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Oscar Onyeama, the director general of the Nigerian Stock Exchange (NSE) has explained the dearth of Initial Public Offerings (IPO) since 2015. The last IPO on the stock exchange took place in January 2015.
Speaking this morning at the BusinessDay Capital Market and Investors Forum, Onyeama listed several factors that have resulted in the dearth of IPOs.
“The combined effects of the 2015 national elections, slump in commodity prices, global economic slowdown, recession and FX market illiquidity have resulted in a dearth of Initial Public Offers (IPOs) in the Nigerian capital market” Onyeama explained.
He disclosed that last IPO was by Transcorp Hotels in January 2015. Since then, “Capital raised on the NSE fell by 95% between 2014 and 2016, from N43.95Bn raised in equities in 2014, to N2.59Bn raised in 2016.”
He said that listing activities on the NSE is currently dominated by “by supplementary offers, listings by introduction, debt issuances, mergers and divestments, since 2015.” However, “Equity market capitalization declined 27.54% to N9.54tn in 2016 from N13.16tn in 2014, before rebounding 42.12% in 2017, closing the year at N13.62tn.”
Onyeama also disclosed the several initiatives that the NSE is putting in place to attract new listings on the exchange. This include the launch of the Premium Board in 2015. This board is meant to showcase “deserving companies that have met the highest requirements on liquidity, corporate governance and sustainability.”
The premium board “offers issuers the benefits of greater visibility and opportunities to attract liquidity from impact investors, ESG funds and Sovereign Wealth Funds.”
Onyeama said that Interest in the Premium Board from issuers and investors remains high.
“In 2018, four companies migrated to the Premium Board, and the Premium Board index continues to outperform the ASI, with a 16.02% return as at April 20, 2018; compared to 6.72% return for the ASI.”
He also disclosed that “The Exchange recently launched its Corporate Governance Index (CG Index) to provide investors with additional data points and strengthen listed companies by tracking their corporate governance practices.” The Exchange is also developing a “a co-branded index series with MSCI – a globally recognised index service provider. This index could potentially generate higher order flow into our market, as it showcases the index constituents on a respected, global platform with trusted index methodology. Issuers could leverage on this initiative to attract sustainable funding for their growth objectives.”
Besides the Premium Board, Onyeama disclosed that the Exchange has also created the Main and the Growth Boards. There is also the Alternate Securities Market (ASem) which is a tailored market segment that provides high-growth SMEs the opportunity to access equity finance at lower listing fees and requirements.
Onyeama disclosed that the ASeM platform, which launched in 2013, is currently being expanded to a full-fledged Growth Board to cater for SMEs irrespective of their current stage in the growth cycle.
“SMEs can leverage the proposed Growth Board to increase their attractiveness to investors by adhering to sound corporate governance principles and financial disclosure requirements.”
The BusinessDay Capital Markets Forum, which is currently ongoing in Lagos, brings together top level players in the Nigerian capital market to discuss critical issues affecting the development of the market.
