Experts bemoan under-representation of key sectors on NGX

…Blame stringent listing rules, lack of incentives, others

Apparently irked by the under-representation of some sectors in the nation’s stock market, capital market experts, at the weekend, urged government to accelerate privatisation of its assets and bring them to the exchange for listing to dilute concentration of industry composition of the bourse and boost overall market capitalisation.

The stakeholders who spoke in a chat with The Guardian stated that sectoral analysis of the market shows that some sectors are under-represented.

According to them, while industry composition is concentrated in a few industries like banks, consumer and industrial goods, the agric and oil & gas sectors that are critical for economic diversification, take up a much smaller proportion.

Specifically, the two sectors, which contribute 26 per cent and nine per cent of the country’s GDP, constitute 0.8 per cent and 2.1 per cent representation on the Nigerian Exchange Limited (NGX).

But the stakeholders stated that if the growing agitations for multinational companies operating in Nigeria to list on the capital market since the 2007 to 2008 global financial crises had been actualised, it would go a long way to reducing over-concentration of market composition on few sectors, allowing companies from other sectors to list on the bourse and deepen the market.

Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, stressed the need for government and regulators to ensure that the value of listing on the stock market is sufficiently attractive and much more than the cost of being listed, stating that value proposition is crucial in any business decision, especially for private investors.

Yusuf also urged regulators to make the listing requirements for accessing the Alternative Securities Market (ASeM) less stringent to attract more participation of small and medium enterprises (SMEs) that made up about 50 per cent of the overall economy on the platform and eventually prepare them to list on the Exchange.

The Alternative Securities Market is a specialised board for emerging businesses such as small and mid-sized companies with high growth potential seeking to access the capital market.

“Most of the SMEs cannot meet the listing requirements. Besides, they are much more vulnerable to macroeconomic and other shocks than bigger firms. Attempts to onboard SMEs have not yielded many results.

“Also, better commitment to oil and gas sector reforms will significantly enhance the prospects of more oil and gas companies to get listed.

“Regrettably, the recent capitulation on the Petroleum Industry Act (PIA) has dampened investors sentiments in the sector. Getting other privatised firms listed would deepen the market. But those firms must inspire the confidence of investors for that to happen,” Yusuf said.

Professor of capital market at the Nasarawa State University, Keffi, Uche Uwaleke said the government could use fiscal and tax incentives to attract these firms to list in the stock market.

According to him, the government can adopt a form of tax differentiation model where listed firms are allowed to pay 29 per cent of company income tax out of the 30 per cent statutory requirement.

In addition, he suggested that the government could also grant the listed firms one year tax holiday as another form of incentive to encourage more listings in the market.

Uwaleke also stated that giving the listed firms an opportunity to recover the cost of listing which include legal costs before paying taxes, would go a long way to attract companies to list on the nation’s bourse.