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Nigeria’s Promise Turns to Peril as Investors Head for the Exits – Bloomberg

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Nigeria investors

The promise of Africa’s biggest economy has turned to peril.

Companies drawn to Nigeria by the prospect of a population bigger than Germany and Turkey’s combined are retreating; those staying have publicly criticized the president, a military strongman in the 1980s who came back to power via an election last year; and foreign investors are pulling their money out.

The corporate tribulations that began with a slide in oil prices and accelerated after the imposition of capital controls are also entangled in a global emerging-market slump. In propping up the naira in a futile bid to contain inflation, officials have jacked up pressure on an economy running out of cash, deepening a black market in currency trading and causing shortages of imported goods from fuel to milk. U.S. officials said they will press their Nigerian counterparts to change tack during talks in Washington this week.

“Our clients, Fortune 500 and other multinationals, are all quite concerned by the state Nigeria finds itself in,” said Alexa Lion, a senior analyst at Washington-based Frontier Strategy Group, which advises companies looking at developing nations. “Sentiment has worsened. There’s a lot of anxiety.”

Frustration too.

After four years trying to gain traction, Truworths International Ltd., a South African clothing retailer, last month gave up. It closed its last two outlets in Nigeria, in the southeastern cities of Enugu and Warri. Willing to tolerate dilapidated infrastructure, complicated red tape and expensive rent, the company said the import and foreign-exchange restrictions caused it to throw in the towel.

‘Impossible’

“We were happy to lose money for a few years while we developed the business and opened new stores,” Chief Executive Officer Michael Mark said in an interview. “The straw that broke the camel’s back was not being able to get stock into Nigeria. You can’t have a clothes shop with no clothes. With all the other things, it just wasn’t worth it. It was impossible to do business.”

Nigeria’s appeal has faded as the price of oil, source of 90 percent of export earnings, has crashed. Growth slumped to 2.8 percent last year, the slowest since 1999, and will decelerate to 2 percent in 2016, according to Morgan Stanley. In dollar terms, the economy in 2019 will still be 17 percent smaller than its 2014 peak of $542 billion. Only two years ago, McKinsey & Co. said Nigeria had the potential to grow 7.1 percent annually until 2030 and build a $1.6 trillion economy.
As Nigeria lags, other countries in sub-Saharan Africa have gotten more appealing. Last month, Nigeria fell from first to fourth, behind Ivory Coast, Kenya and Tanzania, in a ranking of business prospects by the research unit of Nielsen Holdings Plc.

Portfolio investors including Aberdeen Asset Management Plc and Ashmore Group Plc, which together oversee about $450 billion of assets, have retreated from Nigerian markets. The main stock index is down 10 percent this year, while the MSCI Frontier Markets Index has lost 2.8 percent. Nigeria’s local-currency bonds are the only ones among 31 emerging markets tracked by Bloomberg to have generated aloss this year. Foreign direct investment this year is set to be the lowest since the 2008-09 global financial crisis, according to data from the central bank.

For now, President Muhammadu Buhari and Central Bank Governor Godwin Emefiele say they aren’t budging from their strong-naira policy. While both acknowledge that businesses are struggling to source enough dollars, Buhari says that a devaluation and easing of capital controls would be akin to “murdering” the naira and send prices up. That’s already happening as manufacturers struggle to buy foreign inputs, with inflation accelerating to a three-year high of 11.4 percent in February.

Markets are betting Nigeria will be forced to follow oil exporters from Russia to Kazakhstan and Mexico and let the currency weaken. While the naira has been all but pegged at 197-199 per dollar since March 2015, forward prices suggest it will drop 29 percent to 280 in a year. The black market rate has weakened to 320.

Bruno Witvoet, the Africa President of Unilever, whose Nigerian subsidiary has seen its shares plunge 31 percent since Buhari came to power, said it would be “very insane” for the country to persist with the currency policies. Nestle SA says its local unit, which has fallen 18 percent in that period, has had to widen the number of banks it uses so that it can access enough foreign exchange.

Not all companies are gloomy. In January, Coca-Cola Co. agreed to pay about $240 million for a 40 percent stake in Chi Ltd., which is based in Lagos, and makes fruit juice and dairy products. Boston Consulting Group this month opened its first office in Nigeria.

