figures. Foreign investment in the capital market is valued at over NGN200 billion. World Bank in their report, “Migration and Remittances Factbook 2008” estimated that Nigerians in Diaspora remitted $3.3 billion in 2007.

It’s pertinent to note that most of the investment has been focused on the banking and financial sector of the economy. Yes, it’s true. The current reforms going on in the country are on those sectors. Bulk of trading on the exchange is on banking stocks.

We have started from somewhere and hopefully the reforms will impact other sectors especially the real sectors positively. My opinion is that when our energy and power sector picks up, more investment will be made to the real sectors of the economy. Most manufacturing companies are groaning under the burden of generating their own power.

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