Walking on water or skating on thin ice?

! page VM6

ONNIE AYERE, chief executive of-ficer of the Nige-

rian Mortgage Refinance Company (NMRC), is the consummate investment banker. Sitting in his plush office overlooking the Ma-

rina and admiring acrylic deal plaques, one may be forgiven for thinking this is the lair of a Master of the Universe in lower Manhattan, with sights of the Hudson River.

Usually, the first thing most people notice about him

is that the man has a sense of effortless style. This time, the talk is not about shopping forays on London’s New Bond Street. It is about his infec-tious passion to lay the pipe-lines between bond investors and home buyers.

Vanguard Markets | Monday, August 4, 2014 | Issue 004

C-SUITE

Fixed Income & Forex

Inside

Whodunnit at Afren?

The announcement that Afren’s board has sent its CEO and COO on temporary sus-pension riled mar-kets at the end of last week. Some analysts fear that this may be the tip of the iceberg.

! Page VM7

Boardroom grandee

In Corporate Nigeria, Senator Udo Udoma is known for his experience and sage counsel.

! Page VM6

Sonnie Ayere, Mortgage Czar

0B 10.0 10.016/07 17/07 17/0724/07 25/07 25/0731/07 01/08 01/0821/07 22/07 22/07

120B 11.6 15.0

14.090B 11.213.0

60B 10.812.0

30B 10.4 11.0

FGN Bonds & TBills NITTY NIBORFGN BondsTreasury Bills

O/N1M

3M6M

TAKEOVERS

Wale Tinubu

161.017/07 25/07 01/0822/07

162.5

162.2

161.9

161.6

161.3

FX ($/N)

Source: FMDQ

BidAsk

1M2M

3M6M

9M12M

S

! Page VM2

Sonnie Ayere, chief executive officer, Nigerian Mortgage Refinance Company

As the mortgage industry grows it will add hundreds of thousands of new jobs and skills to the Nigerian economy each year

Currency Central Rate

US Dollar 155.23

Pounds Sterling

261.2831

Euro 208.0392

Swiss Franc 170.977

Japanese Yen 1.5077

CFA 0.3066

WAUA 236.9421

Chinese Yuan/

Renminbi25.1165

Saudi Riyal 41.3903

Danish Krona 27.8975

SDR 237.6727

INTERVIEWVM2

C-SUITE

VM | Monday, August 4, 2014 | Issue 004

OUR FORMAL designation at the Nigerian Mort-

gage Refinance Company is CEO. What does this role entail?

I hold this title for a defined period at the discretion of our board, chaired by the Coordi-nating Minister of the Economy. When I was appointed, I was given responsibilities to meet certain milestones, one of which is the first refinancing of NMRC.

On a day-to-day basis, I oversee the setting up of the in-stitution by attracting the right people, putting in place the right processes and working to create the right enabling envi-ronment for the achievement of the institution’s mandate.

Tell us a bit more about the NMRC

NMRC is a secondary mar-ket financing institution. It is a high finance vehicle estab-lished to provide long-term funding to mortgage lenders and create corresponding fi-nancial products to be issued to the capital markets on a regular basis. The complexity of the institution comes from ensuring that the issued se-curities match the cash flows of the underlying mortgage pools. In addition to its role as a refinancer of mortgages, the NMRC will also service and manage various bond portfo-lios with different durations, and average lives. How well we do all these will determine the success of the entire transfor-mation we hope to see in the mortgage industry.

NMRC will provide long-term funding to institutions that have created NMRC-conforming mortgages. Pre-viously, the problem lenders faced was the lack of access to long-term funding, that is, 20-25 year money to on-lend to home buyers.

How does NMRC help mortgage lenders match assets with liabilities?

Financial institutions get the money for mortgage origina-tion from customer deposits and money markets. This cre-ates two problems: a classic as-set-liability mismatch between long-term asset creation and short-term liability manage-ment, and the illiquidity bur-den of carrying these mortgag-es on their balance sheets for the duration of the mortgage.

These are the two most debilitating reasons why the mortgage industry has not taken off in Nigeria apart from all the other bureaucratic and legalistic issues, important as those are.

After the mortgage has been underwritten, the mortgage

institution can approach the NMRC to request a refinanc-ing for the duration of the mortgage. If it meets our con-ditions, we will approve it. In theory, this allows the institu-tion to pay off its short-term creditors or replace its deposi-tor’s finance, and then enter into a new long-term contract with the NMRC.

Two things have now hap-pened. First, the mortgage in-stitution’s assets now match its liabilities, and second, it can go ahead to make new loans with the knowledge that the NMRC stands ready to refinance them if they meet its criteria. This has a chain effect on the economy.

More loans to home buy-ers equals more jobs, more jobs mean greater consumer spending, greater consumer spending means more invest-ment lending by companies, and it goes on like a virtuous positive cycle.

What if borrowers de-fault?

NMRC is hedged from de-fault by borrowers because the mortgage lenders retain the credit risk on their books. It is protected by the nature of the covenant with the institutions, which is a bilateral loan. A mortgage lender will still be re-sponsible for making sure that the loan is serviced, while the asset itself is pledged to protect NMRC in the event of a default.

In the event of a cata-strophic event, the govern-ment, because of its explicit guarantee of NMRC-issued bonds, will make bond inves-tors whole with the commit-ment that NMRC will liquidate the pledged assets to counter-guarantee government sup-port. In order words, govern-ment exposure is fully secured and over-collateralised making the overall expected loss, even in times of stress, pretty low.

How did you get in-volved with the NMRC?

There are two sides to my in-volvement, first with the insti-tution itself, and then with the broader development of the bond market in Nigeria.

My direct involvement with the NMRC goes back to con-versations that I had had with the International Finance Cor-poration in the early months of 2012 on the creation of a mortgage liquidity institution. At the time, the IFC had al-ready begun discussions with the CME, Dr. Ngozi Okonjo-Iweala, on how this could be actualized.

On my part, I held some ex-changes with the CME on my ideas about how to make it a success. She deserves credit for her drive to see this vision take off. She co-opted the Bankers’ Committee and other stake-

holders to make this see the light of day. Other sponsors like the Mortgage Bankers’ As-sociation of Nigeria, Bankers’ Committee, the Central Bank, and individuals like Roland Igbinoba deserve appreciation.

Immediately after the Na-tional Retreat on Housing which was initiated and chaired by President Goodluck Jonathan at the Presidential Villa in No-vember 2012, who is extremely passionate about this sector, I transitioned from an advocacy position to an executive capac-ity when the CME asked me to carry the vision forward in the role of Task Manager.

Demographic figures show that over 65% of Ni-gerians are below 25. For generations, most salary-earning Nigerians have seen home ownership as the result of decades of sav-ing for a purchase just in time for retirement. This is in contrast to the case in developed countries. What are NMRC’s plans to radi-cally drop the entry age for home ownership?

NMRC will help to radically change people’s attitudes to home ownership and real es-tate investment. For example, when the mortgage lenders can quickly refinance mortgages, they will start offer promotions create awareness and win cli-ents. As people become more aware of the ease of owning a home, they will start to make the decision earlier in life. When the full cash payment re-striction is removed, and buy-ers need put down no less than 20 per cent cost of the house as their equity contribution, I believe we will see the age floor drop dramatically. This will be supported by other changes taking place in the economy such as the preponderance of

two-income families that can afford the costs of paying mort-gages, as well as the recent re-vision in the pension law that allows people take money from their pension schemes to invest in home ownership.

