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Why regulators should cut transaction costs



The high transaction fees constitute a major impediment to the market’s growth and development, writes CHRIS UGWU


Safe for the current rally, trading activities on the Nigerian stock Exchange (NSE) have been relatively sluggish when juxtaposed with the context of and reaction to the Nigerian Stock Exchange’s (NSE’s) drive for global competitiveness.


High transaction charges on trading executed on the floor of the Exchange have not only continued to pose potential threat to both local and foreign investors but also constitute a clog to prospective issuers and dealing members at the local bourse.


The question market operators and other stakeholders have continued to ask has also remained on how to turn around the market. Hence, several players in the market are calling for the Exchange to lower transaction costs and encourage new listings if it wants to become more attractive vehicles for raising capital and lure new investment.


However, following the weak condition of the local bourse, market operators believed the time is ripe for the regulatory authorities to heed the advice and toe the line of other countries who have enacted a compelling law to reduce these obstacles, which is holding the market from being the bastion of the economy, noting that this is the only way to set in motion the necessary machinery required to turn around the market.


This is because in Nigeria costs constitute impediment for market operators and even to companies wishing to list their shares, while already listed ones are looking for excuses to delist from the Exchange due to excessive charges and unfavourable operating milieu.


NSE costs among highest worldwide


Checks on the NSE fee structure in its ‘Green Book’ revealed an array of fees such as NSE fees, CSCS fees, SEC fees, Value Added Tax, Stamp Duty and Brokerage Commission, which exclude securities-tied fees also payable by the listing or delisting corporates. Further investigation showed that transaction costs across global markets appears highest in Nigeria and Ghana while the United States (US) has the least transaction cost with no charges on stock trades.


Hence, lower cost of transaction appears consistent with the level of market development and by implication, market efficiency, as costs are lower in U.S., China, India and South Africa, which is more developed compared with the Nigerian and Ghanaian markets.


The report noted that a comparative cost analysis embarked on across markets in Africa, showed that Nigeria’s statutory fees (exclusive of brokerage commission) remain the highest not only in Africa but also across major emerging markets across the globe (save for Ghana, which is almost at same level with Nigeria at 0.7 per cent).



For instance, stockbrokers earn only 1.350 per cent of the total cost of 4.04 per cent charges on the equity transactions.


The rest goes to Securities and Exchange Commission (SEC), Central Securities Clearing System (CSCS), NSE and statutorily charges such as stamp duty and Value Added Tax (VAT). Some market operators are of the opinion that given the fact the regulators get money from registration, penalties and others, they ought to receive very minimal commission on secondary market transactions.




Regulators’ efforts


The apex regulatory body of SEC recently disclosed its preparedness to work with the NSE to review transaction cost. Director-General, SEC, Mr Mounir Gwarzo, who served as a discussant at a Break out session (Creating Secondary Market for Investors) of the Annual General Conference of the Nigerian Bar Association made this known.


Reacting to observations made by Mr. Colin Coleman, Managing Director of Goldman Sachs South Africa on the high quantum of transaction cost in the Nigerian capital market, Mounir as well as the CEO of the NSE emphasised that steps had been put in place to ensure a reduction of both the explicit and implicit cost of transactions in the Nigerian capital market.


The DG acknowledged that both explicit and implicit costs in Nigeria are higher than in peer countries, noting that within a short period of time the market would feel the effect of these reductions. He noted that to start with, there would be a haircut on SEC, NSE, Issuing Houses and Receiving Agents fees at the primary issuance side.


He said the four cost centres charge about 70 to 80 per cent of floatation cost, adding that the commission would be addressing the secondary market as well. Stopped The DG also urged legal practitioners to refrain from instituting unnecessary litigation at the instance of their clients who are involved in an enforcement action of the Commission.


He added that this would ensure the support of the Legal profession to the Commission, thereby allowing the Commission to perform its statutory function and adequately protect investors with the aim of continuously developing th


e Nigerian capital market and the economy in general. Concerned by the complaints of high transactions costs on the Nigerian bourse, SEC also noted that one of its near-term targets is the reduction of transaction costs in the stock market.


The immediate past Director General of the Commission, Mr. Mournir Gwarzo, who disclosed this while briefing the media on the outcome of the second quarter 2017 Capital Market Committee (CMC) meeting in Lagos recently, said this became necessary to attract more operators in the market. He disclosed that the commission has formulated rules on transaction cost analysis, which is awaiting the approval of the minister of finance. The NSE also last year announced the revision of the listing and trading fees for securities listed and traded on its Fixed Income Market.


