Preparations are ongoing towards the automation of all Initial Public Offerings (IPOs) and public offers in the Nigerian capital market.
The committee is expected to submit their report on the automation process ahead of the Capital Market Committee’s next meeting.
The automation is expected to avail operators in the capital market the opportunity to operate within the T+3 four-day trading cycle, which currently applies to operators in the secondary market.
When the automation process is completed, investors can easily and virtually subscribe to and pay for Initial Public Offerings and other public offers. Their orders will then be matched and alloted directly to the investors’ investment accounts at the Central Securities and Clearing System (CSCS).
Reports indicate a committee has been set up to this effect, consisting of the Nigeria Stock Exchange, Association of Issuing Houses of Nigeria, Securities and Exchange Commission, Nigerian Interbank Settlement System, among others.
Why this is important
Reacting to this development, the President of the Association of Stockbroking Houses of Nigeria (ASHON), Mr Patrick Ezeagu, stated that the automation of IPOs and other public offers will go a long way towards ensuring transparency and efficiency in the Nigerian capital market. Improved transparency and efficiency will, in turn, boost investors’ confidence.
More so, automating IPOs and other public offerings will also go a long way in reducing stress for investors; both in terms of time and cost. This is because going by this proposed new system, the time and costs investors would incur for the documentation and mailing of IPOs will reduce. This will, therefore, avail all concerned parties the opportunity to complete transactions in a matter of minutes; just as it is currently is the case in the secondary market.
This latest development is in line with a number of steps undertaken by regulators in the capital market towards modernizing it. Recall that the Securities and Exchange Commission had in 2015 launched the E-Dividend Mandate Management System, a platform intended to ensure that dividend payments are made directly to investors’ accounts.
Therefore, as some companies including MTN Nigeria prepare to float their Initial Public Offerings later this year, it is left to be seen whether the automation process would be ready for use.