Economy

Nigeria Records $204m Local, Cross-Border Deals in H1 2020

Published

5 years ago

26/07/2020

By Dipo Olowookere

Despite Nigeria recording more deals in the first half of 2020, the total value of the transactions went down to $204 million (N73.4 billion at N360/$1).

According to the latest Refinitiv M&A data released by Baker McKenzie, there were 26 deals in the period under consideration in contrast to 18 of the first half of last year, indicating a 44 per cent increase.

However, the report said the total deal value of the transactions, which comprised local and cross border, went down by 46 per cent to $204 million from $375 million in H1 2019.

Baker McKenzie explained that this decline in the total value of the deals was likely because most of the deals listed for H1 2020 have no disclosed deal value.

But it said the number of cross border deals increased by 18 per cent in comparison to the first half of 2019, while domestic deals were also up by 86 per cent year-on-year.

The firm noted that about 50 per cent of the mergers and acquisitions transactions in Nigeria were cross border transactions, totalling $40 million, noting that deals were evenly distributed among industries, with financials and high technology recording two inbound deals each and the industrials sector recording two outbound M&A deals.

The $21 million acquisition of Interporto di Venezia SpA in March 2020 by an Orlean Invest Holding subsidiary for $21 million was the biggest cross border deal in Nigeria in the first half of 2020, the report said.

According to the Head of Africa for Baker McKenzie in Johannesburg, Mr Wildu du Plessis, policy and economic uncertainty, including lack of access to foreign exchange, stalled dealmaking in Nigeria in recent years.

“However, the Central Bank of Nigeria (CBN) introduced a foreign exchange window a few years ago, allowing trading at market-determined rates, which boosted the supply of foreign exchange and encouraged dealmakers.

“The government was also looking at more business-friendly legislation. The Nigerian economy was already impacted quite severely by the disruption in oil markets in recent years, but COVID-19 has added extensive damage to the economy, and this will undoubtedly impact negatively on M&A numbers going forward,” he said.

For South Africa, the value of M&A transactions dropped 60 per cent to $3.3 billion in the first half of 2020, down from $8.2 billion for the same period last year (H1 2019).

Also, the volume of M&A deals in the country fell by 18 per cent year-on-year, with 132 transactions recorded in H1 2020, down from 160 in H1 2019.

Domestic M&A activity in South Africa dropped 18 per cent to 64 transactions, down from 78 in H1 2019. Domestic deals were valued at $1.7 billion in H1 2020, down 71 per cent year-on-year.

Cross border transactions reflected the same downwards trend, with M&A volume down 17 per cent to 68 deals, and deals valued at $1.5 billion in the first half of 2020, down 32 per cent from the same period last year.

It was observed that Barloworld’s acquisition of the equity assets of both Wagner Asia Group and SGMS LLC by its Mongolian subsidiary, for $212 million each, were the biggest cross-border transactions in South Africa in the first half of this year.

In the Sub-Saharan Africa (SSA) region, the report said M&A volume decreased 24 per cent to 254 deals, compared to 338 deals for the same period last year.

Also, the total value decreased by 56 per cent to $6.8 billion in the first half of 2020, compared to $15.3 billion in H1 2019, with majority cross border deals at 160 transactions worth $4.8 billion.

It said there were 89 inbound deals in the region during this period, valued at $1.1 billion. The primary target was the materials industry with 24 deals, totalling $305 million.

The United Kingdom and the United States were the primary investors with 17 and 15 deals, worth $161 million and $658 million, respectively.

The region also reported 49 outbound transactions worth $3.6 billion. The industrials sector was the most targeted with nine deals, while the materials and telecommunications sectors had the biggest deal values, totalling $1 billion each.

According to Mr Du Plessis, “There is broad consensus that 2020 and 2021 will be very difficult years across all sectors in Africa, with severe humanitarian challenges, reduced demand across most sectors, constrained domestic economic activity, weaker currencies, supply chain disruptions and increased regulations and restrictions causing business disruption.

“Some sectors will battle to recover while others, such as the technology sector, are likely to be better able to adapt and take advantage of current conditions.”

“M&A activity in Africa going forward could come from distressed M&A transactions. Buyers with strong market positions or balance sheets and an appetite for risk could seek to capitalise on the opportunities available in the most challenged sectors, such as retail, transport, energy, construction, hospitality and leisure, as well as the opportunities in the sectors that have performed well during the pandemic, such as those in technology and healthcare and Fintech.

“The oil & gas industry and non-core infrastructure sectors are also facing significant stress, which might produce opportunities for buyers.

“The bottom line is that there will be very few sectors who have not been badly affected by the pandemic, but this could produce opportunities for buyers who have done their homework and have an appetite for risk,” he added.

According to him, the current developments in terms of the continent’s trade relationships also point to improved investment opportunities in Africa in the medium term.

