The Nigerian stock market has traded sideways over time as volatile forex and macro-economic concerns cost investors in excess of N1trillion but the local bourse future looks well for increased liquidity with the Initial Public Offerings (IPOs) and listing by major brands in telecoms, oil & gas and aviation sectors.
Arik Air, one of the largest Nigerian owned airlines, plans to list the carrier on the floor of the Nigerian Stock Exchange (NSE) by May 2016 as part of its management’s efforts to boost the airline’s capital base and acquire even more aircraft.
Also, MTN Nigeria is planning to become a Public Liability Company (Plc) in 2016 by listing its shares on the floor of the Nigerian Stock Exchange by way of public offer for purchase by interested members of the investing public.
Similarly, Sahara Group, a Nigerian energy company will be raising as much as $1.4 billion (N277billion) through a dual listing of its oil and gas unit on the London and Nigerian Stock Exchanges, along with a debut dollar bond sale.
With the current market liquidity largely skewed towards the banks and a few largely capitalised non-financial institutions which meet investors’ need, market watchers see more worthy listings like these (MTN, Arik and Sahara Group) which cross different sectors of the economy as one that can improve liquidity in the market.
“It is a welcome and positive development for the Nigerian market. The Nigerian market is too shallow for the size and potential opportunities in the economy. The current market structure breadth and depth do not appropriately reflect the economy and its prospects. Listing leading players in the telecoms, oil & gas and aviation sectors will partly correct this structural defect and broaden the market in depth,” Rasaq Abiola, head, investor relations, UBA plc told BusinessDay.
“I believe liquidity and product offerings are a chicken and egg game; with each factor stimulating or driving the other. You will recall that Seplat’s IPO was oversubscribed, with impressive participation from both local and foreign investors. I believe names like Sahara and MTN will stimulate investor appetite, especially if the IPOs are appropriately priced.
“You will agree that investing in a firm (especially equity) is not just on the merit of the strong fundamentals of the company, the price/valuation must also be right. So, you buy the right asset at the right price and at the right time. This is why we often say the stock of a good company is not necessarily a good investment because the valuation may be stretched already (that is the stock may be overvalued),” Abiola added.
Also speaking on these listings, Saheed Basir, head research at Meristem Securities said he strongly believes the market is liquid enough for the offer size.
“The issue is the quality of the offer, not the size of the market. Remember we have pension assets of about N4.9trillion ($22billion) with provision for about 25percent in equities. High Net worth Individuals (HNIs) and insurance companies also have sizable unbeatable funds. If offering is of good quality with good fundamentals, sound corporate governance, it will attract sizeable investible funds”, Basir added.
Before now, analysts at Financial Derivatives Company had noted that the equity market was volatile in reaction to equity market events in Shanghai.
“Foreign portfolio flows to emerging markets turn negative. Spillover effect from China and fall in commodity prices were responsible for poor global equities market performance. The market experienced sustained volatility as investors exited positions and speculators went bargain hunting. Bargain hunters ride mini-bull as key appointments are made and oil prices recover slowly,” the analysts added.
source: Businessday Nigeria
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