Brokers divert Honeywell public offer subscribers’ money

This is like sounding the alarm, Fortune&Class Weekly has been informed that some cash strapped stock brokers have had to divert funds paid to them by investors to purchase the recently concluded Honeywell Flour Mills public offer.

Market trend watchers said beside those brokers that deliberately expropriated the funds to their own use because of the paucity of funds in the market and the near non-existence of transactions in the secondary market, bankers to brokers are impounding, more or less, all money lodged in the accounts of brokers.

“You know that the bank accounts of some brokers are at the moment committed to huge default margin from the banks which the banks on the other hand are desirous of recovering. So, what is happening now is that the public offers like the one conducted by Honeywell provides opportunity for liquidity. What I have heard is that once a debtor-broker pays an investor’s cheque into a bank account, the bank almost certainly confiscates the fund at the matured date of the cheque to offset their exposure to the broker.

NIGERIAN ENTERPRENEURS SCARE: GOVERNMENT POLICIES THAT DESTROYED BIG-TIME BUSINESSES

Only the naïve entrepreneur in Nigeria is excited with the contemplation of floating a manufacturing concern. The wise ones, schooled in the experiences they have had to contend with in the ever changing dynamics of manufacturing and other investments tasks in the production lines have fled the scene to the shelter of trading and merchandising. This, for good reasons. The challenges of conducting manufacturing and related production activities in the country, though, besetting, are however benign when compared with the ease with which government oft volte-face on policies and action stamp out the promises or existence of a once upon-a-time manufacturing plant.
In this review, we track some of the celebrated industrial concerns that had been heckled into non-existence by government policy summersaults over the years, official actions or inaction that have become the scare of entrepreneurs.
Presidential Initiative on Cassava Production
In 2002, cassava suddenly gained national prominence following the pronouncement of a Presidential Initiative. The intent of the Initiative was to use cassava as the engine of growth in Nigeria. In the ordinary sense, the perception is that cassava is indigenous to the country, official statistics claim that Nigeria grows more cassava than any other country in the world with a production capacity of about 34 million metric tones a year.
The Presidential Initiative on Cassava production and export was initiated in the year 2002. The goal of the initiative was to promote cassava as a foreign exchange earner in Nigeria as well as to satisfy national demand. The challenge of the initiative was to make Nigeria earn 5 billion US dollars from value added cassava exports by 2007. The objectives of the Presidential Initiative on Cassava was to expand primary processing and utilisation to absorb the national cassava production glut, identify and develop new market opportunities for import substitution and export stimulate increased private sector investment in the establishment of export oriented Cassava industries, ensure the availability of clean (disease free) planting materials targeted at the emerging industries, increase the yield, productivity and expand annual production to achieve global cassava competitiveness, advocate for conducive policy and institutional reforms for the development of the Nigerian cassava sector and integrate the rural poor especially women and youths into the mainstream of the national economy.
The federal government under Chief Olusegun Obasanjo backed the initiative with funding support while encouraging banks and other government and multilateral agencies to drive the initiative through funding support.
Suffice to say that in response to the government drive, an industry revolving around cassava plantation and processing started emerging. Opportunity seekers were encouraged to invest because of the obvious outward flourish of government. The signs were obvious too, under the Presidential Initiative on Cassava, Nigeria mandated millers to integrate 10 percent cassava flour to wheat flour in making bread, a percentage mix of ethanol in refined petroleum motor spirit (petrol) in the nation’s refineries. These were moves aimed at increasing the utilization of the tuber crop.
Other statistics pointed to the profitability of entrepreneurial engagement in cassava related activities; the domestic demand for cassava starch is about 130,000 tonnes per annum and 200,000 tonnes per annum for high quality cassava flour. The domestic demand for ethanol is 180 million litres – all ethanol is imported In Nigeria. None of these markets are being satisfied by local supplier even till today in Nigeria.
