For IR its time for advocacy Part 2

Though the catalogue of woes befalling Nigeria as enumerated in part one of this series may seem daunting, it presents IR with a golden chance to move out of their comfort zones, think outside the building and spin stories around Nigeria’s potential as an investment destination. It is a chance for corporate Nigeria to demonstrate that they are advocates of the Nigerian project.  

Before dismissing  this proposition as another idealistic ramble, please cast your mind to what IR does when companies go on Road Shows abroad.

Ngozi Okonjo-Iweala, Nigeria's Finance Minister

Here is what they typically do among others:

-          They project their host country (Nigeria in this case) as safe haven for investor capital

• That the economy can grow investors’ capital (robust ROI) 
•    That there are strong economic indicators
•   Project growth prospects of the economy
• Highlight reform 
• Present case studies of successful companies in the economy 
• Highlight political stability
• Explain laws protecting investment
• Demonstrate peace and stability

IR would typically present variants of the outlined points before zeroing in on their companies and sell their investment idea.

Suffice this to mean that IR cannot sell their companies without selling their host economies. They are sold on the investor as a bundle in what economists call, complementary goods.

This suggests that IR is already experienced in promoting a country’s economic potential only that such sale is done on an ad hoc basis.

The new Deal would require a change in mindset, culture and orientation that would demand promoting this economy on a going concern basis.

Now more than ever, with the advent of the internet, corporations are poised to sell to the global community.

Now that we have seen that promoting an economy, a la Nigeria falls within the purview of IR, we can now turn attention to how IR can go about this business.

Our third installment on the subject would do that and more.

PZ Cussons says losses in Nigeria exaggerated

PZ Cussons has reacted to Questor’s caution to investors, which urged them to avoid shares of the conglomerate stemming from losses in Nigeria.   

According to the UK maker of Imperial Leather soap, the violence affecting parts of Nigeria is causing only limited disruption to business in what is one of the company’s most important countries.

Most of PZ’s Nigerian factories are located in the south, while the conflict that has left thousands dead is mostly confined to the north east of the African nation, according to Chief Financial Officer Brandon Leigh.

“It does impact business, but it doesn’t impact all of the business,” Leigh said by phone from London Tuesday after the company reported a drop in first-half sales and profit

About 30 per cent of PZ’s sales and a quarter of profit comes from Nigeria, where at least 65 people were killed in an attack Sunday by Islamist militants on Maiduguri, the capital of the northeastern state of Borno. Next month’s presidential election in the country will be a “key contributing factor” to full-year results, Chairman Richard Harvey said in a statement.
“Post the election there tends to be a rebound in confidence,” Leigh said. “We expect by the end of February to have business as usual.”
PZ Cussons rose 3.6 per cent to 322.1 pence in London trading. The stock has fallen 14 per cent in the past year.
Adjusted operating profit fell 4.4 per cent to £46 million in the six months ended 30 November as revenue slid 10 per cent to £386.7 million. The performance reflected divestments, without which operating profit increased 3.5 per cent and sales 1.5 per cent, the company said.
Growth in Europe and Asia compensated for reduced sales and profitability in Nigeria caused by “difficult trading conditions, disruption in the north and the devaluation of the Naira,” PZ Cussons said.
The company reported a “solid performance in light of the difficult trading conditions in Nigeria,” Canaccord analysts said in a note. The Nigerian presidential elections “will be a key factor for the company’s financial performance.”
The company has a strong balance sheet and an appetite for investment opportunities, Leigh said. It will look for “niche brands and personal care in the food and nutrition space,” he said. “There’s scope for further acquisitions, but we’re also quite choosy in what we buy.”

For IR its time for advocacy Part 1

These are not the best of times for IR practitioners in frontier and emerging economies like Nigeria. There are untoward challenges only the brave and practiced can confront, what with the tumbling oil and asset prices accompanied by currency depreciation. The times present an opportunity for IR to enter uncharted space, the most unlikely being advocacy. Here I present a three part series on how this can be done.

Market free falls can create opportunities. Perhaps the most obvious is that of loading up on discounted assets with potential for generating monster future returns.

Oscar Onyeama, CEO NSE

A less obvious opportunity, with compound interest, is that which allows Investor relations people to stretch the boundaries of their activities from helping their company stocks achieve individual corporate fair value, to one targeted at raising the values of their host economies.

Attaining Fair Value is the sole objective of traditional IR practice.

 Fair value, Wikipedia says, is a rational and unbiased estimate of the potential market priceof a good, service, or asset.

For our purpose, Fair Value is the attainment of robust growth and economic development.

The standard textbook and traditional means of achieving this endpoint is “to build understanding and relationships of trust with financial media, analysts and shareholders”, according to Ian Linton, an eHow Contributor.

Working as a group, the IR community can move towards achieving a robust aggregate of stock fair values and value added to set an economy on a path to recovery; But in the case of booming economies, towards higher output or GDP.

They can take up from where financial and economic analysts leave off in their forecasts of and projections on the economic prospects of nations. This is at best.

At worst, they can work in concert with the men of prognosis to achieve the above results.

It is happifying to note that one such golden opportunity has presented itself in the recent economic flight of capital in Nigeria.

This first came in the guise of tapering in January 2014 when the US financial authorities ended their $85 billion dollar a year bond buying programme in emerging/frontier economies.

And then there was the Central bank of Nigeria’s 8 percent devaluation of the naira, which moved the target band of the currency to 160-176 naira to the U.S. dollar.

The domino effect was further felt from the tumbling of oil prices in the international markets from a high of over $100 to less than $50 in late January.

The Naira took a further hit and foreign investors headed for the exits while citing the heated political scenario and the free rein of terrorists in North Eastern Nigeria.

The cumulative effect on the Nigerian stock market of the barrage of economic punches was a steady investment portfolio outflow of N793.17bn.

This is a rather scary 67.5 per cent rise over the N473.61bn in the corresponding period of 2013. It also marked the first time in three years that FPI outflow would surpass inflow.

Summing up the effect on the markets, Oscar Oyema, head of the Nigeria Stock Exchange (NSE) said, the “bearish sentiments prevailed for most of the year as foreign investors steadily withdrew from the Nigerian market due to currency risk and the recovery of developed economies, and the effects of the US Federal Reserve tapering of its quantitative easing policy.”

It got so bad that JP Morgan threatened to yank Nigeria off its Government Bond Index (GBI-EM), the MSCI index of emerging market bonds, of which the country makes up 1.8 percent.

 “The JPMorgan Government Bond Index-Emerging Markets (GBI-EM) indices are comprehensive emerging market debt benchmarks that track local currency bonds issued by Emerging Market governments. The index was launched in June 2005 and is the first comprehensive global local Emerging Markets index.”

References  

 http://www.punchng.com/business/business-economy/foreign-investors-withdraw-n793bn-from-stock-market/

http://www.bloomberg.com/news/2015-01-16/jpmorgan-reviews-nigeria-bond-index-inclusion-as-naira-retreats.html

http://www.reuters.com/article/2015/01/16/nigeria-bonds-idUSL6N0UV2DH20150116