Economic Recession Dims Hopes of New Listings on NSE


Goddy Egene

The current economic recession has forced companies to delay the listing of their shares on the Nigerian Stock Exchange (NSE) market sources told THISDAY on Monday.

The NSE provides relatively cheaper access and great visibility to companies and the management of the exchange has in recent years stepped up efforts to attract new listings.

While the NSE has said there is pipeline of companies willing to list, THISDAY checks showed that the tough economic situation has dimmed the hopes of new listings in the market.

Before now, the market sources had cited persistent bearish trend that has depressed the share prices of most stocks as discouraging new companies from listing on the NSE.

They also said the fear of erosion of value as experienced by two companies that were listed two years ago was discouraging new listings.
However, economic recession has further dimmed the hopes of seeing new companies coming to list on the exchange.

A market operator told THISDAY that companies that had earlier shown interest to list are now having a change of mind.

“Last year, we had about two companies that gave us assurance to list after realizing the benefits they stand to get from the market. But the companies are no longer forthcoming. They have asked us to wait because of the current economic situation,” the operator said.

Another source said no company would be courageous enough to list on the NSE now because listing also comes with serious responsibilities and obligations that the current economic situation may not allow them fulfill.

THISDAY had last May reported how the unprecedented decline in the shares of Seplat Petroleum Development Company Plc and Caverton Offshore Services Group Plc two years after listing.

“The management of the NSE has brought innovations to the market capable of attracting new listings. But many of them are afraid of value erosion after listing given the current bearish trend. The situation is worsened by the rate at which the shares of Seplat Petroleum Development Company Plc and Caverton Offshore Services Group Plc that were listed two years ago fell,” a stockbroker e had said.

Seplat and Caverton were listed on the NSE on April 14 and May 20, 2014 respectively. Seplat was listed at N576 per share while Caverton listed at N9.50.

Two years after, value of the shares has fallen significantly, with Caverton declining by 92 per cent. The stock closed at N0.73 last Monday.

Caverton, which provides marine, aviation and logistics services to local and international oil and gas companies in Nigeria, recently reported a loss of N2.422 billion for the half year ended June 30, 2016, compared with a profit of N1.093billion in the corresponding.

The company had sent a profit warning saying it would report lower earnings for the H1 of 2016. Caverton had explained that the lower earnings resulted largely due to the unavoidable impact of the recent Naira devaluation which took place within the second quarter of the year.