Jumia Technologies, the African e-commerce company, has filed for an unusual initial public offering (IPO) on the New York Stock Exchange (NYSE) weeks after its largest shareholder, MTN Group Limited, said it will divest its stakes.
Jumia said it intends to take advantage of the growth of e-commerce in Africa to attract public investment. The public listing will enable Jumia to raise funds and boost awareness as Internet access and smartphone use increases.
According to information obtained from the filing that was made on Tuesday, Jumia will trade under JMIA on the NYSE and would be valued at about $1.5 billion.
“We intend to benefit from the expected growth of e-commerce in Africa through the investments that we have made and the extensive local expertise that we have developed since our founding in 2012,” Jumia said in the filing.
Morgan Stanley, Citigroup Inc., Berenberg and RBC Capital Markets will advise and assist Jumia during the public listing.
Not your usual IPO
The public listing by Jumia is not the traditional IPO. It is an American Depositary Receipt (ADR), and the individual shares are referred to as American depositary shares (ADS). ADS is a U.S. dollar-denominated equity share of a foreign-based company available for purchase on an American stock exchange. ADSs are issued by depository banks in the U.S. under an agreement with the issuing foreign company.
Benefits of ADS
ADS provides a wider investor base, as well as lower costs of future capital for Jumia. ADS also negates currency conversions and dealing with other cross-border administrative regulations for U.S. investors willing to invest in foreign companies.
Downside of ADS
ADSs are burdened by currency risk. Price of shares and any income payments can be affected by fluctuations in the currency exchange rate between the US currency and the foreign currency.
Ignoring the Nigerian market
Jumia‘s listing on the New York Stock Exchange comes at a time its largest shareholder, MTN Group, is considering listing on the Nigerian Stock Exchange. Jumia’s move to list on NYSE may be considered as a snub to NSE and Nigerians, the country that is largely linked to the success story and growth of Jumia in Africa.
Jumia‘s IPO-type excludes any Nigerian investor from participating in the purchase of the e-commerce firm’s shares. Stakes in Jumia is only available to American investors for now.
As stated in its filing, the e-commerce company is looking to attract investors, and with its listing on NYSE, it’s easy to predict the kind of investors Jumia is seeking. But Jumia wouldn’t be the first to list outside the Nigerian market despite owning most of its earnings in Nigeria. MTN concluded listing on NSE 18-years after launching in Nigeria – and it wasn’t willingly.
MTN Group considers selling Jumia shares
MTN Group is the largest shareholder in Jumia Technologies, and the telecoms company plans to sell shares through Jumia’s IPO to raise $600 million intended for debt payment.
At its full-year earnings presentation last week, MTN identified Jumia as one of a number of e-commerce assets that could be sold as part of a 15 billion rand ($1bn) asset-disposal plan. It was also reported that the network operator is also looking for buyers for flight-booking site, Travelstart-co.za.
MTN Group currently holds 40 per cent stake in Jumia which is arguably Africa’s biggest online retailer. The company is present in about 14 African countries, including Nigeria where it is in competition with Konga and other smaller e-commerce operators.
Other Jumia shareholders include: Goldman Sachs Group Inc., Millicom International Cellular SA, Orange SA and Africa Internet Group, a venture backed by Goldman, MTN and Rocket Internet SE.
CBN extends Covid-19 forbearance for intervention loans by another 12 months
CBN will continue to charge an interest rate of 5% for its intervention loans for another 1 year.
The Central Bank of Nigeria has announced an extension of its regulatory forbearance for the restructuring of its intervention facilities by another 12 months.
In a circular signed by Dr. Kevin Amugo, the Director of Financial Policy and Regulatory. the apex bank said it will continue to charge its borrowers an interest rate of 5% per annum as against the 9% originally offered. The CBN had on March 20th reduced the interest rates on its intervention loans from 9% to 5% as part of its response to the economic crunch brought on by Covid-19 induced lockdowns.
The CBN also offered to rollover moratorium granted on all principal payments on a case by case basis. All credit facilities had been granted a one-year moratorium starting from march 1, 2020 when the pandemic first gripped Nigeria.
