Some financial experts on Wednesday attributed the disappearance of Initial Public Offerings (IPOs) on the Nigerian Stock Exchange (NSE) in recent years to the poor state of the economy.
The experts told the Reporter in Lagos that IPOs could only thrive in an environment where the purchasing power of the people was high.
The news reports that IPO is the very first sale of a company’s stock to the public.
The news reports that in spite of emergence of the NSE as the third best performing stock in the world in 2017, it recorded no IPO during the period.
Mr Oscar Onyema, the NSE Chief Executive, confirmed recently in Abuja that IPO activity on the NSE during the period was “mute”.
Onyema said that although the IPO segment was stagnant, activity at the equity segment of the NSE increased by 121 per cent to N1.27 trillion in 2017 from N0.58 trillion in 2016.
Dr Uche Uwaleke, the Head of Banking and Finance Department, Nasarawa State University, Keffi, said that IPOs could only be successful when an economy was doing well.
He said that the success rate of an IPO would be limited in an economy characterised by weak aggregate demand because the cost of IPOs were high due to high cost of underwriting.
Uwaleke advised that government should ensure that all its ongoing projects were completed to strengthen the economy to boost the success of IPOs in the country.
Prof. Sheriffdeen Tella, a Professor of Economics, Olabisi Onabanjo University Ago-Iwoye, Ogun, said that the prospect of IPOs would be higher if the current growth in the capital market and economy was sustained.
He said that with stronger economy, many new companies would enter the stock market for long-term financing to expand their businesses.
According to him, this will make the stock market regain confidence of investors.
Source: The Nation