What Africa’s biggest IPO can do for its stock markets

Alhaji Aliko Dangote, Africa's wealthiest businessman with an estimated net worth of $30 billion, launched Africa's largest Initial Public Offering (IPO) for Dangote Petroleum Refinery on September 14, aiming to raise $1.6 billion and achieve a valuation of nearly $50 billion. If successful, the company could become one of Africa's most valuable listed firms.

Dangote, 69, is excited about the prospect, stating that "My own driver, my mother, everybody will now come and have a stake" in the company. The Nigerian Exchange has welcomed retail investors, allowing them to purchase stocks via mini point-of-sales terminals. Trading platforms like Bamboo experienced high demand during the IPO, causing it to crash.

Stock picking is gaining popularity across Africa, contributing to the growth of continental stock markets. The Nigerian benchmark index is up by 71% this year, while the Ghanaian one has increased by over 50%. Despite still being small compared to global markets, African markets are becoming more stable and less unpredictable, with African stocks appearing more affordable after the covid-19 pandemic and the ongoing Gulf war.

African companies have benefited from improved economic policies, such as Ghana reducing inflation and Nigeria increasing bank and pension-fund capital requirements. Local listed companies, such as MTN Nigeria and Dangote's cement business, have shown significant growth. Wealth-building investments are being marketed to ordinary savers as a smarter way to protect against inflation.

Fintech startups like Bamboo are making investing more accessible, with 2.3 million users across several African countries. However, the markets are volatile, and low-income investors are at risk of substantial losses. Institutional investors are expected to increase liquidity in the markets, but the future of African markets remains uncertain.