Individual entrepreneurs were attracted into the field and the buzz made the rounds of great things happening in cassava production in Nigeria. Unfortunately, the fancy was just for a time, even before the exit of the Obasanjo’s regime, there were obvious signs of government distancing itself from the clarion call to cassava farming and processing, soon after the assumption of office of President Umar Musa Yar’Adua, immediate successor to Obasanjo, federal government articulation of the cassava initiative lost its din.
The lacklustre enforcement of the policy of mandating flour millers to integrate 10 percent cassava flour to wheat flour in making bread and other confectionaries were altogether abandoned. Of course, the idealism of the refinery blend of ethanol with petrol had been a mirage according to entrepreneurs that had found their ways into cassava processing. “The nation’s refineries only functioned epileptically, rather, the bulk of refined products are being imported from foreign refineries, so the idea of the ethanol could not have worked out at all.” A cassava processor said
The government of Yar’Adua nailed the fledgling sector by abandoning the ethos of the Obasanjo initiated presidential initiative on cassava initiative. Importations of cassava processed by products and all have been allowed in the country with import tariff of 20 percent value.
“Apparently, this has sounded the death knell for that endeavour.” Another cassava processor said. “Local conditions have made it difficult to produce and process cassava, the thinking was to protect the industry until such a time that it would be able to compete favourably with importation but I understand that government decided to make this reversal because of the need to mitigate increased food prices. But then, we think that it would have been better to strengthen cassava production and processing in the country to boost food supply and to earn more income for government through export.
In the final analysis, the fact is that most entrepreneurs have had their investment and efforts gone up in smoke, another promise subverted by inconsistent government policy shift.
NIGERIAN LAMP PLC
One of the outstanding business endeveavour the recently demised Chief Beyioku Adebowlale of the Adebowale Store fame would be remembered for is his Nigerian Lamp Industry Plc. A courageous indigenous effort to play in the main stream manufacturing sector, when Adebowale built the Nigerian Lamp plant in his native Epe in Lagos State, it was reported to be the first of its kind in Africa. The plant was equipped to manufacture light bulbs and fluorescent.
It is reported that Adebowale was encouraged to make a foray into the manufacturing effort away from his electronic products trading concern in the Adebowale Electronic Store by the positive outlook of government incentive for indigenous manufacturers to commit to the economy in the 1980s.
Unfortunately, by the time the plant came on stream, it was like hitting dirt on first day of commission, government had made a reversal on policy, rather than protect local industries, government lifted the restricted importation of bulbs and fluorescents tube and other lamp forms. The market place was immediately flooded with Asian and Far East Asian countries bulb brands, which were cheaper though low in quality.
Nigerian Lamp, unfortunately, had become a publicly quoted company, Nigerians had subscribed to is initial public offer, but with the influx of cheaper products and brands into the market, the company’s operation became blighted and soon after became literally comatose. The company that never took off for operation eventually was placed under a receiver manager. This officially announced the demise of the once upon a Time promising company.
ROKANA INDUSTRIES PLC
Rokana Industries, had, back in the late 1980s caught the attention of the dentistry world with its production of the uniquely styled Jordan tooth brush. The market penetration of the Rokana brand of tooth brush was fast and quite domineering. It is reported that in its first year of introduction, the Rokana brand had pushed other imported brands to the back of the shelves. Jodan tooth brush was, considered the authentic Nigerian brand though the brand is a British franchise.
The dominance of the brand won’t endure for long however, because the Federal Government felt no need to specifically outlaw the activities of importers who would rather import fake Jordan tooth brush into Nigeria than to import other brands.
This more or less killed the vibrancy of the brand in the market place, it is however to the credit of the endearing qualities of the brand that it still subsists till day despite the continuous import of its counterfeit. The limitation is that Rokana, the producing company which is also a publicly quoted company floated by the immediate past commerce minister in the Yar’Adua’s cabinet Mr. Charles Ugwuh, has remained more or less moribund on the stock exchange’s price listing as investors ignored it even when the stock market was upbeat.
DOYIN INDUSTRIES
