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Chinwendu Obienyi
Since the Nigerian Stock Exchange (NSE) admitted 406,074,000 ordinary shares of 50 kobo each at N4.65 per share for Skyway Aviation Handling Company Limited (SAHCOL) last year, there has been a four -month drought of Initial Public Offerings (IPOs) on the Nigerian bourse
SAHCOL, which is one of the foremost handling companies in Nigeria, went public four years behind the stipulated time by the Bureau of Public Enterprises (BPE), following the sale of the former subsidiary of Nigeria Airways to Sifax in 2009.
The IPO was the first public offer to be facilitated in the Nigerian capital market in the last four years and it had been expected that more companies would go on to follow the footsteps of SAHCOL with the BPE promising that the Nigerian Stock Market would see more IPOs this year.
The Director General, BPE, Mr Alex Okoh, said the BPE was working towards the privatisation of some government companies and assets that would later be listed on the NSE by way of public offering.
According to him, the privatisation and IPO listing is the BPE’s way of contributing assets to the capital market on behalf of the Federal Government.
Sadly the market has yet to experience any activity with companies avoiding the stock market following the slow pace of the economy.
Yes, telecom giants MTN as well as Airtel Nigeria were reported mulling over the possibility of listing their shares on the bourse but discussions still remain ongoing.
When quizzed over the possibility of MTN to list this year, the Securities and Exchange Commission (SEC) said that it is yet to receive any formal application from MTN after it had confirmed its intention to list by introduction on the NSE by June 2019, subject to market conditions, appetite and demand.
However, speaking recently during the 1st quarter Capital Market Committee (CMC) meeting, Acting Director-General, SEC, Mary Uduk, said, “They have not filed any formal application with us. I know that MTN has had issues with the Nigerian government and they have been trying to sort that out and they have sorted one part of the issue but the other part has not yet been sorted out.
Because they are committed to coming to the market, they have decided to come into the market via listing by introduction and I know that they are working hard towards that because they had visited the commission to explain and assured us that after the listing by introduction, once they are able to other issue that is yet to be resolved with the government, then they can now begin formal engagement with the commission”.
Capital market experts who spoke to Daily Sun in separate telephone interviews, noted that the inactivity in the IPO space is down to the slow pace of the economy and low incentives on the part of the government.
According to them, the operating environment remains challenging with investors losing confidence due to the bearish run on the NSE.
Managing Director, Afrinvest Securities Limited, Ayodeji Ebo, attributed the inactivity to the major drag in the economy while adding that if it continues, the capital market might remain shallow.
“I think the major cause is the drag we have been seeing in the economy. Even for the listed companies, if they are not able to raise capital which is one of the primary objectives of listing beyond the visibility that you get, then there is no incentive for you to list.
In terms of how this would impact in the market, this means that the capital market remains shallow and what needs to be done is to see that there is a growth in the economy and once there is growth, people will be able to access capital and if successful, more people will list to access capital”. He explained.
Speaking further, Economic analyst, Dr Austin Nweze, said that the drought in the IPOs is as a result of lack of confidence in the operating environment and called on the government to partner with the NSE to sell the benefits of IPOs to investors who want to go public.
His words, “Nigerian businesses ought to go public, MTN, Airtel, Glo is supposed to go public because going public earns them more incentive to establish their institutions and also to create wealth and contribute other quota to the economy. Again, with what is going on right now in the capital market, a lot of investors are losing confidence because the operating environment is no longer conducive for them to operate in and also because the economy is not better managed. When you have a buoyant market, it means that people are having confidence and are investing in the economy and so the drought as regards the IPOs shows that all is not well with the economy”.
Corroborating him, Chief Executive Officer, Sofunix Investment, Sola Oni explained that the current situation in the economy does encourage such venture.
Oni explained that the reason why companies remain cautious is because of the absence of incentives and called for companies to be given fiscal incentives provided they list on the stock market.
“For a company to decide to raise funds through IPO means the company is going to the market to list for the first time which also involves the company understanding the mood or direction of the economy, psychology of investors to be sure whether its shares would be fully subscribed or not.
If MTN gets listed, there is tendency that its shares will be fully subscribed because of the stature of the company, prospects, popularity rating and track record. The question is why are they not coming? It is because there is no incentive in place to attract the telcos. These companies need to be given fiscal incentive. For example, the government can legislate that any company who wants to list would be given tax holiday and the company’s product and services would be given consideration when it comes to patronage. Once such a policy is in place, it will definitely encourage these companies to come”. He explained.
