There is a huge deal in town right now. Yes, something big is brooding. The Nigerian insurance sector has once-in-a-generation opportunity. Simply, when the Nigerian Stock Exchange introduced yesterday a new pricing system by amending the Pricing Methodology Rule, most traded insurance companies saw their stocks drop below 50 kobo. Hitherto, the minimum floor for listed NSE firms was 50 kobo. Under this new Par Value and Share Price Methodology, the number is now 1 kobo.
Since that yesterday, the market forces have started working, and stocks of many listed insurance firms have dropped below 50 kobo. They had been on 50 kobo for years as the old rule made it impossible to drop further. Now, that is gone, and these firms could lose further value. It is very unfortunate of course – nothing to celebrate here. Yet, it is also a problem to be fixed.
Nigerian stock market had a very good year in 2017 but that was driven mainly by category A and B equities; the Category C had marginal impact.
In coming months, I expect most of these insurance firms to move hands. Otherwise, they would be delisted. In short, expect strategic trading at high levels. And if the bulls move, outright acquisitions would happen.
----REGISTER for my Innovation for Growth Workshop, Lagos, Sept 2018.
---Visit our Store for my books, cases, frameworks and more. Now, enjoy our consolidated subscription for all contents (past, present and future).
-- We offer Advisory Services (tech, strategy & Africa).