Doyin Industries is still a flourishing concern, this would not have been so if the man behind the manufacturing concern had not been well grounded in the ways of manufacturing in Nigeria. Of course he had been badly burnt from his engagement with manufacturing.
Samuel Adedoyin, the man behind Doyin Industries started out in business as a trader and he made quite a success of it that he diversified into manufacturing of household and food items and body care products. By 1996 he mobilized credit to build an awesome factory to manufacture his company’s range of products, and he was daring enough to take on multi-national companies. Travails soon ensued, electricity limitation to power the factory and the credit sourcing for funding the factory project became a burden, the market was also flooded with cheaper products from Asian countries.
The operations of the company soon became hamstrung, credit issues from City Express Bank became a public embarrassment for the Kwara State born industrialist, eventually, a production line of the industry had to close down and workers lay off.
DUNLOP
Dunlop Nigeria Plc is the latest of once buoyant companies to hit the dirt. The company had endured the harsh economic environment and had over the years returned impressive earnings to investors in the company being a public quoted company a greater majority of 95 per cent of the company’s shares belongs to several state governments, public companies and no fewer than 93,000 private Nigerians.
In 1991, it acquired majority shareholding in PAMOL (Nigeria) Limited, a rubber producing company to ensure uninterrupted supply of the right quality natural rubber, a major raw material in tyre manufacturing.
The company pioneered the radial car tubeless tyres in West Africa; produced the first crossply tyre in tubeless in Nigerian market; was the first Nigerian tyre company to hold the E.C.E 30 Certificate, an export requirement for car tyres to Europe; and first manufacturing company in Africa (beside South Africa) to hold the ISO 9002 certification.
It would soon be revealed during the former minister of commerce visit to Dunlop factory late last year that the company was merely struggling to stay afloat. The managing director of the company had complained about infrastructural deficiency, especially energy (electricity and recently, gas outages) and import duty regimes, inconsistent tax regimes which combine to place local manufacturers at significant disadvantage.
A major gripe of the company was its N8 billion expansion into the Heavy Truck Radial segment which was frustrated by reversal of government policy on tariff for imported truck/bus tyres from 40 per cent to 10 per cent at the beginning of 2007. This according to the company’s officials, created unfair and inequitable advantages for importers of finished tyres.
The dichotomy between tariff for car tyres (50 per cent) and Truck/Bus tyres (10 per cent) is said to have been abused by importers, both in terms of tariff and haulage evasion.
The situation confers undue advantages on importation rather than local manufacturing, now, the company has declared its incapacity to continue manufacturing activities in the country. Unofficial source said it would resort to tyre importation with grave implications for the rubber from its subsidiary, Pamol.
FAMAD (FORMERLY BATA) PLC and LENNARDS NIGERIA PLC
Before the introduction of the Structural Adjustment Programme, Bata’s ubiquitous outlets were the ultimate in foot wear shopping for all ages, Bata with its lesser cousin, Lennards Nigeria Plc. After 1986, the promise of flourishing was effectively shut out of the footwear manufacturing outfits. Government could not stem smuggling activities.
Synthetic shoes from Dubai and other Asian countries and high quality leather foot wear from Europe smuggled large scale into Nigeria particularly suffocated indigenous production. Ironically, the nation’s export in their raw forms the materials needed for footwear manufacturing. The products are exported, refined, recycled and packaged abroad to be sent back to Nigeria as import.
Till date, no appropriate government policy has addressed the inadequacy in the sector that has turned FAMAD (BATA) and LENNARDS into moribund companies.
VOLKSWAGEN AND PAN NIGERIA
In the 1970s Nigerian was the centre of attraction in the African continent with its hosting of the Volkswagen and Peugeot Automobile Nigeria plants. Nigerians, before the economic deluge of the last quarter of 1986 were sure of brand new cars proudly assembled in Nigeria. The assembly plants were supposed to be transitional in the nation’s march to becoming a full fledged vehicle manufacturing country.
The dream was cut short by government policy. Government steel rolling mills could not produce an ounce to support the desire to attain full production capacity, just as the value of the naira had suddenly depreciated in the years running to the close of the 1980 decade, and government back in the days, unofficially gave the go ahead for the importation of second hand vehicle (Tokunbo) at outrageously low tariff without consideration for age of vehicle to be imported.

