. Operators blame absence of functional govt
The state of the nation’s capital market has again come to the fore as the Nigerian Stock Exchange has delisted 112 companies from its daily official list in seventeen years.
Analysis of the effected companies revealed that 78 companies were delisted on regulatory instructions, 19 out of the 112 firms requested to be delisted voluntarily, 10 firms were delisted on merger basis, three were nationalized, one was on acquisition, while two others were absorbed and licence withdrawn, respectively.
According to the NSE X-Compliance report, delisting is the removal of listed equities of companies from the stock exchange where it is traded on a permanent basis.
However, voluntary delisting occurs when a company decides that it would like to purchase all of its shares or move to an OTC market while in full compliance with the Exchange. Typically, companies are notified 30 days before being delisted, and shares can plunge as a result. On the other hand, the NSE can compulsorily delist a firm when it fails to meet up with post-quotation standards.
Further findings also revealed that most of the companies delisted voluntarily from the capital market had cited harsh economic climate and parent company buy-out as reasons for their decision.
Operators /analysts blame unstable economy
Some operators and analysts, who spoke with The Point, blamed the absence of a functioning government as a missing ingredient in Nigeria’s economic growth.
They warned that for the projected economic growth envisioned by the Federal Government to be realised, it was imperative to get the Capital market back to its desirable heights.
Unhappy with the development, Head of Research at Heritage Global Investment limited, Mr. Caleb Ekanem, said, “A combination of factors has actually been affecting the Nigerian economy and by extension, they have been reactions in the financial markets generally.
“They are headwinds that investors would naturally react to because of the fear of eroding the value of their investment. Most investors are just exiting to preserve their capital and wait for the tide to clear because they cannot just make investment decisions when there is no clarity in the macroeconomic space, and this is affecting the companies” he said.
When asked why local investors failed to take advantage of the exit of foreign investors, the Managing Director, Cowry Asset Management Limited, Johnson Chukwu, said, “If you look at the portfolio of the pension funds administrators, you will see that they are getting underweight in equities; they are shifting much more of their funds to Federal Government Treasury Bills and Bonds, which simply means that they have more faith in the fact that interest rates would go up further. We are in an economy where, because of unclear economic policies, you cannot say that equity prices will rally,”
For the Managing Director, APT Securities and Funds Limited, Malam Garba Kurfi, lack of policy direction of the economy and delay in appointment of ministers have affected the entire system, including capital market.
“Foreign investors, who are the major players in the market, normally analyse the economic policy statement to be able to predict the likely outcome result before they invest their funds,” he said.
A stock analyst with Golden Securities Limited, Mr. Tunde Oyediran, said first and second quarters of the year were always marred with bearish market situation. “It is usually caused by low expectations within the period, which culminate in low patronage by both local and foreign investors.”
Oyediran observed that market in the last quarter of the year would be upswing as levels of activities would increase in volume and values, saying that the major factor that would trigger this performance is increased expectation for better third quarter and end of the year results.
Shareholders call for policy enhancement
In circumstances where companies come up to delist voluntarily, the shareholders are left in the lurch with no option but to tender their shares at whatever price, which may be much lower than the actual value of the company. The shareholders, therefore, called on the regulators to introduce policies that will enhance minority shareholders’ protection in 2019.
They warned that such actions are disincentive to market growth, and that regulators must review transaction costs, and grant tax incentives to listed firms to enable them enjoy the benefits of being listed as obtainable in the global market.
According to them, with the little signs of recovery and capital appreciation witnessed in the market in recent times, there is a need for the whole gamut of the market, including listed firms, to be cautious and avoid any action and decisions that could erode investors’ confidence in the market.
The National Coordinator, Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, said, “The government and regulators are not doing enough by not protecting investors and the market as required.”
Okezie, however, advised that the capital market regulators should wake up from their slumber, and do the needful now before all the companies delist from the exchange. “They should be creative and introduce good packages for the benefits of the quoted companies,” he said.
NSE optimistic on market recovery
The Director-General of the NSE, Mr. Oscar Onyema, said he’s very optimistic that the capital market would recover before the end of the year. “The effect of the reforms on the sector and the various products put in place will help to energise the market to rebound, adding that with government’s support, vibrancy would be restored. “I have no doubt that we have a great future. The Nigerian capital market will in the very near future be the toast of investors in Africa and beyond.”
Speaking as it relates to recent delisting of some companies at the capital market, Onyema said companies in their life cycle would list and some of them would delist over time. “That is the reality that exchanges around the world experience. Companies will delist for different reasons from voluntary to regulatory delisting, mergers and acquisitions and other things that would cause them to delist”.
He explained, “Our job is to make it easy for companies to come in and if they want to leave, that they leave in an orderly manner. So, what we have tried to do with our listing rules in the last three years is that we have tried to enhance the rules to ensure that companies are orderly, especially companies that want to delist voluntarily and where there is a business purpose why they are delisting”.
He assured investors that the council and management team would continue to carry out market reforms to champion the acceleration of Nigeria’s and Africa’s economic development.