Rewane: Dangote Refinery’s IPO to Lift NGX Capitalisation to N236trn

Bismarck Rewane, Managing Director of Financial Derivatives Company (FDC), forecasts that the upcoming Initial Public Offering (IPO) of Dangote Refinery will substantially increase the market capitalization of the Nigerian Exchange (NGX). Rewane projects a rise of 30 to 40 percent, potentially elevating the NGX's total market value from N161 trillion to N236 trillion.

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In a ‘pure addition’ world the NGX would jump from N161 trillion to N236 trillion at listing and the ASI would re-rate proportionately.

This projection assumes that the listing will attract fresh capital without significant outflows from existing stocks. It is also based on the assumption that Dangote Refinery will be valued at the higher end of its estimated range, between $50 billion and potentially up to N75 trillion. Rewane noted that in a "pure addition" scenario, the NGX would see this dramatic increase, and the All Share Index (ASI) would re-rate proportionally.

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We believe part of the IPO will be funded by trimming liquid blue-chips making the net cap gain smaller than expected.

However, Rewane also cautioned that the reality of the IPO might involve a temporary decline in the ASI before it rises. He cited factors such as inflation induced by global conflicts, which has impacted consumer spending power, affecting 35 percent of NGX investors. Furthermore, he anticipates that some investors may sell off existing blue-chip stocks to fund their subscription to the Dangote Refinery IPO, which could temper the immediate net capital gains.

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You know what they say, buy on the rumour and sell on the news.

Rewane contextualized the Dangote Refinery IPO within a global trend of "IPO crazes" and the rise of the "world's richest men." He referenced IPOs from companies like SpaceX, valued over $1.8 trillion, and potential listings from OpenAI and Anthropic, highlighting the immense valuations in the current market. Back in Nigeria, the anticipated listing of the Dangote Refinery, with its estimated $50 billion valuation, is generating considerable excitement among both institutional and retail investors. From a macroeconomic standpoint, the refinery is expected to enhance Nigeria's export revenues by adding significant value to the country's net exports, particularly as a countermeasure against falling oil prices.

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The anticipated listing of Dangote Refinery is on lips of institutional and retail investors, as the best thing since sliced bread.