Exodus on the exchange

For varied reasons that have heightened worries, companies are leaving the Nigeria Stock Exchange (NSE) in droves, a development that underlines bad policies, weak economy and regulatory brinkmanship between the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC).

Between 2009 and 2015, especially in the wake of the capital market crash of 2008, about 50 companies exited the bourse for different reasons.

But in four years, from 2015 to 2019, over 30 companies have delisted while more notices for voluntary delisting have been filed at the Exchange, raising questions on the continued relevance of the bourse as a platform for capital formation by companies in dare need of low-cost, long term capital.

Whilst some of the reasons for delisting have put the bourse and the CBN on the spot, majority have centred on deep-seated local apathy, declining disposable income of citizens, poor economic situation of the country that has compounded the woes of many firms, and increasingly diminishing value of trading shares at the exchange.

Besides mergers and acquisition, and the default on post-listing requirements which is sometimes deliberate, many of those that had de-listed said they were no longer getting value for their continued stay on the bourse.

In two years, specifically 2017 to 2019, some 13 companies de-listed, and in what seems to have underlined the argument of lack of value for continued stay, some of the firms have remained strongly in business while couple have closed shops.

“The major reason behind the wave of voluntary delistings is that companies feel they can no longer enjoy the privilege of being able to form capital from the market. Of all the reasons, this major issue of blighted chances of capital formation constitutes the crux of the matter,” said David Adonri, a senior dealing member of the exchange and Chief Executive Officer of Lagos-based Highcap Securities Limited.

The Registrar, Institute of Capital Market Registrars, Lagos, Dr. Walker Ogogo sees voluntary delisting as business decision to assist companies navigate the murky economic waters.

“Voluntary delisting from the NSE does not mean anything is wrong with the market or the listing arrangement of the NSE or with Securities and Exchange Commission (SEC). It is a business decision that companies do take in response to the austere economy”.

“The companies are operating in this economy that is still recovering from a recession. And since they are not isolated, that means they are taking decisions that will keep them afloat based on the situation of the economy,” the ICMR boss stated.

Heightening Delisting Waves

Breakdown of the 13 shows the NSE de-listed eight companies that consistently violated post-listing rules, which, in some quarters, is a cheap strategy for regulatory-induced delisting.

Five companies however delisted on the unanimous recommendation of their shareholders who believed the equities’ trading platform currently holds lesser attraction than what it was in the pre-market crash era when scramble for listing was seen as a wise strategy for companies eyeing equity capital formation.

Findings by our correspondent reveal strong fundamentals of the companies which voluntarily delisted in the period under review after their share prices crashed in obvious contradiction of market valuation principle of equities trading.

An instance is Seven Up Bottling Company Plc, a leading soft drink manufacturer, which dominates size-able chunk of Nigeria’s soda industry with the likes of the Nigerian Bottling Company (NBC).

Until lately when competition got keener and new entrants snatched more than half of the market shares, and leaving NBC and Seven Up to scramble for the remaining half, the two leaders in the beverages’ sector were among the most profitable entities quoted on the NSE consumer goods sector.

Seven Up delisted on March 5, 2018, seven years after NBC delisted voluntarily citing moves by some foreign investors to inject capital into the conglomerate as reason for its decision. Before then, share price movement of 7-Up had plummeted from  N107.06 as of December 11, 2017 to N96. 88 per share as of March 3, 2018. This was after stagnating at N101.97 from December 28, 2017.

Traded volume also remained too low to attract price mark up in the period leading up to its delisting after 32 years on the bourse. High operational cost and huge short term borrowing had eroded its 2017 net profit, resulting in huge loss of N10.78 billion in just one financial year, after recording profit decline in 2016.

Market operators said that NBC could have raised the much needed capital from the Exchange were the market still attractive as in the pre-2008 days.

“The likes of NBC which delisted ostensibly to enable capital injection from foreign investors could have raised capital from the Exchange if the market were still attractive, “ a stockbroker argued.