I will like to help create the property ladder where young persons can start from a self-contained apartment and grow into a family 3-4 bedroom house over the course of their careers.

But this is not simply about home ownership. It has just as much to do with wealth crea-tion and giving people a stake in the society. Take the example of a young couple in their late-20s who plan to buy a 1-bedroom house on the Lekki-Ajah axis that costs N20m. Let us assume that a mortgage lender agrees to lend them 80 per cent of the purchase price, that is N16 million. The couple provides the balance of N4m, five years down the line, the home appre-ciates in value to N30 million. They decide to sell. Give or take, after paying back the principal, interests and fees, the couple will have at least N14 million equity in the home from the initial N4million investment. If they take this amount and re-invest in a bigger home, or two more of the same kind, they are already on the escalator of building wealth for their fam-ily. Should they replicate this process five times over the span of their thirty-five year working careers, you will agree that the amount of value they will create for themselves is clear. This is the type of mind-set shift that NMRC will help unlock for mil-lions of Nigerians.

Critics in some quarters have described the crea-tion of the NMRC as insti-tutional duplication of an area already being served by the Federal Mortgage

W Continued from Page VM1

NMRC will provide long-term funding to institutions that have created NMRC-conforming mortgages. Previously, the problem lenders in Nigeria faced was the lack of access to long-term funding, that is, 20-25 year money to on-lend to home buyers. What NMRC will do is to allow commercial banks and mortgage banks match these assets with 20-year liabilities on their books.

In this interview, Sonnie Ayere, chief executive officer of the Nigerian Mortgage Refinance Company, tells Obiora Onyeaso about the institution’s mandate, its vision to make every Nigerian family own their home, and his own career.

Home ownership revolutionary

A. A family approaches bank for mortgage loan and receives approval.

B. The lending bank approaches NMRC to refinance the mortgage to balance its long-term asset-liabili-ty mismatch.

Overview of NMRC’s secondary financing function

C. NMRC packages a pool of compliant mortgages as bonds and mortgage-backed securities. It sells these to investors. It manages the cash flows from these pools and passes them on to the investors.

D. Investors buy the fixed income securities created and sold by NMRC for their portfolios providing critical liquidity to the growth and sustenance of Nigeria’s mortgage market.

Mortgage-backed Securities

Corporate Bonds

Homeowners

Investors

Mortgage Lenders

A

B

C

D

Infographic by Publican Media

Y

INTERVIEW VM3

C-SUITE

VM | Monday, August 4, 2014 | Issue 004

Bank of Nigeria. Is this a valid concern?

Ideally speaking, using the National Housing Fund (NHF) criteria, which sets the ceiling for mortgage loans at N15 mil-lion, I would recommend that

the FMBN focus on the afford-able housing space where loan demands do not exceed N15 million. This is an area where it has a long record of competence.

On the reverse of that coin, the NMRC would apply its resourc-es to refinancing mortgages that exceed N15 million in value. The reality is that the market is so big that when the industry takes off, as it certainly will, there will be more than enough room for the NMRC and FMBN to oper-ate without encroaching on each other’s terrain.

One area that has re-ceived scant attention among the mandates of the NMRC is job crea-tion. Could you shed some more light on how the growth in approved mort-gage volumes will boost employment?

Experts’ project that for each new standard 4-bedroom house built there are 7 new jobs created during the actual con-struction process. When one includes the number of new jobs and investments that are made throughout the entire value chain of home building, the number goes even higher.

As the mortgage industry grows it will add hundreds of thousands of new jobs and skills to the Nigerian economy each year driven by companies servicing the entire building sector. My hope is to see major domestic and foreign direct in-vestment come into Nigeria to service this space as economies of scale will now make sense. Standardisation of properties will also help.

In terms of market size, Nigeria’s housing deficit is estimated at 17 million. If we calculate the cost of each new home at an average of N5 mil-lion, this gives a value of N85 trillion, which is equivalent to a $500 billion, that is, the same amount as our rebased gross domestic product.

Are there plans to list the NMRC on the Nigerian Stock Exchange?

At the appropriate time the NMRC will offer an opportu-nity for Nigerian investors to participate in its success story. When the business grows to a level where its revenues and cash flows reach a steady level,

the NMRC will invite Nigerians to partake in its future benefits.

Apart from financial gains, what other benefits would the NMRC offer to the average Nigerian?

The benefits will be finan-cial, social, economic, and po-litical. On a side note, as more Nigerians access mortgages and are pulled into the credit ecosystem, the government will have a greater incentive to manage interest rates so that payments are sustainable for households and voters. When interest rates are high, as we have had in the past few years, it gives financial institutions an inverted incentive to invest in government securities in-stead of lending these funds to households, and business owners. As a trained financial economist, I am yet to hear of an economy that has grown to its full potential under a high interest rate regime.

I hope that the more Nigeri-ans take mortgages, the more government will become com-pelled to keep interest rates manageable. This can only result from prudent economic policies and good governance. They are all interrelated. A seminal paper, which articu-lated my ideas and which I co-wrote in 2010, Nigeria: Before the Oil Runs Dry, sets out the case for developing a federal structure that incen-tivises states to independently generate revenues. Housing is a major source of tax revenues so expanded home ownership will profit state governments’ coffers as well. It is also an im-portant forward indicator of economic health, which is why new home construction figures are closely watched by eco-nomic policy makers and aca-demics in developed countries.

With initial sharehold-ers’ equity of $37 million, and possible off balance sheet funding options it is expected that the NMRC will be regular issuer of bonds to finance its mort-gage buying programs. How soon can investors expect to see the first NMRC paper?

Our target is to have the first refinancing in the last quarter of this year, and no later than the first quarter of 2015. Once we issue the first bonds, we expect to be a regular issuer to enable the NMRC to finance its mandate. The demand from investors is there so we envis-age a good reception.

Prior to your current posi-tion as CEO for NMRC, you founded Dunn Loren Merri-field. At that time, the market already had dominant play-ers. What client needs did you identify that could be served better at the time?

This is a question I’ve been asked before. DLM hung our shingle above the door in 2009. It was the lowest point of the global financial crisis. I made the decision to open shop then because I am a con-trarian at heart. For instance I believe that the hardest times are also the best times to start a business because you either sink or swim. When times are good, money is cheap but at the peak of markets, the next is the trough, commonly referred to in economics as business cycles.

Of course, there was also the hunger to build a business. I was 42 and I said to myself that if I keep putting this off after a certain point the drive may no longer be there. I had been

fortunate to have worked with Tony Elumelu, an excellent mentor and believer in people. The successes we recorded at UBA Global Markets, which I set up with his guidance as the pioneer managing director, gave me the confidence that I could repeat the same.

Finally, I had been in the market long enough to iden-tify a number of shortcomings in the way clients were served, and institutions run. I was, as some said, brave enough to want to do it better, to build a firm in the image of the best franchises you would find in the City and Wall Street. My vision was to build a firm that tied up origination, distribu-tion, and trading, the three legs of the investment banking stool under a single seat.

You have been involved one way or another with real estate financing and deal structuring from the

early stages of your pro-fessional career. How did this happen?

Although I was studying fi-nancial economics at universi-ty and dreamt of working in fi-nance, chance and opportunity have played a big role in my ca-reer. I had a friend who always used to talk of life in the City’s financial circles. I also watched Wall Street, the movie, and read Barbarians at the Gate, about the RJR Nabisco takeo-ver and other books about Wall Street back then. These had a profound influence on my young, impressionable mind.

