The recent wave of delistings from the Nigerian Exchange (NGX) by notable companies such as Flour Mills of Nigeria (FMN) and GlaxoSmithKline (GSK) has sparked conversations among investors, regulators, and market analysts.
While some attribute these exits to strategic business decisions aimed at attracting private equity investors, others blame bureaucratic delays and regulatory bottlenecks. Are these claims valid? How do these dynamics impact Nigeria’s capital markets and the broader economy?
Wave of delistings
The NGX saw an unprecedented wave of corporate exits in 2024, with about 16 companies either voluntarily or forcibly delisted due to strategic restructuring, operational challenges, or non-compliance with listing requirements.
Among the prominent departures are Nigerian Flour Mills of Nigeria (FMN), and GlaxoSmithKline Consumer Nigeria Plc, a move that underscores the shifting dynamics within Nigeria’s corporate landscape.
Flour Mills was delisrted after its majority shareholder, Excelsior Shipping Company Limited, extended an offer to acquire the shares held by minority stakeholders.
The transaction, structured under a scheme of arrangement in line with Section 715 of the Companies and Allied Matters Act 2020, enabled Excelsior to consolidate full ownership of the company.
Under the terms of the buyout, Excelsior acquired the remaining shares not already in its possession, offering minority shareholders a total exit package valued at N105.2 billion.
As of September 24, 2024, the core investor controlled a 63 per cent stake in Flour Mills, equivalent to 2.59 billion shares valued at N142.8 billion.
The transaction received final approval from the Securities and Exchange Commission (SEC) in January this year, culminating in Flour Mills’ removal from the NGX’s daily official list.
GSK Consumer Nigeria delisted its 1,195,876,488 ordinary shares from the NGX as part of a broader restructuring strategy.
The company’s decision reflects its ambition to streamline operations across Africa, focusing resources on markets with stronger strategic opportunities.
This move aligns with GSK’s global efforts to optimize its portfolio and drive operational efficiency. The NGX’s regulatory arm has not shied away from enforcing compliance standards.
In 2024, firms like Niger Insurance Plc, Resort Savings and Loans Plc, and RAK Unity Petroleum Plc faced forced delistings due to prolonged non-compliance and operational deficiencies.
The exchange cited these firms’ failure to submit audited financial reports and persistent underperformance as grounds for removal.
According to a statement by Godstime Iwenekhai, Head of Issuer Regulation at the NGX, “the delisting of these companies reflects their inability to meet the exchange’s stringent listing standards, making their securities unsuitable for continued trading.”
The wave of delistings has affected various sectors, from insurance to hospitality. Among the companies delisted in 2024 are Goldlink Insurance Plc, Medview Airline Plc, STACO Insurance Plc, and The Tourist Company of Nigeria Plc.
Most of these entities struggled with regulatory bottlenecks, liquidity crises, and operational inefficiencies. Medview Airline Plc, for instance, which stagnated at about N1.62 per share for two consecutive years, was delisted after prolonged stagnation.
The airline’s chairman, Sheikh Abdul-Mosheen Al-Thunayan, attributed its underperformance to political instability and tight liquidity.
Similarly, RAK Unity Petroleum Plc concluded its liquidation process in 2023 and no longer required a listing on the NGX. Other notable delistings, including Union Dicon Salt Plc and ASO Savings & Loans Plc, were tied to years of financial reporting deficits.
The delistings of 2024 serve as a stark reminder of the critical need for operational excellence, regulatory compliance, and robust financial management.
A push for private equity? Moses Igbrude, the National Coordinator of the Independent Shareholders Association of Nigeria (ISAN), provided an insider perspective at the recent annual conference of the Capital Market Correspondents’ Association of Nigeria (CAMCAN).
According to him, some companies delisted in order to facilitate the entry of private equity investors—a move allegedly hampered by the regulatory framework of the Securities and Exchange Commission.
“The process wouldn’t be fast or easy if they (delisted entities like FMN) remained listed on the exchange,” he argued, pointing fingers at regulatory delays as a primary obstacle. But are these delays a significant deterrent? Charles Fakhroha, a seasoned market practitio
The narrative surrounding delistings from the NGX reflects a broader conversation about the interplay between regulation and market efficiency
ner with nearly two decades of experience, contends that while delays occur occasionally, they are often necessary.
“There are processes to ensure due diligence and efficiency,” Fakhroha explains. “Regulators are tasked with safeguarding the market from risks like money laundering and terrorist financing. These checks are critical for maintaining a secure and efficient market.”
Delays
Critics argue that the regulatory environment in Nigeria can sometimes be cumbersome, discouraging companies from staying listed. However, Fakhroha dismisses the notion of systemic inefficiency.
“Processes have been streamlined for optimal performance,” he said. “Take, for example, a foreign portfolio investor. “They must go through steps involving stockbrokers, the Central Bank of Nigeria (CBN), and the Capital Importation Certificate.
These steps ensure transparency and compliance, not just in Nigeria but globally.” David Adonri, Principal Partner at Lagos based Highcap Securities Ltd., echoes this sentiment, emphasising that delisting often stems from strategic decisions rather than regulatory challenges.
“Companies are not obligated to disclose their reasons for delisting. However, the market remains robust, with new listings like Aradel Holdings, whose market capitalisation significantly surpasses all of the delisted firms put together,” Adonri noted.
Regulatory oversight and investment challenges A closer look reveals that the regulatory ecosystem is designed to balance market accessibility with security.
While these measures may introduce occasional delays, they also protect the economy. For instance, the anti-money laundering requirements enforced by the Nigerian Financial Intelligence Unit (NFIU) mandate that transactions exceeding a certain threshold must be reported for verification.
This process ensures compliance with global standards, albeit at the cost of added time. “Clearances by regulators like the Securities and Exchange Commission (SEC) and NFIU are necessary for maintaining market integrity,” Adonri remarked.
“However, these clearances do not imply significant delays for companies seeking investments,” he added.
Market dynamics
Despite the delistings, the NGX continues to attract new entrants. Companies like Aradel and the anticipated listings of Dangote Refinery and the Nigerian National Petroleum Company Limited (NNPCL) underscore the market’s resilience.
“The Nigerian capital market remains a viable platform for raising equity funds,” Adonri emphasised. “Recent public offerings by banks and some conglomerates like Nigerian Breweries Plc have been highly successful, demonstrating investors’ confidence in the market,” he said.
The bigger picture
While the regulatory environment may present challenges, attributing delistings solely to bottlenecks oversimplifies the issue. For many companies, delisting is a strategic move to align with evolving business goals, attract specific types of investors, or escape the scrutiny and obligations of being publicly listed.
At the same time, regulators must continue to strike a delicate balance between enforcing due diligence and fostering an investor-friendly environment.
Streamlined processes, transparent communication, and technological advancements can help bridge this gap.
Conclusion
The narrative surrounding delistings from the NGX reflects a broader conversation about the interplay between regulation and market efficiency.
While some stakeholders criticize delays, others see them as a necessary safeguard. Ultimately, the Nigerian capital market’s ability to attract and retain companies will depend on its adaptability, transparency, and capacity to address the concerns of both issuers and investors.
As new players prepare to enter the market, the growth prospects of the NGX appears promising—if it can navigate these complexities effectively.
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