New Telegraph

February 24, 2024

Boosting capital market via compelled listing

To ensure growth, the Federal Government needs to enact a law that compels local and foreign corporate organisations to be listed on the local bourse. RHODA OGUNSEYE writes

 

The need to make listing compulsory has become necessary as the Nigerian Exchange Limited (NGX) continues to experience a fewer new listings, while other potential companies remain cold footed.

Wealth creation

The NGX has always emphasised its potential to create wealth and ensure invenstor confidence.

According to the Exchange, “we provide access to capital for Nigerian and international companies, from small cap and growth oriented companies, to more established businesses looking to utilise the capital market to fund their business and expansion strategies.

 

“With our experience, streamlined listing process, global standards of regulation, technology capabilities and diverse investor base, we are your ideal partner for issuing equity. Listing on NGX provides your company with the opportunity to benefit from improved access to capital, increased global profile and access to liquidity.” Commenting on the development, Kasimu Garba Kurfi, MD/CEO, APT Securities and Funds Limited, said most of this huge foreign conglomerates were quoted in their own country, but they do not want to be quoted in other places unless they are compelled.

“If you look at it, Coca-Cola is trading in UK and U.S., but they don’t want to trade in other stock markets. Because the Federal Government is silent about it, they choose not to be quoted. “They came previously because they were compelled. The same thing with 7UP and Shell. Today, Nestlé is trading in Nigeria because of the 1972 decree. “This is why we need to pass a law that compels companies by necessity to be quoted on NGX,” he said.

 

The first big legislation to affect the Nigerian Stock Exchange (NSE) was the 1972 indigenisation policy in the Nigerian Enterprises Promotion Decrees (NEPC). The purpose of the law was to transfer ownership of foreign-owned firms, listed and/or operating in Nigeria, from foreigners to Nigerians. In banking for instance, Nigerians were to own 60 per cent equity in any bank operating in Nigeria. Garba stated that Ghana en acted a law that makes it attractive for foreign companies to go list in their Stock Exchange.

He said: “There is also need for government companies to be in the capital market. Look at NLNG, they are making profit, but not in the capital market, likewise NNPC, but not quoted. Charity must begin at home.”

Raising capital

Professor Ken Ife, Lead Consultant, ECOWAS Commission, noted that listing in the capital market gives opportunity for raising huge capital, development and shared prosperity.

He said: “Now that NNPC is a private company, it gives us a brilliant opportunity to shift the debate from development financing to outskirt-based financing. Why do I say that, Saudi Arabia is one of the richest countries in the world, number three in crude oil production, but they needed $25 billion. “They didn’t go to the World Bank or outskirt development banks, but they raised the capital through Saudi- Aramco that was valued at $1.5 billion dollars, buy just putting five per cent of its shares in their stock exchange.

 

“Now that company as at May 2022 was worth $394 billion, the highest capitalised company in the world after Walmart ($576 billion), Amazon (486 billion), Petro China ($443 billion).” Ife explained that “if you look at NNPC, it is not less than $100 billion dollars, just opening 10 per cent of the Holdings to the public and make sure you get the ownership to those oil bunkers and vandals.

 

“Those that are breaking the pipelines, encourage them to buy NNPC shares, then you will see reduction in the illegal activities because they will see the company as their own.”

Experts’ views

Professor Uche Uwaleke, Professor of Finance and Capital  Market at Nasarawa State University, Keffi, who corroborated this point, said: “With time, we expect NNPC to be quoted company on the Nigerian Exchange Limited (NGX) that’s part of the plan.”

 

Saudi Aramco, the world’s largest oil exporter, has surpassed U.S.-based technology giant Apple to become the world’s most valued company with a market capitalisation of almost $2.43 trillion. Chief Olusegun Osunkeye, a renowned industrialist, had also called on relevant stakeholders to ensure urgent listing of the converted Nigerian National Petroleum Corporation Limited. He said listing NNPC Limited, which has been converted to private company, would enable it operate transparently and profitably.

The ultimate challenge is how government, other capital market regulators and operators can work harmoniously to encourage investors. As a positive fallout of the Petroleum Industry Act (PIA), the news broke recently that the Nigeria National Petroleum Corporation (NNPC), had been converted to a private company, NNPC Limited.

 

The announcement has triggered the on-going analysis of the company’s financial health, civil service orientation of its staff and other key performance indicators that will enable a discerning investor to purchase its shares.

 

The new company can take advantage of Initial Public Offering (IPO) to raise capital to boost its operations and generate tax for government.”

 

Moses Igbrude, Publicity Secretary, Independent Shareholders Association of Nigeria (ISAN), said: “SEC and NGX should also put a very good advocacy programme in place to encourage and awaken Nigerians interest in the capital market to reduce dominance of foreign investors.”

 

He said that this would boost local participation in the market and as well enable local investors to absorb shares offloaded by foreign investors any time there was perceived economic instability.

Deepening economy

Despite the poor rate of companies coming to list on the NGX, it has continued to strategise to deepen the capital market and the economy. Nigerian Exchange Limited (NGX) said it was committed to fostering the growth of the Nigerian capital market through increased retail investor participation.

Temi Popoola, the Chief Executive Officer of NGX, said this recently while emphasising the commitment of NGX to provide a reliable, efficient and an adaptable exchange hub in Africa for investors and businesses, to save and to access capital.

 

Speaking on some of the immediate plans of the Exchange, Popoola noted that NGX would consolidate these advances by focusing on key initiatives aimed at growing the capital market for the benefit of all key stakeholders, maximising its business transformation initiatives to ensure that Nigeria’s capital market is on a trajectory towards improving retail participation, technology adoption, innovation competence and building a very robust marketplace for capital products and services.

Last line

Popoola elaborated on the Exchange’s plans to improve retail investor participation in the market, saying that NGX would intensify efforts aimed at driving retail expansion and digital transformation targeted at building end-to-end digital platforms and leveraging partnerships with market intermediaries to enhance the distribution of capital market products and services.

 

Read Previous

Analysts: Insecurity, naira weakness, others hinder Nigeria’s capital inflows

Read Next

IMO presses for adoption of Nigeria’s SPOMO Act

Leave a Reply

Your email address will not be published. Required fields are marked *