Shifting global trade patterns have seen the major players turn to Africa to find new avenues for trade and investment.

Examples include the recent Economic Partnership Agreements signed with the UK to govern bilateral trade with certain African countries after Brexit; China’s continued interest in Africa, especially in terms of the Belt and Road Initiative (which might endure short term slowdowns but offers long term gains in digital programmes and sustainability); the recent United States Africa strategy, which has a renewed focus on trade and investment between the two regions; the European Commission’s Comprehensive Strategy with Africa, published after COVID-19 and positioning the EU as an close ally of Africa; and the African Continental Free Trade Area agreement, postponed to 2021 due to COVID-19, and intended to streamline intra-African trade across the continent and reduce the continent’s dependence on foreign investors.

“So, while Africa, alongside the rest of the world, will be weathering the devastating effects of COVID-19 for some time, the future M&A forecast looks brighter, with good investment opportunities becoming clearer across the continent once the pandemic eases,” Mr Du Plessis noted.

In the report, Baker McKenzie said going forward, dark clouds remain over the M&A market in Africa in the short-term, with economic uncertainty likely to cause a reduction in foreign investment in Africa.

However, recent developments regarding Africa’s policies on trade and investment, and its renewed partnerships with major global economies, brighten the continent’s prospects for medium-term recovery, it submitted.

Economy

Petrol Price to Rise as Landing Cost Hits N885 Per Litre

Published

3 hours ago

27/03/2025

Adedapo Adesanya

By Adedapo Adesanya

The pump price of petrol will likely increase in coming weeks as the landing cost of a litre of imported Premium Motor Spirit (PMS) into the country increased by N88 from N797 per litre last week to N885 per litre this week.

This informing is according to the latest data from the Major Energies Marketers Association of Nigeria (MOMAN) on Wednesday.

The association confirmed the rise in the landing cost in its daily energy bulletin released on Wednesday, arguing that price changes are inevitable in a deregulated market.

The new landing cost is N25 higher than the N860 per litre that end-user customers pay for Dangote petrol from MRS and other partners.

Similarly, the Dangote refinery’s ex-depot petrol price is N815 per litre, N70 lower than the new landing cost..

The landing cost fell from about N927 below Dangote’s ex-depot price, forcing the refinery to react with a price cut.

The development resulted in the loss of billions of Naira by marketers as they were made to sell petrol below their costs.

There are, however, indications that this may lead to increase in petrol prices in the coming weeks as a result of the disagreement between the Dangote refinery and the Nigerian National Petroleum Company (NNPC) Limited over the Naira-for-crude deal and the rise in the landing cost.

While announcing the suspension of the sale of the product in local currency last week, the Dangote Group said, “Dear valued customers, we wish to inform you that the Dangote Petroleum Refinery has temporarily halted the sale of petroleum products in naira. This decision is necessary to avoid a mismatch between our sales proceeds and our crude oil purchase obligations, which are currently denominated in US dollars.

“To date, our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received. As a result, we must temporarily adjust our sales currency to align with our crude procurement currency.”

Immediately after the announcement, the cost of loading petrol at private depots in Lagos jumped to about N900/litre.

In a related development, seven vessels carrying imported PMS were expected to berth at seaports along the nation’s borders between March 17 and 23.

These vessels, carrying 115,000 metric tonnes, representing 154.22 million litres of PMS, brought in products through three seaports – Tincan port in Lagos, the Lekki Deep Seaport in Lagos, and the Calabar port – to improve fuel supply nationwide.

Economy

Mastering Futures and Options: A Guide to Starting Your Trading Journey

Published

4 hours ago

27/03/2025

Dipo Olowookere

Introduction

Trading in futures and options (F&O) has become a popular way to diversify investments and hedge risks in the financial markets. With the right knowledge and strategy, anyone can start trading and leverage F&O to maximize returns. This guide will walk you through the fundamentals of business with futures and options, how to start trading, and essential strategies for success.

Understanding Futures and Options

What Are Futures?

A futures contract is a financial agreement to buy or sell an asset (stocks, commodities, or indices) at a predetermined price on a future date and to start future and option trading futures and options. Futures are standardized contracts traded on exchanges like NSE (National Stock Exchange) and BSE (Bombay Stock Exchange).

Key Features of Futures Contracts:

Obligatory Execution: Buyers and sellers must fulfill the contract on the expiry date.
Margin Trading: Traders only pay a fraction of the total contract value as a margin.
Leverage: Investors can take large positions with limited capital.

What Are Options?

Options give traders the right (but not the obligation) to buy or sell an asset at a specific price before or on the contract expiry date.

Types of Options:

Call Options – Gives the right to buy an asset at a fixed price.
Put Options – Gives the right to sell an asset at a fixed price.

Why Trade Futures and Options?

