Bismarck Rewane, Managing Director of Financial Derivatives Company (FDC), has projected that the planned initial public offering (IPO) of the Dangote Petroleum Refinery could significantly reshape Nigeria’s capital market. According to him, the listing has the potential to push the Nigerian Exchange (NGX) market capitalisation from about N161 trillion to as high as N236 trillion.
Rewane made the projection while speaking at the June edition of the Lagos Business School (LBS) breakfast session, where he analyzed the possible market impact of the refinery’s expected $50 billion valuation. He explained that in a “pure addition” scenario, the inflow from the listing could trigger a proportional re-rating of the All-Share Index (ASI), reflecting a major uplift in market value.
The economist noted that the refinery IPO could inject between N60 trillion and N75 trillion into the market, based on an exchange rate of about N1,385 to the US dollar. He added that this could translate into a market capitalisation increase of roughly 37 to 47 percent, with the ASI potentially gaining between 30 and 40 percent if conditions remain stable and investor participation is strong.
However, Rewane cautioned that the market reaction may not be immediate or linear. He explained that liquidity pressures could cause an initial dip in the ASI, as retail investors—who make up a significant portion of NGX activity—may sell off blue-chip stocks to fund participation in the IPO. He also pointed to broader macroeconomic pressures, including inflationary effects from global geopolitical tensions, as factors that could temporarily weigh on the market.
Ultimately, he said the true impact of the Dangote Refinery IPO would depend on how much new capital enters the system versus how much is simply reallocated within it. Aliko Dangote, President of the Dangote Group, has indicated that the refinery IPO could take place as early as September, with investor demand already running into billions of dollars ahead of the listing.
source: The cable