NSE receives ‘No objection’ letter from SEC on demutualisation

•Plans court-ordered meeting to commence takeoff  
•Lists global economy, political instability others as 2020 economic drivers

Plans to demutualise the Nigerian Stock Exchange (NSE), are on top gear, as the Exchange yesterday, announced it is currently putting final touches to hold a court-ordered meeting and Extra Ordinary General meeting (EGM), following a ‘No Objection’ approval letter received from the Securities and Exchange Commission (SEC), last month.

Demutualising an exchange therefore transforms it from being owned by members or brokers, to one with a different governance structure where members of the public can buy shares.

At the 2019 Market Recap and 2020 Outlook, in Lagos, Monday, the Chief Executive Officer, NSE, Oscar Onyema, said: “Now that we have seen the ‘No objection’ letter from the SEC in December, we are now putting in place final touches to have the court-ordered meeting and the EGM. 

“There will be significant engagement with investors, press and our primary constituency, the brokers, and other members of the Exchange and the general public. So there is a very robust plan already in place.

“We are working as quickly as we can to complete it, and we hope that very soon, we will put out the notices for the EGM. There is statutory requirement; you have to wait for 28 days for the court-ordered meeting from when you did the notice after the EGM 21 days.” 

He added: “We are following the process, and we worked through the holiday period to see how quickly we can bring in these meetings.”

He continued: “The Exchange is a self-regulatory organisation, while we have a number of tools to address infraction from an enforcement perspective.

“We have to work in partnership with the SEC and EFCC to address other aspects of enforcement where our powers are limited to, so that those engagements are well-defined, and we continue to meet with them on a regular basis.”

On delisting of companies, Onyema said: “The life of an Exchange is such that some companies leave, and another company come on board. If you look at the market cap of the
Exchange, we have gotten a number of heavy weights, and we also lost a number of companies.

“What the Exchange is actually trying to do is that we have to be positive in terms of the number of companies listed and market capitalisation. 

“We cannot force anybody to stay listed or even list in the first place. We have to provide the value, and we hope they continue to extract that value, and find a compelling case
to list or to stay listing. We would continue to work with the various parties. Before a company delists, even if it is through a merger, there is a lot of engagement that goes on. 

“Sometimes, we have this engagement even in their home countries to make sure that we are tapping into the most senior people; the people that have the decision making powers.”
   
Onyema also listed crude oil price and production, global economy, political stability and business environment as key factors that would shape Nigeria’s ,economy this 2020.
 
He noted that the dynamics of crude oil price and production would continue to influence the capital markets and large economies, since Nigeria still relies on oil production for foreign reserves. 
 
According to him, the U.S. and Iran tension, oil supply shocks and progress in trade negotiations between U.S. and China, may put pressure on crude oil in 2020.
Onyema said enhanced focus on infrastructure renaissance, and promotion of laws that will support the business environment would be key to Nigeria’s success this year.
 
“Accordingly, the Exchange will continue to advocate for business-friendly economic environment, working in conjunction with both the public and private sectors,” Onyema said. 

On 2019 market performance, he said the NSE All-Share Index posted a negative return of -14.60 per cent at 26,842.07 having reached a year high of 32,715.20 in February 2019.
He said the equity market capitalisation increased by 10.55 per cent to N12. 97 trillion from N11.73 trillion in 2018, largely due to sustained primary market activities throughout the year, while the NSE Indices posted negative returns during the year, with the NSE Consumer Goods Index being the most impacted, declining 20.83 per cent, followed by NSE Main Board Index and NSE Lotus Islamic Index. 

Onyema further revealed that the Exchange rolled out various initiatives such as new market structure, to enhance liquidity and ensure market stability alongside efficiency to support equity market in 2019. 
   
“Our fixed income market performed exceptionally well in 2019, as market capitalisation increased by 20.42 per cent to N12.92 trillion from N10.72 trillion in 2018.”
He added that capital raising was dominated by the Federal Government, which accounted for 60 per cent of bond issuances during the period to finance fiscal and infrastructure deficits.