My entry into structured fi-nance in 1997 was not planned. But now I look back I see that my bosses must have recog-nized my innate creative talent and decided to channel my en-ergies into that area. I have not looked back since because for me, this is a passion, and I am grateful for it.

You have led several deals using innovative structures. One analyst has called them ‘deal art-istry’. Describe the in-tellectual fulfilment of a well-executed complex transaction?

Of course, there is a sense of fulfilment that comes from the knowledge that our humble efforts will enable a company pay for a new factory, increase production in multiples, or complete a takeover. Successful businesses touch lives positively.

There is a craftsmanship to what we do. The way obli-gations and expectations are worded in contracts may seem abstruse to many. To us, they have a poetic beauty when they

are done right and achieve their purpose.

One engagement I recall demonstrates this. A few years ago, we helped a fast food chain structure a future flow securitisation that if it had been done would have allowed it to fund its business and pay back in a way that had not been attempted in this part of the world before. Essentially, we helped the company sell its receivables forward. The abil-ity to do deals like that in a way that is sustainable for the bor-rower, complies with the law, addresses tax concerns, and takes care of myriad other mat-ters that must be taken into consideration, gives me a great sense of psychic satisfaction.

How hard was it attract-ing the right calibre of tal-ents to work on projects or tasks handed to you and how much harder is it to keep them?

In reality, it is hard to find good people, and tougher to keep the best of them. In my experience, the empathy be-tween bosses and employees is very important. The culture we are building here is one that encourages professional growth, knowledge sharing, an espirit de corps from be-ing part of an elite team of problem solvers, comfort in the work environment, and mutual respect. We do not just mouth these things. I made a conscious decision to build the firm on these principles. These are what helps to bring in good people, and keep them.

The most successful CEOs confess to having legacy and transition at the back of their minds. How would you rate lead-ership development at Dunn Loren Merrifield?

When we started here we were a single company called Dunn Loren Merrifield Lim-ited. Today, we have transi-tioned to a group with more than one institution under that brand: DLM Advisory Part-ners, DLM Securities, DLM Asset Management & Research and DLM Nominees.

None of the leaders at these companies started off as man-aging directors. They learnt under me, matured, and were adjudged ready to run indepen-dently. This is a testament to the grooming we put in place here.

You have post gradu-ate qualifications from the University of Dundee, Cass Business School, and the London Business School. How important is classroom learning for a successful career in in-vestment banking?

A sound education is very important. But classroom learning should be seen for what it is and not over-rated. Frankly, I would rate academic learning at 30 per cent of what it takes to become a successful investment banker.

It may surprise you to learn that many top invest-ment bankers in the City studied courses like math-ematics, biology, English literature, and philosophy or politics at Oxbridge, and not accounting, bank-ing or finance. How do you square that with the fact that they are some of the best quant traders or M&A specialists?

In my case, the most impor-tant learning I had was when two mentors from Moody’s Investor Services, the rating agency, took me by hand and decided to give me value by teaching me the nitty-gritty of structured finance from how to understand the hidden mean-ings in prospectuses for com-plex securities to constructing innovative deal structures. This was field practice at its best.

There is a perceptible shift in the balance be-tween bonds and equities

in favour of the former. The latest statistics show bonds hovering at 30 per cent of market capitalisa-tion. What is responsible for this trend and will it continue?

If you look at the balance sheet of companies you will find that the debt component outweighs the equity compo-nent by a ratio of at least 2 to 1, and in most cases, multiples of that depending on the indus-try. Due to the early stage of development of Nigeria’s fixed income market, many compa-nies that should be financing their growth and operations with bonds are still dependent on bank loans and share sales.

Macroeconomic policy also plays a role in all of this. I be-lieve that if the Central Bank of Nigeria had kept the monetary policy rate (MPR) at 6 per cent instead of raising it to 12 per cent, the 30 per cent figure we see today would be around the 50 per cent mark.

The spike in rates has led to government bonds crowd-ing out corporate bonds since most investors, including pension fund administrators (PFAs) who were just warming to the idea of investing in cor-porate and most other bonds, opted for the attractive rates paid by FG bonds. The new CBN governor has hinted at a reduction of risk-free rates back to single digits. When this happens, I believe it will jump-start interest in corporate and other bond issuance again.

Where do you see your contributions in the in-stitutions you have estab-lished in the next 10 years?

I would like to see NMRC having had a major impact on the housing sector in Nigeria. Who says we cannot finance 2 million units each year with multiple multiplier effects for the Nigerian economy? The demand is there. For DLM my vision is that it evolves into an institution like the Investment Banking and Trust Corpora-tion. I have a lot of admira-tion for Atedo Peterside, who founded IBTC in 1989 at the age of 33.

In the early 1990s, I remem-ber telling myself way back then, that if I did not get a job in London, I would return to Nigeria to work for IBTC. To-day, we have many people who have had the opportunities and exposure of IBTC’s founder. The question we should ask ourselves is whether we have created the types of interest-ing employment opportuni-ties that would attract the best young talent in our domestic market and the Diaspora to want to return and be part of something magical?

With an ever growing popu-lation, we need to create more institutions that would absorb the bright young minds. DLM and NMRC should be among those institutions. If we don’t do it now, who will? This should be a burning desire for all able Nigerians of my gen-eration. ;

Experts’ project that for each new standard 4-bedroom house built there are 7 new jobs created during the actual construction process. When one includes the number of new jobs and investments that are made throughout the entire value chain of home building, the number goes even higher.

There is a sense of fulfilment that comes from the knowledge that our humble efforts will enable a company pay for a new factory, increase production in multiples, or complete a takeover. Successful businesses touch lives positively

Barbarians at the Gate: The Fall of RJR Nabisco by Bryan Burrough and John Helyar