Delay of Public Offer Returned Money: Wema Registrars Accuses Access Bank of Forgery, Manipulation

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Mr. Gbenga Oyebode (SAN) Chairman of the Board of Access Bank Plc was intent at justifying his bank’s decision to change its registrars, so, he announced to shareholders gathered at the venue of the bank’s 2008 Annual General Meeting that because his bank was dissatisfied with the services of its former registrars, Wema Registrars, over the handling of its last public offer, Access Bank decided to jettison the registrars services of Wema Registrars for a new registrars firm, United Securities Limited.

That public condemnation of the services rendered by Wema Registrars sent a surge of outcries through the ranks of personnel at Wema Registrars culminating in a formal protest to the management of Access Bank and a threat to head for the court of law if the libelous condemnation of Wema Registrars as contained and read by the Chairman of Access Bank at the last AGM was not retrieved and apologies offered. Wema Registrars threatened to sue for a redress of N.5billion if Access Bank refused to address its demands.

Will this be the torrid end to a business relationship that had flourished for close to a decade? Those that have followed events that marked the relationship between the bank and registrars say a legal battle may truly be imminent especially in consideration of the disdain with which Access Bank had dealt with its erstwhile registrars even up to the point of demanding an apology for the public hacking of the quality of services rendered it (Access Bank) by Wema Registrars.

“Wema Registrars was not going to make a fuss over the ways Access Bank had conducted its public offer. As far as we are concerned, we’ve done a good job of even saving them from present sanction by the Securities and Exchange Commission for the many breaches of regulatory compliance guidelines relating to public offer allotment and returned monies.” A Wema Registrars insider says.

“Of course we knew they had decided that they were going to establish their own registrars firm, this was clearly stated in their public offer prospectus, we couldn’t have been bothered, it is their right, but what I think is not right is for them to hang our reputation on a bad name in the public to justify and cover up their manipulations of their own public offer. I don’t think this is appropriate for a financial institution that wished to be respected.” The source protests.

Historically, Wema Registrars had managed registrars related functions for Access Bank since 22 December, 1997, it (Wema Registrars) was in charge of the bank’s first public offer in 1998 where the bank raised the sum of N462,000,000 mainly through 5,347 subscribers. And had since then, managed three other public offers (2001, 2004 and the now controversial 2007). Wema Registrars also handled the bank’s 2001 right issue and 2006 bond issue as well as the share reconstruction exercises between Access Bank, Capital International Bank and Marina International Bank in the run up to the consolidation of the bank.

So, why did the management of the bank’s 2007 public offer turn such a sore point in the relationship between the bank and the registrars?

Another Wema Registrars source argues that this could be adduced to the bank’s desperation to manipulate the offer proceeds and conveniently use Wema Registrars as the fall guy if the regulatory authority smelt the rat, and as things turned out, to also use their (Access Bank) own deliberate obfuscation of the offer allotment and returned monies process as good excuses to persuade shareholders and regulatory authorities of their need to change registrars.

“The fact of intent at manipulating the offer was clear enough.” The source says. “Despite the fact that the offer closed two weeks later than earlier scheduled because of an extension from the original closing date of August 29th 2007 to September 12th, 2007, the registrars did not receive the returns from Access Bank, as required, until very late. In fact, one of the returning agents to the subscription that had sold 261,849,400 units valued at N3,901,556,060 to about 4000 subscribers did not submit details of its returns to the registrars until December, 2007, just some few days to the final submission to the Securities and Exchange Commission.” The source reveals.

“Even at that, so many agents attempted to submit to the registrars much later than this date but they were rejected by the registrars, but obviously, the bank did not reckon with the breaches of the regulatory authorities, so they accepted the agents’ late returns without recourse to the registrars. This led to so much hiccups in the shares allotment process.” The source added.

Matters became rather desperate when the Securities and Exchange Commission specifically directed by a letter of January 4, 2007 to the registrars that by January 11, 2007 the dispatch of returned monies to subscribers that were not fully allotted shares they paid for.

Meanwhile, all monies raised had, at this time, being domiciled in the vault of Access Bank with direct control by the bank. Ordinarily, this should not be. A capital market veteran informs that funds raised during public offers should be the direct responsibility of the registrars until all necessary administration had been concluded on the offer.

“It is at this point in time that the issuing house(s) would turn over the funds to the issuer that is the company raising the funds through public offer.” The veteran explains.

