Nigeria records zero IPO activity in 2017 as investors look to other markets
by Micheal Ani
March 8, 2018 | 1:00 am| | | Start Conversation
The Nigerian Stock Exchange has yet to record a single Initial Public Offer (IPO), since 2016 as investors look into South, East and North Africa markets according to a report from global consulting firm, Price Waterhouse Coopers(PWC).
The report which captured equity analysis and debt capital market transactions that took place between 2013 and 2017 on exchanges throughout Africa, as well as transactions by African companies on international exchanges, reveals that Africa’s largest economy since 2013 has only recorded four IPO valued at $760 million with the highest coming in 2014 valued at $548million.
The top 10 African IPOs by value took place in South Africa, Egypt, Tanzania and the Francophone West African region, represented by the BRVM. On a sector basis, for the first time in five years the consumer services sector dominated the African IPO market with 44 percent of total value, followed by the financial services sector with 26 percent. In terms of volume, financial services accounted for the greatest volume of IPOs with 50 percent, followed by consumer goods with 14 percent.
In terms of value, the Johannesburg stock exchange, led on recorded deals in Africa with a total number of 44 IPO deals from 2013 – 2017 valued at $4.8 billion placing it first among other African peers. Egypt stood second with a total number of 13 IPO deals valued at $1.3 billion.
Morocco and Tunisia stood third and fourth with a total number of five and 23 deals valued at $535 million and $ 391 million respectively. Nigeria came fifth with a total number of four deals valued at $760, while Kenya, Namibia, Mozambique, Zambia and Zimbabwe came lowest in the league with a total value of $42 million, $21 million, $11 million, $9 million and less than $1 million in the same period under review.
“Capital markets in Africa saw a recovery in 2017 with the positive impact of commodity stabilisation on economies such as Cote d’Ivoire and Nigeria, which emerged from five successive quarters of Gross Domestic Product (GDP) declines, and resilience in the face of economic and political uncertainty in South Africa,” Andrew Del Boccio, PwC Capital Markets Partner said.
“Since 2013, there have been 519 African ECM transactions raising a total of $52.7 billion, up 17 percent in terms of capital raised over the previous five-year period. Overall, ECM activity in 2017 was the second highest since 2013 in terms of volume with 121 issuances, up 25 percent over the previous year, and the highest since 2013 in terms of value, driven mainly by a few significant IPOs and further offers (FOs) during the year,” he added.
“We are optimistic about the pipeline of companies seeking to access the capital markets in 2018, including cross-border IPOs of African companies, given encouraging indicators in large markets such as South Africa, Egypt, and Nigeria, and the continued economic growth in East Africa and the Francophone West African countries.”
The much expected initial public offering (IPO) by MTN Group for its Nigerian unit will happen by June 2018, BusinessDay reported last week. Ahead of that target, MTN Group hopes to get all necessary approvals for the listing including that of the Securities and Exchange Commission (SEC) and Nigerian Stock Exchange (NSE).
MTN Group agreed to list the Nigerian unit on the Nigerian Stock Exchange this year as part of a June 2016 agreement to pay a $1 billion fine for missing a deadline to disconnect unregistered subscribers amid a security crackdown.
Standard Bank Group Limited and Citigroup Incorporated have been advising Africa’s largest mobile-phone company on the sale that could raise as much as $500 million on the Nigerian Stock Exchange.
The Nigerian stock market rose by 42 percent last year.
The year 2017 saw the second-largest volume in Africa IPO activity over the past five years and is the largest in value, with $2.9bn raised in IPO proceeds, exceeding 2015 (the year with the next-largest value raised over the past five years) by 42 percent. Over the past five years, there have been 134 IPOs by African companies on both African and international exchanges, raising $9.1bn, a 37 percent increase in capital raised over the preceding five year period, 2012-2016.
Despite the policy gridlock and economic and political uncertainty South Africa has experienced over the past five years, the JSE has maintained its dominant role in the African capital markets. In 2017, capital raised from IPOs by companies on the JSE in US dollar terms increased by 178 percent compared to 2016. Since 2013, capital raised from IPOs by companies on the JSE alone of $4.8bn represents 52 percent of the total African IPO capital raised.
“In terms of capital markets activity, we expect that the recovery seen in 2017 will gain momentum in 2018 against a more stable political and economic backdrop,” Del Boccio said in a March 6 note to clients
While a stronger year for some exchanges in sub-Saharan Africa, IPO activity on the North African stock exchanges – Egypt, Morocco, Tunisia and Algeria – decreased by 61% in terms of the value of IPO proceeds. There was also no IPO activity in Ghana compared to 2016, which saw $102.0 million raised on the Ghana Stock Exchange.
In contrast, elsewhere on the continent, 2017 saw some significant increases in IPO value on exchanges in Namibia, Rwanda and Tanzania compared to the prior year.
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