MARKET DATAVM4

MARKET SNAPSHOT

3-MONTH PRICE TREND OF BELLWETHER STOCKS

LEGEND

ACCESS 9.9811.147.22

1YtD 0.383.96%

1.3916.18%

0.020.20%3M 1W

PE 6.350.02

May June July23/07

T F W T F

01/08

ASHAKACEM 33.0034.1713.87

1YtD 11.1250.82%

14.8281.52%

3.1110.40%3M 1W

PE 41.253.11

May June July23/07

T F W T F

01/08

CADBURY 70.54110.0067.8

1YtD -26.64-27.42%

-0.76-1.07%

0.000.00%3M 1W

PE 47.2930.00

May June July23/07

T F W T F

01/08

CAP 40.0051.6635.96

1YtD -7.98-16.63%

0.000.00%

0.30.76%3M 1W

PE 23.300.30

May June July23/07

T F W T F

01/08

CCNN 13.9914.878.00

1YtD 2.0016.68%

4.9955.44%

0.725.43%3M 1W

PE 12.500.72

May June July23/07

T F W T F

01/08

CONTINSURE 1.121.330.93

1YtD -0.08-6.67%

0.109.80%

0.000.00%3M 1W

PE 7.000.00

May June July23/07

T F W T F

01/08

FCMB 4.234.593.01

1YtD 0.3910.16%

0.6819.15%

0.020.48%3M 1W

PE 4.810.02

May June July23/07

T F W T F

01/08

GUARANTY 28.6131.8022.67

1YtD 0.863.10%

1.615.96%

-1.49-4.95%3M 1W

PE 8.821.49

May June July23/07

T F W T F

01/08

MANSARD 2.552.731.95

1YtD 0.052.00%

0.3515.91%

-0.12-4.49%3M 1W

PE 16.680.12

May June July23/07

T F W T F

01/08

OANDO 27.0036.899.32

1YtD 0.271.01%

11.3572.52%

1.013.89%3M 1W

PE 24.221.01

May June July23/07

T F W T F

01/08

STANBIC 31.0031.5015.51

1YtD 8.6638.76%

8.6838.89%

3.5012.73%3M 1W

PE 16.133.50

May June July23/07

T F W T F

01/08

UBA 7.499.606.65

1YtD -1.66-18.14%

0.598.55%

-0.40-5.07%3M 1W

PE 4.410.40

May June July23/07

T F W T F

01/08

DANGCEM 224.10250.02185.00

1YtD 7.943.67%

-1.90-0.84%

-13.40-5.64%3M 1W

PE 19.5013.40

May June July23/07

T F W T F

01/08

FIDELITYBK 2.013.051.85

1YtD -0.69-25.56%

0.115.79%

-0.03-1.47%3M 1W

PE 2.960.03

May June July23/07

T F W T F

01/08

GUINNESS 190.10266.70162.00

1YtD -45.91-19.45%

19.5911.49%

-7.90-3.99%3M 1W

PE 24.627.90

May June July23/07

T F W T F

01/08

MOBIL 160.22178.84102.00

1YtD 44.2238.12%

40.2233.52%

-9.68-5.70%3M 1W

PE 15.339.68

May June July23/07

T F W T F

01/08

OKOMUOIL 33.7648.0532.15

1YtD -11.07-24.69%

-0.44-1.29%

1.263.88%3M 1W

PE 14.511.26

May June July23/07

T F W T F

01/08

TOTAL 172.00195.50146.26

1YtD -1.30-0.75%

18.8612.32%

-13.73-7.39%3M 1W

PE 13.2813.73

May June July23/07

T F W T F

01/08

UNILEVER 49.2565.0042.50

1YtD -3.75-7.08%

1.082.24%

1.152.39%3M 1W

PE 35.941.15

May June July23/07

T F W T F

01/08

DIAMONDBNK 6.358.205.86

1YtD -1.15-15.33%

0.071.11%

-0.37-5.51%3M 1W

PE 3.840.37

May June July23/07

T F W T F

01/08

FLOURMILL 77.6792.0063.91

1YtD -12.33-13.70%

9.6614.20%

3.634.90%3M 1W

PE 22.983.63

May June July23/07

T F W T F

01/08

HONYFLOUR 4.184.502.56

1YtD 0.338.57%

0.4612.37%

-0.10-2.34%3M 1W

PE 12.290.10

May June July23/07

T F W T F

01/08

NASCON 10.1215.1010.07

1YtD -4.73-31.85%

-1.24-10.92%

-0.38-3.62%3M 1W

PE 9.640.38

May June July23/07

T F W T F

01/08

PRESCO 36.8349.0032.00

1YtD -2.17-5.56%

-1.29-3.38%

-1.17-3.08%3M 1W

PE 4.421.17

May June July23/07

T F W T F

01/08

UACN 60.0267.8542.58

1YtD 4.037.19%

13.4628.91%

-2.17-3.49%3M 1W

PE 28.472.17

May June July23/07

T F W T F

01/08

WAPCO 120.00136.7387.50

1YtD 5.004.35%

12.0011.11%

2.001.69%3M 1W

PE 14.812.00

May June July23/07

T F W T F

01/08

ETI 16.8718.5212.40

1YtD 0.482.93%

3.8729.77%

-0.03-0.18%3M 1W

PE 4.600.03

May June July23/07

T F W T F

01/08

FO 228.90259.9435.00

1YtD 136.03146.47%

94.4270.21%

4.672.08%3M 1W

PE 49.414.67

May June July23/07

T F W T F

01/08

INTBREW 26.1031.5017.98

1YtD -2.22-7.84%

1.395.63%

-0.55-2.06%3M 1W

PE 42.280.55

May June July23/07

T F W T F

01/08

NB 185.00189.00140.00

1YtD 19.9912.11%

34.0022.52%

6.803.82%3M 1W

PE 34.426.80

May June July23/07

T F W T F

01/08

PZ 38.0045.9830.08

1YtD 1.002.71%

2.005.56%

-0.80-2.06%3M 1W

PE 29.100.80

May June July23/07

T F W T F

01/08

UAC-PROP 16.6121.3112.00

1YtD 1.238.03%

-3.01-15.32%

-1.49-8.23%3M 1W

PE 7.761.49

May June July23/07

T F W T F

01/08

ZENITHBANK 25.0527.4019.23

1YtD 0.050.20%

2.129.25%

0.100.40%3M 1W

PE 7.240.10

May June July23/07

T F W T F

01/08

TICKER 25.2327.4019.23

1YtD 0.230.92%

2.9012.99%

0.010.04%3M 1W

PE 7.290.01

May June July21/07

M T W T F

25/07

FBNH 14.4017.3711.50

1YtD -1.90-11.66%

0.604.35%

-1.11-7.16%3M 1W

PE 6.671.11

May June July23/07

T F W T F

01/08

GLAXOSMITH 65.8574.9758.50

1YtD -4.15-5.93%

-2.22-3.26%

-0.16-0.24%3M 1W

PE 21.680.16

May June July23/07

T F W T F

01/08

JBERGER 63.3976.4559.18

1YtD 0.320.50%

1.662.69%

-0.61-0.95%3M 1W

PE 9.350.61

May June July23/07

T F W T F

01/08

NESTLE 1105.101250.01916.00

1YtD -76.90-6.51%

27.832.58%

-0.10-0.01%3M 1W

PE 38.370.10

May June July23/07

T F W T F

01/08

SEPLAT 643.00735.00590.00

1YtD 38.206.32%

13.002.06%

-37.00-5.44%3M 1W

PE --37.00

May June July23/07

T F W T F

01/08

3 4 5

9

13

10 11

12

6

8

14

7

21

1. 52-week low price2. Year low price3. Current price4. Year high price5. 52-week high price6. Current price7. 5-day price change8. PE ratio9. 1-year price change10. 3-months price change11. 1-week price change12. Daily price movement over 3 months.13. 30-day moving average14. Daily price movement over last week