“It’s an immense market,” said Geoffrey White, CEO for Africa at Kuwait-based Agility Public Warehousing Co K.S.C., which plans to spend hundreds of millions of dollars building four warehouse and logistics parks in Lagos and the capital Abuja by 2020. “You can’t really have an African policy without having Nigeria high up on the list.”

For Frontier Strategy Group’s Lion, Nigeria is too important for foreign companies to exit en masse.

“But a lot will depend on what happens with the currency,” she said. “For now, the opportunity cost of not being there is too high. That could change if the currency situations worsens. It’s definitely a pivotal time.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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The Time is Now for Global ESG Regulation: deVere CEO

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Nigel Green - Investors King

A global regulatory framework for environmental, social and governance (ESG) investing is now urgently required, affirms the CEO of one of the world’s largest independent financial advisory and fintech organisations.

The ‘call to action’ from Nigel Green, the chief executive and founder of deVere Group, comes as major financial institutions are handling a massive uptick of inflows into the sector but at the same time facing accusations of inconsistency in their approach to sustainable impactful investments.

Mr Green says: “Environmental, social and governance investing is this decade’s ultimate investment megatrend – and it has been accelerated since the pandemic began.

“There’s been a dramatic increase of inflows into the sector from both retail and institutional investors as it has become clearer than ever that human health is reliant upon healthy ecosystems; that we need to ensure the sustainability of supply chains; and that those companies with robust corporate governance and good business practice fare better in difficult times and are ultimately best-positioned for the future.”

He continues: “The trend is unlikely to slow down in a post-pandemic world. Millennials, who are statistically more likely to seek responsible investment options, are set to become the major beneficiaries of the largest inter-generational transfer of wealth – an estimated $30trillion over the next few years.

“In addition, recent research reveals that the majority of environmental, social and governance investments have outperformed their non-sustainable counterparts over the last year and have had lower volatility.

“This will only serve to attract more investors.”

Given the continuing and increasing demand, Mr Green says that the regulatory landscape must reflect the situation.

“Regulators need to catch-up.  Initiatives that began in the EU are now spreading worldwide, but much more needs to be done, at a faster pace and with a joined-up approach. There remains a startling lack of consistency in definitions and data.

“Considering the momentum of the sector, the time is now for the establishment of a global regulatory framework for ESG investing.”

This, he says, will provide greater protections for those investors who are looking for profits with purpose. It will also help to reduce ‘greenwashing’, which is where an investment or company gives an inaccurate impression over its green, socially responsible or corporate credentials.

The deVere CEO concludes: “A robust standardised regulatory framework would make the sector even more attractive, which will then help investors reach their financial goals whilst proactively protecting people and the planet.”

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BMW and Ford Invest in Solid Power to Secure All Solid-State Batteries for Future Electric Vehicles

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 Solid Power, an industry-leading producer of all solid-state batteries for electric vehicles, yesterday announced a $130 million Series B investment round led by the BMW Group, Ford Motor Company and Volta Energy Technologies.

Ford and the BMW Group have also expanded existing joint development agreements with Solid Power to secure all solid-state batteries for future electric vehicles.

The investment positions Solid Power to produce full-scale automotive batteries, increase associated material output and expand in-house production capabilities for future vehicle integration. The BMW Group and Ford aim to utilize Solid Power’s low-cost, high-energy all solid-state battery technology in forthcoming electric vehicles.

“BMW and Ford now share leading positions in the race for all solid-state battery-powered electric vehicles,” said Doug Campbell, CEO and co-founder of Solid Power. “Solid Power now plans to begin producing automotive-scale batteries on the company’s pilot production line in early 2022 as a result of our partners’ continued commitment to Solid Power’s commercialization efforts.”

Solid Power has demonstrated its ability to produce and scale next-generation all solid-state batteries that are designed to power longer range, lower cost and safer electric vehicles using existing lithium-ion battery manufacturing infrastructure.

Solid Power’s leadership in all solid-state battery development and manufacturing has been confirmed with the delivery of hundreds of production line-produced battery cells that were validated by Ford and the BMW Group late last year, formalizing Solid Power’s commercialization plans with its two long-standing automotive partners.

“Solid-state battery technology is important to the future of electric vehicles, and that’s why we’re investing directly,” said Ted Miller, Ford’s manager of Electrification Subsystems and Power Supply Research. “By simplifying the design of solid-state versus lithium-ion batteries, we’ll be able to increase vehicle range, improve interior space and cargo volume, deliver lower costs and better value for customers and more efficiently integrate this kind of solid-state battery cell technology into existing lithium-ion cell production processes.”

