THE VIRUS AND ITS HOST

Igbrude Moses canvasses the need for the NSE and SEC to address the challenges in the capital market

The case of the present management of Nigeria Stock Exchange (NSE) and Securities and Exchange Commission (SEC) is similar to a situation of a virus and its host. When a virus attacks it’s host, it gradually weakens the host by destroying its immune system, which will eventually lead to its death, forgetting that the death of it host will consume it. In an effort to create a market that resembles international market and using the reason of attracting foreign investors the Nigeria Stock Exchange (NSE) has designed and formulated policy frameworks which favour and attract portfolio investors instead of real investors who come to speculate when the country is a bit stable and dump the shares immediately they notice any little instability in the economy. To sell their point they compare our market to other stock exchanges like London, New York, Canada, etc. They forget that companies operating in those countries have good environmental factors like good infrastructure, single interest rates, favourable government policies, stable power supply etc., unlike Nigeria where everything is in the opposite.

We all know that Nigerian companies face a lot of hurdles like high interest rate, poor infrastructure, insecurity, inconsistencies in policies from government, high taxes, corruption, multiple foreign exchange, lack of power supply, etc. Instead of making policies that will assist our listed companies, they are only interested on how capitalisation has moved up and the money they are making from the market. What are the advantages of PLCs over limited companies? What is the related party’s transaction law meant to serve? And what benefits or advantages has it brought to the market? Why are PLCs preferred now to limited companies? What is the par value pricing methodology rule serving? Is it in the interest of local investors or those portfolio investors? Why are the telcoms, upstream companies and others not interested in listing in the market? Must we as people always imitate other countries? Why can’t we build an exchange based on our standards and values so that we can develop at our own pace, instead of relying on foreign investors to develop our economy for us? These are questions begging for answers!

The NSE mission is “To provide investors and businesses a reliable, efficient and an adaptable exchange hub in Africa, to save and access capital.” If saving is one of its key objectives, why expose the market to portfolio investors? Do they come with good intention to improve the companies? How many foreign companies have listed on our exchange as compared with those who have left the market, since the present management came in? And what happened to the unclaimed dividends of these delisted companies?

To access capital is its second objective. Now companies like Nestle, Presco, Okomu and others have not accessed capital in the market. What advantage or benefits do they enjoy? The NSE should

WHY CAN’T WE BUILD AN EXCHANGE BASED ON OUR STANDARDS AND VALUES SO THAT WE CAN DEVELOP AT OUR OWN PACE INSTEAD OF RELYING ON FOREIGN INVESTORS TO DEVELOP OUR ECONOMY FOR US?

see to it that it’s become advantageous to be a public quoted company than to be a limited liability company. The intrinsic benefits of being listed on the market must be clear, concise and transparent to all. The NSE and SEC should articulate policies that will encourage entry into the market and focus on real development by engaging government and the powers - that -be on the importance of the capital market to the economy. They should assist companies that run into troubled waters, especially those that government policy inconsistencies affected by giving forbearance to such entities, and by exempting them from penalties, fees, etc.

At present, the way the capital market rules and policies are structured are compounded with the Nigeria operating environment. It is disadvantageous and discouraging to be a listed PLC, which is why these companies always opt for the option of delisting from the exchange whenever they run into problems. The likelihood that more will be delisted in the nearest future is very high. So, there is an urgent need for the NSE and SEC to acknowledge that there is challenge. They should go back to the drawing board to identify those problems and address them otherwise sooner or later the virus will be consumed by the dead of the host.

Although, entering and exiting the market is allowed, the NSE should put in place rules and policies that will discourage companies from leaving the market. The exchange should ensure that core investors don’t own more than 50-60% of the shareholdings of any company.

The SEC should collaborate with NSE to bring to the knowledge and understanding of the government the challenges and problems facing companies in doing business in the country and suggest best ways to assist them as well as educating those running the government on the importance of the capital market to our economy.

They should continuously engage in investors’ education and awareness campaign to raise the consciousness of Nigerians to the importance of the capital market. The more Nigerians have confidence and invest in the market, the more its stability.

We all should encourage a home grown capital market driven by the dictate of our needs and development. No foreigner will develop our country for us. We must take the bull by the horns and make our country great by ourselves.

Remember, without these companies the exchange will not exist and SEC will have nothing to regulate. Therefore, the existence and good performance of these companies is in our collective best interests.