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Nigeria Exchange to Lure 500 Companies in Next Five Years

The Nigerian Stock Exchange will target 500 companies for initial public offerings over the next five years as Africa’s second-largest bourse seeks to reach a $1 trillion market capitalization by 2016, the regulator said.

The exchange expects five companies to start trading their shares by year-end, Arunma Oteh, director-general of Nigeria’s Securities and Exchange Commission, said in an interview in London Oct. 18, without identifying the businesses. The bourse needs oil and gas, power and telecommunications companies to list stock to meet its market-value objective, she said.

“There are a number of large, significant companies that are preparing to come to the market,” Oteh said. Power producers needing funds to cover spending needs are expected to list “at some point,” while talks are being held with telecoms companies on encouraging them to trade their shares, she said.

The NSE’s All Share Index gained 33 percent this year, compared with a 1.3 percent decline in the MSCI Emerging Markets Index, for a market capitalization of $74 billion, excluding exchange-traded funds and depositary receipts. Nigeria’s economy, the continent’s second-largest after South Africa, which also has the largest stock and bond markets, may expand 6.75 percent next year, compared with an estimate of 6.5 percent in 2013, Finance Minister Ngozi Okonjo-Iweala said in an interview in Washington Oct. 11.

‘Ambitious Target’

“It is an ambitious target,” Pabina Yinkere, head of research at Lagos-based Vetiva Capital Management Ltd., said by phone today. “The NSE has to list large corporations. There has to be incentives to list and economic growth. The equity investment climate globally has to be right and favorable to the country. Some factors that will support the target are global in nature and outside the control of the NSE, making the realization even more challenging.”

While Nigeria’s Lagos-traded stocks also rallied last year, rising 35 percent, the gains didn’t translate into more initial public offerings. The number of listed companies declined to 194 in 2012, from 198 in the previous year, according to stock exchange data. The benchmark equities gauge of Africa’s largest crude producer is the 10th best performer among 94 indexes tracked by Bloomberg this year and fourth best in Africa after the key measures of Ghana, Kenya and Zambia.

Improved corporate governance standards and a consistent approach to market regulation will encourage more companies to sell shares, Oteh said.

Oil Listing

A dual listing planned by an oil exploration and production company will be “defining” and may encourage others to follow, she said. The Nigerian regulator approved the listing and is expecting consent by next month from the other exchange, Oteh said, declining to give details other than to say that the company has a track record of acquiring fields from international oil producers and making them viable.

Seplat Petroleum Development Co., which bought assets in the Niger River Delta from Royal Dutch Shell Plc (RDSA), plans a dual listing in Lagos and London, Lagos-based BusinessDay reported June 27, without saying where it got the information. Raising funds through the stock market is one of the options being considered by Seplat, Chioma Nwachuku, general manager of corporate affairs for the company, said by phone from Lagos yesterday.

The bourse’s $1 trillion target includes equities, ETFs and bonds, Oteh said. The stock exchange moved to Nasdaq OMX Group Inc. (NDAQ)’s trading platform at the end of last month, which will allow the bourse to trade options and futures.

The goal of increasing the number of listings from the 193 securities on the all-share index is only attainable if “there are incentives,” Bismarck Rewane, chief executive officer at Financial Derivatives Co., said by phone from Lagos yesterday. That includes “bringing down transaction costs, reducing taxes and also ensuring there’s enough investor funds,” he said.

Africa’s most populous country ranks 139rd out of 174 in Transparency International’s Corruption Perceptions Index, where lower scores signal increased graft.

To contact the reporter on this story: Maria Levitov in London at mlevitov@bloomberg.net

To contact the editor responsible for this story: Daliah Merzaban at dmerzaban@bloomberg.net

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