Nigeria’s Equity Market Declines By N6bn

Transactions on the floor of Nigerian Exchange on Wednesday closed on negative note, shedding N6 billion. Market capitalisation of listed equities declined by 0.02 per cent to N36.923 trillion from N36.929 trillion reported on Tuesday. The NGX All Share Index also depreciated by 11.61 basis points to 67206.16 points from 67217.77 points reported the previous day. A review of the investment showed that Multiverse led gainers table, growing by 9.74 per cent to close at N2.93 per share, Chams Plc followed with a gain of 9.71 per cent to close at N1.92 per unit, Caverton Business Solutions added 9.35 per cent to close at N1.52 per unit, FTNCocoa Plc up by 8.97 per cent to close at N1.70 per unit while Geregu powers increased by 7.71 per cent to close at N370.00. On the contrary, ETranzact and SUNU Assurance recorded the highest loss, shedding 10 per cent each to close at N7.56 and N0.99 per share. Deep Capital trailed at 7.41 per cent to close at N0.25 per share, Eterna Plc dropped by 7.41 per cent to close at N13.75 per unit, United Bank for Africa down by 5.79 per cent to close at N18.75 per share. Volume of trades increased by 9.756 million, representing 3.05 per cent as investors traded 329.660 million shares valued at N4.410 billion in 5998 deals against 319.904 million shares costing N6.330 billion in 6272 deals. Transactions in the shares of Fidelity Bank led market activities with 50.319 million shares valued at N411.728 million, AccesCorp plc followed with 43.186 million shares worth N30.101 million, Chams Plc traded 26.650 million shares cost N50.127 million, United Bank for Africa exchanged 25.848 million shares cost N502.077 million while GTCO Plc exchanged 20.630 million shares cost N733.793 million.

Growing concerns surround delisting of companies from NGX

Amidst rising domestic costs, fluctuating naira exchange rates, and challenges in dividend declaration and tax payments, several large-cap companies listed on the Nigeria Exchange Limited (NGX) are considering leaving the market, raising concerns among equity market stakeholders. Over the past 22 years, more than 120 companies have either voluntarily or regulatory delisted from the NGX, and the increasing frequency of such announcements or rumours is causing unease among analysts and investors. Initial estimates suggest that approximately N182 billion in market value could exit the NGX due to potential departures by prominent companies like PZ Cussons (current price N20), GSK (current price N12.65), and Oando (current price N7.07). This trend underscores several critical issues within the market, including the perceived lack of tangible benefits associated with being listed, difficulties in raising capital, relatively lower valuations of publicly-listed companies compared to their private counterparts, and challenges in determining exit pricing. Many companies, particularly those with international interests, are opting for private status due to the opportunity cost of remaining listed on a formal exchange. Market analysts argue that this shift should be a cause for concern for NGX management and the Securities and Exchange Commission (SEC). While these companies intend to continue operations within Nigeria, they seek the advantages of private arrangements, which offer more confidentiality and flexibility in managing profits to minimize tax obligations, thus avoiding the need for widespread distribution of local dividends. To reverse this growing delisting trend and safeguard the interests of minority shareholders, several corrective measures are being considered. These include revising listing regulations to enhance the quality of publicly-listed firms, providing support for companies through innovative equity funding programs, offering incentives such as corporate income tax (CIT) reductions to listed firms, and increasing the costs associated with delisting. The issue of low exit pricing, which significantly impacts the value of investments held by minority shareholders, is a primary concern that calls for regulatory attention.