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Slow-down in rights issuance of listed companies on the Nigerian Stock Exchange (NSE) market in the first quarter of 2019 is a mere reflection, amongst other factors, the struggling state of the Nigerian economy and current trend in the Nigerian equity market.
So far into 2019, the NSE approved two rights issues by Fidson Healthcare Plc and Sovereign Trust Insurance with total issues valued at N5.08 billion in January respectively.
This is low compared to N90.6 billion worth of right issues recorded in the first quarter of 2018 when the economic grew 1.95 percent and all share market index picked up 8.52 percent before factors surrounding political uncertainty began setting in.
Analysts believe that slow-down in economic activities in Nigeria could see companies not motivated to raise more funds for expansion purposes except for the reason to clear up debt obligations, especially with companies having high leverage ratios.
Evident in the Nigerian GDP report released by the National Bureau of Statistics (NBS), since the country exited recession in the second quarter of 2017, GDP growth has barely struggled to hit a 2 percent growth.
While investors on the Nigerian stock exchange (NSE) market may have watched values for their investments erode due to the persistent bearish trend in the equity market space, listed companies are also faced with the challenge of persuading shareholders to subscribe cash for new issues due to lower share price levels.
Current bearish trend in the market may see companies apply brake on the move to raise more cash either to settle debt obligations or for expansion through rights issue this year as against the year 2018.
The year 2018 recorded rights issues which amounted to N237.6 billion initiated by 6 companies listed on the exchange as stated on the X-compliance … Read More...