Critics of the Nigerian Stock Exchange maintained that the market had not been tested to capacity even with the recapitalization of banks. They claimed that the depth of the stock market was not one where a lot of people would invest in billion dollar offers. The reasons varied, one was the capitalization level of existing banks and other reasons were the assumed amount of investment capital the Nigerian public was willing to invest in the Nigerian Stock Market. Dangote Sugar owned by Nigerian billionaire Aliko Dangote was one of many companies that were influenced by the opinion that the stock market would not be able to subscribe to the wealth of a public offer that ran into billions of dollars. Previously, Dangote Sugar was a privately owned company not quoted on the Nigerian Stock Exchange.
Following the gains from the recapitalization exercise in the banking sector, a huge number of banking establishments recorded over-subscriptions of various public offers running into billions of dollars. Institutions such as Zenith Bank and First Bank recorded over-subscription levels of more than 400% in their various public offers. Following such gains the management of Dangote Sugar reversed its opinion as to the depth of the Nigerian Stock Market and the possibilities available when it came to the funds that could be raised from the market. The company decided to apply for listing by way of an initial public offer and the application was granted.
Dangote Sugar is a company which primarily deals with the importation and sale of sugar and other than the Honeywell Group, had no major competitor as far as the whole of Nigeria was concerned. With a population of over a 150 million people, all of whom are potential consumers of sugar, Dangote had a strong foothold in the Nigerian market. At its conclusion of a $420 million dollar initial public offer, Dangote Sugar reported an over subscription in excess of 40% only to become Nigeria’s most capitalized company 19 days later with a capitalization of 404 billion naira up from 108 billion naira and representing a gain of more than 125% in share price within 19 days of trading.
Investors who had bought into the share price at 18 Naira were taking gains at 40 Naira and above within weeks. Meaning an individual who had bought into the company as it listed freshly on the stock exchange with about 1.8 million naira would be worth 4.0 million naira only two or three weeks later. The myth had been shattered about the depth and profitability of the Nigerian Stock Market and a lot more followed in terms of success on the market.
That is indeed a proof that every segment of Nigeria economy can be profit pulling if decisions were made wisely.