The drought in Nigeria’s Initial Public Offering (IPO) market entered its fourth year in January 2019 even as companies already listed on the Nigerian Stock Exchange (NSE) are voluntarily exiting the bourse.
Between 2014 and 2018, the country recorded a total of three IPOs valued at $571 million, according to data compiled by PricewaterhouseCoopers (PwC), a global consulting firm. The listings are Seplat Petroleum Development Co., an indigenous oil and gas firm, which listed on both the NSE and the London Stock Exchange (LSE) in 2014; Haldane McCall Real Estate Investment Trust (HMK REIT) in 2014, and Transcorp Hotels in January 2015.
While there has been no new listing in the market since January 2015, BusinessDay checks show that no fewer than 13 companies earlier listed on the NSE voluntarily delisted from the Daily Official List of the Exchange between 2011 and 2018. Newrest ASL Nigeria plc recently notified the Exchange of its plans to delist in 2019.
“The drought we are seeing is not surprising as it is a reflection of what is happening in the economy,” said Paul Uzum, a stockbroker at Halo Nigerian Capital Limited.
“If the economy is booming with more activities and the private sector is strengthened, you will see more companies having more confidence to come into the market to get listed,” Uzum said.
In terms of the value of deals within this period, Nigeria came third in dollar terms behind South Africa and Egypt whose deals were valued at $5.9 billion and $1.57 billion, respectively.
The Casablanca exchange of Morocco and the Abidjan-based BRVM exchange came next behind Nigeria at $498 million and $400 million, respectively, while Zimbabwe, Zambia and Namibia recorded the least deals in monetary terms that were valued at $1 million, $9 million and $21 million, respectively. Nigeria was, however, ranked among the least countries in terms of the number of IPOs within the review period.
MTN, South African telecommunication giant and Nigeria’s biggest non-oil foreign direct investor, planned to list its Nigerian unit on the Lagos bourse in 2018. But a fiasco between MTN and the Central Bank of Nigeria slowed the telco’s planned listing. MTN last year already flagged off the listing of its Ghanaian unit.
MTN in 2018 dragged the CBN to court after the apex bank demanded the return $8.1 billion the telco repatriated as dividend to its shareholders. MTN denied any wrongdoing. The fiasco cooled off after the telco settled some $53 million payment late last year. Both parties confirmed the payment.
The firm is planning to list by introduction sometime around May this year, Rob Shuter, president and CEO, MTN Group, said in an exclusive interview with BusinessDay.
What has happened is that the Nigerian capital market for the past four years, apart from 2017 when it recorded 42 percent capital gains, has been on a negative performance,” said Johnson Chukwu, managing director/CEO, Lagos-based Cowry Asset Management Limited.
What this means is that there has been no strong demand in the secondary market that would encourage issuers to come into the market to raise capital, and because there are no demands, stock prices tend to be declining and trading below their intrinsic value.
Chukwu explained that whenever a company is trading below its intrinsic value, companies in that sector will not want to come to the market.
Nigerian stocks have taken a blow, moving from being among best-performing stocks in 2017 to become worst among stocks in emerging markets.
The re-election of Nigeria’s incumbent and strong earnings performance by companies have failed to lift investors’ confidence in investing into the equity market as investors pile up cash in the fixed income market, sending yield to low levels. Stocks have been down -0.22 percent since the start of the year.
MICHEAL ANI
