Nigeria and Africa’s largest mobile network, MTN revealed this week that it was going to list on the Nigerian Stock Exchange sometimes in 2017. The news was welcomed by a lot of Nigerians considering the impact this will have on investments in Nigeria.
To get a sense of how big deal this could be, MTN Group is currently valued at about $18 billion. MTN Nigeria is said to contribute about 40% of the group’s profits, thus one can infer that MTN Nigeria could be worth about $7.2 billion. The Nigerian Stock Exchange on the other hand is valued at about $32 billion. Based on our back of the envelope calculation, MTN listing on the Nigerian Stock Exchange will increase the NSE market value by about 22%.
But that’s not all there is to the effect of a possible listing of MTN on the Nigerian Stock Exchange. In this article, Nairametrics sought to highlight what benefits there could be for Nigerians from a potential listing of MTN on the Nigerian Stock Exchange.
Capital Gains – One of the major reason why people invest in shares is for capital gains. Capital gains are recorded whenever the share price of a stock appreciates over how much you paid when you bought it. MTN being a highly profitable company is likely to record capital gains more often than not. At the time of writing this article, MTN share price had lost (Capital loss) 22% in the last one year. However, it has gained 5% between January and today. One of the reasons why MTN has lost this much in value is mostly due to the fine imposed on it by the Nigerian Government. However, analysts believe the company will recover from this loss. In fact, MTN has over the last 5 years gained about 117% (before the fine was imposed).
Dividends – One of the rewards for being a shareholder of a company is also receiving dividends. Dividends can be paid via cash or via a script issue of shares for free). MTN has paid dividends every year since 2004 according to records from its website. A consistently paying dividend company, means the company is profit-making and shares part of that profit to its shareholders. Long term fundamental investors prefer dividend paying companies because it is a measure of how tenacious they are at making profits while growing the business. MTN’s track record of paying dividends will be of immense benefit to Nigerians who love dividend paying companies.
Pension Funds– Pension funds in Nigeria are one of the most sought after investors due to their size and quantum of investable funds. Investors therefore use their indexes for determining where they put their money. However, the Nigerian Pension Acts provides conditions for Pension funds to invest in. The conditions are that the company must have dividends at least 1 on 5 years and must be profitable 3 out of 5 years. MTN Group easily meets these criteria in South Africa, even though it is yet to be listed in Nigeria. The benefits for your pension fund assets are also significant as PFA’s not have a big, proven and reliable company that they can invest in.
Tax for government – The Federal Government also gains immensely by attracting MTN to invest in Nigeria via taxes. Nigeria currently does not tax capital gains made from the sale of shares, however it does places a 10% withholding tax on dividends paid by companies. It also charges a 5% VAT on commission and fees paid to stockbrokers when shares are bought and sold. A company the size of MTN will contribute immensely to the government’s tax revenue if it eventually lists.