The revised fee structure, became effective on August 17, 2016, will be piloted for an initial six months period, and evaluated to determine if it has met its objectives. Under the revised fee structure, the NSE will no longer charge trading fees on fixed income traded on its platform.

The initial flat listing application fees of 0.15 per cent for all bond types has been replaced with variable listing application fees.


With this, Corporate Bonds exclusively listed on the NSE, with existing equity listing, will attract 0.01 per cent listing application fee. Dual listed Corporate Bonds with existing equity listing and other Corporate Bonds will attract 0.0375 per cent listing application fees. Similarly, the listing application fees for State and Supranational Bonds has been reduced to 0.05 per cent. The Exchange also replaced the fixed Brokerage Commission of 0.0005 per cent with a negotiable rate capped at 1 per cent.


This will enable investors negotiate trading commission with brokerage firms, thus driving competition and best execution.


Experts’ opinion


Following deliberate actions taken by capital market regulators and operators to woo retail investors back to the market, Analysts at Meristem Securities Limited have said a reduction in transactions costs will attract more investors.


According to them, the relatively high costs of transactions on the NSE calls for concern to investors particularly at the retail segment of the market with such charges as the stamp duty still being charged on every transaction, which takes place on an electronic platform.


They explained that a comparative cost analysis they embarked on across markets in Africa, showed that Nigeria’s statutory fees (exclusive of brokerage commission) remain the highest not only in Africa but also across major emerging markets across the globe (save for Ghana, which is almost at same level with Nigeria at 0.7 per cent).


They noted that the new transaction notification system (X-Alert) used to replace the former Trade Alert is a welcome development expected to come as a relief to wide spectrum of investors, especially institutional and high net-worth investors.


Last line


Transaction costs are important to investors because they are one of the key determinants of net returns.


Transaction costs diminish returns, and over time, high transaction costs can mean huge loss of money from not just the costs themselves but because the costs reduce the amount of capital available to invest.

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‘Radio can be used to check herdsmen/farmers’ clashes’



Mrs. Alison Data Phido is the Executive Director, African Radio Drama Association (ARDA). ARDA was launched in Nigeria in 1996 and has more than 30 radio stations across the country. She speaks with FLORA ONWUDIWE on some of their executed projects in form of drama and jingles which have been syndicated to other countries in Africa and broadcast on the BBC in Hausa. Mrs. Phido also suggested the methodology to put an end to Fulani herdsmen and farmers’ clashes


What informed establishing the African Radio Drama Association (ARDA)?


The ARDA was established in faraway Harare, Zimbabwe. It was during a development communication symposium of people who are interested in using radio to the development of communications. It has scholars; radio producers, actors, presenters, even some development people, people who are working in health, agriculture and so on.


So, it was a symposium that was looking at ways we can communicate better with our populations on several development areas and problems that we have in Africa. It wasn’t just Africans; we had people from Asia, Philippines and the Caribbean. There were people who are passionate about what the most accessible medium is and how we can use it so that people will really benefit from it. Those of us who went from Nigeria were amazed at the sheer possibilities of how one can use a simple medium like radio to achieve so much in terms of development. We were amazed because at that time, radio was no longer an attractive medium.

If you were born in the 50s, or grew up in the 60s and 70s, you saw the impact of radio. In the 90s, television had taken over and videos were the in thing. And the reasons were not far-fetched. But even in the developed countries, radio is still very important to them; so why is it not that way in Nigeria. We knew at that time the radio had become deregulated so even the private radio stations had programming that was nothing to write home about.


Mostly, they were playing a lot of music and advertisements. Nobody was spending money producing programmes anymore. But in other countries, you hear about people using radio dramas to promote agriculture, make people think about family planning, better reproductive health; they are using radio drama to promote girl child education. We saw what people were doing with radio and we said, why can’t we do the same in Nigeria, Africa. So the association was born.



What are those contents that affect Nigeria that you are using radio to promote?


Think about all the indexes of under- development; education, good governance, democracy, democratic principles, accountability, corruption. We talk about reproductive health matters, children’s health, nutrition in families, female genital mutilation, widows’ dispossession, and child’s rights. Under gender inequality, we talk about sexual responsibility issues, HIV/AIDs and Malaria.


The issue raised was that people in the rural areas are mostly affected. When you take some of these executed projects to them, the barrier is language; how do you communicate for them to have an impact of ARDA’s project?


