Nigeria plans to take its bourse public





By Tom Burgis in Lagos

Published: August 23 2010 22:31


Nigeria plans to become the latest emerging market to demutualise its stock exchange amid a struggle for control of sub-Saharan Africa’s second-biggest bourse.


The plans, which are at an early stage, are part of efforts to establish the Nigerian Stock Exchange among the prime destinations for frontier investors. They would see the current mutual owners – mainly its broker-dealer customers – joined by new investors, probably through a flotation.


Arunma Oteh, head of Nigeria’s Securities and Exchange Commission, said the capital markets regulator was “committed to the demutualisation of the Nigerian Stock Exchange, as it is key to building a world-class capital market”.


She added: “It is an opportunity for both local and international investors.”


Similar exercises elsewhere have helped to transform exchanges long avoided by all but the hardiest international investors and fund managers into vibrant bourses.


Some analysts credit Brazil’s emergence as an economic powerhouse in part to the successful demutualisation of Sao Paulo’s Bovespa exchange.


However, Nigeria’s stock exchange is still reeling from a crash that saw the total market capitalisation of listed stocks fall by 70 per cent between its peak in 2008 and the end of last year, equivalent to losses of $50bn. Subsequent investigations have uncovered widespread abuses including share price manipulation, insider trading and fraud. One exchange insider estimated the bourse could be worth $2bn, based on revenues from more than $100m a day in trades at the peak of the recent boom.


Thomas Caldwell, a US-based investor in exchanges, said a share offering at Nigeria’s exchange could attract foreign buyers keen for exposure to an economy that ranks among the world’s biggest energy producers but where investment can be perilous.


“You need reliable reporting, a system where you can trust the numbers,” he added.


Proposals to demutualise have circulated since the start of the decade but had stalled as market grandees feared losing their influence under a new structure.


Officials and brokers said the sudden removal this month of Ndi Okereke-Onyiuke, the NSE’s long-serving chief executive, cleared the way to revive the demutualisation plans.


Her successor, yet to be appointed, is expected to further the moves towards demutualisation.


Nonetheless, a listing could be a year or more away.


One Nigerian broker said international investors had expressed interest during earlier discussions of a possible demutualisation. Others suggested that governance concerns would have to be addressed before a demutualisation could succeed.

Tom Burgis, West Africa correspondent, Financial Times
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