Stakeholders Foresee Growth Opportunities in NSE’s Demutualisation

•SEC, CAC approve new status for bourse

By Goddy Egene

Stakeholders in the capital market have hailed the final approval given by the Securities and Exchange Commission (SEC) and the Corporate Affairs Commission (CAC) for the demutualisation of the Nigerian Stock Exchange (NSE), saying it will lead to the growth of the market and the economy.

The approval by SEC and CAC has led to the completion of the demutualisation process of the exchange, transforming it into a profit-making and limited liability company.

With the demutualisation, a new non-operating holding company, the Nigerian Exchange Group Plc (NGX Group), has been created with three operating subsidiaries.

The subsidiaries are: Nigerian Exchange Limited (NGX Limited), which will be the operating exchange; NGX Regulation Limited (NGX REGCO), the independent regulation company; and NGX Real Estate Limited (NGX RELCO), the real estate company.

Reacting to the development, the Chairman of Association of Securities Dealing Houses of Nigeria (ASHON), Chief Onyewenchukwu Ezeagu, said the demutualisation of the NSE was one of his happiest moments.

“The development is one of my happiest moments as the Chairman of ASHON, having along with other critical stakeholders delivered on the mandate to demutualise the exchange. Demutualisation will enhance the effective transformation of not only the NSE but also the entire securities ecosystem in particular,” Ezeagu stated.

President, Chartered Institute Stockbrokers (CIS), Mr. Olatunde Amolegbe, also said the approval would herald a new vista in the growth trajectory of the NSE.

“This is a process that already enjoys the support of all market stakeholders because of the immense benefits that we expect that it will bring to investors and the Nigerian economy at large. We expect increased innovation and growth among market participants,” Amolegbe added.

The Executive Director, NOVA Merchant Bank, Ms. Funke Okoya, said the demutualisation of the NSE had birthed a new vista of opportunities for the capital market.

According to her, the ownership structure should infuse greater efficiency and enhanced operational bandwidth, which will help to drive liquidity, expand its operations and deepen the market.

“The NSE is undoubtedly a critical element in the Nigerian capital market and plays a critical role in the development of the market. With our subsidiary as a broker/dealer on the NSE and of course a shareholder of the new NGX Group, I look forward to new offerings, efficiency gains and renewed service orientation from the leadership, with optimism that such would be complementary to the growth strategies of our securities trading subsidiary and other capital market operations, including asset management and investment banking,” Okoya said.

A former Council Member of the NSE and Managing Director/CEO of APT Securities and Funds Limited, Mallam Garba Kurfi, said the demutualisation would lead to greater investor participation in the governance of the exchange and unlock capital for stockbrokers who may decide to trade their shares for liquidity.

“The demutualisation of the NSE would make the exchange to function better like its peers such as the Johannesburg Securities Exchange (JSE), Nairobi Securities Exchanges that have already undergone the process. It will bring global best practices. In all, it is a good thing and all of us are going to be happy at the end of the day because it is going to unlock more capital for the market. For instance, if I place shares as collateral, I can trade and make money, we are pleased this is coming after so much delay,” Kurfi said.

Another stockbroker, Mr. Samuel Oguntayo, said as a profit-making company, the exchange would be restructured to become more agile and improve on its innovativeness and capitalise on new income opportunities in order to create value for shareholders.

“Apart from the fact that members who would be allotted their shares can trade these shares on over-the-counter (OTC) and make money, the benefits of the demutualisation will trickle down to ordinary Nigerians and every other participant in the market. Given the fact that the exchange will be restructured, there will be room for recruitment of new hands to man the new areas to be created. When it is a non-profit-making organisation, there was little motivation to make more money. But now that it is going to be a profit-making organisation, it has to make sure more money is made so as to end up with profit to share among the shareholders,” he stated.

Oguntayo added that the corporate governance principle governing other corporations will come into play in the running of the NSE and ensure transparency.

“Besides, there will be more products and services in the market and this could be other streams of income for operators,” Oguntayo said.

An investor and shareholder activist, Mr. Boniface Okezie of Progressive Shareholders Association of Nigeria said the demutualisation would bring benefits to all stakeholders in the market.

“It is going to be a healthy competition in the capital market because the platform will become a listed entity at some point. And so, as everyone among its staff will put in their best to make sure people who invest reap their fruits of their investment because they will now compete with those other companies also listed in on the platform.

“Even foreign companies who want to do business here will take us serious going forward,” he said.
According to him, the exchange will also become more business-oriented and as a private driven organisation interference from the Securities and Exchange Commission (SEC) for instance, will reduce.

Earlier yesterday, the NSE had said with the approvals by the SEC and CAC, it could now activate its Transition Plan (TP)to a new operational structure and holding company.

According to it, “The extensive TP, taking the group and its subsidiaries through to full operational launch, covers legal and practical changes to enable the functioning of the new corporate structure, with no loss of service and a seamless transition for market participants.

“The TP will also see the inauguration of boards for each of the new entities, staff reallocation to their respective functions within the operating subsidiaries, operationalisation of business plans and budgets, technology systems transfer, and the requisite arm’s length agreements between the entities.”

NSE stated that upon operational launch, the group’s new brands, including a new website, will be unveiled, and the group will be in a position to execute its strategic vision.

“Stakeholders, including our new valued shareholders will benefit from the group’s enhanced corporate governance framework, access to capital to fund strategic developments and more globally competitive exchange,” NSE added.
It said the approvals would enable the shares of NGX Group Plc, which have been registered with the SEC, to be allotted to the membership pursuant to the court-approved scheme of arrangement.

“Ahead of its listing on NGX Limited, the shares of NGX Group Plc will be available for bilateral trades to be executed in line with extant rules and regulations of the Nigerian capital market. Otunba Ogunbanjo will serve as the inaugural chairman of NGX Group Plc’s Board of Directors,” it stated.

Demutualisation of the NSE has been seen as pivotal because it creates new strategic opportunities that will enable the group realise its vision of becoming Africa’s leading capital market infrastructure provider.

The creation of a holding company and a new capital structure will also enable NGX Group Plc to form new dynamic relationships, drive strategic partnerships and gain capital-raising flexibility.

The NSE members approved at its last AGM the listing by the introduction of NGX Group Plc on NGX Limited.