VM | Monday, August 4, 2014 | Issue 004

MARKET SNAPSHOT

MARKET DATA VM5

# TICKER WTD YTD

1 DANGCEM -5.64 3.67

2 NB 3.82 12.11

3 NESTLE -0.01 -6.51

4 GUARANTY -4.95 3.10

5 ZENITHBANK 0.40 0.20

6 FBNH -7.16 -11.66

7 WAPCO 1.69 4.35

8 STANBIC 12.73 38.76

9 GUINNESS -3.99 -19.45

10 ETI -0.18 2.93

11 FO 2.08 146.47

12 UBA -5.07 -18.14

13 OANDO 3.89 1.01

14 ACCESS 0.20 3.96

15 TRANSCORP 3.57 26.96

16 UNILEVER 2.39 -7.08

17 FLOURMILL 4.90 -13.70

18 PZ -2.06 2.71

19 UBN -6.22 -12.07

20 CADBURY 0.00 -27.42

21 UACN -3.49 7.19

22 DANGSUGAR -2.59 -20.27

23 DIAMONDBNK -5.51 -15.33

24 INTBREW -2.06 -7.84

25 FCMB 0.48 10.16

26 JBERGER -0.95 0.50

27 ASHAKACEM 10.40 50.82

28 7UP 6.97 57.29

29 GLAXOSMITH -0.24 -5.93

30 TOTAL -7.39 -0.75

31 FIDELITYBK -1.47 -25.56

32 MOBIL -5.70 38.12

33 STERLNBANK -2.54 -8.00

34 CONOIL 1.64 1.08

35 SKYEBANK -5.94 -33.26

36 PRESCO -3.08 -5.56

37 OKOMUOIL 3.88 -24.69

38 CAP 0.76 -16.63

39 NEIMETH -1.67 7.27

40 MAYBAKER -5.75 -35.69

WEEK-TO-DATE RETURN-10% -5%

-40%

-20%

-30%

-10%

0%

+10%

+20%

+30%

+40%

+50%

+60%

+70%

+80%

+100%

+90%

+120%

+130%

+140%

+110%

+150%

0% 5% +15%+10%

YEA

R-TO

-DAT

E RE

TURN

LAGGING

SLIPPING LEADING

IMPROVING

1

2

3

45

6

7

8

9

10

11

12

1314

15

16

17

18

19

20

21

2223

24

25

26

27

28

2930

31

32

33

34

35

36

27

38

39

540

The relative size of each individual stock’s bubble chart is determined by its market capitalization. For indices, the relative size of each bubble chart is the total value of the capitalization modified values of each constituent stock.

TRADING BREAKDOWN BY SECTOR

Sector %

Financial Services 76 \ 56

Conglomerates 8 \ 17

Oil & Gas 6 \ 8

Others 10 \ 19

24/07 01/0830/0712.4

12.5

12.6

12.7

12.8

2906

2912

2918

2924

2930

FGN Bond Index

Market Value YTD Return

VM | Monday, August 4, 2014 | Issue 004

INDEX PERFORMANCE

Index Week Opening

Week Close Change WtD MtD QtD YtD

1 All Shares Index 42,285.82 41,934.40 -351.42 -0.83 -0.39 -1.29 1.46

2 NSE 30 Index 1,933.21 1,913.38 -19.83 -1.03 -0.42 -0.95 0.33

3 NSE Banking Index 441.72 427.51 -14.21 -3.22 -1.36 -1.24 -4.54

4 NSE Insurance Index 148.73 147.77 -0.96 -0.65 -0.01 0.64 -3.34

5 NSE Consumer Goods Index 1,054.31 1,055.79 1.48 0.14 -0.21 -0.23 -4.04

6 NSE Oil/Gas Index 453.72 471.53 17.81 3.93 0.36 0.7 38.73

7 NSE Lotus Islamic Index 2,813.19 2,791.18 -22.01 -0.78 -0.27 -2.9 -2.51

8 NSE Industrial Index 2,714.02 2,725.26 11.24 0.41 0.44 2.2 7.02

MARKET SNAPSHOT

Date Deals Turnover Volume Turnover Value Traded Stocks Advanced

StocksDeclined Stocks

Unchanged Stocks

All Shares Index Value

1 24.07.2014 113 22 39 52 42,529.74

2 25.07.2014 113 25 30 58 42,285.82

3 30.07.2014 5,830 713,842,101 6,727,979,195.42 119 \ 112 29 \ 29 29 \ 36 61 \ 47 42,368.99

4 31.07.2014 6,248 354,760,258 6,912,884,935.90 118 \ 51 24 \ 5 34 \ 1 60 \ 45 42,097.46

5 01.08.2014 4,997 276,500,149 5,939,306,763.98 103 \ 116 19 \ 23 36 \ 40 48 \ 53 41,934.40

The \ arrow signifies week-on-week change in value. This week’s value is shown on the left of the \ sign, and last week’s value on the right.

GLOBAL INTEREST RATES & INFLATION TARGETSCentral Bank Rate Last Date

Change%

Change Inflation

TargetChina 6.00% 05.07.2012 -0.31 4.00%Japan 0-0.10% 05.10.2010 -0.20 2.00%

UK 0.50% 05.03.2009 -0.50 2.00%USA 0-0.25% 16.12.2008 -0.75 2.00%

Eurozone 0.15% 05.06.2014 -0.10 <2.00%Brazil 11.00% 02.04.201 +0.25 4.5% +/-2.0%Canada 1.00% 20.07.2010 +0.25 2.0% +/-1.0%Egypt 8.25% 05.12.2013 -0.50

India 8.00% 28.01.2014 +0.25Indonesia 7.50% 12.11.2013 +0.25 4.5% +/-1.0%Malaysia 3.25% 10.06.2014 +0.25Mexico 3.00% 06.06.2014 -0.50 3.00% +/-1.0%Morocco 3.00% 28.03.2012 -0.25Nigeria 12.00% 10.10.2011 +2.75 6.00% - 9.00%Qatar 4.50% 10.08.2011 -0.50Russia 8.00% 28.07.2014 +0.50 5%*

Thailand 2.00% 12.03.2014 -0.25 0.5% - 3.0%Turkey 8.75% 24.06.2014 -0.75 5.00%

* +/- 1.5 pct point uncertainty band

Indices

ASI

NSE30

NSEBNK

NSEINS

NSECNSMRGDS

NSEOILGAS

NSELOTUSISLM

NSEINDUSTR

-0.83%-0.39%

-1.03%-0.42%

-3.22%-1.36%

-0.65%-0.01%

0.14%-0.21%

3.93%0.36%

-0.78%-0.27%

0.41%0.44%

1.46%

YtD, % WtD, % DtD, %

0.33%

-4.54%

-3.34%

-4.04%

38.73%

-2.51%

7.02%

-5% -3% 0% 7%5%3%

FrTh51,38

51,60

52,04

51,82

52,2651,396.07

Mo Tu We Th

JSE FTSE

MoFr6,670

6,705

6,775

6,740

6,8106,791.55

Tu We Th Fr

FTSE 100

MoFr1,920

1,935

1,965

1,950

1,9801,925.15

Tu We Th Fr

S&P 500

ThWe41,88

42,06

42,42

42,24

42,6041,934.40

Fr We Th Fr

NSEASI

Obiora Onyeasoobiora.onyeaso@customsstreet.com

BUSINESSVM6 VM | Monday, August 4, 2014 | Issue 004

JULY 30, OANDO Energy Resourc-es, the Toronto

Stock Exchange-listed com-pany majority owned by Oando (94.6%), announced it had closed the deal to ac-quire the Nigerian assets of

ConocoPhillips for $1.65 bil-lion. The deal will push up the company’s oil production to about 50,000 barrels of oil per day from the current 5,000 bopd. FCMB Capi-tal Markets was the lead arranger on the transaction. The firm has built a strong reputation for major energy sector deals in Nigeria. In 2013 it arranged a $225 mil-lion loan for Accugas Limited, a subsidiary of Seven Energy, to finance the construction of a central processing facility and second gas pipeline pro-ject in Akwa Ibom.

Industry insiders confide that Oando offered to pay a significant premium to competing bids submitted by Seplat, Lekoil, and the Midwestern/Transcorp

consortium in order to win the assets. Analysts point out that the company had little choice if it planned to grow its upstream portfolio as the number of assets being of-fered for sale by oil majors is shrinking. Add to this that the federal government has shown that it is in no rush to conduct regular and trans-parent bid rounds.

It has been a two-year long marathon of starts and stops to get to this point for Oando, which has now suc-cessfully transformed itself from the largest downstream operator to a serious player in the country’s upstream sector.

