By Emele Onu
The world’s biggest stock-market rout this year is hindering initial public offerings in Nigeria, where a slumping oil price is pushing the local currency to record lows.
“The low oil price and rising macroeconomic risk have affected stock valuations, making it difficult for an issuer to get best value,” Pabina Yinkere, head of research at Lagos-based Vetiva Capital Management Ltd., said by phone. “With the many uncertainties seen in the market, subscription levels for any IPO will depend largely on the timing and strength of the issuer.”
A 14 percent slump in the Nigerian Stock Exchange All-Share Index (NGSEINDX) in 2015, the largest among 93 global gauges tracked by Bloomberg, is causing investor fatigue, according to Yinkere, whose Vetiva is the lead broker for the Oando Plc (OANDO) rights offer closing Jan. 28. It also helped manage the merger of Dangote Cement Plc (DANGCEM) and Benue Cement Co. and the entity’s listing in 2010. The bourse of Africa’s top oil producer missed its target for share sales last year, according to Chief Executive Officer Oscar Onyema.
Nigeria is struggling to deal with a more than 50 percent drop in the price of crude since June, slashing income from the commodity that accounts for almost all exports. Adding to investor concern is an election set for Feb. 14 taking place as the country battles a worsening Boko Haram insurgency in the northeast.
The bourse is targeting share sales from companies outside the West African nation as oil’s impact on local businesses scupper its objective of reaching a $1 trillion market capitalization by 2016, Onyema said on Jan. 14. It currently stands at about $49 billion.
Investment Banking
Investment banking activity in Nigeria will decline because of the drop in oil, Charles Kie, head of corporate and investment banking at Ecobank Transnational Inc., said in an interview in Davos. Some banks are taking a more conservative approach, which will slow down how fast deals are completed, he said.
The 195-member all-share index rose 0.4 percent to 29,812.05 at close on Friday in Lagos, for a weekly gain of 2.7 percent. The naira weakened a fifth day, retreating 0.4 percent to 191.23 per dollar by 3:06 p.m. in Lagos, extending losses over the past three months to 14 percent, the most among 24 African currencies tracked by Bloomberg.
The 2015 stock selloff has included banks, manufacturers, consumer companies and energy businesses. Ikeja Hotel Plc (IKEJAHOT) led decliners, falling 27 percent. Dangote Cement is down 22 percent andGuaranty Trust Bank Plc (GUARANTY), the nation’s largest lender, dropped 17 percent. The lone new stock this year was Transcorp Hotels Ltd., a unit of Transnational Corp. of Nigeria Plc. The shares listed at 10 naira on Jan. 15 and are unchanged, according to NSE data, while the parent company is down 8 percent this year to 3 naira.
Growth Strategy
“This is not a good time for Nigerian assets,” Mike Nwanolue, an analyst at Lagos-based Greenwich Trust Group Ltd., said by phone. “With stock prices as they are, companies planning offers will face the difficult choice of having to issue more shares for less proceeds. You’ll find it’s more convenient to stand back and watch.”
The bourse recorded six equity listings in 2014, the same number in 2013, Onyema said. In the vote next month, former military ruler Muhammadu Buhari will try to unseat incumbent Goodluck Jonathan. While many potential new listings may stay away in 2015, some companies with offerings already in the works could go ahead, said Yinkere.
“Companies that have already planned an IPO as strategy for their growth this year will likely go ahead,” he said. “It’s likely they’ll want to do it after the , when the uncertainties have reduced.”
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