Investors bemoan huge losses, capital flight from delisting of 27 firms

•Urge govt to rev up ease of doing business

Capital market shareholders have bemoaned the number of companies delisted from the exchange in five years, leading to huge capital flight amid a general downturn in economic activities.

They, therefore, urged the government to adopt a holistic strategy that would accelerate commitment in the ease of doing business in Nigeria and reduce operational costs.

The investors, apparently irked that 27 companies were forcefully delisted from the Nigerian Exchange Limited (NGX) between 2016 and 2021 in a new data from the Exchange, maintained that for Nigeria to become a strategic economic frontier in sub-Saharan Africa and across the globe, it must have a vibrant manufacturing sector that would spur activities in the stock market as most of the delisted firms cited harsh economic climate.

NGX data showed that 14 firms underwent regulatory delisting in 2016, four in 2017, two in 2018, two in 2019, one in 2020, and four in 2021.

A regulatory delisting happens when a company is forced to delist itself from an exchange due to failure to meet the post-listing requirements of the exchange.

The shareholders noted that the Nigerian manufacturing sector currently experiences monumental challenges and constraints responsible for lower productivity, output and increased cost of doing business.

According to them, this has continued to depress the profit margins of these firms and impede their growth.

Some of the 27 companies include Costain West Africa, MTECH Communication, MTI, and Nigerian Ropes, with market capitalisation valued at N2.4 billion, N4.5 billion, N2.4 billion and N1.9 billion.

The stakeholders argued that while the market capitalisation of the NGX is currently upbeat due to price appreciation from a few companies dominating the market, especially the telecoms firms, other stocks have consistently recorded price depreciation.

They noted that if the manufacturing sector of any economy did not record significant improvement, companies operating in the environment would find it difficult to grow and make a profit. This is expected to continue to reflect on the company’s financial performance and share prices in the stock market.

President of Ibadan zone Shareholders Association, Eric Akinduro, lamented that many of the moribund companies that could not survive the current harsh operating environment were investors’ toast in the past.

He stated that shareholders are at the receiving end because regulatory action of delisting did not guarantee any compensation for investors, unlike voluntary delisting that occurs when a company decides to remove all its shares from the exchange and subsequently moves it to the NASD for trading.

He stressed the need for the government to focus more on creating an enabling environment and favourable policy needed to cushion the effect of macroeconomic headwinds on listed firms.

“The cost of listing and penalty payable should also be revisited as the country is passing through a difficult period and all these should be considered to keep companies alive on NGX.

“Before this delisting, investors keeping records must have known that such companies are not viable again, no financial report publication, no AGM, no dividend payment. Definitely such a company is comatose. Regulatory delisting is just to formalise its existence on NGX,” he said.

The President, Issuer and Investors Alternative Dispute Resolution Initiative (IIADRI), Moses Igrude, lamented that investors, especially domestic retail investors, always suffer significant losses whenever companies are delisted.

He, therefore, urged the government to pursue friendly policies and initiatives to push the market forward.

He stressed the need for capital market regulators to allow listed companies that are not meeting post-listing requirements to remain ‘public focus’, noting that institutional investors might develop an interest in such firms and decide to invest in them.

In addition, he warned that such actions are disincentives to market growth, stressing the need for regulators to review transaction costs and grant tax incentives to listed firms, to enable them to enjoy the benefits of being listed as obtainable in the global market.

National Coordinator of New Dimension Shareholders Association, Patrick Ajudua said: “I believe that for efficient and proper protection of investors, the exchange must carry out its legitimate duty by ensuring that companies that vehemently refuse to comply with post-listing rules are shown the way out.”