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Nigeran Equity: Offering value despite the problems

Is the tide about to turn for the Nigerian Stock Exchange (NSE)? With major companies trading at very low P/E ratios, and with prospects of greater political stability, surely this is an emerging market that has been too long overlooked? Nigerian Bottling Company managers seem to think so. In March NBC did a N3.5 billion ($38 million) rights issue, Nigeria's largest ever.

Atedo Peterside, CEO at Investment Banking & Trust Company in Lagos which led the issue, says: "It was the first large-scale deal to be launched after February's presidential election. It was certainly at least in part a vote of confidence in the future ­ Nigeria's largest soft drinks company would hardly have been prepared to launch a jumbo rights issue if it had no faith in the political outlook."

But sceptics will require a lot more convincing. Despite being sub-Saharan Africa's largest equity market, the Nigerian Stock Exchange (NSE) has failed to live up to its potential. Set up in 1960 it has suffered from low volumes, poor liquidity, political interference and pyramid schemes. As of December 1998 its 186 listings had a combined market capitalization of N260 billion, just 7.87% of GDP.

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