Listing of oil companies to boost stock market by N45.58trn
December 5, 2011
The market capitalisation of the Nigerian Stock Exchange could be boosted by N45.58 trillion ($303.37 billion) should petroleum companies operating in the country be listed on the local bourse, as canvassed by notable Nigerians. As at November 29, 2011, market capitalisation was N6.29 trillion, while the all share index was 20,000.26 basis points.
But a study by an investment firm shows that the listing of Shell Petroleum Development Company (SPDC), quoted in the Netherlands, its home country, could grow the Nigerian market by N7.63 trillion ($90.24 billion). The listing of Total Upstream, based in France, would add N4.15 trillion ($27.29 billion) to the market.
Conocco Petroleum, quoted in the New York Stock Exchange, would add N3.41 trillion( $22.76 billion); Petroleo Brazileiro Nigeria, based in Brazil N3.41trillion( $22.76 billion); Syntroleum N3.37 trillion ( $22.52 billion); Statoil Nigeria N2.78 trillion ( $18.58 billion); Exxonmobil (USA) N13.53 trillion( $90.24 billion); Chevron Nigeria, N6.99 trillion ($46.62 billion).
These oil companies are quoted in their home countries and on the New York Stock Exchange and the study was based on the assumption that the Nigerian subsidiaries accounted for 25 percent of the companies’ market capitalisation and exchange rate of N150/ $.
The listing of these companies is expected to offer Nigerians the opportunity of being co- owners and sharing in the huge earnings. These oil companies which make so much money, using infrastructure built with tax payers money, repatriate a large proportion of the profits back home.
By listing on the local bourse, they would be deepening the market and enhancing the process of capital formation and economic development.
The House of Representatives Committee on Capital market has promised to get the energy sector and its players listed on the bourse of the Nigerian Stock Exchange, while efforts will be made to ensure the passage of the Petroleum Industries Bill. According to Herman Hembe, who is chairman of the Committee, the legislative house will partner with relevant stakeholders to speed up the passage of the Petroleum Industries Bill, to foster subsequent listing of major upstream players, the NNPC and all other operators in the oil and gas sector.
Hembe however pledged that this would be done through formal and contractual requirements , supported by incentives, unbundling of stringent eligibility requirements, which create high barriers for potential entrants and hinder participation by willing businesses, as well as adoption of options that promote foreign investment in our economy under terms that support our national interests.
The committee believes that the measures will rapidly grow the economy by ensuring that substantial wealth is generated and stays in Nigeria. It further said 1that such a move would grow the market and reduce corruption.
But Sanusi Lamido Sanusi, governor of the Central Bank of Nigeria (CBN) is of the view that a more drastic approach should be adopted to get these companies to list. Sanusi would prefer that government should take a firm stand and institute a policy compelling the multinationals to either participate in the capital market, or leave the country.
“But the question is, why can’t we have a law that will compel companies like MTN, Globacom and Shell to list on the Nigerian Stock Exchange? There is absolutely no reason. They don’t need to own 10 per cent of their companies and they don’t need to be held closely by a narrow range of Nigerians’, Sanusi said at the just concluded economic summit.