Nigeria’s sold-off state power companies may be required to list on the nation’s stock exchange within five years, the head of the market regulator said, as the bourse targets a $1 trillion market value by 2016.
The government approved bids this year by companies including Siemens AG (SIE), Korea Electric Power Corp. (KEP) and Transnational Corp. (TRANSCOR) to buy stakes in utilities as Africa’s biggest oil producer seeks private investment to curb power cuts which are a daily occurrence. Requiring the companies to list shares would make the exchange more representative of the country’s economy, Securities and Exchange Commission Director General Arunma Oteh said in a Dec. 21 interview in her office in the capital, Abuja.
Only about 17 percent of Nigeria’s economy is reflected on the market, according to Oteh. The Nigerian Stock Exchange, sub- Saharan Africa’s second largest bourse, has attempted to encourage listings and bring bigger trading volumes by introducing short selling, market making and securities lending this year. The bourse has a current value of $54.6 billion, according to data compiled by Bloomberg.
“Within a five year period these companies will be expected to list,” said Oteh, citing discussions with the Bureau of Public Enterprises, which is responsible for the privatization process. “We cannot make the mistake that we made with telecoms” which were granted cellular licenses in 2001 and weren’t required to list their shares, she said.
None of the main four telecommunications companies, including Africa’s largest operator MTN Group Ltd. (MTN), are listed on the Nigerian exchange. Oteh said she wasn’t looking to have listing made compulsory for them now.
Royal Dutch Shell Plc (RDSA)’s local unit, which is the West African country’s biggest private oil company, isn’t represented on the market either. Oteh said it makes “good business sense” to be on the bourse.
“They need to invest and invest aggressively, so I don’t even agree that there’s sufficient cash flow that they need financing, but more importantly people can have empathy for these companies,” she said. “We’ve had vandalization of pipelines, we’ve had base stations being blown up. If people in those neighborhoods had even one or two shares in these companies they would protect these base stations or pipelines like hawks.”
Oil theft and spills are common in Nigeria, where Shell said last month it removed 135 illegal connections from its pipelines in the first 10 months of the year. The country loses 150,000 barrels a day from theft, Shell Chief Financial Officer Simon Henry said last month.
Telephone companies, including MTN, Bharti Airtel Ltd. (BHARTI) and Emirates Telecommunications Corp. (ETISALAT) have had offices and transmission towers bombed and attacked since September in the country’s mostly Muslim north where the government is fighting an Islamist militant group Boko Haram.
The SEC will probably approve rules for Islamic-compliant Sukuk bonds in the first quarter of next year, with a number of Nigerian states including south-western Osun waiting to issue debt, Oteh said.
While states have been selling conventional bonds to finance projects such as infrastructure development, roughly half of Nigeria’s 160 million population are Muslim and so unable to participate, Oteh said.
“For me it’s a financial inclusion issue, you have a very high population of Muslims in Nigeria and it will just ensure we comply with some of their religious requirements,” she said.
Lagos state, home to Nigeria’s commercial capital and largest city, issued its biggest bond of 80 billion naira ($509 million) in November at a coupon price of 14.5 percent. Rivers state, in the oil-producing south, may sell a 100 billion-naira bond next year to fund its budget deficit, Standard & Poor’s said Dec. 19.
Three trading groups either have or are about receiving SEC approval to start retail bonds trading next year, to give the general public access to fixed income securities now dominated by institutional buyers, according to Oteh. These are the Lagos bourse, the Financial Market Dealers Association, which groups banks, and the National Association of Security Dealers.
“What we want is that most trading, including over-the- counter, is within our purview,” she said. “We’re very excited because it certainly brings more transparency to the market, it brings more depth.”
The introduction of the NASDAQ OMX Group Inc. (NDAQ) trading platform to the Nigerian Stock Exchange will probably take all of 2013 to become functional, Oteh said. English-speaking West African countries led by Ghana are pushing Nigeria to make the platform a common regional market, she said, with representatives of the countries exchanges and regulators meeting in Nigeria to discuss the idea.
“It’s large enough of a platform and in West Africa there is a move toward integration of the markets and it’s not being driven by Nigeria its being driven by the other smaller markets,” she said. “Nigeria’s market is big, so the opportunities for cross listing for companies from West Africa to list on the NSE and vice versa is very, very important.”
The Nasdaq platform, which was signed in April, will allow the bourse to have options in 2014 and futures in 2015 to help deepen the market, said Oteh.
A restarting of the Abuja Securities & Commodities Exchange may be ready within 12 months, Oteh said.
“We’re prepared to give licenses to other people and we’ve had three companies approach us,” she said. “If you don’t have a commodities exchange you will not be able to leverage subsistence small-holder farmers” and provide consistency in pricing and quality, she said. terms of trying to aggregate, standardize, ensure that the quality is what it should be.’’
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