Some Nigerians seeking to invest in the Dangote Petroleum Refinery and Petrochemicals FZE Initial Public Offering have turned to personal savings, loans and proceeds from the sale of assets to raise funds to buy shares, Saturday PUNCH has learnt.
Findings by our correspondents revealed strong interest in the shares among prospective retail investors, some of whom said they expected the investment to yield substantial returns in the future.
While some respondents said they were dipping into savings or raising funds through other means, others said the prevailing economic hardship had made it difficult for them to participate in the offer.
The refinery opened its IPO on Monday, September 14, giving Nigerians an opportunity to own equity in the company.
The offer comprises 4.1 billion ordinary shares priced at N525 each, with the company targeting about N2.15tn to part-fund an expansion that would nearly double the refinery’s capacity to 1.4 million barrels per day.
The minimum subscription is 10 shares, costing N5,250.
Dangote Group Chief Executive Officer, Aliko Dangote, said the low entry threshold was deliberately set to allow ordinary workers, including drivers, cooks and domestic staff, to become shareholders, describing the offer as “the IPO for the people.”
The offer is expected to close on October 13.
Investors turn to savings, loans
A staff member of the Federal Ministry of Works, David Adelabu, described the shares as expensive for struggling civil servants but said he considered the offer an opportunity to become a shareholder in the refinery.
He said, “I have small shares in some companies, including Glo and MTN, but Dangote’s shares will be the highest I will be buying. It is on the high side, but I feel this is an opportunity to become a shareholder in Dangote.
“I understand that the dividends are not going to be immediate, but I don’t mind even if it will entail selling a plot of land I have in Metumbi here in Minna. I will gladly do so.”
A trader in Dutse, Jigawa State, Adamu Bala, said he planned to use savings from his business to buy the shares.
“I will not sell my house. I will use a small profit from my shop to buy,” he said.
Similarly, a civil servant, Fatima Mannir, said women in her group had started raising money through contributions, known as adashe, to participate in the offer.
“We have started raising money through adashe,” she said.
A trader in Damaturu, Yobe State, Malam Musa Ibrahim, said he invested part of his business savings after learning about the offer.
“I am using part of the money I have saved from my business.
“I believe that if I can invest a small amount now, it may become useful to me in the future. But I am also being careful because business is not easy at the moment,” he said.
Another resident, Aisha Mohammed, said she raised money by cutting down on some household expenses.
“I did not borrow money to buy the shares. I have been saving little by little, and when I heard about the offer, I decided to use part of what I had saved,” she said.
A businessman, Abdullahi Yusuf, however, said he obtained financial assistance from a friend to increase his subscription.
“I wanted to buy more shares than what my savings could afford, so I discussed it with a friend who agreed to lend me some money.
“I know that borrowing money to invest carries risks, but I am hoping that the investment will perform well. I will repay the money from my business income,” he said.
A petty trader, Hauwa Lawan, said she sold some personal belongings she no longer used and added the proceeds to her savings to finance her purchase.
“I sold some things that I was no longer using and added the money to my savings,” she said.
A farmer, Mallam Abdullahi Adamu, said he sold farm produce to raise about N500,000 to invest in the shares.
In Kano State, an investor, Abdulmalik Ibrahim, said he bought 10 shares for N5,250 using personal funds.
Hardship keeps some investors away
While some Nigerians are finding ways to participate in the IPO, others said economic pressures had put the investment beyond their reach.
A civil servant in Kogi State, Saliu Joseph, said he would have loved to invest but had just paid his children’s school fees.
“Right now, I don’t think I can afford to participate unless a miracle happens,” he said.
A retired permanent secretary in the state, Bola Boro, also said he would not participate because he could not afford the investment at the moment.
“As a retired civil servant, I cannot afford such an amount to invest in the offer. Even though I am a fan of investment through the stock market, which I have been doing for years, I don’t think it will be convenient for me to participate considering the time frame of just one month,” he said.
A civil servant, Kuta Abdulahi, said the financial demands of his children’s education had left him unable to participate in the share offer.
“I must tell you the truth, I know about the Dangote Refinery shares, but I cannot even think of it at this time. My children are just resuming a new term in school. Where will I get the money for their school fees before thinking of buying shares? Please, I have a lot on my head,” he said.
Similarly, a vulcaniser, Ahmed Alkali, said his income was barely enough to meet his family’s basic needs, making investment in shares difficult.
“With the kind of job I do, I am working from hand to mouth. So, how can I buy shares when I have not eaten?” he asked.
Experts warn against borrowing
Investment experts, however, cautioned Nigerians against taking loans, selling properties or committing all their savings to the IPO, warning that equity investments carry risks.
Speaking with Saturday PUNCH, the Group Managing Director of Lancelot Group, Adebayo Adeleke, urged prospective investors to understand the risks associated with the capital market before committing their funds to the IPO.
Adeleke, who is also a former Secretary of the Independent Shareholders Association of Nigeria, said capital market investments should be made with funds that investors could afford to leave untouched for the long term, noting that equities were unsuitable for people struggling to meet immediate financial needs.
He said, “When you buy shares, you are buying a portion of the ownership of the business. Investment takes a lot of time to pass through gestation, to stability, to profitability. And you cannot, with any degree of certainty, predict when the company is going to turn the corner and begin to produce profits.
“So, investment money is not the money you are likely to need in the next two months, three months, six months, even one year. If you cannot part with your money for a minimum of three to five years, the capital market is not the place to invest.”
Adeleke, however, described the IPO as a strategic investment, citing the refinery’s scale and demand for its products.
Also speaking, the Head of Financial Institutions Ratings at Agusto & Co., Ayokunle Olubunmi, urged Nigerians to consider the risks associated with the investment and avoid committing all their savings to the offer.
He said, “There are plenty of risks to this business. It’s not risk-free. Things can get worse for the business. Valuation is based on expectations of what will happen in the future. Things might not go as planned. And, like we all know, equity is a risky business.”
Olubunmi particularly cautioned prospective investors against selling property or using up all their savings to invest in the offer.
He advised them to invest only a portion of their funds and diversify their portfolios.
The expert also advised those considering taking loans to buy the shares to have a separate and reliable repayment plan rather than depending on returns from the investment.
The Emir of Kano, Muhammadu Sanusi II, had earlier warned prospective investors against using their children’s school fees or selling their homes to invest in the shares.
Sanusi, who gave the warning on Thursday while speaking at the company’s roadshow in Kano, urged prospective investors to invest only money they could afford to set aside for some time, suggesting amounts such as N10,000, N20,000 or N30,000.
Source: punchng.com
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