Unstable of ‘Big Listings’ takes Local Buyers off Stock Market

The inability of the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) to push for ‘big listings’ particularly by large  companies, is adjudged as a major factor driving local equity buyers reluctance at the bourse.

While foreign investors continue to take the shine off local investors at the Nigerian stock market, the inability of the latter to raise their game has continued to be a source of concern to market operators whose major clientele fall within that category.

“There is no business in the stock market because local investors are out of the market. We need to look at the causes,” Ariyo Olushekun, immediate past president, Chartered Institute of Stockbrokers (CIS) said at a workshop organised recently by the Association of Stockbroking Houses of Nigeria (ASHON) and Association of Issuing Houses of Nigeria (AIHN).

“We say the top ten stockbroking firms controlling the market are doing well, I am not sure they are doing well because there are no ‘big listings’. Our local economy is not helping the market,” Olushekun, who is also the vice-chairman/CEO, Capital Assets Limited, further said.

Analysts say their listing on the Stock Exchange would have given more Nigerians the opportunity to be part owners, as well as helped drive liquidity in the market.

Since the capital market witnessed a downturn in 2008 the companies have not seen the need to make bold moves into the market, for fear that such issues might fail, as a result of low investor confidence in the market.

Analysts say regulators should step up their interface with the federal and legislative governments, to push for mandatory listing of companies that currently drive Nigeria’s GDP numbers. Their concerns heightened post-rebased GDP, as the stock exchange ideally should be the barometer for measuring the economy.

The ratio of Nigeria’s capital market to GDP is below 20%; compared with those of its peers like South Africa and Malaysia, which are high at 184percent and 274 percent respectively. Nigeria’s dismal ratio of capital market to GDP results as key drivers of the Nigerian economy hardly feature on the stock exchange.

The current N13.5trillion market capitalisation of equities listed on the Nigerian bourse is just 8.43% of about N160trillion ($1trillion) which Oscar Onyema, CEO, Nigerian Stock Exchange set as target for 2016.

With just two years ahead of this huge target, the outlook is now blurred on the possibility of meeting the mark, particularly as  most of the telcos, and oil and gas companies making huge profits doing business in Nigeria are not listing on the stock exchange.

Recently, Oscar Onyema, Chief Executive Officer (CEO), Nigerian Stock exchange (NSE) said that to attract more companies to the exchange and to retain a larger pool of investors at the minimum, the nation’s bourse needs to maintain stable and consistent policy regimes.

Onyema said this at the Capital Market Solicitors Association (CMSA) annual business luncheon, held last week in Lagos.

“We have worked tirelessly to revise key rules for dealing members and issuers, and developed several new rules to create the much needed order, equitable treatment, efficiency and protection for all participants in our market”, Onyema  further said.

“Many energy companies will seek equity funding to moderate debt that asset buyers have on their balance sheets”, Austin Avuru, CEO Seplat plc, said at the business luncheon.

“In the past five years, $15 billion in asset acquisition deals have occurred in Nigeria’s oil and gas and power sector, and 80 percent of them were done by debt”,  said Avuru, whose Seplat, was the first major Nigerian energy company to have a dual listing in Lagos and London.

Since Seplat listing on the Exchange, its IPO helped to show the way, with $230 million or 48 percent of total funds raised coming from Nigeria.

According to data obtained from the keynote address of  Oscar Onyema, the CEO of NSE, titled “Reawakening the capital market through participation of key players in the economy” as at February 2012, agriculture contributed nearly 44 percent to GDP, yet was less than 0.3 percent of market capitalisation; Oil and Gas was over 14 percent of GDP but constituted a mere 3 percent of market capitalisation; Power, at just over 3 percent of GDP, is not represented on the market at all; while telecoms, with 5.5 percent of GDP  was a meagre 0.5 percent of market capitalisation.

Arunma Oteh, director-general of SEC, said that the NSE would target 500 companies for initial public offerings (IPO) over the next five years, to reach a $1 trillion market capitalisation by 2016.

She also pointed out that the bourse needs oil and gas, power and telecommunications companies to list stocks to meet its market-value objective.

“There are a number of large, significant companies that are preparing to come to the market,” and talks are being held with telecoms companies on encouraging them to trade their shares, she added.