Flour Mills of Nigeria has officially been delisted from the Nigerian Exchange Limited (NGX) following a buyout by Excelsior Shipping Company Limited, the company’s largest shareholder.
This means Flour Mills’ shares are no longer publicly traded. If this sounds familiar, it’s because this delisting follows a trend. Union Bank and GlaxoSmithKline also delisted between 2021 and 2023, collectively losing ₦335.5 billion in market capitalization. So, what does this mean for the Nigerian market?
Excelsior Shipping Company, led by Mohammed Haroon Abdul Samad and Sushil Santlal Sharma, completed the ₦105.2 billion buyout through a legal process called a scheme of arrangement. This means Flour Mills is now privately owned and no longer accountable to public shareholders.
Flour Mills, a company known for products like Golden Penny Flour, pasta, noodles, and sugar, has been a staple in Nigeria for years. Before delisting, Flour Mills had a market capitalization of ₦335.41 billion.
Flour Mills delisting raises other concerns
When combined with the ₦335.5 billion lost from other delistings, Nigeria has lost a significant ₦670.91 billion in total market value. This shrinking of the stock market could impact investor confidence, both locally and globally.
This change is raising important questions. When big companies like Flour Mills delist, they can make quicker, long-term decisions without worrying about stock market performance or public shareholders.
This could be a good thing for business, but it also means that the number of public companies is shrinking. As a result, there’s less capital available for business expansion, which could impact job creation and slow down economic growth.
But the issue that really stands out is the effect on tax revenue. Public companies like Flour Mills had to disclose their financials, taxes, and profits, giving the government a clearer picture of their contributions.
Now that Flour Mills is privately owned, it no longer has to follow these disclosure requirements. This creates uncertainty about how much tax the company will continue to pay, and that’s something the government can’t afford to ignore.
Flour Mills was a major contributor to Nigeria’s tax revenue. While exact tax figures aren’t readily available, the size of the company suggests it would have been paying a substantial amount.
With fewer companies required to disclose financial information, it becomes harder for tax authorities to track whether companies are paying their fair share. And if they’re not, it raises the risk of tax evasion.
Regulators now also face a challenge. Public companies are audited regularly, ensuring they comply with tax regulations. However, private companies have more flexibility and less oversight, making it harder to track whether they are meeting tax obligations. If this trend of privatisation continues, the government may struggle to ensure businesses are paying their fair share of taxes.
If you’re an investor, you should keep an eye on companies considering delisting. This trend could signal that businesses want more control, but it also means there will be fewer opportunities to invest in public companies.
While this could benefit companies by allowing them to make quicker decisions, it also presents challenges for regulators and investors who rely on transparency and accountability.