Issues on dispatching returned monies to unallotted subscribers became rather suspicious when, according to a source, Wema Registrars dispatched a letter to Access Bank to prompt an early dispatch of cheques for returned monies but the bank refused to even acknowledge the letter. Two other letters, one on January 21 2008 and the second on February 1, about a month after the dispatch was supposed to commence, did not elicit any form of response from Access Bank. It was not until February 15, a clear month plus four days after the dispatch should have commenced when, Wema Registars, according to inside source, was compelled to write another reminder to Access Bank, outlining the grave consequence of the breaches of regulatory requirement regarding the dispatch of returned monies that the bank decided to give consideration to the registrars request by calling a meeting for February 21, 2008 where issues of the returned monies will be ironed out.

An official that was present at the meeting intimates Fortune and Class Weekly that representatives of the management of the bank decided to change the rules of returned monies to subscribers by insisting that notifications should be made through the media that subscribers with over 50,000 unallotted shares should go to Access Bank’s designated branches to collect their refund.

“We protested that this was a clear breach, informing them that the SEC may not take kindly to the arrangement because the bank should not, in fact, be seen as having control over the funds raised through the public offer at that point in time. But then, they insisted, so we really had no choice but to concede to them. Now, at this point, a draft of the newspaper advertisement for the notice to investors was handed over to the registrars who published it on Monday, February 25, 2008 in the Punch and This Day newspaper.

“Besides, a draft of the letter informing investors to approach Access Bank directly for their refunds was also handed over to the registrars by Access Bank. This was vetted by the registrars, provisionally appended her signature and then returned the draft to Access Bank officials on the understanding that the Registrar would check with the Securities and Exchange Commission to ensure that the actions would not contravene the Commission’s directives on matters relating to returned monies.
When the registrars asked for the draft for further inputs, according to Fortune and Class Weekly source, officials at Access Bank were not forthcoming.

“We were already frustrated when, suddenly, on March 6, more than two months after the dispatch of the refund should have commenced, in fact, it should have been concluded by that date, about 4,000 letters were brought in cartons to the registrars office.” The source says.

The registrars staff were patently aghast at the letters suddenly dumped in their office by Access Bank.
“We were more than surprised when we opened one of the letters. We realised that Access Bank had, in fact, printed our official letter headed paper without discussion or approval from us and, had, gone ahead to print the draft letter we thought still needs some inputs, on the forged letter headed papers of Wema Registrars.

“The clear conclusion we reached at this point in time was that Access Bank did the printing of the forged letter head paper without the registrars knowledge to cover their many breaches of the Securities and Exchange Commission’s guidelines for the refund of the returned monies. This was further reinforced by the fact that Access Bank dumped the offensive letters in our office on the same date the officials of the Securities and Exchange Commission were examining their (Access Bank) books with respect to the public offer.

“The same day they dumped the letters, we forwarded a letter of protest to them (Access Bank), copied to the Director-General of SEC, dissociating ourselves from the non compliance of Access Bank with the SEC’s regulations on returned monies as contained in the forged letters.” The source reveals.
Curiously, sensitive as this matter had turned out; the Securities and Exchange Commission is yet to take an active position on the issue. This troubles other capital market operators that had been following the unraveling of the suspected breaches involved in the Access Bank public offer.

“This is typical.” A capital market operator says. “This explains why so many subscribers to public offers get short changed. You can imagine what beneficial transaction and trades the bank would have undertaken with money that should have been refunded to subscribers for close to a year after the conclusion of the offer way back in September 2007. What is the excuse the SEC would give for not investigating this case which had been formally reported to it by the registrars that managed the offer? The apparent lethargic reactions to sensitive issues like this only lead to loss of confidence in the stock market because the exploitation of the mass of investors is obvious.” The operator protests.
An Access Bank spoke person, Mr Segun Mamora, however insisted that the bank had to be directly involved in dispatching returned monies to its public offer subscribers because it became apparent that Wema Registrars could not manage the volume of responsibility deriving from the massive number of subscribers to the 2007 public offer.

“The fact is that when it was becoming obvious that the time was running out on the schedule of returned monies for the offer subscribers that were not allotted, we had to call a meeting where we met with the Registrars. After evaluating the situation, we all agreed that Access Bank should assist Wema Registrars in the dispatches. A letter was drafted which the parties agreed to and we undertook to dispatch them as agreed.

“There is no issue involved here, Access Bank and Wema Registrars have both gone before the Securities and Exchange Commission to explain the matters involved and it has been resolved.”

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