“Being a leader in advanced battery technology is of the utmost importance for BMW. The development of all solid-state batteries is one of the most promising and important steps towards more efficient, sustainable, and safer electric vehicles. We now have taken our next step on this path with Solid Power,” said Frank Weber, Member of the Board of Management BMW AG, Development. “Together we have developed a 20 Ah all solid-state cell that is absolutely outstanding in this field. Over the past 10 years, BMW has continuously increased the battery cell competence– important partners like Solid Power share our vision of zero-emission mobility.”

Solid Power is currently producing 20-ampere hour (Ah) multi-layer all solid-state batteries on the company’s continuous roll-to-roll production line, which exclusively utilizes industry standard lithium-ion production processes and equipment.

Both Ford and the BMW Group will receive full-scale 100 Ah cells for automotive qualification testing and vehicle integration beginning in 2022. Solid Power’s all solid-state platform technology allows for the production of unique cell designs expected to meet performance requirements for each automotive partner. Solid Power’s truly all-solid cell designs achieve higher energy densities, are safer and are expected to cost less than today’s best-performing lithium-ion battery cells.

“Volta invested early in Solid Power when our team of energy and commercialization experts found they had not only promising technology, but also a fundamental focus on manufacturability. After all, a breakthrough battery will not find a place in the market if it can’t be produced at scale with acceptable costs,” said Dr. Jeff Chamberlain, CEO of Volta Energy Technologies, a venture capital firm spun out of the U.S. Department of Energy’s Argonne National Laboratory focused on investing in breakthrough energy storage and battery innovations.

“The fact that Solid Power is already producing multi-layer all solid-state batteries using industry-standard automated commercial manufacturing equipment is why Volta is excited to ramp up its earlier investment. The company’s partnership with BMW and Ford will further accelerate the full commercialization of Solid Power’s batteries and position both car companies to be among the first to have EVs on the road powered by safer, affordable, high-energy solid-state batteries.” He added.

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Custodian Investment To Raise $15M Additional Capital

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custodian and UACN Deal

Shareholders of Custodian Investment Plc yesterday gave their approval to the board of directors of the company to raise the naira equivalent of up to $15 million as additional capital through a convertible loan instrument.

The shareholders, who gave the approval at the 26th Annual General Meeting (AGM) of the group held in Lagos, also authorised the directors to convert the loan into shares in the company at a conversion price higher than N6.00 per share or the 12-month historical daily share price of the company derived from the Daily Official List of the Nigeria Exchange Limited (NGX)for the period ended March 23, 2021.

They hailed the board and management for reporting improved financial performance and returns on investment despite the adverse effect of the Covid-19 pandemic which disrupted global and local economies in 2020.

Sunny Nwosu, the founding Coordinator of Independent Shareholders of Nigeria (ISAN), commended the company’s performance and returns on investment. He, however, advised that the company should consider a bonus issue to shareholders because of the robust statutory reserves and regulatory requirements.

Also speaking, the President of Nigeria Shareholders Solidarity Association, Mr. Matthew Akinlade, said the performance was a very good one based on the financial indices.

Another shareholder, Mr. Adebayo Adeleke, commended the company for weathering the storm of 2020 and its challenging operating environment. He praised the company for the foresight of having a holding company which now enables it to make investment decisions easily.

The shareholders approved the final dividend of 55 kobo per share, bringing the total dividend to 65 kobo, having paid an interim dividend of 10 kobo last year.

Addressing the shareholders at the meeting, the Chairman of the board of directors, Dr. (Mrs.) Omobola Johnson, said, “I am delighted to report that our company recorded significant successes during the 2020 financial year despite the challenging operating environment, a fallout of the global Covid-19 pandemic and the resulting weak oil earnings, Naira devaluation and high inflation.”

She noted that the successes recorded by the company in 2020 was an affirmation of the robustness of the group’s business model, which allowed it to quickly adapt to the fast-changing environment, the astute leadership of the company supported by energetic employees using technology to efficiently provide prompt services to clients.

According to her, despite the challenges faced during the year under review, the group more than doubled its profits by posting a profit after tax of N12.69 billion as against N6.01 achieved in 2019.

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