BY NKIRUKA NNOROM
The Nigerian Stock Exchange, NSE, is becoming increasingly safer for investment following the establishment of more rules and regulations leading to improved confidence in the system, said Ibukun Adebayo, Head, International Business Development EMEA, London Stock Exchange.
Speaking to financial journalists on the sideline of the annual Euromoney conference, titled, “The Nigeria Banking and Capital Market Conference”, in Lagos, Adebayo affirmed that volatility in the Nigerian stock market has eased to a level that will attract more local companies to raise fresh capital through Initial Public Offers.
He said, “The market has become wider and more diversified; we have the small capital market launched which is the alternative securities market. And we also have series of different measures that have been put in place by the regulator to strengthen the market.”
Explaining why stocks on the NSE are still undervalued, he said, “We have seen a crash in the volume of investors locally, and we have seen a retrenchment of foreign international capital back to the cistern of low yielding assets back at home.
This should be the only reason why the Nigerian market is still low, low evaluation, we mean and less IPOs opportunity. But the market I think is now showing very good signs of restoring the confidence.”
He further stated that issues around transaction cost was beginning to disappear, saying, “raising capital locally from the domestic market is now becoming cheaper, because some of the issues around transaction that serves as the weakness are beginning to disappear.
“And currently, the volatility level in Nigeria is coming down to a level that is conducive to the re-emergence of IPOs. Now the fixed measurement index of the Nigerian stock exchange is becoming stable and is dropping to a level where we will see further issuances by a lot of local companies and indeed IPOs.
He stated that three Nigerian companies (two unlisted and one listed) have successfully raised capital from the London Stock Exchange in the last twelve months.
Giving a breakdown, he said, “So it has been a very interesting year. For about twelve months, we have seen three Nigeria issues in London. The first was through a company call Eland Oil and Gas which is an oil and gas company producing fuel in the Niger Delta and it’s a joint venture company with Elcrest.
It raised about 120 million pounds in the London market. And that was the largest IPO from a Nigerian company in the London Stock Exchange in three years as at the time it was listed. And the price performance since it was listed has increased by about 35 percent. The next company to list was Zenith Bank, which listed with just about $890 million and the bank has been performing very well. The trading volume in London is solid. So, the effect of this is that the listing of the bank will attract more investors to Zenith Bank stock and that will also increase the propensity of trading locally as local investors become more familiar with the bank.
“We have our third listed company called Lek Oil, which again is indigenous Oil and Gas Company, which raised about $50 million in London at the end of May this year and also that company has been performing very well in the secondary market. So much so good, Lek Oil actually came back to the market and raised another $20 million, which closed about two weeks ago.”