The Nigerian Stock Exchange (NSE) has failed to attract listings that replicate broad sectors of the of the economy as strong and consistent GDP contributors are not well represented in the market.
The NSE according to BusinessDay analysis lag peers in market capitalization to (GDP) ratio (a metric used to determine the overall value of a market) which stands at 12 percent, compared the JohannesAgriculture, oil/gas and information and communications technology (ICT) sectors which contributed 21 percent, 16 percent and 10 percent respectively to Nigeria’s GDP in 2017 accounts for a dismal 1 percent, 5 percent and 0 percent of total equities market capitalization of N13.25 trillion at the close of market yesterday.
There are only 5 companies representing the agric sector on the Nigerian stock exchange (NSE), 7 representing the Oil and gas sector and 12 representing the ICT sector together accounting for N881.2 billion, a shallow 6.3 percent of total market cap.
The agricultural sector has been the single largest contributor to Nigeria’s GDP over time with total contribution to GDP in Q1 standing at about 4 percent. A well enabled agric sector will result in upspring of companies attractive enough to do IPOs, analysts say.
The financial services sector with heavyweights like Guaranty Trust Bank, Zenith Bank, Stanbic IBTC and EcoBank is over represented in the market contributing 33 percent to total NSE market capitalization and 3 percent to total GDP in 2017.
Natural resources contributed 9 percent to total 2017 GDP but had no significant contribution to total market capitalization. In the same vein, ICT which contributed 10 percent to GDP had an insignificant contribution to market capitalization while the consumer goods sector contributed 26 percent to total NSE market cap and 4 percent to GDP.
The manufacturing sector contributes 9 percent to GDP and it comprises of consumer goods and industrial goods. Industrial goods which parades Dangote cement, the most capitalized stock in the market with current market cap standing at N3.9 trillion, has a crucial 28.3 percent of total market cap.
Wale Okunrinboye, head of research sigma pensions said “the major reason we haven’t seen enough agricultural firms come to list on the exchange is that the sector is largely informal and is not structured enough to be listed on the exchange. Also, their productions are majorly subsistence with small scale farmers.”
On his part, Dolapo Ashiru, a Lagos based financial analyst said “the government must get involved in terms of creating an enabling environment where businesses can thrive and also put in place policies that will encourage local production so we can have more of Okomu and Presco coming to list.”
ICT segment of the Nigerian economy is predominantly occupied by big telecommunications companies having very high market share and finance base with banks ready at any point to finance their expansion operation. This according to analysts is one of the reasons behind their lack of interest in listing on the bourse.
The biggest stock market news from the ICT sector which has been described by many as a good development is the MTN Nigeria IPO expected to kick off before the end of the year. MTN plans to list its Nigerian unit which BusinessDay estimates is worth between N3.2trn ($8.56 billion) and N3.9trn ($10.88 billion) on the Nigerian Stock Exchange (NSE), and may use part of the fresh funds raised to reduce debt.
Olalekan Ipele, Oghogho Edosomwan,Cynthia Ikwuetoghu & Abdullateef Eniola-Giwa