By the transaction, Oando becomes the beneficial owner of Phillips Oil Company Ni-geria Limited’s 20 per cent non-operating interest in the onshore oil mining leases (OMLs) 60, 61, 62, and 63. It would also take ownership of the related infrastructure and facilities in the joint ven-ture with the Nigerian Agip Oil Company Limited (NAOC JV). Offshore, Oando would receive Conoco Exploration and Production Nigeria Lim-ited’s 95 per cent operating interest in OML 131, and Phil-lips Deepwater Exploration Nigeria Limited’s 20 per cent non-operating interest in oil prospecting licence (OPL”) 214. In June 2014, the Hon-orable Minister of Petroleum Resources for Nigeria ap-proved the conversion of OPL 214 to OML 145 for an initial period of 20 years.

Wale Tinubu, Oando’s chief executive, who is ad-mired for staying hungry and ambitious in spite of winning several laurels and accumu-lating a sizeable personal wealth, must now convince investors that he has what it takes to take the new Oando from potential to promise.

According to the Financial Times, over the past 5 years indigenous companies like Oando, Seplat, Shoreline Natural Resources and Seven Energy have paid $5 billion to

purchase assets have expand-ed exponentially, buying as-sets worth $5bn from divest-ing multinationals including Royal Dutch Shell, Total of France, Eni of Italy, Chevron and ConocoPhillips signaling a retreat from Africa’s larg-est oil producer. These indig-enous companies will account for nearly a quarter of the country’s oil production, or about 600,000 barrels of oil per day, by 2020. At present, they produce a marginal 10 per cent.

The length of time taken to complete the deal exposed the challenges faced by Ni-gerian companies when at-tempting to swallow large, costly assets. Oando financed the acquisition with an equal mix of debt and equity. The lofty valuation, rich forecasts and complex financial engi-neering expose the company to risks that may impair its ability to reward equity own-ers for some time to come. Apart from the lengthy du-ration it took to raise the fi-nancing, the company also experienced delays in win-ning the approval of Dr. Diezani Allison-Madueke, the petroleum minister. Her approval was only received in June.

All the hurdles are in the past.

In a press release issued by the company, Tinubu proudly declared that the company would continue to ‘play a piv-otal role in the consolidation, growth, and development’ of the Nigerian oil and gas industry, and that his team will ‘continue to seek strate-gic opportunities that pro-vide a platform for enhanced growth and value creation for our stakeholders.’ It looks like he is determined to slough off insinuations that he has a ‘bid ’em up’ bug. When asked by a Reuters reporter if the company plans to bid for the OML 138 block that Total has pt up for sale, he recoiled. ‘It’s a good asset but the price is quite high. $24 per barrel, I think it’s a bit too expensive.’

Wale Tinubu, CEO, Oando, the man with the golden smile

Source: Forbes.com

TAKEOVERS

SPOTLIGHT

Now the real work begins

ON

S

Source: Thomson Reuters

Oando Income Statement History and Forecast

0 0%

100 1%

200 2%

300 3%

400 4%

500 5%

600 6%

700 7%

Billi

ons

NGN

2011 2012 2013 2014e 2015e 2016e

Sales Operating profit Net incomeOperating Margin Net Margin

Jan’

13Fe

b’13

Mar

’13

Apr

’13

May

’13

Jun’

13Ju

l’13

Aug

’13

Sep’

13Oc

t’13

Nov’

13De

c’13

Jan’

14Fe

b’14

Mar

’14

Apr

’14

May

’14

Jun’

1423

/07/

1430

/07/

14

Source: Thomson Reuters

Oando target price consensus revisions

1.0101.5152.0

202.5

253.03.54.04.5

30

5.0 35

5.5 40

Num

ber

of E

stim

ates

Targ

et P

rice

Number of estimates UpgradingNumber of estimates UnchangedHighest Target Average Target Lowest Target

Source: Nigerian Stock Exchange

% Changes in Oando Share Price vs. NSEOILGAS Index

-5.0%02/07 08/07 14/07 18/07 24/07 01/08

-2.5%

0%

2.5%

5.0%

7.5%

10.0%

OANDO price change NSE OILGAS Index change

471.53457.15

28.5 27.00

ENATOR UDOMA Udo Udoma, CON, 60, is the senior part-

ner of Udo-Udoma & Belo-Osagie, a thriving commercial law firm he founded in 1983. From 1999 to 2007, he was a member of the Nigerian Sen-ate.

Senator Udoma, whose fa-ther served on the Supreme Court for 13 years, specializes in advising clients on Nigeria’s investment laws with a focus on the petroleum, energy and natural resources sectors.

His counsel is also sought on company law, corporate re-structuring, mergers and ac-quisitions and the raising of financing in the capital and money markets.

The graduate of St. Cathe-rine’s College, Oxford Univer-sity served for two years (1991-1992) as the pioneer chairman of the Corporate Affairs Com-mission. From 1993 to March 1994 he was the Special Ad-viser to the Minister of Petro-leum and Mineral Resources.

Since January 2010, Sena-

tor Udoma been the chairman of UAC of Nigeria Plc where he owns a beneficial interest of 24,063,132 shares (1.25 per cent) according to proxy fil-ings. He has been on the con-glomerate’s board since 1995. He has also been a member of the board of Unilever Nige-ria since January 2008.

In June 2008, the former lawmaker, whose great-great grandfather founded Ikot-Abasi in modern-day Akwa Ibo state, was appointed as the chairman of the Securi-

ties and Exchange Com-mission of Nigeria. In Febru-ary 2010, Senator Ganiyu Solomon criticized him for retaining roles on the boards of quoted companies at the same time as serving as the chairman of the board of the SEC. He believed the risk of conflicts of interest made his position untenable. In his de-fence, the SEC chairman ex-plained that he was not an ex-ecutive chairman, and that he had ‘served on the board of the company prior to my appoint-

ment as chairman of SEC and had declared it, as required by law.’

In April 2010, Senator Udo-ma joined the board of First Hydrocarbon Nigeria. The company was founded in 2009 by Afren in partnership with FCMB and GTBank to take advantage of opportuni-ties open to indigenously—controlled oil companies.

Senator Udoma has been the chairman of board of Un-ion Bank of Nigeria since February 2013. ;

Senator Udo Udoma, Lawyer, Corporate titan

Such statements must be re-assuring to Oando’s share-holders and bankers.

After the clinking of cham-

pagne flutes, the real work begins if this acquisition is avoid the fate of a Pyrrhic vic-tory. ;

After two years on its board, Adebayo Ogunlesi has been named as the lead director of Goldman Sachs, the investment bank. He re-places James Schiro, who is retiring for medical reasons. This is a first for Wall Street as Ogunlesi’s selection marks the first time a person of Afri-

can descent would occupy the position at a global financial institution.

Although his appointment has been welcomed by many, two questions have since been raised about his qualification and his authority. Ogunlesi, a distinguished investment banker and founder of Global Infrastructure Partners, has never run a public company. Normally, chairmen of major US corporations have several years of chief executive, or at least, c-suite experience be-fore nomination as chairmen. Governance experts have also criticized the retention of the chairman title by Lloyd Blank-fein, the bank’s chief executive.

