Economy
Nigeria to Make $3.98b from Business Deals in 2018—Report
By Dipo Olowookere
A new report released by Baker McKenzie, a multinational law firm, has predicted an increase in global deal activity next year.
The report, titled Global Transactions Forecast, which is in its third edition, attributed this rise to the easing of key economic and political risks as well as the emergence of positive macroeconomic deal drivers.
It specifically noted that deal making in Nigeria looks set to increase in 2018 and 2019 after a period of policy uncertainty which saw M&A transactions decrease.
Conditions in South Africa are also predicted to improve, but this will depend on political and economic conditions in the country in the next two years, the report added.
According to Baker McKenzie, globally, 2017 has been a period of apprehension for dealmakers and while economic growth has certainly slowed, the cliff-edge some were predicting has failed to materialise.
Following on the momentum created in the second half of 2017, The Global Transactions Forecast, developed in association with Oxford Economics, predicts a cyclical peak in 2018 for several macroeconomic and financial deal drivers, with 2018 marking the high point of the deal cycle for the world’s largest transaction centres.
Head of Africa at Baker McKenzie in Johannesburg, Mr Wildu du Plessis, noted that in Nigeria, policy and economic uncertainties had contributed to stalled dealmaking in the country. Uncertainties included a lack of access to foreign exchange, blockages to the government budget process, and low oil production that had constrained GDP growth.
“As these conditions ease in the final months of 2017 and into 2018, a rebound in M&A to around US$4 billion in both 2018 and 2019 is forecasted,” Mr du Plessis was quoted as saying in the statement made available to Business Post by Baker McKenzie on Tuesday.
In Nigeria, M&A transactions were valued at $1.2 billion in 2016, this is predicted to drop to $716.4 million in 2017.
In 2018, this is predicted to rise to $3.98 billion and to $3.94 billion in 2019.
There were 28 M&A transactions in 2016 and 28 are predicted again in 2017, 35 deals are expected in 2018, rising to 40 in 2019.
In South Africa, the forecast is similar. Growing political risk and a sluggish economy contributed to a halving in total M&A in 2017 versus 2016.
However, the forecast predicts that economy should improve in 2018 thanks to the impact of monetary policy easing and stronger commodity prices. But at around $9 billion in 2019, the forecast for the peak in M&A activity in this region will be less than a third of the level seen in 2015.
Mr Du Plessis noted, however, “For South Africa, there is no guarantee that the predicted upswing will come to pass. There is just too much political uncertainty. If the ANC National Conference in December does not deliver the solution that markets are hoping for, then deal flow and IPO activity will be affected and depressed. If on the other hand there is some hope of a change to the political situation, things may well indeed change for the better.”
Morne van der Merwe, Managing Partner of Baker McKenzie in Johannesburg said, “Current conditions in South Africa have slowed M&A growth in that international investors are reluctant to invest in South Africa due to the political and economic uncertainty. This uncertainty has caused a reduction in Foreign Direct Investment, which, in turn, hindered deal-making. Due to the downgrades and potential for further downgrades, the cost of raising capital for acquisitions has also become more expensive.”
In South Africa, M&A transactions were valued at $10.7 billion in 2016, this is predicted to drop to $4.5 billion in 2017.
In 2018, this is predicted to rise to $8.5 billion and to $9.2 billion in 2019.
In terms of deal volume, there were 115 M&A transactions in South Africa in 2016, this is predicted to rise to 172 transactions in 2017, 273 deals are expected in 2018, rising again to 295 in 2019.
Globally, “After a few soft patches in 2017 we have a more optimistic outlook for the global economy and dealmaking in 2018, as long as the brakes are not put any further on global free trade. We see an uplift in both M&A and IPO activity as dealmakers and investors gain greater confidence in the business prospects of acquisition targets and newly-listed businesses,” added Paul Rawlinson, Baker McKenzie’s global chair. “However, it’s not a done deal, with the threat of a Hard Brexit and a NAFTA collapse both still very real. Business will need to continue to make the case for liberal trade and investment frameworks.”
By Modupe Gbadeyanka
The federal government has been asked by the Nigerian Bar Association (NBA) to suspend the implementation of the controversial tax laws.
In a reaction to the tax reform acts, the president of the group, Mr Afam Osigwe (SAN), the suspension of the laws would allow for a proper investigation into allegations of alterations in the gazetted and harmonised copies.
A member of the House of Representatives, Mr Abdussamad Dasuki, alleged that some parts of the laws passed by the parliament were different from the gazetted copy.
To address the issues raised, the NBA said it is “imperative that a comprehensive, open, and transparent investigation be conducted to clarify the circumstances surrounding the enactment of the laws and to restore public confidence in the legislative process.”
“Until these issues are fully examined and resolved, all plans for the implementation of the Tax Reform Acts should be immediately suspended,” the association declared.
