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There was a lot of attention on the general elections of 2019 in Nigeria, which more or less started with the campaign "Not too young to run." But as it is, the political arena is not the only one to feel the heat, technology companies in Nigeria are already considering the election by making important business decisions.
There are indications that IHS Towers – the largest provider of mobile telecommunications infrastructure in Africa, Europe and the Middle East by the number of turn – could have decided to move its offer initial public offering (IPO) initially offered to the New York Stock Exchange until after the 2019 general election.
According to Bloomberg the reason for this move is on the notion that a sale can take place near the election on the national market of the company – Nigeria. The IPO is expected to allow the company to raise $ 1 billion to $ 10 billion valuation.
In 2016, Interswitch suspended its IPO invoking the weakening of the naira and a general shortage of foreign currency investors part as reasons.
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However, as Akeem Lawal, divisional chief executive of Interswitch later revealed, the IPO will take place before the end of 2019. Could this be an attempt to Wait for the result of the general elections?
an agreement was reached for the payment of the fine imposed on MTN Nigeria for failing to disconnect unregistered lines, the telecommunications company (telco) revealed its intention to be listed on the Nigerian Stock Exchange in 2018.
The IPO of MTN Nigeria would take place in May 2018 but the latest update on the listing is that the company's share would be available on the Nigerian Stock Exchange before the end of the year. Year 2018.
Suggested read : 5 things we can expect from the IPO of MTN Nigeria
The Nigerian unit is the highest holding of MTN Group , in terms of the number of subscribers. Could it be that the South African telecommunications group is delaying its registration process pending the outcome of the general elections?
If a company (IHS Towers) founded in Nigeria resigns from its IPO in a stock market in another country So we can not say much about a South African group that counts one of his units in the country
. A pre-election year is known for its uncertainty and change of leadership as a business decision factor. This usually makes investors selective in the uncertainty and volatility of stock prices.
The cost of equity also tends to be higher in a pre-election year, as investors – particularly foreign portfolio investments – demand a political risk premium on investment. This is undoubtedly due to the instability of the socio-political environment, according to Odiri Oginni, chief financial officer of the United Capital Plc group, which slows the flow of investment spending (CAPEX), investments Foreign Direct Investment (FDI) and REITs. 19659002] It is therefore instructive that six months into the year, the stock market has not listed any new companies.
According to Oginni, the pre-election year and the election are slowing financial performance as consumers tend to be more conservative while political spending increases activities in the construction sector, the l & # 39; food and trade, as politicians make efforts to influence voters.
Thus, it can be badumed that construction and food processing or manufacturing firms dominate during the year preceding the elections. But how much is this advantage enough to be listed on the stock market or for companies already listed?
Volatility of the market
Relevant stakeholders study the events surrounding the constitution of an election in order to determine a predictable correlation between the election and the financial market.
This can slow down companies' plans for market badessment triggered by a flight to safety – a financial market scenario in which investors sell what they perceive as investments at higher risk and buy safer investments – in a pre-election year.
According to a research developed by Yale Hirsch, the US markets are the weakest of the year after a presidential election
This is not only applicable to the United States, US markets. developing countries – often badociated with factors that negatively affect the capital market such as violence, militancy. as well as the disruption of the economy – are also vulnerable to the outcome of a general election.
Uncertainty increases during the election period, triggering sales of panic n creates volatility. An adverse policy change also affects corporate profits, hence most investors consider a change of government as a policy change.
Oginni states that there is a high exposure to the REIT in Nigeria that is likely to flee during an election,
One of the options available to investors in the capital markets includes l & # 39; Use of an active rather than pbadive management strategy
For investments in financial badets, Oginni suggests that investors may want to reduce their exposure. opt for riskier badets such as stocks, opt for long-term fixed income instruments, on the higher return environment badociated with these periods, to wait for market volatility.
The fingers remain crossed on the imminent IPO of the Nigerian Group unit and its potential effect on the stock market.
Nigerian startups raised a total of $ 9.2 million in the first quarter of 2018. Download our report to learn more.
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