By OKEY ONYENWEAKU
Fresh facts are presently emerging as to why blue-chip corporates in the Nigerian business environment like the Nigerian National Petroleum Corporation, NNPC, Globacom and 9Mobile may have presently shelved plans to list on the trading floors of the Nigerian Stock Exchange, NSE
Aside from ensuring the advantage of easier access to affordable and cheaper funds (capital) to develop their businesses and service their commercial costs, listing on the Stock Exchange helps boost the image and trustworthiness of firms that go public. It also earns the firms higher credibility, making them more attractive to potential employees and top talents.
Within the country, many firms have, in fact, availed themselves of this window of opportunity offered by the Nigerian Stock Exchange. Over the years, many companies both small and big have scrambled to belong to the league of quoted companies on the NSE.
Today the NSE which was established in the 1960s and which commenced trading from premises it had rented from the then-burgeoning media conglomerate, Daily Times of Nigeria Plc, accommodates over 161 equities that are listed and have their stock prices boldly displayed on the price charts for members of the trading public to take their pick from, almost daily.
While many of the firms are seen to have listed willingly, a few others were either coaxed or brought into the capital market fold through some degree of moral, if not regulatory suasion.
Underscoring the latter point would be the facts that are evident to those who have keenly followed developments in the capital market, and who still remember vividly the policy of banking consolidation of the former Governor of the Central Bank of Nigeria, Prof. Chukwuma Soludo.
The banking consolidation exercise, a regulatory policy which forced many Nigerian Banks to recapitalize from an earlier shareholders funds threshold of N2billion to a new lever of N25 billion inevitably dragged many banks to list on the NSE to be able to raise the N25billion capitalization or take the option of a merger or be acquired.
Notwithstanding how they come into the market, however, both big and small firms engaged in the market have been able to survive till date based on their ability to tap into the opportunities offered by the Nigerian Stock Exchange.
Looking critically at the listed equities in the market, firms as Nestle Nigeria Plc, Nigerian Breweries Plc, FBN Holding Plc, Union Bank of Nigeria Plc, Guinness Nigeria Plc, Cadbury Nigeria Plc, Unilever Nigeria Plc, UACN Plc and PZ Cussons Plc easily rank among those that have traded for a long time on the NSE. And then between 2004 and 2006, many of the then-new generation banks embraced the capital market to raise funds to recapitalize and were subsequently sucked into the thrills and grind of daily trading on their equities in the market.
More recently, telecoms firms such as MTN Plc and Airtel Plc removed the toga of being private firms and undressed themselves in the public. Also playing strong in the market is the Cement Industry which has contributed the likes of Dangote Cement, BUA Cement and Lafarge Africa Plc, albeit with relatively quite heavy capitalization numbers.
Despite the ups and downs witnessed by equities over the years, many more investors appear to have good testimonies about the market than otherwise. On the flip side though, there is od course also those who do not have many favourable comments about their experience in the capital market.
Whatever may be the case, however, the capital market has contributed immensely to the development of the Nigerian economy, having helped firms to access cheap funds to run their operations, including financing their jumbo expansion plans and other related developments. From the start of operations in the 1960s till date, companies have raised huge amounts that are now estimated to have run into several trillions of naira.
Despite this self-evident fact that the capital market has proved to have more merits, in terms of its playing a prominent role in deepening the nation’s economy, some other big and small firms do not seem to want to very readily avail themselves of the many opportunities derivable from listing on the Exchange. This development has also raised the curiosity of many.
Nevertheless, discerning market analysts have not ceased to wonder why the likes of Globacom, NNPC, NLNG, Shell BP, Promasidor, Orange Drugs, Emzor Pharmaceutical are yet to take the bite and make their grand entry into space many consider to be their almost natural habitat.
Whereas more companies are expected to list on the exchange to deepen the capacity and range of the market, investors are also not pleased with the fact that a few seemingly well-capitalized firms which were members of the Customs Street brotherhood over the years have presently delisted from the market. For context, however, of the 113 Companies that have delisted from the market, Coca-Cola Bottling Company Plc, SEVEN –UP Bottling Company and A. G Leventis Plc among others delisted from the market voluntarily while others had regulatory issues and left.
While analysts and market stakeholders cannot specifically point out why there still seem to be mixed reactions of many companies to the NSE, others say listing on the exchange should be the singular decision of the board and management of any firm since no company should be forced to go public.
