Columnists
NSE Demutualization, the right way to go
The demutualization exercise is expected to produce a new non-operating holding company with three operating subsidiaries.
Recently, the Nigerian Stock Exchange (NSE) completed its long-awaited demutualization after getting the approval of the Securities and Exchange Commission (SEC) and CorporatebAffairs Commission (CAC). The demutualization exercise is expected to produce a new non-operating holding company with three operating subsidiaries.
The subsidiaries are Nigerian Exchange Limited (NGX), NGX Regulation Limited (NGX REGCO), and NGX Real Estate Limited (NGX RELCO), saddled with operating, regulating, and acting as the real estate arms of the Exchange, respectively.
The Nigerian Stock Exchange (formerly Lagos Stock Exchange) was founded on 15 September 1960 and began operations on 25 August 1961. In a bid to catch up with the needed efficiency to take its place as the leading Exchange on the African continent, members had agreed at an Extra-ordinary General Meeting in 2017 to demutualize the Exchange.
A decision that became more pronounced as the demutualization bill became law in August 2018. Demutualizing the Exchange changed it from its earlier status as a nonprofit organization limited by guarantee into a public company.
According to the Group Chief Executive Officer, Mr Oscar Onyema, ‘The Nigerian capital market should play a role commensurate with Nigeria’s status as Africa’s largest economy. At the Nigerian Stock Exchange, we have a vision that the new Group will become the premier exchange hub for Nigerian businesses and for the African economy. We are implementing a series of measures towards this goal, demutualization being a critical milestone. The completion of demutualization is a truly significant moment, and we welcome the new possibilities that have opened up for us today.’
In our view, the exercise will provide an avenue for the Exchange to achieve greater efficiency in all its core activity areas. The Group’s listing on the Exchange makes the current ownership stakes tradable while also providing an avenue for Capital (Equity or Debt) raise should the company need financing.
Furthermore, the Group’s incorporation would subject it to more public scrutiny, a factor that we expect would engender better corporate governance and better reporting standards. The company plans to invest in the necessary infrastructure to lower trading cost, improve real-time access to deals matching and reduce system downtime.
CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.
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Book of States 2020: Vast resources, low industrial development
State governments have been heavily reliant on FAAC distribution to meet recurrent expenditure, thus making no room for capital spending.
The Nigerian Investment Promotion Commission (NIPC) in a recent report titled “Book of States 2020” highlighted the investment prospects of the 36 states of the federation including the Federal Capital Territory (FCT) to steer attention to the subnational investment opportunities in Nigeria. We note that the report is an outcome of a partnership between the commission and the Nigeria Governors’ Forum (NGF) to showcase the key investment opportunities for each state.
The report focused on the key areas of physical capital (airports, railway stations and seaports), resources (natural and minerals) and demography (population and labour force) of each state including their Internally Generated Revenues (IGRs), budget spending and household consumption.
While we acknowledge the decrepit infrastructure as a major hindrance to the growth of businesses and economic prosperity of many states, we note the little emphasis placed by the states on financing capital projects to attract private sector investments. Over the years, state governments have been heavily reliant on FAAC distribution to meet recurrent expenditure, thus making no room for capital spending.
The truth is that as long as state governments do not make desperate efforts to develop their internal revenue-generating capacity, the states in the country would continue to operate an inefficient rent collection system where they rely solely on FAAC allocation to meet basic needs such as paying workers’ salaries.
In our view, we believe the efforts to revive the ailing status of many states depend on the effectiveness and soundness of policies made to propel investments. Currently, Nigeria has enormous potentials to improve tourism given its ample amount of resources to attract both local and international tourists. Many countries in the continent such as South Africa, Kenya and Morocco have made great fortunes from tourism.
Over 50% of the states have recorded no foreign direct investments over time due to little or no requisite infrastructure needed to attract capital inflows amid untapped resources in these affected regions. Also, we believe the Federal Government needs to relax its control on some of the state-owned resources to enable the states better exploit these resources.
CSL Stockbrokers Limited, Lagos (CSLS) is a wholly-owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.
