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Interswitch, others delaying listing, IPO due to deep naira-dollar differentials

The prevailing forex crisis hitting the economy has extended its streaks of frustrations to prospective capital market investors as companies planning to either list on the exchange or go to the market for shares and IPOs are now developing cold feet.

Earlier November, indication emerged that the planned one of the leading GSM networks had set to hit the market but was hobbled by the forex crisis which experts say is capable of running down share values as soon as one is listed.

The same challenge is currently frustrating the readiness of Interswitch, leading payments systems group and owners of one of the payments card brand.

Recently, it suspended plans to raise as much as $1 billion in an initial public offering as investors fret over further potential weakness in the naira and a shortage of foreign currency.

The company, which operates in five African countries, said last year it met with banks including Bank of America Corp., Barclays Plc and Standard Bank Group Ltd. about a potential 2016 share sale in Lagos and London.

The IPO would have enabled London-based private equity group Helios Investment Partners LLP, a shareholder, to return some money to investors, Mitchell Elegbe, Interswitch Chief Executive Officer said in a December 16 interview.

“The macroeconomic situation in Nigeria is the determining factor’’ in delaying the plans, Elegbe, said at the company’s offices in Lagos, the commercial hub.

Potential investors are “jittery’’ about the naira exchange rate and whether they will be able to buy foreign-exchange to get their money out of the West African country, he said.

Nigeria imposed a peg on the naira in early 2015 to protect the currency and conserve reserves in response to the plunging price of oil.

The move starved lenders of foreign exchange, and prevented companies from accessing enough dollars to import raw materials and repatriate profit. The naira has slumped 36 percent since the peg was ended six months ago, still more than 30 percent stronger than the black-market rate against the dollar.

Even though experts are upbeat that a deal leading to a dual listing in London and Lagos could value Interswitch at more than $1 billion, the company’s focus now will be on expansion.

Key targets may include two East African countries to add to operations in Kenya, Tanzania, Uganda and Gambia, Elegbe said.