Oscar N. Onyema
After six decades of operation as a non-profit organisation under the control of some individuals and institutions, the Nigerian Stock Exchange (NSE) has begun the journey to becoming a public-owned company.
The exchange has officially announced the completion of its 10-year project to join 56 other demutualised stock exchanges. The move, which would usher in the public listing of the exchange’s shares, was finalised last Wednesday, following approvals the Securities and Exchange Commission (SEC) and the Corporate Affairs Commission (CAC). The new development has opened a new vista in trading at the exchange, especially growth prospects as more people are likely to embrace the market, said an independent investor, Amaechi Egbo.
According to Egbo, a new regime of transparency will now be enthroned against the previous opaque and insider-dealing culture, which had led to the crash of the market in the wake.
“It will also create an avenue for the exchange to access more capital to meet its needs and stay competitive without necessarily placing an additional financial burden on participants. Increased ownership of the bourse would enhance awareness about the market.
“It will also boost investors’ confidence and corporate governance would be improved as ownership will be separated from management, paving the way for robust investment,” he said.
Vice President, Highcap Securities, David Imafidon Adonri, said the NSE has now been elevated to where it can compete on all fronts with similar enterprises around the world with unlimited access to mobilisation of resources to execute its corporate mission.
“It can now attract investors across all areas of investment just like any other company. It can maximise its profit by commercialising its services in line with what the market can bear. Henceforth, just like any other company, it will pay corporate taxes and meet all other tax obligations.
“As a public company, its shares will be traded in the capital market. Consequently, it will become a credible investment outlet that can add to deepening the capital market. Its enhanced financial status will enable it to continuously upgrade its facilities and service delivery to world-class standards and be able to remunerate its staff appropriately.
“Being a public limited company, the NSE is now open for acquisition by any investor in the world. It can also go into a merger with any other corporate bodies under well-defined and quantifiable value exchange rate,” he said.
Segun Ajibola, a professor of economics at Babcock University, said the unbundling of NSE will ensure efficiency in the running of its affairs through the holding structure.
“NSE can now fully annex a private sector template for its operational structure and adopt a more focused and business-driven approach. Such efficiency will simmer down and create positive multiplier effects on the capital market, the financial market and the economy as a whole,” he said.
Demutualisation is transforming a private, member-owned company into a public company that is shareowner-based. It allows the shares of the bourse to be quoted on its floor.
Analysts believed a significant part of the current problem with the capital market is low confidence especially on the part of the domestic investors. Currently, not less than four million Nigerians participate in the capital market just as less than 30 per cent of listed equities are actively traded in the market.
They argued that the current size of the capital market constrains its role in national economic development. Market liquidity as measured by the volume of trading. The market turnover is comparatively low at less than 20 per cent of the country’s GDP.
Foreign investors are significant players in the equities market often dictating the pace of market activity while local institutional investors such as pension funds and mutual funds are less active in the equities.
Since the 2007-2008 financial crisis, local investors that got their fingers burnt developed apathy on the market. This is despite efforts and various initiatives adopted by the capital market regulators to restore confidence and woo local investors to the market.
But demutualisation is changing the narrative. The NSE, which was incorporated as a private company in September 1960 as Lagos Stock Exchange and was changed to the NSE in December 1977, has finally transformed into a corporate, profit-oriented organisation owned by shareholders.
With the new arrangement, a new non-operating holding company, the Nigerian Exchange Group Plc (NGX Group) has been created. The group has three subsidiaries namely Nigerian Exchange Limited (NGX Limited), the operating exchange; NGX Regulation Limited (NGX REGCO), the independent regulation company and NGX Real Estate Limited (NGX RELCO), the real estate company. All the entities have been duly registered at the CAC.
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