The market crashed in 2008 and eroded investor confidence, replacing it with deep-seated apathy visible among local retail investors who were major drivers of half a decade long bullish cycle.

Ashaka Cement Plc ( in a merger with Lafarge Plc) but operating independently, Avon Crown Caps and Containers, Paints and Coatings Manufacturers Nigeria Plc, and lately Great Nigeria Insurance Plc are among the companies that voluntarily delisted lately from the NSE.

They are still strong in their various sectors and turning out good returns on investments.

Diminishing value of continued listing

On April 9, 2019, First Aluminium Nigeria Plc also exited the Nigerian Stock Exchange (NSE), citing lack of benefits from continued listing on the bourse as the company’s shares continued to trade at ridiculous discount to the intrinsic value.

The firm which listed in NSE daily official list in 1992 with ALUCON Holdings S.A. having 75.48 percent stakes as core investors, said its shareholders were not benefiting from the continued listing and were not getting exit opportunities either.

The share price was stuck at 50 kobo for about six years between June 2011 and June 2017, and thereafter experienced further diminution, both in share price and trading volumes. Over the last 18 months daily average volume ranged between 2,815 to roughly 2,918 units during the period July 2017 to December 2018.

“Shareholders are not benefiting from the continued listing as they are not getting exit opportunities and their investments have been locked up, thereby finding it difficult to dispose of their shareholding. “Neither the company nor its shareholders have benefitted as the company’s shares continue to trade at a significant discount to the intrinsic value,” the company lamented in a statement.

NSE policy backlash

Some quoted companies suffered severe price crash to 20 kobo after the NSE removed the 50kobo par value base. This NSE policy exposes some to hostile acquisition.

The Oscar Onyema-led management of the Exchange had reviewed downwards equities’ par value in 2017 expecting prospective investors could take advantage of rock bottom prices to invest and bring liquidity into some of the shares.

Though the policy achieved liquidity target, but it invariably affected the value of some, turning them to commodities that could only be exchanged for a kobo, Nigeria’s lowest currency denomination.

It has also resulted in sharp depreciation in market capitalisation of the affected firms. One of them is Great Nigerian Insurance Plc which play in a sector where the most traded share is below 50kobo. This reason, in addition to a series of sanctions totalling N50million for late filling of financial results, sources say, pushed the company into the decision to delist its shares.

The Managing Director Courteville Business Solutions Plc, Mr. Adebola Akindele, gave a startling revelation while lamenting the crash to 20 kobo, the share price of his company. He alleged the market was playing pranks to make them throw money at it so as to boost the value. The foremost e-business solutions and advisory company is one of the few companies whose shares on NSE Premium Board traded at ridiculously low price of 20kobo per share.

The CBS share price crashed after the NSE removed the 50kobo par value base, Akindele however insisted that 20kobo price per unit of the stock was not a fair value of CBS Plc going by the audited financial report of the company as at December 31, 2017.

“The market is playing pranks. The market expects us to start throwing money to boost the share price. We will not do that. We are not interested in throwing money at our stock to boost transactions and price. It is not proper,” said the CBS boss over the telephone.

CBN’s inflation-targeting rates at odds with equities 

As with the NSE policy backlash, the CBN’s inflation-targeting, double-digit interest rate has ensured that investments change destination, leaving the equities market for fixed income instruments.

With interest rate at 13.4 percent after staying above 14 percent for 33 months, government bonds and treasury bills have remained preferred investment instruments yielding between 15 and 17 percent interest, about 4.5 percent above 11.3 percent inflation rate as at February 2019. As as March 2019 however, interest rate was 13.5 percent while inflation rate stood at 11.25 percent.

“Interest rate has to come down to lower single digit and the fiscal authorities have to support with market with friendly fiscal policies to make equities market more attractive once again. If equities become attractive again, investor confidence will be restored and companies can raise much needed capital and therefore have reason to stay on the exchange,” Adonri submitted.

