• As investors urged the govt to enter the capital market devt
Parlous infrastructure, lack of foreign exchange (forex), various taxes, etc. have been linked to the rising cases of companies being removed from the Nigerian Exchange Limited (NGX), especially in the manufacturing sector as investors at the weekend, charging the incoming government did not. to handle the problems of the capital market with levity.
Investors are calling on the government to commit to creating policies that will reduce the appetite of operators in the sector and make the sector more competitive.
In addition, he asked the government to use the capital market to provide the necessary funds to finance energy, transport and social infrastructure projects at the federal and state levels, exceeding the budget.
Investors, who argued that the government exit witnessed the largest number of unlisted companies, said it was a ‘colossal’ loss for the market and shareholders.
According to them, there is a need for the incoming administration to vigorously pursue the development of the manufacturing sector and increase the nation’s productive capacity to boost the performance of listed companies.
He noted that if the manufacturing sector of any economy does not record significant improvements, companies operating in the environment will find it difficult to grow and profit. And this will have a multiplier effect on the company’s financial performance and share price in the stock market.
Indeed, no fewer than 44 companies valued at nearly N350 billion were delisted from the daily official list of the Nigerian Exchange Limited (NGX) between 2015 and 2022, a major blow to the capital market during the period.
Of the 36 companies between 2015 and 2019, 25 were forcibly delisted by NGX for not complying with post-listing requirements on the exchange, eight exited voluntarily, while three chose to merge.
For example, Diamond Bank and Ashaka Cement, with market capitalizations of N56 billion and N38.1 billion, were delisted on a merger basis while Seven up Bottling Company, Cappa and D’Alberto, IHS exited voluntarily with N52.2 billion, N18.7 billion and N16.7 billion market capitalization.
Costain West Africa, MTECH Communications, MTI, and Tali Nigeria, with market capitalizations of N2.4 billion, N4.5 billion, N2.4 billion and N1.9 billion, were forcibly removed by the NSE. But the exchange only listed seven new companies during the period.
In 2020, AG Leventis was removed from the official NGX daily list, while five companies were removed in 2021. These companies are: Portland paints and Products Plc, Unic Diversified Holding Plc, Nigerian-German Chemicals Plc, Evans Plc and 11 Plc. Union Diagnostics and Clinical Services Plc and Studio Press Plc will also be removed in 2022.
The declining fortunes of these companies are due to the loss of competitiveness in the manufacturing and marketing of consumer goods. Many have a weak domestic base and rely heavily on imports to survive.
For example, the Chairman of AG Leventis, one of the companies that was voluntarily delisted from the exchange in the conglomerate sector, Ahmed Kazalma Mantey, has stated that the effects of the 2016 recession have a detrimental impact on operations, because there is a reduction in credit. opportunity, which is affected by income.
“This harsh environment together with ongoing infrastructure, especially the power grid and roads, increases the cost of doing business. However, we strive to continue to grow our business as much as possible.
A two-year review of some manufacturing stocks shows that in the agricultural sub-sector, Ella Lakes which was at N4.25 kobo in September 2021, closed at N3.96 kobo on Friday, March 17, 2023 while FTN Cocoa declined. from 48 kobo to 28 kobo. Livestock Feed also shrank to N1.09 kobo from N2.23 kobo recorded in 2021. In the Food products sub-sector, the National Salt Company of Nigeria (NASCON) during the period shrank from N15.20 kobo to N12.20 kobo. Union Dicon Salt also stood at N8.95 kobo from N9.90 kobo to reach in 2021. Honeywell flourmills also fell from N3.83 kobo to N2.25 kobo.
For Diversified Food products, Nestle also reduced it to N1,080.30 kobo from N1,489.00 in 2021.
Analysts, operators and investors have bemoaned the huge flight of capital and the number of companies delisted from the exchange in the period in the middle of the general downturn in economic activity, stating that most of the companies delisted from the exchange are the harsh economic climate.
Therefore, the shareholders reiterated that the government should create a viable manufacturing sector by addressing the issues that affect the achievement of employment potential and reduce poverty in order to increase the country’s GDP.
Some of the challenges faced by manufacturers include, difficulty in accessing foreign exchange (forex) to obtain raw materials, high cost of electricity/power, and high cost of transportation.
Others include: low demand for commodities; difficulty in accessing funds; regulatory issues from numerous regulatory agencies; poor port administration and unavailability of raw materials; wisdom somersaults.
The President of New Dimension Shareholders Association, Patrick Ajudua said the outgoing administration failed to harness the potential of the capital market and benefit from it.
He lamented that while the current market capitalization of NGX is optimistic with the price appreciation of some dominating companies, especially telecommunications companies, other stocks are constantly recording price depreciation.
Ajudua emphasized that the government needs to address the multiple tax issues that continue to have a negative impact on manufacturing companies and listed companies.
Furthermore, he asked the government to provide foreign exchange to producers so that foreign investors can return dividends and reduce the amount of unclaimed dividends in the capital market.
According to him, failure to achieve this will increase the apathy of foreigners in the market and push local investors away from multinational companies operating in Nigeria.
“Hopefully, we pray that the incoming government will see the direction of the capital market as an engine of economic growth and infrastructure development. Therefore, the government should look at the direction of the capital market to raise funds for infrastructure and economic growth.
“Economic growth will reflect the well-being of citizens when people have enough to take care of their immediate needs, as well as have enough to save and channel it into investment.”
The National Coordinator of the Progressive Shareholders Association of Nigeria, Boniface Okezie admitted that the outgoing government has not shown much interest in capital market development.
However, he expressed optimism that the incoming government will use the market to raise capital and pursue other reforms that will benefit the market.
The President of Ibadanzone Shareholders Association in Nigeria, Eric Akinduro said the outgoing administration initiated many policies that have negatively affected the market.
He mentioned the creation of the Unclaimed Dividend Trust Fund (UDTF) where the N170 billion unclaimed dividend was remitted and managed by the Securities and Exchange Commission and the Debt Management Office (DMO).
According to him, the creation of a trust fund is not a disincentive for investment because the previous trust fund was destroyed by corruption.
He pointed out that the decision has damaged the confidence of retail investors and caused apathy in the market.
Akinduro called on the government to reconsider its stance on the issue and other decisions made in the past that have resulted in disincentives for investment and capital market growth.