Hedging Against Market Risks: Investors use F&O to hedge risks in volatile markets.
High Leverage: Traders can control large positions with minimal capital.
Profit in Bull and Bear Markets: Options trading allows earning from both rising and falling markets.
Portfolio Diversification: F&O trading provides exposure to various asset classes.

How to Start Trading in Futures and Options

1. Open a Trading and Demat Account

To trade in F&O and how to start trading you need a Demat and trading account with a registered stockbroker.

Steps to Open an Account:

Choose a SEBI-registered stockbroker (e.g., Zerodha, Upstox, Angel Broking).
Submit KYC documents (PAN, Aadhaar, bank details, income proof).
Complete account verification and receive login credentials.

2. Understand Market Fundamentals

Before trading, gain knowledge about:

Stock Market Trends: Track NIFTY, SENSEX, and India VIX to understand volatility.
Fundamental and Technical Analysis: Learn to analyze financial reports and price charts.
Option Greeks (Delta, Gamma, Theta, Vega): These help in assessing option price movements.

3. Learn About Margin Requirements

Trading in F&O requires margin money, which varies based on contract size and market conditions. Stockbrokers provide margin calculators to help traders plan their positions.

4. Choose the Right Trading Strategy

Popular Futures Trading Strategies:

Trend Following Strategy – Buy futures in an uptrend, sell in a downtrend.
Spread Trading – Buy and sell futures contracts simultaneously to minimize risk.
Scalping – Profit from small price movements by making multiple trades.

Popular Options Trading Strategies:

Covered Call Strategy – Holding a stock while selling call options to earn premiums.
Straddle Strategy – Buying both a call and put option to profit from high volatility.
Iron Condor Strategy – Combining multiple options contracts to limit risk and enhance returns.

5. Start Trading with a Demo Account

Most stockbrokers provide paper trading accounts where beginners can practice trading without real money. This helps in understanding price movements, placing orders, and managing risk.

6. Monitor and Manage Risks

Stop-Loss Orders: Protect against significant losses by setting stop-loss levels.
Position Sizing: Avoid investing all capital in a single trade.
News & Events: Track financial news, RBI policies, and corporate earnings reports.

Essential Tips for Successful F&O Trading

Start Small: Begin with a few contracts and increase exposure gradually.
Stay Updated: Follow market news, economic indicators, and stock trends.
Avoid Overtrading: Excessive trading can lead to high brokerage fees and losses.
Maintain a Trading Journal: Keep records of trades to analyze mistakes and improve strategies.
Use Hedging Techniques: Reduce risk by using protective puts and call options.

Conclusion

Trading in futures and options is a powerful way to maximize investment opportunities and manage risks. By understanding market trends, choosing the right strategies, and practicing risk management, traders can build a profitable trading career. If you’re new to F&O trading, start with a Demat account, practice with demo trades, and gradually scale up as you gain confidence.

With the right approach, trading in futures and options can be a lucrative business venture and a strong financial tool for long-term success.

Economy

Okitipupa, Geo-Fluids Crash NASD Bourse by 0.75%

Published

5 hours ago

27/03/2025

Adedapo Adesanya

By Adedapo Adesanya

The duo of Okitipupa Plc and Geo-Fluids Plc weakened the NASD Over-the-Counter (OTC) Securities Exchange by 0.75 per cent on Thursday, March 26.

This depleted the market capitalisation by N14 billion to N1.915 trillion from the N1.929 trillion it ended a day earlier, and the NASD Unlisted Security Index (NSI) decreased by 14.40 points to 3,315.21 points from 3,340.14 points.

Okitipupa Plc went down by N28.50 during the trading day to N256.50 per share from Tuesday’s closing value of N285.00 per share, and Geo-Fluids Plc crashed by 5 Kobo to close at N2.65 per unit versus N2.70 per unit.

There was an increase of 78.22 per cent in the volume of securities transacted to 30,026 units from the 16,848 units transacted in the previous trading day, there was a 15.59 per cent growth in the value of transactions to N3.7 million from N3.2 million, and the number of deals completed by the market participants increased by 225.00 per cent to 13 deals from the four deals recorded a day earlier.

At the close of business, Impresit Bakolori Plc was the most traded stock by volume on a year-to-date basis with 533.9 million units worth N520.9 million, the second position was occupied by Industrial and General Insurance (IGI) Plc with 70.0 million units sold for N23.8 million, and the third position was taken by Geo Fluids Plc with the sale of 44.1 million units for N89.0 million.

Also, Impresit Bakolori Plc was the most traded stock by value on a year-to-date basis with a turnover of 533.9 million units worth N520.9 million, trailed by FrieslandCampina Wamco Nigeria Plc with the sale of 13.3 million units valued at N513.9 million, and Afriland Properties Plc with 17.6 million units sold for N360.1 million