Why some firms shun listing
For some of the listing-shy firms, there have been serious concerns over the challenges of trading within the Nigerian Stock Exchange that emanate from the weak macro-economic environment which is heavily exposed to the fluctuations of oil prices. The capital market is not insulated from the occasional bites that come when the price of the nation’s single dominant export commodity, crude oil, takes a beating. Therefore, there is a consensus that if the capital market is the authentic barometer with which to measure the economy, there must be greater efforts at economic diversification to boost other sectors.
Before now also, owners of businesses, entrepreneurs and the World Bank have complained about the drawbacks from the continued lingering of multiple exchange rates. The development has hampered inflows and outflows which affect entrepreneurial efforts.
Investors in the market have also almost always believed that adequate liquidity is lacking in the market. Experts explain that liquidity is the ability to exchange your stocks for cash as quickly as possible and predictably. The implication is that you can sell your shares at a predictable price because there are enough buyers and sellers to stabilise the market.
But with the weak outlook in the market currently, the earlier touted liquidity status of the market may have weakened as well.
The Securities and Exchange Commission (SEC), the apex regulatory authority of the Nigerian Stock Exchange (NSE) is neither a member of the National Economic Council (NEC) nor has any role to play in the economic advisory team of President Buhari. Many have raised their eyebrows in wonder as to why an economy that presumably wants to grow should exclude such a vital body from its core planning and decision-making system.
Some also finger political instability in Nigeria as part of the reasons why there is a seeming gradual erosion of confidence in the market which should be a beehive of activity for the not only Africans but the world at large.
Nonetheless, Business Hallmark’s recent research revealed that as at October 2019, the Nigerian Stock Exchange (NSE) was the fourth-largest stock exchange in Africa with a market capitalisation of ₦12.8 trillion ($35 billion), and encompassing 161 companies from 11 different sectors.
Sectorally, recent developments show that the market has been dominated by the Technology sector (₦3.8 trillion), though the Financial Services sector accommodates the highest number of listed companies (53) and is the most actively traded.
The consummate value of the Nigerian Stock Market comes to about 9 per cent of Nigeria’s economy while at 292% South Africa’s stock market is almost 3 times the size of its economy. But this notwithstanding, it is clear that the Nigerian economy is the largest in Africa with GDP slightly larger than that of South Africa. And this makes many to wonder why much has not been done to tap a lot more of this capacity to serve the interests of the market and the overall economy to boot.
On this, analysts are divided as to whether the capital market in Nigeria has adequately measured up to world standards to the level of creating enough confidence to attract more companies, both local and foreign, to list on the bourse.
While the Chief Executive Officer of High Cap Securities Limited, Mr David Adonri believes that the market has come of age and contributed immensely to the development of the economy, he noted that the government does not seem to come up with policies that support the growth of the capital market.
According to him, the major challenge of entrepreneurship in Nigeria has to do with inadequate capital which duty lies primarily upon the capital market to create or form the type of capital that is required for diversification.
He, however, explained that the capital market’s shallowness had denied it the capacity to achieve that project since policies tend to support the flourishing and development of the alternative money market instruments.
Adonri said the primary market needs to be reactivated, explaining for example that there has not been any initial public offering of worth since 2008.
‘The primary market has not been reactivated. Since 2008, there has been no offer for subscription. Companies prefer to raise money where their shares can be adequately priced and subscribed. The market does not have public policy support and there are various policy support measures that the government should engage to help revive or activate the primary market,’ said Adonri.
For the Managing Director/ CEO of Heritage Investment & Securities Limited, Chidi Ajaegbu, he reckons that the Nigerian Capital market is indeed deep and has what it takes to attract international confidence and investment. He adds that in his view the NSE also has the technological sophistication and international best practices to compete anywhere in the world.
“There is no confidence problem in the market. Some of the international firms not playing in the market today have been here with us even when the economy had not become this weak. Their not listing on the exchange is rather a mindset thing. Some are not ready to dilute the ownership of their company and are not ready also to subject themselves to the post-listing requirements”, said Ajaegbu.
Similarly, a Lagos based financial analysts, Olisa Egbunike told Business Hallmark that the Nigerian capital market was deep and possesses facilities that have given it international recognition.
‘’Our entrepreneurs are afraid of losing ‘the 90 per cent’ of their holdings in Nigeria. Financial literacy is very low among the elites and entrepreneurs who do not know that it is better to own a 10 per cent stake in a big and thriving firm than own 90 per cent in a sick and small company’’, said Egbunike.
Business Hallmark checks reveal that before now, there had been speculations that loss of confidence, a crisis in the Exchange and market meltdown were among the reasons why some companies pulled out, others were threatening to pull out and others are reluctant to list on the stock exchange.
