Sept 13, 2015/NSE

Efforts by the current leadership of The Nigerian Stock Exchange (“The Exchange or The NSE”) to further deepen the capital market appears to be yielding positive fruits as some dominant players in various sectors of the economy have indicated interest in listing on The Exchange next year. This flood of interests further affirms the unique role of the Exchange in building globally competitive brands that can contribute to the economy in a sustainable manner.

The roll call of those that have shown interest in joining the league of listed companies on the NSE includes, Nigerian’s telecommunication giant, MTN Nigeria, the leading airline in Nigeria today, Arik Air as well as the foremost energy group, Sahara Group.

These companies have the potentials to lift the market and create additional liquidity. MTN Nigerian controls more than 50% of the GSM subscribers’ base in Nigeria and has been a darling of many would be investors. Arik Air, which is the biggest Nigerian airline at the moment is also seeking to be named the national carrier. Sahara is one of the leading indigenous oil and gas companies that services a wide range of clients.

The intention of these companies to raise funds through the Nigerian Stock Exchange affirms the unique position of the Exchange to assist corporate to access capital in a more efficient manner compared to debt financing.  But more importantly, the corporate governance efforts of the Exchange may be adjudged to yielding dividends with these companies not just offering a stake of their equity to investors but ready to subject themselves to greater scrutiny on corporate governance which public quoted companies are often grilled on.

It will be recalled that last year the NSE completed a major dual listing on the London Stock exchange with Seplat raising $500million through an IPO. This fund raise is the biggest and most successful capital raise in Europe after the 2008 meltdown. This brings to two companies on the NSE with cross border listings.

This seamless execution of the transaction may have been positively impacted by the agreement between NSE and LSE to promote capital markets initiatives in their respective markets especially on dual listing. With the Seplat deal in the bag, the likes of Sahara may have an easy ride as well. As the NSE collaborates with more African exchanges, the barriers for entry into other markets would be easier for Nigerian companies.

Analysts spoken to posit that the recent launch of the premium board by the NSE may have provided additional impetus for these companies to consider listing. Some argued that the board creates a new level of entry into the capital market on NSE that is prestigious and can be leveraged in pitch with international investors due to the corporate governance component of the requirements to be satisfied before listing on the premium board.

The new premium board is a platform for companies that do not only meet the NSE’s stringent listing criteria of capitalization, governance and liquidity, but also possess the capacity to attract global investors.

Commenting on the launch of the premium Board, Chief Executive Officer, NSE, Mr. Oscar N. Onyema OON said, “The Exchange is a member of the United Nation’s Sustainable Stock Exchange Initiative, which is designed to encourage stock exchanges to influence their ecosystem to adopt sustainable ways of doing business around Environmental, Social, and Governance dimensions. The Premium Board is one result of our commitment to place corporate governance front and centre as a way to improve the climate for doing business in Africa. We expect that companies on the Board will enjoy the highest levels of visibility and appeal to investors looking for large companies with the highest standards of corporate governance.”

The new management of the Exchange since its inception in 2011 has introduced some key compliance and enforcement initiatives at ensuring zero tolerance approach to market infractions. Some of these include The NSE’s inspection of Broker-Dealers to ensure members are in compliance with The Exchange’s rules. In the area of transparency The Exchange has introduced electronic platforms that allow investors and prospective investors to have firsthand knowledge of market operator’s activities online.

These platforms include Broker Trax, this give updates on broker-dealers compliance with the rules of the market; X-Compliance, provides compliance related updates on all listed companies as well as a functional web-site which offers near real time data and information on event and happenings in the market.

In the area of disclosure, the X-Issuer platform provides a mechanism for the secure electronic delivery of issuer information to the market.

Market surveillance ensures the effectiveness and fairness in all market dealings, erring issuers are penalize by way of fines, public censure, suspension, forced resignation, revocation of license (expulsion) for market infractions.

On the other hand an investor protection platform is in place to secure investors interest. To ensure its full operation it is segmented into three main sector which involves complaints management, this is the operation of an investor focused complaints handling and problem resolution system, the X-Whistle, a vehicle for secure and effective submission of tips and referrals regarding violations and the Investor Protection Fund which provides compensations to investors with genuine claims of pecuniary loss.

The exchange has also embarked on various road shows to expose the potentials of the market to the global community. The CEO of NSE while addressing Nigerians in Diaspora recently said, “As the largest economy in Africa, Nigeria present significant opportunities”. The recent move by the big players in the energy, aviation and telecom companies to list on the NSE is an indication of issuers taking advantage of the opportunities provided by the Exchange to provide cheap funds.

With a new government in place hopes are high that president Buhari will give a huge bounce to the capital market. What has made some investors to sit on the fence for the moment is the announcement of economic policy and appointment of new cabinet. With that hurdle crossed, it may not be too long before we start to see a flurry on investment deals returning to the capital market through the NSE.