By Goddy Egene

The management of the Nigerian Stock Exchange (NSE) is putting various strategies in place to enhance liquidity in the stock market, THISDAY checks have revealed.

Among the top strategies is the reduction in the volume of shares required to effect a change in the price of an equity, introduction of market makers, and share buy-back.

It was gathered that the management of the Exchange, led by the chief executive officer (CEO), Mr. Oscar Onyema, discussed some of these issues with CEOs of stockbroking firms at a meeting held last week.

A source at the meeting disclosed that the Exchange was planning to reduce the volume of shares required to move the   price of a stock from 50,000 units to10,000 units.

“Going by the thinking of the NSE, this will create liquidity and impact positively on the share prices of most of the highly capitalised stocks. But this experimentation will begin with   large capitalisation firms. The modalities to start the experimentation are still being worked out and the necessary approval being sought,” the source said.

The NSE had in 2008 raised the units of shares to move a price of stock to 100,000, following discovering of arbitrary movement in share prices.

But at present, for a stockbroker to move the share price of any company, either downwards or upwards, the broker must have a minimum of 50,000 units. THISDAY checks revealed that this would soon change for companies that are highly capitalised and considered very illiquid.

“If the plan of the NSE sails through, eight companies would be affected by the new rule.

They include Nestle Nigeria Plc, Guinness Nigeria Plc, Total Nigeria Plc, Mobil Oil Nigeria Plc and Dangote Cement Plc. There are also three managed funds that will fall under this category,” the source added.

Apart from the new price rule, the Exchange is equally considering the classifying stockbroking firms into active and inactive categories. Also, companies would be classified into small, medium and large capitalisation.

“The companies would also be classified based on liquidity and illiquidity, low price, medium price or high price. This, the NSE CEO told us, will be good for market analysis and for portfolio investors to make their decision,” the source said.

It was further gathered that the Exchange was considering re-visiting the issue of market makers and share buy-back as a way of improving the liquidity in the market.

The Securities and Exchange Commission (SEC) had in 2009 given guidelines on the share buy-back as part of the measures to address the stock market meltdown.

Although SEC licensed some market makers, they are yet to commence operations, due to stiff guidelines also introduced by the former management of the NSE and the crisis in the banking industry that led to the intervention of the Central Bank of Nigeria (CBN).

Source: Thisday

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