A call for strategic clarity amid NASD’s challenges

As the 11th Annual General Meeting (AGM) of NASD PLC approaches, there’s no denying that the stakes are high for Nigeria’s premier over-the-counter (OTC) exchange. With key issues such as the re-election of Directors and the company’s financial performance under scrutiny, stakeholders are keenly watching how these conversations unfold. One of the notable voices in this discourse is VFD Group, a long-term proprietary investment company that has taken an active interest in the exchange’s future.

VFD’s recent statement has drawn attention to NASD’s governance structure and financial health, raising questions that reflect the concerns of many shareholders. However, while some may view VFD’s stance as assertive, it’s essential to consider their position in the broader context of market efficiency and shareholder rights.

VFD is not just another investor—it plays a critical role in the Nigerian capital market as an agent driving market efficiency and contributing to developing the country’s financial infrastructure. The Group’s concerns about NASD are grounded in its long-term commitment to ensuring that Nigerian companies, especially those operating in the capital market space, can tap into the enormous benefits of listing on a robust exchange.

That said, NASD has faced undeniable challenges. In recent years, the exchange has struggled with profitability, posting consecutive losses, including N79 million and N69 million in 2022 and 2023, respectively. Yet, it’s important to acknowledge that the current Chairman and Managing Director have been at the helm for less than 24 months—a relatively short time to implement their strategies fully.

Given the current global and domestic financial climate, turning around an exchange in these conditions is no easy task. Both stakeholders and the management team must understand that achieving consistent profitability requires time, patience, and a conducive macroeconomic environment.

Nevertheless, some of VFD’s points touch on deeper structural concerns. It is discernible that NASD’s major revenue line in recent years has come from delisting fees, a concerning trend for any exchange. For instance, NASD earned a significant sum last year from VFD’s delisting, and there are indications that another significant delisting could occur within the year. While delistings may be a part of the normal business cycle, reliance on such fees for performance is a red flag. An exchange’s primary focus should be on attracting new listings, expanding its platform, and enhancing its service offerings—not on profiting from companies exiting the market.

VFD’s stance, therefore, goes beyond mere critique. As shareholders, they are exercising their unalienable rights—rights that any investor is entitled to in a publicly traded company. These include the right to seek enhanced performance in investee companies, to exercise their voting rights during AGMs, to seek clarification on management’s strategic objectives and plans, and, where necessary, to challenge those plans if they believe they are misaligned with the company’s long-term interests. If no alignment can be found, shareholders also have the right to exit their investments or, when necessary, execute a transaction to exit other misaligned shareholders.

VFD’s position highlights the need for greater strategic clarity from NASD without implying any intent to control the exchange. Shareholders, including VFD, understandably seek a clearer understanding of NASD’s long-term objectives, particularly given recent losses and challenges in attracting new listings. The governance and financial performance concerns reflect a broader interest in seeing the exchange succeed.

This goes beyond profitability—it’s about ensuring NASD is on a solid path forward with a clear strategy. These expectations are typical for any institution of NASD’s importance to Nigeria’s capital markets. While it’s important for shareholders to raise questions, it’s equally essential to recognise that NASD’s current management is still relatively new and requires time to implement its strategies fully.

In conclusion, this unfolding situation should not be seen as a battle between NASD and VFD but as an opportunity for dialogue and growth. The Nigerian capital market stands to benefit significantly from a stronger, more efficient NASD, and VFD’s call for strategic renewal should be seen in that light. With open communication, a shared commitment to excellence, and a focus on long-term goals, NASD and its shareholders can work together to ensure the exchange’s future success.