Investors wary of increased capital flights from NGX

. Urge govt to prioritise manufacturing

Experts have bemoaned increased capital flights and huge loss of investment incurred by investors due to the voluntary delisting of firms, especially companies in the manufacturing sector.

They urged the government to adopt a holistic strategy that would help unlock rapid development in the productive industry and increase the sector’s contribution to the nation’s growth.

Irked by a fresh delisting announcement from Greif Nigeria Plc, with capitalisation of N232 million, stating that it is currently finalising its delisting process from the Nigerian Exchange (NGX) after resolving outstanding tax liabilities and other debts, the investors urged the government to prioritise the manufacturing sector and tackle problems impeding the growth of firms operating under the sector to enhance competitiveness.

Greif Nigeria Plc is a firm that specialises in the production and marketing of steel drums, plastic containers, and sheet metal products. The company also provides services such as steel punching and aluminum welding.

The company acknowledged the challenges facing the business, citing increased competition and a stagnant market for steel drums. The firm claimed to have been operating below costs, even below direct material costs and sees no signs of the improved market condition as a result of increased competition and a stagnant market for steel drums.

“We do not see an improvement happening soon. The company, which was listed on the NGX in 2011, has experienced a prolonged decline in its stock performance, dropping by 57 per cent from N13 at listing to N5.45,” it stated.

Checks showed that between 2015 and 2020, 36 firms valued at N253.6 billion delisted their shares from the daily official list of the NGX, implying a huge loss to investment, especially to retail investors.

In 2023, four listed firms with a combined capitalization of N127 billion pulled out from the stock market voluntarily. Many of these firms cited the harsh operating environment and infrastructure challenges facing the productive sector.

The shareholders stated categorically 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 continue to spur activities in the stock market.

According to them, if the manufacturing sector of any economy does not record meaningful improvement, companies operating in the environment will find it difficult to grow and make a profit which would impact negatively these firms’ performance and share prices in the stock market.

A member of the Exceptional Shareholders Association of Nigeria, OlugbosunAriyo, said the delisting of Greif Plc from the stock market is an indication of the tough environment faced by Nigeria’s manufacturing sector.

According to him, high operational costs, particularly due to unreliable power supply, difficulties in accessing foreign exchange, and poor infrastructure, are driving many companies out of the market.

To address this, he suggested that the government should focus on providing affordable and stable power electricity, improving access to forex, and upgrading critical infrastructure. He pointed out that tax incentives and clear regulations would also ease the burden on manufacturers.

In addition, he said with targeted interventions, the sector can regain its competitiveness and reduce the rate of company exits. President of the Ibadan Zone Shareholders Association, Eric Akinduro, decried the huge losses investors have incurred in the last few years due to the rising trend, noting that the most worrisome is the sharing formula, where investors are left with no option but to offer their shares at discount.

He argued that aside from the harsh operating environment that is currently hitting hard on the manufacturing firms, the directors of these companies are not proactive enough to restrategise and leverage opportunities in the sector to grow their businesses.

“The company reported that it is going to suspend its operations due to low performance and several other market challenges. The operation and performance of the company are quite below operating and material costs.

“The economy is very unfriendly due to the high rate of inflation and cost of doing business. Essential facilities and enabling environments for businesses to thrive are not available. Companies are just struggling to make it in this country.

“But the directors of some of these firms are not proactive enough to take decisive measures before things get out of hand and become a problem. They are not thinking outside the box to tap into opportunities outside their core business. Moving out of their comfort zone is difficult for them. They keep doing the same thing in the old way and expecting positive results, but it cannot work.” He called for government intervention in key sectors of the economy, especially in the areas of improving the ease of doing business.