Stories by Chinenye Anuforo and Chinwendu Obienyi
With the bill to allow change of ownership of the Nigerian Stock Exchange (NSE) passing its second reading at the National Assembly, capital market stakeholders have said that demutualising of the nation’s bourse would boost liquidity, transparency and accountability.
Demutualisation is the process by which a mutually owned organisation transforms to a shareholder owned entity. Put in another way, it is the changing from a not for profit organisation to a limited liability company where members of the mutual organisation become shareholders and ownership and management are separated. When the legal structure of a stock exchange is transformed through the process of demutualisation, the ownership, the management and the trading rights at the exchange are segregated.
Thus, a demutualised NSE will become a company limited by shares, having share capital and subscribers to the share capital or shareholders, a board of directors, management that is separate and independent from the board and subject to rules and regulations of company operations in Nigeria.
According to Chief Executive Officer of PAC Securities Limited, Eugene Ezenwa, NSE demutualisation will ensure that the benefits of the exchange will trickle down to ordinary Nigerians and every other participant in the market. “If you are a player in the market, you participate and you buy the shares of the exchange, all other benefits will trickle down unlike when it is a non-profit making organisation where you don’t know how the money is accounted for. Now that it is going to be a profit making organisation, the governance principle governing other corporations will come into play and this means transparency. That is to say, corporate governance would come into play. In terms of recruitment, management of exchange, all Nigerians will know how these are being done,” he said.
On his part, the NSE Council President, Mr. Aigboje Aig-Imoukhuede, argued that demutualisation of the exchange will bring the Nigerian capital market at par with other international jurisdictions, result in enhanced governance, transparency and visibility while attracting strategic partners, investors and good quality issuers.
Also commenting, Senator Foster Ogola, Acting Chairman, Senate Committee on Capital Market, said the NSE plays a major role in Nigeria’s financial market and its conversion and re-registration into a public company limited by shares is essential to develop and strengthen the capital market and enhance the formation of capital for the expansion of the Nigerian economy. He said the move was also in line with the 2015-2025 Capital Market Master Plan, stressing that the proposed demutualisation would promote efficiency in the creation and harnessing of capital as well as creating liquidity in the market and adopting and strengthening corporate governance best practices.
“It is anticipated that the demutualisation of the NSE will reinforce the continuous growth and development of a dynamic, fair, transparent and efficient capital market and thus significantly contribute to Nigeria’s economic development,” Ogola said.
Mr. Yusuf Ayo Tajudeen, a member of the lower legislative chamber of the National Assembly, explained that the demutualisation of the local bourse was necessary to better enhance investors’ confidence in the capital market, which has been experiencing rising profile lately.
He argued that with the bill passed and assented to, it will give NSE the opportunity to convert and re-register itself into a public company limited from its present company limited by guarantee.
According to him, the Johannesburg Stock Exchange (JSE), the biggest bourse in sub-Saharan Africa, has already done this since 2006. In his words, “demutualisation will improve liquidity, promote the competitiveness and attractiveness of the domestic capital market as well as engender good corporate governance and boost investors’ confidence.”
However, the Chief Executive Officer, NSE, Oscar Onyema, while speaking on the benefits of the project, noted that demutualisation of NSE will generate substantial motivation for the development of an agile exchange thereby consolidating its innovativeness and strengthening its leadership both at local and international levels while also adding value to its stakeholders.
“As a demutualised entity that is profit-seeking, the NSE will be in a better stead to capitalise on new income opportunities, free from any limitations arising from conflicting member interests and existing laws and more importantly be able to better support the economic growth of Nigeria,” he noted.