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Nigeria: NSE management axes more companies

Nigerian Stock Exchange Market

The management of the Nigerian Stock Exchange (NSE) on has placed 12 insurance companies on technical suspension  on Tuesday after placing 13 quoted companies on indefinite technical suspension,

Some of the affected insurance companies are Great Nigeria Insurance, Guinea Insurance, Intercontinental Wapic Insurance, and Niger Insurance. Those sanctioned on Monday were among the 28 companies earlier placed on the watch list of the NSE.

The NSE said it sanctioned all the affected companies for failure to submit their audited accounts for the year ended December, 2009.

Meanwhile, two companies – Union Diagnostics and Nigeria Wire & Cable – that were suspended last month had their suspensions removed on Tuesday.

UBA Tier-2 Capital

Also on Tuesday, the NSE said that the United Bank for Africa (UBA) has officially notified the NSE council that it “successfully raised” a total of N20 billion in Tier-2 Capital through the issue of subordinated unsecured seven years debt.

“The bond will be listed on the Stock Exchange, subject to the approval of the council of the NSE,” the Exchange said.

The additional capital, the statement added, “is to help UBA further strengthen its capital base, enhance its capital adequacy ratio, expand distribution channels and IT infrastructure, and further grow risk assets with a view to enhancing its incomes.”

The N20 billion bond is the first in the series of the N400 billion medium term bond issuance programme approved by shareholders of UBA last year.

A Tier-2 Capital is a fund raised by companies from private investors. The term is usually used to describe the capital adequacy of a bank.

Capital restructuring

Speaking recently on the need for companies to optimise their capital structures, Ngozi Edozien, chief executive of Actis West Africa, a private equity investment company, said companies should seek other appropriate means to raise funds, to further boost their capital base.

“Securing the right debt-equity mix is a balancing act, and is influenced by the cash flow profile of the company, and where the company is in its lifecycle,” Ms. Edozien said.

She said achieving a balanced debt-equity mix positions a business for optimum growth, reduces risk, and increases the attractiveness of the company to new investors.

“A key issue in our environment is that, often, businesses are too focused on one or the other, thereby hampering growth or exposing the business to too much risk. Equity is foundational while debt provides expansion opportunity,” she said.

Olu Delano, head, Leveraged and Acquisition Finance at Stanbic IBTC, said companies “seeking credit should have the appropriate type of debt instrument and structure to match the cash flow profile of their business or project.”

Meanwhile, at the close of Tuesday’s trading, the market capitalisation closed at N5.945 trillion from Monday’s figures of N5.819 trillion, reflecting a N126 billion gain or 2.16 percent increase. The All-Share Index also gained 2.16 percent or 515.2 units yesterday, up from 23,747.81 basis points to close at 24,263.01.