What To Do To Retain Quoted Companies On NSE

Analysts said there is nothing the SEC and the NSE can to do to reverse delisting trend because the situation of the market is a direct outcome of a hostile economy that is not supportive of long term capital formation.

“Not until the economy recovers in such a way that investors’ confidence is restored on a long term and fresh activities are introduced to boost the economy, the situation may remain the same for a long time more,” said a stockbroker who did not want his name on print.

He added: “The only thing which the NSE and the Securities and Exchange Commission (SEC) can do is to embark on advocacy to persuade the companies to stay on. But in terms of keeping the exchange attractive, there is nothing they can do.”

Although the regulatory authorities are introducing palliatives like the NSE X-Academy introduced to offer training to market operators in areas which they are not quite conversant with and the recent initiative by SEC to convene all market operators to a regular talk shop on tactical and operation issues in the market.

These may not achieved the desired result if the economy continues to be in a coma and the monetary policies are not evolved to support equities’ market.

The Chief Executive Officer, NSE Oscar Onyema kept mum, refusing to comment on the exodus which many have laid the blame hugely at his doorstep.

DELISTED COMPANIES BETWEEN 2015 & 2019.

S/N	FIRMS	DATE	TYPE OF DELISTING
1	CAPPA AND D’ALBERTO PLC	16-Jan-2015	​Voluntary
2	NIGERIAN SEWING MACHINE MANUFACTURING PLC	13-Jul-2015	Regulatory: NSE
3	STOCKVIS PLC	13-Jul-2015	Regulatory: NSE
4	NIGERIA WIRE & CABLE PLC	13-Jul-2015	Regulatory: NSE
5	IPWA PLC	18-May-2016	​Regulatory: NSE
6	G. CAPPA PLC	18-May-2016	​Regulatory: NSE
7	WEST AFRICAN GLASS INDUSTRIES PLC	18-May-2016	​Regulatory: NSE
8	INVESTMENT & ALLIED INSURANCE PLC	18-May-2016	​Regulatory: NSE
9	ALUMACO PLC	18-May-2016	​Regulatory: NSE
10	JOS INTERNATIONAL BREWERIES PLC	18-May-2016	​Regulatory: NSE
11	ADSWITCH PLC	18-May-2016	​Regulatory: NSE
12	ROKANNA PLC	18-May-2016	​Regulatory: NSE
13	VONO PRODUCTS NIGERIA PLC	23-May-2016	Merged with VitafoamPlc
14	LENNARDS (NIGERIA) PLC	1-Dec-2016	Regulatory: NSE
15	P.S MANDRIDES & COMPANY PLC	1-Dec-2016	Regulatory: NSE
16	PREMIER BREWERIES PLC	1-Dec-2016	​Regulatory: NSE
17	COSTAIN (W.A) PLC	1-Dec-2016	​Regulatory: NSE
18	NAVITUS ENERGY PLC	1-Dec-2016	​Regulatory: NSE
19	NIGERIAN ROPES PLC	1-Dec-2016	​Regulatory: NSE
20	BECO PETROLEUM PRODUCTS PLC	2-May-2017	​Regulatory: NSE​
21	MTECH COMMUNICATIONS PLC	2-May-2017	​Regulatory: NSE
22	MTI PLC	2-May-2017	​Regulatory: NSE
23	UTC PLC	2-May-2017	Regulatory: NSE
24	ASHAKACEM PLC	4-Jul-2017	Merger with Lafarge Africa Plc
25	AVON CROWN CAPS AND CONTAINERS PLC	18-Sep-2017	Voluntary
26	SEVEN-UP BOTTLING COMPANY PLC	5-Mar-2018	Voluntary
27	AFRICAN PAINTS (NIGERIA) PLC	6-Apr-2018	​Regulatory: NSE
28	AFRIK PHARMACEUTICALS PLC	6-Apr-2018	Regulatory: NSE
29	PAINTS AND COATINGS MANUFACTURERS NIGERIA PLC	17-Aug-2018	​Voluntary ​
30	GREAT NIGERIA INSURANCE PLC	25-Jan-2019	Voluntary