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Rights issue spurs resurgence of primary market activities


According to them, if the trend is sustained, the multinationals and small-scale businesses that are not listed may approach the stock market for listing, further contributing to market growth.

• Five firms to raise over N200 billion in 2017

Capital market experts have expressed optimism that the high level of participation from investors in the on-going right issues of some quoted companies on the Nigerian Stock Exchange (NSE) would stir up activities in the primary market segment as well as spur the revival of public offers.

They argued that the recent resurgence recorded in the primary market in terms of activities, is an indication that the investing public is gradually coming back to the market, largely due to reforms in the secondary market, which has attracted both foreign and local investors to the market in the past few months.

According to them, if the trend is sustained, the multinationals and small-scale businesses that are not listed may approach the stock market for listing, further contributing to market growth.


A rights issue is an offer of new shares from a company to its existing shareholders on or before a prescribed date in proportion to their existing equity holding, and is priced at a discount to the market price of the stock as an incentive to the shareholder to buy them.

Last month, market indices appreciated by 7.68 per cent. The last time the stock market recorded such improved performance since after the global recession was in the week ending April 2, 2015. The index then closed with a week to date gain of 18 per cent, valued at a whopping N2 trillion due to expectations that followed the election of President Muhammadu Buhari.

Indeed, about five companies listed on the Exchange plan to expand their businesses through right issues in this financial year to the tune of over N200 billion altogether.

Specifically, Lafarge Africa N140 billion rights issue is expected to attract patronage from investors and ‘tickle’ their appetite to invest. The Chairman of the company, Bolaji Balogun, while addressing shareholders during an investors’ forum in Lagos, recently, explained that the move will help reduce its debt profile, improve cash flow and position the firm for future expansion.

Similarly, Union Bank recently received shareholders approval to raise N50 billion through rights issue. The offer, expected to launch before end of this quarter, according to the Chief Executive Officer, Emeka Enuma, would be used to finance its growth strategy.

For Wapic insurance, its N10 billion rights issue is a proactive step towards getting the company ready and set for a much-anticipated regulatory increase in the minimum capital of insurance companies. This, according to Wapic Chairman, Aigboje Aig-Imoukhuede, is particularly instructive in view of the recent adoption of the Risk Based Supervision model by the National Insurance Commission (NAICOM), and the directive to insurance companies to implement the Solvency II Capital Allocation model by 2018.

The proceeds from Livestock Feeds’ N730 million rights will be deployed as working capital to enhance its profitability. The company chairman, Larry Ettah, expressed optimism on the success of the offer, noting that the market is beginning to record some activities in the primary market segment.
C and I Leasing is also seeking N100 million additional capital to expand its fleet operations.

The Group’s Chief Finance Officer (CFO), Alex Mbakogu, while addressing investors at an investors’ forum recently in Lagos, said the Group will be raising more capital from its already multiple contracts with the International Oil Companies (IOCs) on its offshore support vessels and related marine services.


Furthermore, he added that the company plans to raise the money at a time when its businesses are on the trajectory of growth.
Public offers at the NSE had dried up since the recession, just as low equities’ prices and poor investor confidence had discouraged firms from raising capital in the public market.

Also, activities in primary market section of the Nigerian capital market in the last five years have been on parallel level, as the market recorded zero Initial Public Offers (IPO) since 2008.

Reacting to the development, a market consultant with Delloit Investment Limited, Tunde Oyediran, said the recent improvement in the stock market would revive the primary market, noting that it is an indication that investors are regaining their confidence in the market.

He pointed out that the impact of the primary market activities on any market cannot be over-emphasised, adding that it deepens and expands the market, as witnessed in 2010, with the introduction of Dangote Cement. This, according to him, has contributed to increase in the market capitalisation and overall growth of the market.

“This signal is good for the market; no capital market in the world grows the market only on secondary market activities. The recent increase in activities through right issues of companies is an indication that investors have realised the importance of long-term investment in good companies that have future prospect.

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