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.

The Nigerian Exchange Group Plc will be headed by Oscar Onyema as Group Chief Executive Officer (GCEO) while Temi Popoola will assume office as CEO of Nigerian Exchange Limited. Also, Tinuade Awe will head the NGX Regulations Limited as CEO.

The President of the NSE, Otunba Abimbola Ogunbanjo said the final approvals marked the achievement of an important milestone. His words: “Successful demutualisation was one of my fundamental objectives when I assumed the presidency of the exchange. The SEC’s decision to approve the NSE’s demutualisation brings this aspiration to a successful conclusion in a process that included the passage of the demutualisation Act through the National Assembly.

“We are elated that this milestone has been achieved as we celebrate the 60th anniversary of the commencement of trading at the Exchange and now look forward to the future public listing of its shares on NGX Limited. On behalf of the NSE, I would like to warmly thank all those that have worked assiduously to achieve this watershed event on our journey to make the NSE a multifaceted exchange that extends across various markets and geographical regions.”

To the Chief Executive Officer of the NSE, Oscar Onyema, the Nigerian capital markets would play a role commensurate with Nigeria’s status as Africa’s largest economy.

“At the Nigerian Stock Exchange, we have a vision that the new group will become the premier exchange hub for Nigerian businesses and for the African economy. We are implementing a series of measures towards this goal, demutualisation being a critical milestone. The completion of demutualisation is a truly significant moment, and we welcome the new possibilities that have opened up for us.”

Attempts to demutualise the NSE began in 2011, seeking proposals from local and foreign financial advisers in this respect in 2014.
Following the resolution passed by the members of the exchange at an Extra-Ordinary General Meeting (EGM) in 2017, the chairman, House of Representatives Committee on Capital Market and Institutions, Yusuf Tajudeen, sponsored a bill, which was first read in the House on March 29, 2017.

The Bill is titled: “An Act to facilitate the development of Nigeria’s capital market by enabling the conversion and re-registration of the NSE from a company limited by guarantee to a Public Limited Company (PLC) by shares and for related Matters, 2017 (Otherwise called ‘Demutualisation Bill’ HB 983).

At the Senate, the bill (SB 531) was sponsored by Senator Forster Ogola, Acting Chairman, the Senate Committee on Capital Market. Now a global phenomenon, demutualisation is being embraced by several countries of the world.

For instance, of the 64 members of the World Federation of Exchanges, 56 have been demutualised. Up till the early 1990s, most of the world stock exchanges were non-profit, mutual organisations limited by guarantee and monopolised by members and stockbrokers.

The first stock exchange to break away from the norm was the Stockholm Stock Exchange in 1993. Helsinki Stock Exchange followed in 1995. In the African market, Johannesburg Stock Exchange and the Nairobi Stock Exchange were demutualised in 2006 and 2014.

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