NAIROBI — The landmark stock market debut of Nigeria's Dangote refinery was promoted as a chance for investors across Africa to own a stake in the continent's largest refining complex and to help finance its own industrial development.

Yet the $1.6 billion share sale was never registered as a public offering outside Nigeria, according to the prospectus. That left prospective investors dependent on their home countries' regulations, or forced to find workarounds through the handful of eligible online financial platforms.

The gap between Dangote's pan-African ambitions and the uneven uptake beyond Nigeria illustrates how the continent's fragmented capital markets continue to constrain cross-border investment. The offering won approval only from Nigeria's Securities and Exchange Commission, which has no jurisdiction outside the country — public offerings generally must be registered in each market where they are marketed to the public — a measure of the regulatory hurdles standing in the way of a genuinely pan-African deal.

Aliko Dangote, Africa's richest man and the majority owner of Dangote Petroleum Refinery and Petrochemicals, told Reuters that navigating the securities rules of multiple jurisdictions was a "teething problem."

The continent has pursued economic integration efforts — most prominently the African Continental Free Trade Area, a pact that took effect in 2019 and aims to create a single continental market for goods and services — but still lacks a framework for jointly regulating capital-market issuance.

"I'm sure with this, a lot of our own capital markets will also try and change their regulations," Dangote said, to make it easier for cross-border investments in the future. "We want to make sure that the African capital markets collaborate with each other."

Building African capital markets

Pointing to a proposed refinery in Lamu, Kenya, Dangote said the project should be listed on Nairobi's stock market and made accessible to investors across Africa, which in turn would help integrate the continent's capital markets.

"That's what we want to do. We want to deepen them," Dangote told Reuters.

Demand for the shares was strong across the continent, Dangote said, adding that Kenya's and Botswana's capital markets alone could have fully subscribed the offering. Issuers typically receive regular feedback from advisers and brokers as an offering progresses.

Kenya's market regulator approved a public offering of Global Depositary Receipts — negotiable certificates that let investors hold a foreign company's shares through their local exchange — linked to the IPO, though the approval came with just eight days left in the subscription period.

Dangote has said he is aiming for 10 million shareholders in the refinery — double the roughly five million retail subscribers attained by Saudi Aramco in its blockbuster 2019 listing, then the world's largest IPO.

'Extremely disappointed'

Markets outside Nigeria that wanted to participate in the IPO, such as the Nairobi Securities Exchange, had to seek regulatory approvals — a process that took weeks to secure. That left frustrated investors unable to subscribe, blaming disparate regulations for the missed opportunity.

"People were extremely disappointed," said Sultan Mwangi, a Kenyan financial researcher who had set aside $5,000 to invest.

Africa's capital markets remain among the world's most fragmented. Regional integration — including efforts to lift local saving rates to boost investment — lags progress in Latin America and parts of Asia, and investors still face a patchwork of national rules and market infrastructure.

In Rwanda, investors had to register with the market regulator before applying for shares, adding another hurdle.

"Those eligible will be assisted by authorized intermediaries but registered in Nigeria," said Celestin Rwakumbuka, chief executive of the Rwanda Stock Exchange.

Hannah Ryder of consultancy Development Re-ined said the Dangote refinery offering demonstrates Africa's ability to finance industrial development, noting that past large capital market deals on the continent focused on banks and telecoms. Still, she described the IPO as "somewhat less ambitious in reality than it started off."

"Most importantly and conceptually for the continent's manufacturing aspirations, it raises large domestic finance for an industrial asset, which is fairly unique for the continent," she said.

The African Development Bank has been pushing a financing model called the New African Financial Architecture for Development, aimed at mobilizing large-scale local savings in the wake of aid cuts. With Africa's capital markets still shallow and illiquid, the IPO was expected to demonstrate how regional savings could be channeled into major investment projects. The AfDB did not respond to a request for comment.

Two investment channels for Africa

Only two brokerages — Ecobank and Standard Bank-owned SBG Securities — were listed in the prospectus as channels for African investors.

Ecobank, which operates in 34 African countries, said it was seeing "encouraging interest… from investors across East, West and Central Africa." Standard Bank did not respond to a request for comment.

By contrast, Nigerians can use 53 channels, including banks, brokerages and trading apps, to buy shares. Fintech firms say they can help widen access across borders.

"One of the biggest opportunities fintech creates is the ability to remove geographical barriers to investing," said Richmond Bassey, chief executive of retail-focused fintech platform Bamboo.

Bassey said Bamboo provides eligible Africans, including Nigerians outside the continent, access to the Dangote IPO through a licensed nominee in Nigeria — a local entity that holds the shares on investors' behalf.

Dangote has promoted the sale as a way to spread share ownership among ordinary Africans. Investors can buy as few as 10 shares for 5,250 naira ($3.96).

Lagos entrepreneur Jide Owolabi said he is investing despite what he perceived as a steep valuation of nearly $50 billion for the refinery.

"There is enough room for revenue growth as they begin to harness the potential from the petrochemicals and other value-added products, such as plastics and detergents," he said.

Others were skeptical.

"There are other companies that can offer better returns on investment," said Peter Oke, a financial literacy advocate in the southwestern city of Ibadan.

($1 = 1,325.3200 naira)

Reporting by Reuters