Analysts in the Nigerian capital market have expressed worry over lack of new listings on the Nigerian bourse.
As the debate to list or not to list heightens at various capital market gatherings, analysts at Financial Derivatives Company note that the debate on the desirability of listing also rages among listed companies.
According to these analysts, “reporting requirements and short-term expectations of shareholders look to offset the expanded capital access and enhanced corporate profile that come with listing. The information disclosure disadvantage of listing appears expensive for quoted companies in Nigeria.
“In the consumer goods space, unlisted companies appear to have an information advantage over listed companies. Competitors have a head start on the activities and strategic initiatives of listed companies.”
Read also: Japaul, Honeywell, Dangote Flour to exit NSE-LII on Shari’ah compliant screening
The analysts add that “traditionally, quoted companies issue new equity when prices are high. Public offers of shares have dried up since the market crash of 2008-2009. Low equities’ prices and poor investor confidence had discouraged issuers from raising capital in the public markets. Companies have shown a preference for debt financing and rights issue.”
Also, analysts at FBN Capital expressed worry over the substantial increase in market capitalisation of N3.5 trillion to N11.5 trillion over two years, been driven by the strength of the index rather than new listings, which have been poor.
The Federal Government and the capital market authorities have called for new issues, and the National Assembly did once propose a legal requirement for foreign companies in the energy and telecoms sectors to list on the local exchange.
“Ultimately, however, companies list if it suits them and if they are satisfied with the regulatory environment. We recall how the international reputation of the Nairobi bourse was transformed by the Initial Public Offering (IPO) for Safaricom in 2008,” the analysts say.
According to FBN Capital analysts in their report titled “It’s our second birthday!,” the NSE ASI had risen by just 3.2 percent year-to-date (ytd) on “our first anniversary and the figure for our second stands at 27.7 percent, having retreated from 42.5 percent in the recent sell-off. Daily turnover has picked up, to N4.1 billion Monday (below the average ytd of N4.8bn) from N2.2 billion on
the day of our launch. This healthy increase is due to both foreign players in this era of cheap money and domestic institutions which have re-entered the market after their bruising in the domestic credit event of 2008 and 2009.”
“The largest single positive development for the local financial markets in the past two years has been the inclusion of Nigeria in the JP Morgan government bond indices. This has introduced new foreign investors in the fixed-income area to a credit previously off their radar. The recent sell-off has been brutal across almost all stock markets and many debt markets.
