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Raising Funds From the Capital Market



capital market - Investors King
  • Raising Funds From the Capital Market

In the last ten years, Nigeria has made remarkable progress in capital market development. The menu of available asset classes has been expanded to include Exchange Traded Funds, while market infrastructure has been modernised and strengthened with the Platforms for Over-the-Counter trading namely the National Association of Securities Dealers and the Financial Market Dealers Exchange now established.

Improved regulation and confidence- building measures by the regulators have contributed in no small measure to lift the market.

Specifically, the Securities and Exchange Commission, has undertaken a number of initiatives to boost investors’ confidence notable among which are the establishment of the National Investors Protection Fund meant to cushion the adverse effect of losses suffered in the capital market, and the e-dividend policy designed to minimise cases of unclaimed dividend.

There is also the Direct Cash Settlement scheme which ensures that investors receive their money directly whenever securities are sold, the Corporate Governance scorecard for companies listed on the Nigerian Stock Exchange and the recapitalisation of capital market operators which has gone a long way in curbing sharp practices in the market.

As a complement, the NSE implemented minimum operating standards for market operators as well as launched the Premium Board which offers issuers the benefits of greater visibility and opportunities to raise capital.

Undoubtedly, these measures have sent the right signals to the investing public with regard to rules enforcement and market discipline.

While these are encouraging developments, experts say many businesses have yet to take advantage of the opportunities which the capital market provides in raising the needed funds for business expansion. They say going public and offering stock in an initial public offering represents a milestone for most privately owned companies.

According to them, the main reason companies decide to go public, however, is to raise money and spread the risk of ownership among a large group of shareholders. Spreading the risk of ownership is especially important when a company grows, with the original shareholders wanting to cash in some of their profits while still retaining a percentage of the company.

Experts say one of the biggest advantages for a company to have its shares publicly traded is having their stock listed on a stock exchange.

In addition to the prestige a company gets when their stock is listed on a stock exchange, other advantages for the company include being able to raise additional funds through the issuance of more stock.

This is because companies can offer securities in the acquisition of other companies stock. Also, stock options programmes can be offered to potential employees, making the company attractive to top companies.

Experts also say that having a company’s stock listed on a capital market can attract the attention of mutual and hedge funds, market makers and institutional traders. But what does it take to have a company shares listed on the capital market? Experts say the company must have a proven track records backed up with profitability.

According to the Securities and Exchange Commission, for a company to have its shares listed on the capital market for the first time, such a firm would be registered as a public limited company with no restrictions on the transfer of fully paid shares.

The company must also have a minimum of three years’ operating track record with a pre-tax profit from continuing operation of not less than N300m cumulatively for the last three fiscal years and a minimum of N100m in two of these years.

Other requirements to be satisfied by the company, according to SEC is the presentation of financial statements which must be compliant with the applicable SEC rules and covering the last three fiscal years; and ensuring that a minimum of 20 per cent of the issued share capital is made available to the public and held by not less than 300 shareholders.

The company intending to list its shares on the capital market is also expected to have shareholders’ equity of not less than N3bn; and if the listing is in connection with an Initial Public Offering, the promoters and directors will hold a minimum of 50 per cent of their shares in the company for a minimum period of 12 months from the date of listing.

The company will also ensure that the directors and promoters of the company will not directly or indirectly sell or offer to sell such securities during that 12 months period.

Other requirements are that the company intending to list must ensure that the securities are fully paid-up at the time of allotment or registration in compliance with the applicable SEC rules; and it must undertake to promptly pay annual listing fees based on market capitalisation.

The Acting Director-General, SEC, Mary Uduk, says the commission is working with the Corporate Affairs Commission to encourage more companies to list on the capital market.

She says, “We are making concerted efforts in collaboration with CAC and other stakeholders to assist public companies that are yet to register their securities to do so without much difficulty.

“These initiatives continue to highlight and promote developments and trends in the Nigerian Capital Market and drive Financial Inclusion aimed at reducing adult exclusion from financial services.

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

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Travellers to Access $4k , Businessmen $5K as CBN Boosts Forex Supplies



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Nigerians travelling abroad can access a maximum amount of $4,000 foreign exchange from the banks following the Central Bank of Nigeria’s announcement to increase forex supplies.

Sources from some of the banks said those travelling on business trips could also access a maximum amount of $5,000 for each trip.

The CBN had said in a recent statement that it had concluded plans to increase the amount of foreign exchange allocated to banks to meet legitimate needs.

This followed the warning by the CBN Governor, Mr Godwin Emefiele, to Deposit Money Banks to desist from denying customers the opportunity to purchase foreign exchange.

The purposes to access forex included Personal Travel Allowance, Basic Travel Allowance, tuition fees, and medical payments as well as Small and Medium Enterprises transactions or for the repatriation of Foreign Direct Investment proceeds, the CBN had stated.

At a virtual Bankers’ Committee meeting last week, the bankers discussed how the CBN intended to assist with forex to ensure availability for the upcoming summer period and the return of students to school in September.

The CBN also said the BDCs would continue to have their weekly allocations.

The committee observed that the rates were going up.

It stated, “The CBN has said that all the banks must make available at all times and anyone who wants to buy BTA, PTA, medical fees, student school fees and all the eligible invisible purchases to ensure that Nigerians are not forced to go and queue in the parallel market.

