Market Rally Boosts Prospects of Equities Capital Raising

The recent rebound in the Nigerian equities market has increased prospects of companies considering raising funds through public offering of shares to finance their expansion and other projects.

For more than three years that the market has performed negatively, companies moved away from raising funds through sale of shares to members of the investing public. The companies stayed away from equity capital raising due to fear of poor response from investors. Those who dared the equities market did so through rights issues, which, in most cases, recorded partial success. Most of the companies have been resorting to the domestic and international debt markets.

However, the rebound in the market that has led to a significant rally, making the market to record a year-to-date growth of 23.6 per cent as at Monday, has opened a window for companies to raise equity capital to boost their operations.

A top official of a leading issuing house in the market, who spoke to THISDAY, said some companies were already considering raising additional funds via equity capital.

“Because of the bear run that persisted in the market for a long time, some of the companies went for debt capital, which is very expensive compared to equity capital raising. However, the positive investor sentiments seen in the market in recent time is making some of them to consider issuing shares not only to existing shareholders but also to new ones,” the broker said.

According to him, if the bull-run continues for more months, some public offerings will be seen in the market soon.

Analysts at FSDH Research said recent developments show that confidence is returning to the Nigerian economy and the risks are waning.

The analysts explained that recent economic challenges and the high interest rate on debt securities in Nigeria had imposed limitations on companies’ ability to issue debt capital to fund expansion.

“As the economy is gradually exiting the current recession, there would be a need for companies to expand production capacities. Thus, the current rally in the equity capital