The Nigerian Stock Exchange (NSE) has become a shadow of its former self as Public Offerings that were once choice of many corporates have suddenly become lamentably scarce. BusinessDay checks revealed that for the last three years, the Nigerian bourse has not had a new company listed on the Exchange.
Between 2006 and 2010, the market recorded about 180 different Public Offers, IPO’s and Rights Issues. The number of IPOs alone in the market within the stipulated five-year period was 88, public offers numbered up to 54, while 38 rights issues were reported.
The allure has, however, faded even after the country exited its worst recession in 25 years. Even the ranking of the NSE as the third-best market in the world in 2017 has not translated to more IPO or Rights Issue from companies.
The long-awaited MTN Nigeria listing is yet to berth. The most recent IPO that could have come to the bourse as expected by market analysts was the Jumia IPO, but that was lost to a more advanced New York Stock Exchange (NYSE). Despite having its largest market in Nigeria with market share of 70 percent of e-commerce in Africa’s most populous nation, Jumia recently listed on the NYSE.
Lack of reforms is one of the reasons why the Nigerian bourse has become unattractive, said Henry Ogbuaku, group head, asset management at Growth & Development Asset Management.
“Since the time the market began to decline in 2008 till today, not much has been done to revive the market. One would have thought that by now the regulator would have done something to support the market but that has not happened,” Ogbuaku told BusinessDay.
Oscar Onyema, CEO, Nigerian Stock Exchange, while reviewing the market for 2018 and presenting outlook for 2019, said to enhance its listing prospects, the Exchange has strengthened “government engagement efforts on privatisation and listing of state-owned enterprises, and we expect to take advantage of opportunities within this space during the year”.
“We also intend to maintain our collaborative efforts with public and private sector stakeholders to advocate for market-friendly policies and cater to infrastructure financing needs as well as other capital requirements necessary for sustainable economic growth. The Exchange intends to work with the private sector as well to catalyse the listing of more companies,” Onyema said.
But these assurances have not yielded the needed positive sentiment.
“This market is not deep, that is the main problem,” Wale Okunrinboye, head of research at Sigma Pension, said.
On Jumia’s recent listing on NYSE, industry sources said it was contrary to expectations as it was only normal that the Amazon clone in Africa should have listed on the Nigerian bourse.
“I was expecting Jumia to list on the NSE, but I guess they have their reasons for going on NYSE,” said an investment manager who asked not to be named.
Jumia, the largest e-commerce company in Africa with operations in 14 countries, holds the record as the first Africa-focused tech company to launch on NYSE or any major global Exchange. The e-commerce company garnered investor interest and enjoyed an impressive first day run. It offered 13.5 million shares for purchase and raised $196 million. Its stock, which was priced at $14.5, closed up 75 percent in its first trading day.
Nigeria’s economy emerged from contraction in Q2 2017 fuelled by the increase in global oil prices, its major source of foreign earnings. Entering 2019, the biggest concern for investors was that the stock market could fall further, given that most of the challenging factors that beclouded market performance in 2018 were expected to persist over 2019.
But the economy has remained below its population growth rate. The full year 2018 real GDP stood at 1.93 percent, higher than the 0.82 percent growth rate recorded in 2017 but below the estimated 3 percent annual population growth rate.
Except the NSE All-Share Index and GSE Composite Index (Ghana), most of the stock markets that were monitored by analysts appreciated in Q1 2019. The last IPO seen on the Nigeria bourse was in 2016 when Seplat Petroleum Development Company plc and Transcorp Hotels plc went on the Exchange.
The current state of the NSE is affirmed by First Aluminium Nigeria plc, one of the first Nigerian listed companies, as it lamented that “the current illiquidity nature of the capital market” has rendered the primary corporate objective of its listing to raise capital and provide liquidity unattainable.
According to a statement issued to the NSE, First Aluminium plc explained that the decision to delist is not far from the fact that its shareholders are not benefitting from the company’s continued listing on the bourse, even as they are not getting exit opportunities either.
“The share price was stuck at 50 kobo for about six years between June 2011 and June 2017, and thereafter experienced further diminution, both in share price and trading volumes,” the company said.
Analysts at Lagos-based United Capital had said in their February 12 note that “2018’s sell-off sent the gap in valuations between stocks in developed and developing countries back to near-record levels”.
Skyway Aviation Handling Company (SAHCOL) is the most recent company that is in the process of finalising its listing on the Nigeria bourse but months after the extension deadline, it is yet to start trade on the Exchange.
The Ground Handling Company extended the closing date of its IPO by 12 days to December 19, 2018 due to high demand and to avail Nigerians in diaspora the opportunity to invest.
The company said since then, it has been in the process of completing the listing but refused to comment when BusinessDay asked for update on the IPO.
Since 2015 when MTN agreed to the Lagos IPO as part of the settlement of a $1 billion fine imposed by Nigerian regulators on the Africa telecom giant, it has not been able to list on the bourse. The South African wireless operator incurred the penalty after missing a deadline to disconnect unregistered subscribers amid a security crackdown in the West African country.
MTN Nigeria expects to list its shares on the NSE in the first half of 2019, subject to regulatory approvals. This will be achieved via a listing by introduction and will be followed by a public offer once market conditions are conducive.
Early this year, most of the companies which the NSE hunts to meet its new listings target were seen to be very much within. For instance, no fewer than 97 Nigerian firms were identified by the London Stock Exchange Group (LSEG) as crucial in powering the next stage of Africa’s growth.
These Nigerian companies were named in the report ‘Companies to Inspire Africa 2019’ which featured 360 companies from 32 different countries across the continent. These companies were said to be boasting an incredibly impressive average compound annual growth rate of 46 percent, up from 16 percent last year. Most of the identified companies should be attractive for listing on the NSE if well engaged by the bourse, experts say.
IHEANYI NWACHUKWU & ENDURANCE OKAFOR