MTN, for example, has kept its IPO in abeyance saying the conditions that caused its reluctance were still there, implying that investors may have to wait longer for its public offering.
At that also, the NSE is still expecting the following companies to list their shares on its floors:
Globacom Limited, commonly known as Glo, is a Nigerian multinational telecommunications company founded on 29th August 2003, by Otunba Mike Adenuga. As of June 2018, the company had more than 3,500 employees worldwide.
As at December 2018, Glo had over 45 million subscribers, making it the second-largest telecommunications network operator in Nigeria
In 2011, Glo became the first telecommunication company to build an $800 million high-capacity fibre-optic cables known as Glo-1, a submarine cable from the United Kingdom to Nigeria. It is the first successful submarine cable from the United Kingdom to Nigeria. Globacom also has the following strategic business units: Glo mobile, Glo Broad Access, Glo Gateway and Glo-1.
The company is privately owned by the Mike Adenuga Group which also consists of Cobblestone Properties and Estates, a real estate and property development company, Conoil PLC, a petroleum marketing company, and Conoil Producing, a crude exploration and production company. Analysts think Glo is good enough to list on the Nigerian Stock Exchange.
9Mobile Emerging Markets Telecommunication Services Ltd. (EMTS), trading as ‘9mobile, is a Nigerian private limited liability company. EMTS acquired a Unified Access Service License from the Nigerian Communications Commission in 2007.
It is a provider of telecommunication services. The company’s telecommunication services include international roaming, postpaid and corporate, mobile broadband for customers, enabling them to connect to all over the world.
The company which had suffered a crisis when took a loan of $1.2 billion for expansion from a Consortium of 13 Banks had faced considerable challenges which had prompted the alleged laying off of over 1000 staffers.
The service provider had in 2017 changed its name from Etisalat to 9mobile.
Analysts also believe that the company is big enough to list its shares on the Nigerian Stock Exchange (NSE).
Orange Drugs Limited is a wholly Nigerian company, an indigenous pharmaceutical marketing and manufacturing company based in Lagos and has branches all over Nigeria. Orange Drugs whose Chairman is Chief Tony Ezenna is an incorporated limited liability company. With an authorized, fully paid share capital of N5million, it was registered on 20th July 1988. (RC:115913). It is involved in the marketing and distribution of well-tested drugs which are manufactured in the United States of America, Germany, Indonesia, Italy and India with the Nigerian market in mind.
Within its pharmaceutical portfolio, Orange Group Pharmaceuticals offers a complete range of ethical products for various ailments. The company’s products range from solutions for aches and pains to feverish conditions. These products are distributed to hospitals, pharmacies and drug stores across the nation through an integrated distribution network. Products include popular brands like Boska, Komix, Medik 55, Mixagrip, Procold, Sudrex and Zaiki.
Analysts believe that Orange Drugs is big enough to list its shares on the Nigerian Stock Exchange.
Promasidor Nigeria Limited is a consumer packaged food company headquartered in Isolo, Lagos. It is a subsidiary of South Africa based Promasidor Holdings. The firm’s major brands include Cowbell milk, Loya milk, Sunvita cereal, Onga seasoning and Top Tea beverages. The firm is on record as having very ingeniously introduced the sale of powdered milk in sachets into the Nigerian market, a practice which was later to be taken up by other competitors.
The firm is a leading producer of milk in Nigeria today.
Indeed the Cowbell story is one of the more recent consummate innovation legends of the Nigerian business space. Promasidor Nigeria Limited began operations in Nigeria in March 1993 under the business name of Wonder Foods. Cowbell milk was the first product introduced to the country and it was initially sold at a size similar to the market leader, Peak milk. However, sales generated by the firm’s 400 gram powdered milk was not encouraging. To compete with the other milk brands, the firm imported larger packages of milk which are then sold to wholesalers who then scoop the milk from the larger package into smaller polythene bags for resale. This sales and distribution method did get some traction. Thereafter, Cowbell decided to import smaller sachets of milk to target middle and low-income earners. This selling strategy increased the firm’s revenue. Thereafter, the firm diversified into other sectors such as chocolate drinks, tea and seasonings. By 2010, it was recording an annual turnover of $300 million.
In 2003, the firm changed its business name from Wonder Foods to Promasidor to promote uniformity across the group. The company which is worth several billion in real value and which recently acquired the former publishing headquarters of Champion Newspapers at Ilasamaja, Lagos is big enough to list on the Exchange.
The question that remains then is how much longer? We wait.