Custodian Announces Nigeria's First Share Buy-Back

Nigeria's Custodian and Allied Insurance Plc. announced the country's first share buy-back on Friday, a move expected to be followed by other companies with depressed share prices and flush with cash.

Advisors to the general and motor insurance company said approval had been received from the Securities and Exchange Commission for the buy-back, which must be completed by June.

A fall of around 60 percent from early 2008 in sub-Saharan Africa's second biggest stock market has left companies such as Custodian that tapped the market when it was near the top with uninvested cash and far lower share prices.

Custodian's Initial Public Offering was priced at 5.20 naira in March 2008, near the peak of a stock market boom. Shares traded at 2.99 on Friday, giving it a market capitalisation of 14.3 billion naira ($95 million).

Custodian shareholders had approved the buy-back of up to 5 percent of issued shares from the open market, Managing Director Wole Oshin said. He said that by returning cash to shareholders, it would ensure long term investor confidence.

Advisors said Custodian had 4.6 billion naira in its share premium account at the end of 2008 and those funds would be used for the buy-back. They did not say what proportion of the funds would be used.

Regulatory guidelines say companies buying back shares cannot pay more than 5 percent above the average market price over the previous five trading days.

REUTERS.