A spectacular IPO in Nigeria

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Christian Hiller von Gaertringen

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The power company Geregu Power (ISIN: NGGEREGU0000) is the latest bet of Nigerian billionaire Femi Otedola. On 5 October, he introduced 2.5 billion shares of NGN 100 each (EUR 0.2344) on the Nigerian Stock Exchange (NGX) in Lagos. In the first trading hour, the share rose by 10% to NGN 110. At the end of the first trading day, the market capitalisation had jumped by EUR 123 million to EUR 709 million. Before this transaction, Otedola’s net wealth stood at approximately EUR 2 billion, according to the US magazine Forbes.

This IPO makes Geregu Power the first pure power company listed on the NGX. Its main asset is the gas power plant Geregu I next to the village of Geregu located on the banks of the Niger river, half-way between Port Harcourt and Nigeria’s capital Abuja. Prior to this transaction, Transcorp Nigeria (ISIN: NGTRANSCORP7), backed by Nigerian billionaire Tony Elumelu, was the only power share listed on NGX. But power generation represents just 86.5% of Transcorp’s net sales as the company also runs hotels. Elumelu acts as the chairman of the group and still owns 2.1% of the shares. However, this small stake is worth nearly EUR 2 million. The US magazine Forbes estimates Elumelu’s total wealth at EUR 710 million.

Femi Otedola, born in 1962, is one of Nigeria’s best-known businessmen. He was chairman of Forte Oil, an importer of oil products which has since been rebranded Ardova (ISIN: NGAP00000004), valued EUR 42.1 million on the equity market. He then founded Zenon Petroleum and Gas that controls a major share of the Nigerian diesel market and owns a large portfolio of shipping, real estate and finance. He is furthermore, thanks to a 5.1% stake, the single largest shareholder of First Bank (ISIN: NGFBNH000009). This participation alone is worth EUR 42 million.

Otedola used the proceeds of the sale of his Ardova stake to buy Geregu Power which generates electricity and owns a unit named Amperion Power Distribution. Beside Amperion, the Nigerian government still owns a 20% stake in the Geregu power plant.


African pension funds are turning to sustainable strategies

The Namibian Government Institutions Pension Fund (GIPF) announced last week to launch a responsible investment and active ownership policy to facilitate the integration and implementation of environmental, social, and corporate governance (ESG) considerations into the fund's investment activities, said Penda Ithindi, the chairman of GIPF’s investment committee at an event in front of asset managers working for the pension fund. The GIPF has an asset base of NAD 136 billion (EUR 7.7 billion).

“There is growing consensus around the importance of private investment to scale up sustainable development, for example, build new sustainable green buildings or transform existing buildings”, said Nilian Mulemi, the GIPF’s chairwoman.

Other institutional investors in Africa have already adopted responsible investing strategies. South Africa’s Government Employees Pension Fund (GEPF) e.g., claims since a couple of years to integrate ESG considerations. The GEPF is Africa’s largest pension fund managing assets worth ZAR 2.1 trillion (EUR 119 billion). Other large pension funds in the country are the Old Mutual Super Fund, the Sanlam Umbrella Fund, the Sentinel Retirement Fund or the Eskom Pension and Provident Fund. They are all committed to both, high financial returns and responsible investing.

Pension funds in Africa are experiencing high growth rates as retirement schemes become more important on the continent. According to an OECD report published in November last year, pension fund assets in Egypt grow by 8% to USD 6.2 billion (EUR 6.3 billion), in Ghana by 27% to USD 4.7 billion, in Kenya by 11% to USD 13.7 billion, in Namibia by 18% to USD 11.8 billion and in Nigeria by 9% to USD 32.6 billion – to give just a few examples. These inflows consist of capital market gains and of the payments made by public authorities in favour of their employees.

However, the sustainable investment strategies of African pension funds seem to diverge from responsible investing in the US or Europe. An active ownership and engagement seem to be more important than ticking off ESG criteria that investment targets should meet.


Alliances is a favourite on Casablanca stock exchange

In the midst of a stock market fraught with doubt and uncertainty, the Moroccan real estate developer Alliances Développement Immobilier (ISIN: MA0000011819) stands out. Since the beginning of the year, the share price went up by 78.5% to MAD 65.99 (EUR 6.13). In the past three months alone, the share price has risen by 24.5%.

In spite of a difficult business environment chairman Mohamed Alami Nafakh Lazraq who owns 51.7% of the shares announced in June a full order book. Alliances specialises in residential and tourism real estate projects such as residential complexes, villas, golf courses, hotels, economical and mid-level housing. Net sales are expected to increase to MAD 8 billion (EUR 743 million) in the next four years from estimated sales of MAD 1.6 billion (EUR 149 million) this year. The analysts of BMCE Capital Global Research estimate that net income will increase to MAD 11.20 per share in 2023 from MAD 5.40 in 2021.


Moody’s puts five listed banks in Tunisia under review

Bad news from the Tunisian banking sector drags the stock prices of the leading banks on Tunis stock exchange down. The shares of Arab Tunisian Bank (ISIN: TN0003600350) lost last week 2.9%, Banque Internationale Arabe de Tunisie (ISIN: TN0001800457) 4.5%, Société Tunisienne de Banque (ISIN: TN0002600955) 6.1%, Amen Bank (ISIN: TN0003400058) 1.2% and Banque de Tunisie (ISIN: TN0002200053) 4.7%.

The credit rating agency Moody’s placed on Wednesday last week the rating of these five banks under review in view of a possible downgrade. According to the rating agency, the main driver for this decision is the increasingly uncertain operating conditions in the country. Prior to this decision, Moody's had placed on 30 September the Government of Tunisia's Caa1 long-term ratings on review for downgrade. Tunisia's elevated government liquidity risks and fragile external position raised the risk of default.