“So what the Central Bank is doing is to encourage all banks to make sure that there is available forex at all times, and that his information should be communicated on all our platforms.

“We are asking our customers to come to the branches and for BTA, for example, present the required documents, which are basically your international passport, your visa, your valid ticket and fill up the form in the bank.

“And what we have been instructed to do is ensure that we don’t turn anybody back and that we should request from the Central Bank once we exhaust the forex that we have.

“The idea is to have a hitch-free summer period and the resumption for children to go back to school. The idea is to ensure there is less pressure on the forex and then the rates will come down.”

Speaking during the virtual meeting, the Group Managing Director, Access Bank, Herbert Wigwe, said, “I think again as part of the central bank’s role in terms of price stability and the need to support small and medium enterprises, there was a highlight of the need for banks to go and support SMEs who import small raw materials for them to set up their businesses.”

The Managing Director, Ecobank, Patrick Akinwuntan, said, “All banks are available to ensure forex need is met.”

Managing Director, Sterling Bank, Abubakar Suleiman, said the CBN had provided sufficient foreign exchange to meet the needs of all legitimate Nigerian travellers and therefore, the idea of going to any other market should not arise at all.

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U.S Dollar Gained as Fed Shifts Interest Rates Hike from 2024 to 2023, Crypto Drops



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The United States Dollar gained on Thursday after the Federal Reserve raised inflation expectations to 3.4 percent and moved the year it is expected to raise interest rates from 2024 to 2023.

Policymakers suggested that interest rates could be raised twice by late 2023 given “Summary of Economic Projections” (SEP) released on Wednesday.

The dollar index, which tracks the greenback against six major currencies, gained 0.63 percent to 91.103, its highest since May 6.

The jump was as a result of renewed interest in the American economy as growth is expected to hit 7 percent in 2021 despite the rising inflation. Similarly, economic conditions are projected to improve faster than initially predicted.

The Federal Reserve Chair Jerome Powell said “the economic conditions in the committee’s forward guidance will be met somewhat sooner than previously expected.”

The interesting thing is that the Fed has gone beyond simply acknowledging that inflation is rising and that the U.S. economy has a lot of momentum, and it has essentially shifted to a much more hawkish stance in this set of projections,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

Powell said the central bank will maintain its $120 billion monthly bond-buying program to continue to support the economy but also suggested the possibility of pulling back on quantitative easing used to keep rates low.

I think we’re back to talking about a mild rally in the U.S. dollar and the data becoming very important over the summer period prior to Jackson Hole and September’s meeting,” said Simon Harvey, senior FX market analyst at Monex Europe.

Billions Flow Out of Crypto Market Ahead of Better US Economy

Investors are moving money in billions out of the crypto market, according to Whale Alert reports. On Thursday, 26,999,9990 USDT valued at $26,999,990 was transferred from Binance to an unknown wallet while another 19,999,995 USDT transferred from Bitfinex to an unknown wallet.

Investors moved 20,000,000 USDT to Bitfinex; 55,180 Ether worth $134,030,121 from an unknown wallet to another unknown wallet and 55,000 Ether estimated at $133,389,506 was also transferred to an unknown wallet in the early hours of Thursday.

5,000 Ether worth $12,168,082 and 1,000 Bitcoins worth $38,953,357 were transferred from an unknown wallet to Binance. To see the rest of the money being moved out of crypto space visit Whale Alert.

Cryptocurrency market capitalisation dipped by 5.03 percent in the last 24 hours but has lost $898 billion from $2.523 trillion it attained on Wednesday, May 12, 2021, to $1.625 trillion on Thursday, June 17, 2021.

The plunge in cryptocurrency was a result of improving global economic outlook, especially in the United States of America, the largest crypto investing nation.

The unregulated crypto space is largely treated as a haven asset to avert disaster during the global downturn. Meaning, an improvement in the global economy will generally impact cryptocurrency capital inflow and overall performance. Investors King expects cryptocurrency to extend its decline in the third quarter.

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CBN Raises Customs Forex from N381/US$1 to N404.97/US$



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The Central Bank of Nigeria has raised the Naira exchange rate for cargo clearance from N381/US$1 to N404.97/US$1.

This was confirmed by Uche Ejesieme, the Public Relations Officer (PRO), Tin Can Island Customs Command.

The PRO explained that it was not the customs job description to raise the foreign exchange rate but that of the central bank.

The N24 difference has been implemented on the customs system managed by Web Fontaine.

Commenting on the situation, Kayode Farinto, the Vice President of the Association of Nigerian Licensed Customs Agents, said the increase would further escalate inflation on import goods and hurt consumers’ buying power given the present economic situation.

An importer, Gboyega Adebari, who was shocked at the decision said stakeholders will be greatly affected by the decision.

According to him, “When we went to assess a job this morning, we were told that the exchange rate has been increased, though we have been expecting it, but we don’t expect that it would be so sudden. The implication of this on cargo clearance is that cost of clearance would increase by N24 difference.

“The cargoes that already enroute Nigeria would also be affected, the jobs that we want to clear this morning were affected.

“When you go back to the importer and request for money, they will tell you there is no notification of increase from customs, so the freight forwarders are the ones that would bear the additional cost.”

Naira plunged to N502 against the United States Dollar at the parallel market on Wednesday and traded at N715 to a British Pound and N605 against the European common currency, Euro.

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