Harrison EDEH
THE Securities and Exchange Commission’s approval of the Dangote Petroleum Refinery’s planned initial public offering (IPO) has given Nigeria’s stock market another major catalyst, with investors already showing stronger appetite for equities ahead of the offer.
SEC approved the sale of 4.1 billion ordinary shares at ₦525 each, which could raise about ₦2.15 trillion if fully subscribed.
The approval also registered Dangote Refinery’s existing 120.13 billion shares, clearing the way for the company to proceed with the next stage of the offer.
The development came as the Nigerian Exchange Limited (NGX) recorded a strong performance in the week ended September 4, with the All-Share Index (ASI) rising 2.36 per cent to 246,992.44 points. The market value also increased by 2.40 per cent to ₦159.56 trillion.
The market’s response was particularly strong on Friday, September 4, following the announcement of the SEC approval.
Advocate Times reports that trading activity during the week also increased sharply, with 4.36 billion shares changing hands, up 73.91 per cent from the previous week, while the value of transactions rose 70.69 per cent to ₦210.33 billion.
The oil and gas sector, which could benefit most directly from renewed investor interest in the refinery story, led the sectoral rally with a 9.10 per cent gain.
Banking stocks rose 3.58 per cent, consumer goods gained 3.52 per cent, while insurance stocks advanced 3.85 per cent.
The strong market performance suggests that the Dangote Refinery listing is arriving at a time of renewed investor interest in Nigerian equities.
For Nigerians looking to participate, the IPO offers an opportunity to own a stake in one of the country’s biggest industrial projects, rather than gaining exposure only through companies that may benefit indirectly from the refinery.
According to Dangote Refinery, the SEC approval “clears the refinery’s draft offer documents and authorises the company to proceed with its Completion Board Meeting and Signing Ceremony, marking a significant milestone in the IPO process.”
“According to the Commission, the proposed offering comprises 4.1 billion ordinary shares at ₦525 per share, with the potential to raise approximately ₦2.15 trillion if fully subscribed. In addition, the SEC has registered the company’s existing 120.13 billion ordinary shares,” it noted.
The company expects that the public offer will create an opportunity for wider investor participation in the refinery, which currently has a capacity of 700,000 barrels per day and is being expanded to 1.4 million barrels per day.
Aliko Dangote, chief executive officer of Dangote Group, said on Thursday, September 3, that the IPO would open within the next 10 to 12 days.
The size of the offer makes it significant for both investors and the wider market. If fully subscribed, the ₦2.15 trillion raise would rank among the largest capital-raising exercises in Nigeria’s history.
However, analysts caution that investors should look beyond the excitement surrounding the listing and consider the refinery’s longer-term performance.
Ifeanyi Ubah, chief investment officer at VNL Capital, said the refinery’s biggest potential impact would come over time through its effect on fuel imports, exports, savings and the wider economy.
“So obviously, because of the capex spend, we might see a slowdown in profitability, but the major goal is the trickle-down effect of this particular refinery,” he said.
He maintained that the refinery’s contribution should not be judged only by its direct impact on economic growth.
“The focal point and multiplier effect really is more long-term,” Ubah said.
According to him, reducing Nigeria’s dependence on imported fuel and increasing exports could generate wider benefits for the economy by reducing pressure on foreign exchange and improving economic stability.
The market’s strong performance also comes against the backdrop of growing investor confidence.
Analysts at Cowry Asset Management, in their weekly report, stated that they expect the Nigerian equities market to remain positive, although investors could become more selective after the market’s strong gains this year.
“Looking ahead, we expect a cautiously bullish outlook for the Nigerian equities market, supported by renewed buying interest and positive investor sentiment following the confirmation of Nigeria’s FTSE Russell reclassification,” the analysts said.
However, they warned that “given the market’s strong YTD performance, some profit-taking and short-term volatility may emerge.”
For retail investors, the Dangote Refinery IPO therefore offers a new route into the country’s capital market, but the size and popularity of the offer also mean that investors will need to assess the company’s long-term earnings potential rather than simply follow the market excitement surrounding the listing.
With the SEC approval now secured and the offer expected to open within days, the Dangote Refinery IPO is set to test how much appetite Nigerian investors have for owning shares in one of Africa’s largest industrial projects.
