Stakeholders in the financial industry believe that the recent foreign exchange reforms implemented by the Central Bank of Nigeria (CBN) which allow for the free float of the naira will ease the burden experienced yearly by foreign investors in repatriating their dividends.
The stakeholders further say that the reforms as they relate to the free float of the naira will attract more foreign investments into the Nigerian economy, especially the nation’s money and capital markets.
The exchange rates of Nigeria’s currency, the naira, to other international currencies, especially the US dollars, were allowed to be determined by the forces of demand and supply at the foreign exchange market, a move local and international investors described as long overdue.
The Naira-US dollar exchange rate subsequently rose from an average of N462.88/$ to about N747.13/$.
Recall that listed companies on NGX with significant foreign stake, had challenges repatriating their dividends in the last two years due to scarcity of foreign exchange. As a policy response, Nigerian Breweries and MTN Nigeria explored a cash dividend conversion scheme that allowed the affected shareholders to convert their dividends into ordinary shares.
As at the close of business on the Nigerian Exchange Group on 7 July 2023, a total of 66 listed companies had declared their corporate actions for the year ended 31 December 2022. The summation of all the dividends declared by these companies amounted to N1.76 trillion.
The companies that declared the most dividends include market heavyweights such as Dangote Cement, which paid N20 per share translating to N340.81 billion. MTN Nigeria paid N317.53 billion, followed by Seplat which paid N273.65 billion; Zenith Bank, N100.47 billion, and BUA Cement that paid N94.82 billion.
Guaranty Trust Holdings paid N91.24 billion, while Airtel Africa declared N83.59 billion to be ranked as the sixth highest dividend paying listed firm in 2023. BUA Foods ranked as the seventh highest dividend paying company in 2023 with the declaration of N81 billion.
Access Holdings paid N53.31 billion just as Stanbic IBTC Holdings, United Bank for Africa and Lafarge paid N45.35 billion; N37.62 billion, and N32.15 billion respectively.
According to market data, some of the notable listed companies have foreign individuals and institutions as either majority or minority shareholders. Dangote Cement has (Duoraid Zaghouani) Investment Corporation of Dubai indirectly controlling 234,540,000 units of shares. Another foreign minority shareholder is GW Grey Pte Ltd indirectly controlling 128, 560, 764 units of shares.
Foreign investors in Access Holdings control 3,259,708,345 units of shares amounting to about 9.1 percent. MTN International (Mauritius) Limited controls 72.8 percent of MTN Nigeria’s shares outstanding.
For Lafarge Cement, AIC UK and CariCement BV control almost 70 percent shareholding in Lafarge Cement Nigeria. Seplat Nigeria has Roger Brown, M & P, and Petrolin Group as individual and institutional foreign investors.
Socfinaf S. A. controls 62.94 percent stake in Okomu Oil. Foreign institutional investors have significant stake in TotalEnergies, Presco, Sunu Assurance, Stanbic IBTC Holdings, Nigerian Breweries, Guinness, among others.
Most of the industry leaders the Nigerian Observer spoke with believe the forex reforms will ease dividend repatriation from Nigeria in the medium to long term.
“Yes, it will make a difference as the greenback will now be more accessible. The only issue will be the availability of sufficient supply of dollars compared to demand,” Fiona Ahime, MD, FBNQuest Securities, said.
Another analyst said that while the FX reforms will ease dividend repatriation, it will be after the current FX backlog must have been cleared.
“The president mentioned it (forex reform) in his inaugural speech and we expect the CBN to clear the FX backlog which we understand they are working towards, so as to improve foreign sentiments in the market.
“And as FX supply gradually comes back into the market, we would expect repatriation of dividends to also improve” Abdulazeez Kuranga, an analyst with Cordros Securities said.
The liberalisation of the FX market is also expected to attract more foreign investors into the Nigerian market which is being dominated by domestic individual and institutional players.
“Foreign investors can repatriate more freely now as the market is liberalised. Some of them are already coming back to the market,” Saheed Bashir, CEO of Meristem Securities, said.
According to NGX’s Domestic and Foreign Portfolio Participation in Equity Trading Report, foreign individual and institutional investors accounted for 22.88 percent of equity trading activities in 2021. Their participation rate fell to 16.32 percent in 2022.
Further analysis of the report showed that from January to May 2023, foreign investors accounted for 9.51 percent of the equity trading transactions.
“Foreign dividend repatriation will improve in the long run, but not in the short run,” an employee of one of the tier-one banks, who did not want his name mentioned, said.