The Sagamu, Ogun indi-gene has a proud pedigree. His father, Emeritus Professor

Theophilus Oladipo Ogunlesi, OFR, was the first Nigerian professor of medicine. He at-tended Kings College, La-gos and Oxford University, where he bagged a first class degree in Philosophy, Poli-tics and Economics, before proceeding to Harvard Busi-ness School to earn a JD and MBA from its Law and Busi-ness Schools respectively. While at Harvard Law School, Ogunlesi also enrolled at the business school to overcome his fear of numbers. The new lead director once told an in-terviewer that the reason he enrolled at business school was to overcome his fear of numbers. ‘I was a guy who never really liked numbers in school. I was never any good in math.’ ;

CORPORATES TRANSPARENCY

REGULATION

COMMENTARIAT VM7VM | Monday, August 4, 2014 | Issue 004

Afren’s canaries in the coal mine

Adebayo Ogunlesi

Nigeria’s Foreign Reserves and US$/N Exchange Rate

FREN, AN INDE-pendent oil and gas exploration and pro-

duction company operating in Africa and the Middle East whose founders included the recently deceased Rilwan Lukman, a former petroleum minister, has temporarily sus-pended its chief executive of-ficer, Osman Shahenshah, and chief operating officer, Shahid Ullah, following ini-tial findings of an independent review by Willkie Farr & Gal-lagher, a law firm appointed by the board. The news provoked panic selling of its shares. The company’s market capitaliza-tion shrunk from £1.6 billion to £1.2 billion in the aftermath of the news on Thursday.

In a terse statement issued Thursday, the FTSE 250 com-pany said that ‘in the course of review of the potential need for disclosure of certain previous transactions to the market, evidence has been identified of the receipt of unauthor-ised payments potentially for the benefit of the CEO and COO.’ The statement goes fur-ther to clarify that these pay-ments were not made by Afren and that it ‘has not found any evidence that any other Board members were involved.’

Canaccord Genuity, a UK-registered brokerage, wrote in a note that the sus-pensions ‘raise plenty of ques-tions which are unlikely to be answered in the near term. Afren’s corporate govern-ance reputation has not been amongst the best in the sec-tor, and investor scepticism in some quarters would appear to have been vindicated by today’s news.’ It does not find the non-implication of direc-tors assuring either since ‘we have been unable to find out if this also means no-other em-ployees are involved.’

Egbert Imomoh, a board member and former deputy managing director of Shell Pe-troleum Development Compa-ny (Nigeria), has been named as the executive chairman, and Toby Hayward, who until now was the senior in-dependent director, as interim chief executive.

Last year, 30 per cent of

shareholders voted against the retention of Imomoh as chairman at its annual general meeting. They also rejected a generous pay package for the suspended CEO. The revolt was sparked by Afren’s deci-sion to raise its stake in First Hydrocarbon Nigeria, a company it set up in 2009 in partnership with First City Monument Bank Plc and GT-Bank as vehicle for winning business in Nigeria. The com-pany initially owned 44.4 per cent of FHN, and decided to raise its stake to about 80 per cent. It paid $105m for the ad-ditional equity. It also struck a deal that allows it to purchase a further 12.5 per cent in FHN at $3.32 a share in 2015.

What later became clear was that Imomoh, and the suspended executives had purchased a 15 per cent stake in FHN at $0.13 per share for a total cost of $1.3m. These shares were sold at the end of May last year at $2.47 per share, a whopping 1,800 per cent return on the original price paid. Shareholders were upset that the directors’ stakes in FHN was not disclosed until

then. That compounded con-cerns about governance prac-tices at Afren.

At least one source has said that it is not unthinkable that the suspensions are linked to a power play following the pass-ing away of Rilwan Lukman.

With Lukman’s passing, there are plenty of knives out in Nigeria and so perhaps it should not be that surprising that an internal investigation has quickly revealed payments to Shahenshah and meant that he has been suspended.

Investors can get some com-fort that the company, which has operations in eleven coun-tries as far-flung as Kurdistand and Ethiopia, is doing well.

Last year, the company pro-duced about 47,112 barrels of oil per day. Its 2014 produc-tion target was revised down-ward to 40,000. In its first quarter results of the year, it said that it had only been able to produce 35,465 barrels of oil per day.

The company has post-poned the publication of its half year results from August 4 to no later than the end of the month. ;

The ‘Bayo-sphere’ keeps expanding

Pens up!

Foreign reserves rising

The oily road to going public

The Central Bank of Nigeria’s deadline for bureaux de change to raise their capital base to N35 million from N10 million by July 31 has passed. The forex dealers under the auspices of the Alhaji Aminu Gwadabe-led Association of Bureaux De Change Operators

of Nigeria (ABCON) had lobbied to extend the deadline by 40 weeks to no avail.

Pabina Yinkere, head of research at Vetiva Capital Management, told Bloomb-erg that the CBN directive is ‘aimed at reducing the specu-lative demand for foreign ex-change over the election cy-

cle,’ and would be a ‘positive for the currency if properly implemented, and if success-ful, could prevent an aggres-sive tightening of monetary conditions.’

Alhaji Gwadabe announced on Friday that over 70 per cent of ABCON’s members failed to meet the deadline. ;

Latest figures available from the CBN website show that the country’s foreign exchange reserves rose to $38.94 billion. In a com-muniqué issued at the end of its July monetary policy committee (MPC) meeting,

the central bank noted that the uptrend in reserves was ‘mainly due to increased ac-cretion and moderation in the rate of depletion.’

According to Reuters, the naira has ‘remained stable at around 161-162 to the dollar

on the interbank market and 155.75 on the official window, on the back of support from dollar sales by some energy companies and offshore in-vestors buying local debt.’ ;

At its quarterly CEO Din-ner held last week with the theme ‘The Role of the Cap-ital Market in Unlocking Value in the Oil and Gas Sector’, the Nigerian Stock Exchange reminded pri-vately held companies of the benefits of being listed. There is a growing call for more com-panies in the commanding

heights of the economy to sell shares to the public.

Many owners of companies operating in the sector read-ily admit that the long-term capital an initial public offer-ing brings would be welcome. They also recognise that it can be a poisoned chalice. Their reticence comes from a percep-tion that the investing public

has a limited understanding of their businesses, investment patterns, and cash flows.

A director at an indigenous oil and gas company has pri-vately suggested that the NSE needs to do more work con-vincing the buy-side, espe-cially institutional investors, role they can play in attract-ing them to the market. ;

$35B 155.0N07’13 09’13 11’13 01’14 03’14 04’14 06’14

155.1N

155.2N

155.3N

155.4N

155.5N

155.6N

$40B

$45B

$50B

Source: arabianoilandgas.comWorker at Afren’s Barda Rash field. The company paid $588 million for the Iraqi asset in 2012

Afren’s Nigerian operations

Nigeria Working Interest Local Partner

Ebok 100%/50%a Oriental

Okoro Setu 50%b Amni

OML 26 45%c FHN

OPL 310 40%d Optimum Petroleum Development Ltd

OML 113 16.875%e FHN

Okwok 70%/56%f

Oriental Addax Petroleum (Nigeria

Offshore)

OML 115 100%/50%g Oriental

Source: AfrenNotes: a- working interest pre/post cost recoveryb - working interest post cost recovery.c - held through FHN,a subsidiary of Afren plcd - 40% economic interest (following completion of farm out and subject to Nigerian Ministerial Consent).e - Held through FHN, a subsidiary of Afren plc, post cost recov-ery economic interestf – 70% pre cost recovery effective working interest 56% post cost recovery effective working interest (subject to gross volumes lifted). g - 100% pre cost recovery effective working interest; 50% post cost recovery effective working intererest.

