Nigerian Capital Market’s 62 Years of Impact
The Nigerian Stock Exchange (NSE) now Nigerian Exchange Group was founded in 1960 as the Lagos Stock Exchange, on September 15, 1960. Operations began officially on August 25, 1961 with 19 securities listed for trading but informal operations had commenced earlier in June, 1961. As Nigeria celebrates 62 years anniversary, Kayode Tokede writes on how the Exchange has driven Africa’s largest economy, integrated market infrastructure, and its role in wealth creation.
In the beginning
From the early beginnings when only 19 securities were listed for trading to the now demutualised market, and over 300 securities composed of stocks, bonds, and Exchange Traded Funds (ETF) worth about N49.6 trillion in overall market capitalisation combined, Nigerian Exchange group Plc (NGX Group) has transformed to Africa’s gateway market, connecting Nigeria, Africa, to the world.
NGX Group has evolved in line with Nigeria’s independence, as operations on the then NSE were initially conducted inside the Central Bank building with firms as market dealers: John Holt Plc, C.T. Bowring, and ICON (Investment Company of Nigeria).
The volume for August 1961, was about 80,500 pounds and it rose to about 250,000 pounds in September of the same year with the bulk of investments made in government securities. In December 1977, it became known as The Nigerian Stock Exchange (NSE).
The NSE converted to an Automated Trading System (ATS) in April 27, 1999, with dealers trading through a computer network. In 2013, it launched its next-generation trading platform, X-Gen, that enabled electronic trading for the retail and institutional segments.
With the economic expansion, the management of the Exchange created mechanisms such as the All-Share Index (ASI), NGX 30, and sectoral Indices to track the market performance.
The likes of Dangote Cement Plc, Nestle Nigeria Plc, Cadbury Plc, UAC Plc, and most leading banks/insurance firms to mention a few listed on the bourse have contributed to the nation’s economy with their expected job creation, tax remittance to government and economic diversification, sustaining economic growth over the years.
The NSE officially transitioned into a demutualised entity in March 2021 and transitioned to a non-operating holding company, Nigerian Exchange Group Plc, with three subsidiary businesses, the Nigerian Exchange Limited (NGX), NGX Regulation Limited (NGX RegCo) and NGX Real Estate Limited (NGX RelCo) after the approval of the Securities and Exchange Commission (SEC) and the Corporate Affairs Commission (CAC). This was a laudable achievement in light of the effort on the part of all stakeholders that saw the passage of the Demutualisation Act through the National Assembly. NGX is the operating exchange that received the securities dealing license from the former NSE and is in charge of all commercial activities of the exchange including listing, trading and ancillary services. NGX RegCo performs most of the resgulatory activities of the NGX through a regulatory services agreement. NGX Relco is the real estate company set up to deliver tailored propery letting, real estate investment and facility management services.
Impact Stories
As Nigeria celebrates its 62nd anniversary, it would be worthy of note to recount strategies embarked upon by NGX Group and its subsidiaries in powering Nigeria’s economy. According to Oscar N. Onyema, GCEO Nigerian Exchange Group, “NGX Group of companies is positioned to be a key player in strengthening the competitiveness of the market on a larger scale. Being a leading integrated market in Africa championing the development of Africa’s financial markets through its subsidiaries and a wide range of services, NGX Group’s impact also spreads across investments in the financial infrastructure space like NG Clearing Limited, Central Securities and Clearing Systems (CSCS), OTC platforms and three fintech companies.
On the part of the Exchange, CEO Nigerian Exchange Limited (NGX) Temi Popoola narrated how the Exchange is helping investors and businesses meet their financial objectives. “When we take a look at what we have achieved with the various listings on the Exchange, you would see that our corporates covers all sectors, making us the preferred listing partner and destination in Africa. As part of efforts to improve the listing experience of current issuers and attract new listings, NGX has intensified efforts with policymakers to shape reforms and policies that are supportive of listings and the capital market at large. We are strengthening the value proposition for corporates to consider the capital markets as a platform for raising capital and working to ensure we are competitive when compared to options that are available to issuers. We are, therefore, actively involved in contributing to policy formulation and advocacy to ensure an enabling environment for listings, including, working with several stakeholders to ensure that the time to market and the costs for listing are optimised.”