It noted that the controversies “raise grave concerns about the integrity, transparency, and credibility of Nigeria’s legislative process.”
“These developments strike at the very heart of constitutional governance and call into question the procedural sanctity that must attend lawmaking in a democratic society,” it noted.
“Legal and policy uncertainty of this magnitude has far-reaching consequences. It unsettles the business environment, erodes investor confidence, and creates unpredictability for individuals, businesses, and institutions required to comply with the law. Such uncertainty is inimical to economic stability and should have no place in a system governed by the rule of law.
“Nigeria’s constitutional democracy demands that laws, especially those with profound economic and social implications, emerge from processes that are transparent, accountable, and beyond reproach. Anything short of this undermines public trust and weakens the foundation upon which lawful governance rests.
“We therefore call on all relevant authorities to act swiftly and responsibly in addressing this controversy, in the overriding interest of constitutional order, economic stability, and the preservation of the rule of law,” the organisation stated.
By Adedapo Adesanya
Demand for hot stocks, including MRS Oil Plc, buoyed the NASD Over-the-Counter (OTC) Securities Exchange by 0.52 per cent on Tuesday, December 23.
The energy company was one of the three price gainers for the session as it chalked up N19.69 to sell at N216.59 per share versus the previous day’s value of N196.90 per share.
Further, FrieslandCampina Wamco Nigeria Plc gained N2.95 to close at N56.75 per unit versus N53.80 per unit and Golden Capital Plc appreciated by 84 Kobo to N9.29 per share from Monday’s N8.45 per share.
Consequently, the market capitalisation went up by N10.95 billion to N2.125 trillion from N2.125 trillion and the NASD Unlisted Security Index (NSI) rose by 18.31 points to 3,570.37 points from 3,552.06 points.
Yesterday, the NASD bourse recorded a price loser, the Central Securities Clearing System Plc (CSCS), which gave up 17 Kobo to close at N33.70 per unit against the previous trading value of N33.87 per unit.
The volume of securities traded at the session went down by 97.6 per cent to 297,902 units from the previous day’s 12.6 million units, the value of securities decreased by 98.5 per cent to N10.5 million from N713.6 million, and the number of deals remained flat at 32 deals.
By value, Infrastructure Credit Guarantee Company (InfraCredit) Plc ended as the most actively traded stock on a year-to-date basis with 5.8 billion units exchanged for N16.4 billion. This was followed by Okitipupa Plc, which traded 178.9 million units valued at N9.5 billion, and MRS Oil Plc with 36.1 million units worth N4.9 billion.
In terms of volume, also on a year-to-date basis, InfraCredit Plc led the chart with a turnover of 5.8 billion units traded for N16.4 billion. Industrial and General Insurance (IGI) Plc ranked second with 1.2 billion units sold for N420.7 million, while Impresit Bakolori Plc followed with the sale of 536.9 million units valued at N524.9 million.
By Dipo Olowookere
It was another bullish trading session for the Nigerian Exchange (NGX) Limited as it closed higher by 0.59 per cent on Tuesday.
The market further rallied due to continued interest in large and mid-cap stocks on the exchange by investors rebalancing their portfolios for the year-end.
Yesterday, Aluminium Extrusion sustained its upward trajectory after it further appreciated by 9.96 per cent to N14.90, as Austin Laz gained 9.81 per cent to close at N2.91, Custodian Investment improved by 9.69 per cent to N38.50, and First Holdco soared by 9.35 per cent to N50.30.
Conversely, Royal Exchange declined by 7.22 per cent to N1.80, Champion Breweries shrank by 6.57 per cent to N15.65, NASCON lost 5.36 per cent to trade at N105.05, Sovereign Trust Insurance depreciated by 5.28 per cent to N3.77, and Japaul went down by 4.51 per cent to N2.33.
At the close of business, 29 shares ended on the gainers’ table and 27 shares finished on the losers’ log, representing a positive market breadth index and bullish investor sentiment.
This raised the All-Share Index (ASI) by 895.06 points to 153,354.13 points from 152,459.07 points and lifted the market capitalisation by N579 billion to N97.772 trillion from the previous day’s N97.193 trillion.
VFD Group finished the day as the busiest stock after it recorded a turnover of 192.0 million units worth N2.1 billion, GTCO exchanged 63.5 million units valued at N5.6 billion, Access Holdings traded 49.8 million units for N1.0 billion, First Holdco sold 45.8 million units valued at N2.3 billion, and Secure Electronic Technology transacted 38.3 million units worth N28.4 million.
In all, market participants bought and sold 677.4 million units valued at N20.8 billion in 27,589 deals compared with the 451.5 million units worth N13.0 billion traded in 33,327 deals on Monday, showing an improvement in the trading volume and value by 50.03 per cent and 60.00 per cent apiece, and a shortfall in the number of deals by 17.22 per cent.
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