We speak in the language that they understand. We do this simply because our methodology starts from who we think the beneficiaries are. For example, in a particular location, they have an issue that they feel that we can help them address; we start by researching, talking and engaging them in trying to find solutions to whatever issues they have. We normally package our programmes in the languages of those people and that is the beauty of radio to be honest. Because if you are low literate or illiterate and you don’t have access to print medium, you cannot understand or read or write. But then people are speaking your language on radio, you will understand them. That is why radio is accessible because even for low literate people, at least it is oral, so we try as much possible to speak to people in the language that they understand and that is why we define our audience first of all.



The issue of reproductive or maternal health is predominantly in the rural areas for lack of facilities and lack of education. The Lagos State Government seems to be more involved, does ARDA work with states?


In every state where we worked, we tried to get the states to key in. If you want things to be sustainable, you have to look at what you have on ground; what is the structure. Maternal health for instance is an issue that they want to address. Many states have family planning units or maternity unit; they have all kinds of programmes that look at addressing maternal health. Nigeria is one of the countries that has very high maternal mortality rate. We are one of those countries that have more women dying just because they are pregnant or delivering a baby. Many countries have reduced incidences of maternal mortality. We are still on the high side.



Do you syndicate some of these projects you execute in Nigeria to other countries in Africa?


Yes we do. We have worked on several Hausa and Fulani projects before. I mention those in particular because if you look at West Africa, Hausa is spoken by populations in several of these countries. For instance, Hausa is spoken in Niger, Cameroun, Mali, Ghana and across the coast, you have pockets of Hausa populations; so you have a lot of international radio stations having Hausa service. We broadcast in the past on BBC Hausa service, Deutchvelle in Fatuwan; a radio drama series that we had in Hausa called ‘Asuga Ategiri’ for several years. That is to show you the reach as we were getting comments and letters from Libya, Sudan, Cote d’ Ivoire, Ghana, Niger among others. We also belong to a network that was set up by an organisation called the Panos West Africa. They support the community radio stations and many countries have hundreds of them. Nigeria is still a new thing here. In Ghana, Mali and Niger, they all have community radio stations and they want contents and they beg for contents. What Panos does is try and get people who are building content to try and contribute to its bank. Once these programmes are in the bank, any radio station can use them.



When the initiative was launched in 1996, did you know that you would go this far?



I knew that we would go even further than where we are now because it was a huge and very big vision. I saw the number one development communication entity, development communication agency on the continent. That was what I thought this organisation is going to be because there has never been anything like it; we have advertising agencies and other media agencies but there are no development communication organisations.



ARDA is made up of experts with cross cultural perspective. What does this mean?


We have the expertise in ARDA that is always a little bit more than what other people have to offer. For example, we have staff or associates from advertising background, which means they are experts in how to package communication to motivate people to buy something; either idea or products. We have people who are producers of media materials, film producers or radio producers, scriptwriters, trainers who can facilitate any workshop or people who can come up with a curriculum or any kind of training.


The edge we have above other people is every single person here has a developmental background. A developmental background gives a different perspective, knowledge and awareness.



Most Non Governmental Organisations (NGOs) usually fold up after a while for lack of fund, but ARDA waxes stronger; the bride of long list of foreign donors, grants and support from within. What is the secret that has kept the organisation afloat for other founders of NGOs to take a cue from?


Some NGOs have come and gone, most of them could be lack of funds, and some may have completed whatever they mandated for themselves to do. But for ARDA, we had a vision for an enduring organisation. So when you had that kind of a vision, you set it up from the beginning to have those characteristics that will make an enduring organisation. What are the things that make an organization stay? When you study organisations that are there for decades there are certain significant characteristics. I think the main thing is that, there is a niche for the kind of services we are offering, because even in the developed countries, communicating development is something that is ongoing. There are things that you are always going to communicate to your community population, so the niche we have carved for ourselves is something that we needed that will always be an important service. So for developing countries, the issues are numerous, there are some long standing matters that still need to be communicated. The other things that made us to survive till now and for us to be attractive to donors as well as partner organizations are two folds; we do quality work that they can see the value, success and impact of some of the things we had done in the past. We have structures in place to manage funds that we do receive, which means that a donor is confident that they gave us money. There is nothing that donors love more than having structures, checks and balances, like having a supervisory board, are they meeting, do you have audited accounts, those are the things that make people part with their money. Also, another source of our income is we do consultancies.



You said you had a project where you had to educate the Fulani herdsmen, what kind of project was that?


