…Accounts for 41.6% of market cap

…Market operators call for more big ticket listing

By Nkiruka Nnorom

THE listing of two telecommunication giants, MTN Nigeria Communication Plc and Airtel Nigeria Plc, on the Nigerian Stock Exchange, NSE, after years of waiting, has injected new life into the Information and Communication Technology (ICT) sector of the stock market.

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The development has positioned the sector as the most highly capitalised sector on the stock exchange, recording N5.43 trillion total market capitalisations as the close of trading last weekend.

The sector’s capitalisation now accounts for 41.6 percent of the total market capitalisation, a tremendous improvement from its position prior to the listing of MTN on May 16, 2019.

As at May 15, 2019, the ICT sector’s capitalisation stood at N7.9 billion, representing a paltry 7.5 percent contribution to the entire market.

The development, according to operators, aligned with market expectations and justifies the clamour for the listing of other blue chip indigenous and multinational companies on the local bourse.

Recall that there have been debates in the last few years over the benefits of having the telcos and other companies in sectors underrepresented or not represented at all on the NSE, list in order for the stock market to adequately reflect the economy.

Financial Vanguard analysis shows that the market capitalisation of the ICT sector shot up to N2.59 trillion following the contribution of N1.8 trillion capitalisation by MTN on its listing on May 16.

The sector, again, rose by another N1.36 trillion on July 9, 2019, following the listing of Airtel Nigeria Plc. The action brought the total market capitalisation of the ICT sector to N4.5 trillion, thereby making it the biggest capitalised sector on the NSE and thus accounts for 31.5 percent of the total market capitalisation.

Meanwhile, investment experts have emphasised the need for the government to introduce incentives that would encourage other companies, not just in the telecom sector, but other sectors, to seek listing and also create an enabling environment to make new listings happen.

They reiterated the age long call for the privatisation of government owned enterprises and listing of same on the local bourse.

According to them, improvement already recorded in the telecom sector following the listing of MTN and Airtel should, ordinarily, be a motivation for the government to pass the Petroleum Industry Bill that would allow for the listing of government owned oil enterprise – Nigerian National Petroleum Corporation (NNPC) – and other oil majors.

Analysing by sectors

Besides the natural resources sector, which also recorded a positive outing at 17.96 percent, all other sectors lagged during the period.

Financial Vanguard’s analysis of activities during the period showed that the construction/real estate sector recorded the worst performance, falling by 62.39 percent to N28.10 billion, followed by the consumer goods sector, which fell by 23.95 percent to N2.29 trillion and the conglomerates sector, which was down 22.68 percent to N68.10 billion.

The agriculture sector was the next as it depreciated by 22.35 percent to N103.02 billion. The healthcare sector placed fifth, recording 22.23 percent decline to N26.37 billion, while the financial services sector also depreciated by 18.04 percent to N3.26 trillion.

Others are the industrial goods sector, which was down 17.72 percent to N3.20 trillion, the oil and gas sector, which saw16.46 percent decline to N517.17 billion and the services sector that fell by 12.45 percent to N114.69 billion.

Incentivise listing, operators tell FG

David Adonri, Managing Director/CEO, Highcap Securities and Investment Limited, stated it is not surprising that the listing of MTN and Airtel has became the game changer in the capital market, saying that the performance is in line with the expectations of the market operators.

“Market operators have consistently clamoured that those telecommunication companies that occupy the commanding height of the Nigerian economy should be listed in the market so that their presence will rub off more on the economy and also make the market a true barometer for the economy.

“The demand and the rise in performance in the sectors are all expectations that have been met,” he said.

“Government should see what has happened in the telecom sector; they should not continue to believe that they can manage commercial enterprises. They should learn a lesson from Saudi Arabia that is planning to privatise her own state-owned oil enterprise, which is several times bigger than NNPC. Government has no business having control having control over NNPC and other commercial enterprises it is managing. So, they should learn from this and privatise those enterprises so that they will start contributing meaningfully to growth of the capital market,” Adonri added.

Speaking about the indigenous telcos, Globacom and Etisalat, that are yet to be listed, he said they are sitting on the fence at their own peril, arguing that sooner or later, those other telcom companies that have listed would establish competitive edge over them.

Johnson Chukwu, Managing Director/CEO, Cowry Asset Management, said: ”The telecommunication sector is almost non-existent on the Nigerian Stock Exchange (NSE). We have had Starcomm listed and later delisted and the telecom sector became almost inactive on the stock exchange.

“However, with the listing of MTN, which became the second biggest capitalised stock on the Nigerian bourse and Airtel, the telecomm sector has seen tremendous activity.

“Again, operators in the telecom sector are largely bell weather operators, which are insulated from economic challenges in the sense that with their innovation in terms of data services, we have seen consistent growth in their revenue irrespective of how the economy performed.

“So, investors are conscious of the fact that this sector has great growth opportunity in the economy. So, we have listed two major operators in the sector listing and that’s we saw some tremendous growth in the telecom sector.”

Speaking on listing of NNPC, he said that government operating businesses are now very few apart from the oil and gas sector where NNPC is still the dominant operator.

He said: “The government has largely withdrawn some of its operating businesses apart from the oil and gas sector and the transport sector, particularly the railway sector, where the government is still operator.

“The key thing is for us to push for the Petroleum Industry Bill that would allow for oil majors to get listed on the stock exchange and become operating businesses separate from their parent companies. That will entail having Incorporated Joint Ventures. Once you have Incorporated Joint Venture, they will operate as pure businesses and they will have the opportunity of coming to the market to get listed.

“The current arrangement where you have them unincorporated and government has a great cash call does not support the growth of the market and the listing of the oil and gas sector. Today, we only have one upstream oil and gas company (Seplat Petroleum Development Company) listed on the Exchange. Beyond Seplat, the rest are downstream operators.”

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On the listing of other telcos, he said: “I think that as the interest rate goes down and the operators see compelling need to borrow, they will have the need to list. So, it is for us to create an environment where it will be very attractive for companies to get listed on the bourse, not necessarily compelling them to list. The key thing is drive listing by incentive, not by enforcement,” Chukwu stated.



Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.