The CEO also boasts of the Exchange’s impact on government and corporates with reference to major listings recorded in the bourse like the Tripartite listings of the Sukuk bond by the Debt Management Office (DMO) and other debt bonds such as the FGN Bonds. “In the end, we are contributing our own quota in improving Nigeria’s economy through the various strategic listings on the Exchange”, he said.
NGX is a technology powerhouse that leverages smart business models to deliver vertical platforms across capital formation, investment, capacity building, market development and a plethora of other services within the capital markets ecosystem. Take for instance the MTN IPO issued in December 2021 that saw a large number of women and younger investors participate. We are not just promoting retail participation, we are advocating financial inclusivity and encouraging diversity in retail participation.”
The demutualisation of the NSE into the NGX Group and subsequent listing on the NGX Exchange was transformational as it gave members of the Exchange an opportunity to own shares in the new entity and find liquidation for their ownership. It has also given the public the opportunity to own a piece of the NGX Group and share in its future profits. It created strategic opportunities that would 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 would also enable NGX Group to form new dynamic relationships, drive strategic partnerships and gain capital-raising flexibility.
Arguably, its mission to promote a fair, transparent, and orderly Nigerian capital market for all stakeholders puts NGX Regulation Limited at the forefront of sustainability and corporate governance-related discussions. NGX RegCo, the self-regulatory organisation is committed to promoting just and equitable principles of trade and sound business practices. Ms Tinuade Awe, CEO, NGX RegCo noted that “NGX Sustainability Disclosure Guidelines which provide companies with a step-by-step approach to integrating sustainability into an organisation’s activities and operations also provide guidance on best-practice sustainability reporting that complies with global standards, including the Global Reporting Initiative (GRI). Our goal is to foster investors’ confidence, whilst we find ways to unlock further capital to address Corporate Governance issues which therefore accelerates sustainable development in Nigeria and beyond”.
NGX successfully launched West Africa’s first Exchange Traded Derivatives (ETD) platform and collaborated with the premier central Counterparty (CCP) in Nigeria, NG Clearing Limited, to provide the clearing infrastructure for NGX Derivatives Market. The significance of derivatives cannot be underestimated as it has brought more liquidity to the market, given sophisticated investors an opportunity to hedge their risk and manage cost for their portfolios, expanded market making opportunities and complemented existing asset classes.
The CEO of NGX, Popoola said the introduction of ETD’s was a step in the right direction for the Nigerian capital market. “Our partnership with best in class CCP, NG Clearing Limited further engenders confidence in the ETD’s market segment amongst market participants, as the clearing infrastructure is capable of reducing systemic risk and enhancing market transparency,” he added.
Contribution to economy
The Chief Executive Officer and Managing Director at APT Securities and Funds Limited, Mr. Kasimu Kurfi said the NGX contribution to the nation’s economy is tremendous.
According to him, “Before, we had market capitalisation that was in the millions but today, we have a market capitalisation that is in trillions of naira. The capital market has provided a place for listed banks and insurance companies to meet recapitalisation exercises in their sector.
“Mind you, in the last 10 years, we have seen additional five companies listed on the NGX. Of course, these companies contributed nothing less than 60 per cent to the market capitalisation as of today. Do not forget, these companies are not government-owned companies.
“The capital market has been a driving force in the nation’s GDP growth and if more companies are listed, most especially the telecommunication and upstream companies, it will enhance the economic growth and capital market wealth creation.
“In the last 62 years, the capital market has played its role in economic growth through companies’ access to capital and government borrowing to finance key infrastructure projects across the country.”
The doyen of the Nigerian capital market, Mr Rasheed Yusuf expressed that the impact of the capital on economic growth has been enormous in both the African and global markets.
According to him, developing states, such as Lagos state has benefited from the capital market to raise needed funds to construct key infrastructure in the state.
He expressed that the Federal government over the years has utilised the capital market to raise bonds amid its budget deficit to support major road constructions across the country.
He said the manufacturing companies and banks amongst others, have tipped from the abundance of the capital market to access liquidity.
“Capital market is the source of funding for most of government and companies’ capital projects,” he said.