38,942,868,287

155.23

CBN Foreign Reservers and Rates

$/N Exchange Rate

A

IS THE END OF charity season and the dry season in Gidi. What a para-

dox. This culminates in the fa-mous, eagerly awaited Small World event traditionally held on the nearest Saturday to the 18th of February. The event

has held every year since 1996. It was started by a group of ex-patriate women living in Nige-ria who were motivated to give something back to the country that had received them so well. These ladies believed that they could, through asso-ciation, raise funds to support local charities. Beginning as a cosy, indoor food fair with 300 guests, it has grown to become a boisterous outdoor festival with over 3,000 peo-ple attending this year.

I have been selected as a member of the Organizing Committee with responsibil-ity for on-ground duty. This is a euphemism. In reality, the matrons have Shanghaied me for the task. How can I say no?

Since I started running my own company I am stretched thin. Time is a scarce com-modity for me. But ‘Befehl ist Befehl’ (German: orders are orders). So I comply with-out audible complaint. On

the day, I grudgingly make my way to the event venue at British International School, Lekki.

Although refreshments will be brought by assigned wom-en to the grounds, I look for-ward to a self-rewarded lunch at Caffé Vergnano 1882. The café is at the Palm’s Shopping Centre, a stone’s throw away from where the event is taking place.

Afternoon supervisory duty is no cake walk. After a few hours, I am knee deep in sand, simultaneously taking in new information on specifications and dimensions of the stage, deciphering a thick South African accent, holding the measuring tape on the water-thirsty field and calculating what would be adequate thor-oughfare space for the ex-pected traffic for hundreds of people. By noon my white silk office shirt is drenched and I am famished.

Caffe Vergnano, an Ital-ian franchise is part of the extensive Double Four Res-taurant Group part owned by the Mattar family. For any child in Gidi of a certain age, a birthday at Double Four Restaurant on 44, Awolowo Road, Ikoyi was a right of pas-sage literally. Their Knicker-bocker glory sundae, Chicken escalope, and chicken livers were family favourites. They also pioneered the brick oven pizzas in Gidi. Pictures from my 12th birthday are docu-mentary evidence of this fact. The food at Caffé Vergnano echo the sentiments of a gone by era.

This is why I relish eating at what most would consider a cafe franchise whose focus is mainly on designer Italian Coffee. Because of the Mattar family backing, their kitchen is just as strong as their es-presso machine.

The grilled chicken and

mashed potato, an off the beaten menu contender, ar-rives in record time. I am a lit-tle disappointed that the fillet is skinless though the chicken is adequately moist. I miss the fact that the chicken is grilled with the skin side down - this was the case in the past - as this heightens the dish that can easily hold its own with any gastropub in England worth its salt.

In the midst of savouring my meal, I receive a text from one of the ladies on the com-mittee and I leave immediate-ly after my meal. This matter on the Mattar gastro-dynasty is definitely not over. To be continued! ;

ART AS AN ALTERNATIVE INVESTMENT

EDITOR: MIDENO BAYAGBON

GROUP BUSINESS EDITOR: OMOH GABRIEL

CONTENT DIRECTION: OBIORA TABANSI ONYEASO

DESIGN & ILLUSTRATION: PUBLICAN MEDIA

Vanguard Markets features unbiased, in-depth coverage of corporate and market developments across a wide range of business sectors.Every week, Vanguard Markets delivers essential business analysis and commentary on Nigerian companies, regional economies, and global markets. Vanguard Markets is published by Vanguard Media Limited in associa-tion with Customs Street Advisors Limited, a specialist communications consultancy.

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In Association With

TERM, ‘OLD MAS-ters’ generally refers to the most recog-

nized European artists—mostly painters, working between the Renaissance and 1800. In mod-ern times, a Master describes an artist usually advanced in age with recognition gained over extensive years of practice.

In contrast, the ‘emergent artist’ is part of a more recent era and lacks a certain appeal and value which time endows his work. An analysis of auc-tion results reveals that the Masters have recorded about 70 per cent of the highest pric-es in Nigeria in the past 5 years.

In this article, we will ana-

lyze auction results for widely acknowledged Master, Yusuf Grillo, as well as an indication of future values.

Yusuf Adebayo Grillo was born in Lagos, Nigeria in 1934 and studied at the Nigerian College of Arts, Science and Technology, Zaria from 1955 to 1960. The following year, he earned a postgraduate teacher’s certificate. In 1958, together with his contempo-raries at Zaria, Grillo founded the Zaria Art Society, famous for its theory of Natural Syn-thesis, which sought to merge Western techniques and con-ventions of representation with indigenous Nigerian traditions.

Much of Grillo’s legacy rests on his achievements as an educationist. A leading member of the Yaba figura-tive school, he served for many years as the director of the School of Art, Design and Technology of the Yaba Col-lege of Technology. He was the first president of the So-ciety of Nigerian Artists, and served for over sixteen years from inception in 1964.

Grillo is well-known for his distinctive style which adopts the geometric planes of classi-cal African sculpture and the rich blue hues of traditional Yoruba textiles as exemplified

by Blue Moon, a 1966 oil on board painting estimated at N8-9.5 million ($66,670-79,170) and sold for N8.8 million ($58,666) in November 2008 at Arthouse Contemporary.

This remains the record for any Grillo sold in Nigeria, erasing the earlier record for Humana set in 2006, an oil on board, which sold for N6.05 million ($40,000) at Arthouse Contemporary in 2008.

Grillo is one of Africa’s most influential modernist painters and the value for his paintings continues to rise on the inter-national market.

Leading international auc-tion house, Bonhams, has featured Grillo in several auc-tions with his highest selling work African Woman with Gele fetching £80,500 includ-ing premium in its May 2014 Africa Now sales. The work had a pre-sale estimate of £30,000 to £50,000.

The table below shows the 5 most expensive works by Grillo sold at Bonhams, an auction house. The results show a steep rise in sales from 2010 to 2014, which will hopefully boost col-lector confidence in acquiring works by the artist. ;

An Artist’s Dossier: Yusuf Grillo

Caffe Vergnano cappuccino cups

ARENAVM8 VM | Monday, August 4, 2014 | Issue 004

Oliver Enwonwuis the director of leading Lagos gallery, Omenka and president of the Society of Nigerian Artists.oliver@omenkamagazine.com

HIGH TABLE

Ify Ojiis a lawyer, writer and food lover. She is the creator of the GidiTang.com (synonym: Lagos Flavour) blog on food and drink in Lagos. teamlogiclimited@gmail.com

The Mattar at hand (1)

IT

Source: torinobygnam.it

Work Details Date Sold Amount

African Woman with Gele, 1975 oil on canvas 92.5 x 91.5cm

21 May 2014Sold for £80,500

inc. premium (N17,879,000)

The Flight,1972 oil on board 122 x 122cm

21 May 2014Sold for £62,500

inc. premium (N13,881,200)

The Blue Madonna, 1965 oil on composition board

119.5 x 51cm21 May 2014

Sold for £50,000 inc. premium (N11,105,000)

Mother - IYA series oil on board

111.5 x 45.5cm 21 May 2014

Sold for £43,750 inc. premium (N9,716,840)

Sabada, 1964 oil on board 113 x 54cm

10 March 2010Sold for US$ 57,950

inc. premium (N8,590,740)

Caffe Vergnano 1882The Palms,

Lekki

The

Yusuf Grillo, African Woman with Gele, oil on canvas, 92.5 x 91.5cm