6 November 2012

Nigeria: NSE Foresees Revival of IPOs in 2013

The Nigerian Stock Exchange (NSE) has said the current market rally and improved regulation could lure up to 20 companies to list on the Nigerian bourse in 2013.

The Financial Times quoted NSE's Chief Executive Officer, Mr. Oscar Onyema, to have made this remark Monday .

This, according to him, is expected to bring about the revival of Initial Public Offerings (IPOs) on the NSE.

The exchange has struggled since a crash in 2008 wiped more than two-thirds off the value of the All-Share Index (ASI) and damaged investor confidence. Since 2009 there have been only a handful of small listings, compared to 88 between 2006 and 2008.

But in the year to date, the ASI is up 28 per cent - and so is corporate sentiment about coming to market. The ASI closed at 26,600.1 basis points yesterday, while the NSE market capitalisation closed at N8.476 trillion.

Onyema, who took over at the exchange in April 2011, told The Financial Times that the NSE had approached around 500 companies to discuss possible listings.

"In 2013, we probably should expect something in the region of 20 listings of quality companies that should be attractive to local and foreign investors, depending on what happens in the United States and Europe," Onyema said.

"The kinds of returns that we have seen this year have set the stage for those companies that want to list."

Banking, consumer goods and industrial stocks have led the market rally. The 2008 crash saw the busting of a stock price bubble, which had been inflated by irresponsible bank lending, poor risk management by brokers, lax oversight and fraud.

The global financial crisis stalled chances of a swift recovery, with foreign asset managers, who account for almost 70 per cent of daily trading on the NSE selling stocks to cover losses elsewhere.

Together with the Securities and Exchange Commission, Onyema has sought to improve regulation. In July 2011, 48 companies, including some of the country's biggest, were briefly suspended from trading for not filing annual accounts on time.

Eight of the 200-odd NSE stocks are now set to be delisted. Onyema said: "Before there was sense that enforcement was selective. Now, if you are on the wrong side of the rules, you will hear from us."

Surveillance of traders and monitoring of brokers is also better, he added. The number of active brokers - currently 235 - will drop once new minimum operating standards are introduced.

To broaden its appeal, the NSE recently introduced exchange-traded funds and hopes to open a fixed income trading platform for retail investors. A bigger challenge is to bring the industrial spread of companies in the capital markets in line with Nigeria's economy. Important sectors such as oil, telecoms and agriculture are still poorly represented on the exchange.

Onyema said listing discussions with foreign mobile operators were continuing, while the companies that successfully bid for the state electricity assets this year were also being encouraged to go public.

Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said the NSE's listings target might be over-optimistic, given that the ASI was still at less than half of its 2008 peak.

"I think we will see some listings in 2013, but the market needs to go up some more," Rewane said. "We must also first see some rights issues from quoted companies."

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