It was a project on Climate Change; an adaptation to Climate Change. Why we worked with the herdsmen is because of the constant conflict between the herdsmen and farmers in the country over resources. Because it is about the distribution of resources, scarce resources and the natural habitat of the herdsmen, the Sahel region of the country is very dry now. Many people can tell you how far the desert has encroached into our country. So you can imagine the Sahel being the driest. We also have the Guinea Sudan areas, which is coming down almost to Benue, Guinea Savannah regions, so you find during the dry season, that there is hardly adequate water and greenery or food for the cattle and most of the breeders that raise cows are nomadic. If there is no food they move South west, until the rains begin and they go back. It is the way that they have always traditionally done their work.


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Glo-sponsored African Voices dedicates this week’s edition to photography



This week’s edition of Globacom-sponsored African Voices on CNN International is all about photographers that are influencing the continent behind the scenes from the camera.


With the theme “Through the Lens”, the 30-minute magazine programme will feature Gerald Rambert of Mauritius, Omar Victor Diop of Senegal and Adnen Chaouchi of Tunisia.


Globacom in a press statement urged viewers to watch African Voices on CNN at 7 a.m. and 4.30 p.m. on Saturday and at 12.30 a.m., 4.30 a.m. and 8 p.m. on Sunday. Further repeats will also run at 5 a.m. on Monday and at 10.30 a.m. on Tuesday.


According to the company, the CCN crew will take a dive with the Mauritian photographer, Rambert, as he introduces viewers to the world of deep sea photography.

He discloses how his big passion for the fish and the sea led him to spending hours in the water and finally to underwater photography. He is today the photographer for many magazines.


The Senegalese photographer, Omar Diop, is a graduate of the Paris Business School who worked in several multinationals before abandoning his corporate job to devote himself to photography. Viewers will find out how he is blurring the lines between photography and painting.


The final guest on the programme is a journalist and radio host who CNN said is changing the way news is consumed through mobile journalism. He is expected to talk about how he combines his job as a journalist with television production.

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AutoBeat / Auto Trends

Weststar commences distribution of firefighting trucks



The Commercial Vehicles department of Weststar Associates Limited recently debuted its first unit of the new Atego 1725 firefighting truck for the year 2018 to support firefighting operations in Nigeria. This is in line with Weststar’s new strategic philosophy to support firefighting operations in Nigeria.


The Mercedes-Benz Atego Firefighting truck comes with a double cabin laid-out for six people – driver plus one person in front and four people behind. It features Autonomous Respirators built into the seat backrests.


The Pump compartment in this Atego Firefighting vehicle is mounted between the cabin and the water tank made of aluminum profiles and coated with smooth aluminum with its Pump access door on the right side and with roller blindtype door located on the left of the driver’s side.


The structure and firefighting equipment are in accordance with MBR 14096 – for firefighting vehicles, setting the minimum  conditions required for the design, construction and performance of the vehicle.


Two tanks are within the inner compartment, one for water and another for LGE, with capacity respectively of 5000 liters of water and 500 liters LGE, fitted with internal longitudinal and transverse deflectors according to standards boost flexibility when driving in rough terrain.


The Atego 1725 firefighting truck is the perfect match for organizations striving to achieve total quality in fire protection solutions as it is equipped with a strong and robust 6.4 liter inline 6 cylinder Mercedes-Benz engine that produces 245hp ensuring excellent performance, complies with Euro 3 emission standards ensuring a low level emission of pollutants and low fuel consumption.


The dashboard of the vehicle supports economical driving by featuring a real time indicator for fuel consumption as well as an econometer, which indicates the most appropriate engine speed in every operating situation. Extremely hazardous fires require top-level skills and innovative agents. Twin- Agent Fire Suppression Systems provide proven technology to fight large flammable liquid and gas fires.


This main capability distinguishes the Atego 1725 firefighting truck from others in its category – combining dry chemical agents for rapid flame knock down and Aqueous Film Forming Foam (AFFF) for securing the fire area.


Available with Class BC dry chemicals (Purple K or sodium bicarbonate) and your choice of 3 per cent or 6 per cent AFFF concentrate. In the words of Mr. Mirko Plath, Managing/ CEO, Weststar Associates Limited – “the Mercedes- Benz’ fire-fighting truck is a genuine all-rounder with extensive equipment and technical payload to match specific needs and situations. It is most suitable and will demonstrate high quality and reliability as a fire truck in Nigeria.


It is available for immediate delivery through Weststar with up-to-the-minute aftersales support synonymous worldwide with the Mercedes-Benz brand.”

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