See excerpt from Circular
“The Central Bank of Nigeria reduced the interest rates on the CBN intervention facilities from 9% to 5% per annum for one-year effective March 1, 2020, as part of measures to mitigate the negative impact of COVID-19 Pandemic on the Nigerian economy.”
Credit facilities, availed through participating banks and OFIs, were also granted a one-year moratorium on all principal payments with effect from March 1, 2020.
Following the expiration of the above timelines, the CBN hereby approves as follows:
1) The extension by another twelve (12) months to February 28, 2022 of the discounted interest rate for the CBN intervention facilities;
2) The roll-over of the moratorium on the above facilities shall be considered on a case by case basis.
What this means
Companies who secured intervention funds from the CBN or through any of its on-lending banks will continue to service the loans at an interest rate of 5% per annum instead of 9%.
- They can also get another year of not needing to pay back the principal sum collection. However, they will need to apply.
- Whilst this move helps the small businesses continue to manage their cash flow, it means the CBN will record a reduction in its income extended under such facility.
- Regulatory forbearance is a widely adopted concept during an economic crunch and it is meant to help stimulate businesses. These pronouncements if implemented will only affect those who borrow from the CBN or BOI but those who do not will miss out.
- Download the circular here.
LNG boss tasks FG to begin the monetization of Nigeria’s gas
Mr Attah has urged the FG to take the gas sector more seriously as the future of Nigeria’s energy lies with it.
The MD and CEO of Nigeria LNG Limited Mr. Tony Attah has tasked the Federal Government to begin the revamping and monetization of the Gas sector in Nigeria.
He made this statement while making his presentation at the 2nd virtual Nigerian Gas Association (NGA) Industry Multilogues, with the theme: “Powering Forward, Enabling Nigeria’s Industrialization via Gas.”
Mr. Tony Attah drew the attention of the audience to the hidden treasure in the Nigerian Gas industry which he believes is not getting enough attention from the government.
On the future of gas as an alternative energy source, Mr. Attah stated that the developed world is already keying into gas as an alternative to crude oil. Gas has proven to be a cleaner and more sustainable alternative.
He exclaimed that Nigeria is very rich in gas and yet poor in energy. Nigeria is the 9th country with the largest gas reserves in the world but makes very little use of it.
Mr. Attah went further to paint a clear picture of the promise of investing in gas using the success achieved by Qatar. Qatar is currently the largest LNG exporter in the world.
“We just touched on a quick case study of Qatar. Someone mentioned Qatar already from a poor fishing country to a gas giant and it took just 10 years, which is why we, as Nigeria LNG, firmly believe in the conversation and the narrative about the declaration of the decade of gas.
“We believe it is possible. If you look at Qatar from 1995, when they really went into gas development, we were just two years behind Qatar. So, Qatar’s first LNG was in 1997.
“Nigeria’s first LNG was in 1999, just two years behind. But then, within 10 years, because of the deliberateness of the government and focus on gas, they have gone to 77 million tonnes and we are at best, 22 million tonnes,” Attah said.
Mr. Attah stressed further the importance of the gas sector in Nigeria’s future. He recalled that the Nigerian Government declared 2021-2030 as the decade of gas. He pleaded with the government to take the sector more seriously as the future of Nigeria’s energy lies with it.
“Gas is the future. That future is now, and just as the Minister of State has made us to realize, gas is food in fertilizer. Gas is transport as you saw in the Auto gas project that was declared.
“Gas is life, as a matter of fact, for cooking, for heating, for existence. Gas is development in manufacturing, gas is power. Gas is everything. “We think it’s time for gas. It’s time for Nigeria to diversify and that is why we fully support the decade of gas,” he said.
What you should know
- Early last year, the director of the Department of Petroleum Resources (DPR) Mr Sarki Auwalu confirmed that Nigeria’s proven gas reserve stood at 203.16 trillion cubic feet.
- Nigeria has the 9th largest gas reserves in the world. It is also the 6th largest exporter of gas.
- The Federal Government declared the year 2021–2030 as the “Year of the Gas“. It pledged to finally kick start the development and commercialization of Nigeria’s huge gas reserves.
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