Amidst rising domestic costs, fluctuating naira exchange rates, and challenges in dividend declaration and tax payments, several large-cap companies listed on the Nigeria Exchange Limited (NGX) are considering leaving the market, raising concerns among equity market stakeholders.
Over the past 22 years, more than 120 companies have either voluntarily or regulatory delisted from the NGX, and the increasing frequency of such announcements or rumours is causing unease among analysts and investors.
Initial estimates suggest that approximately N182 billion in market value could exit the NGX due to potential departures by prominent companies like PZ Cussons (current price N20), GSK (current price N12.65), and Oando (current price N7.07).
This trend underscores several critical issues within the market, including the perceived lack of tangible benefits associated with being listed, difficulties in raising capital, relatively lower valuations of publicly-listed companies compared to their private counterparts, and challenges in determining exit pricing.
Many companies, particularly those with international interests, are opting for private status due to the opportunity cost of remaining listed on a formal exchange. Market analysts argue that this shift should be a cause for concern for NGX management and the Securities and Exchange Commission (SEC).
While these companies intend to continue operations within Nigeria, they seek the advantages of private arrangements, which offer more confidentiality and flexibility in managing profits to minimize tax obligations, thus avoiding the need for widespread distribution of local dividends.
To reverse this growing delisting trend and safeguard the interests of minority shareholders, several corrective measures are being considered.
These include revising listing regulations to enhance the quality of publicly-listed firms, providing support for companies through innovative equity funding programs, offering incentives such as corporate income tax (CIT) reductions to listed firms, and increasing the costs associated with delisting.
The issue of low exit pricing, which significantly impacts the value of investments held by minority shareholders, is a primary concern that calls for regulatory attention.
