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SEC mulls fresh recapitalisation for stock broking firms


•Seeks more palliatives for private equity operators, bluechips
Ahead of the planned change of ownership (demutualisation) of the Nigeria Stock Exchange (NSE), the Securities and Exchange Commission (SEC), may soon call for fresh recapitalisation of stock broking firms operating in the local bourse.

The Acting Director-General, SEC, Ms Mary Uduk, during an interaction with journalists yesterday, in Lagos, said with only 10 per cent of the 255 stock broking firms controlling 80 per cent of the market activities, there is a need for recapitalisation.

Already, other sectors like the banking and insurance are currently warming up for recapitalisation; the industry regulators have given them notice for the exercise.

Uduk said: “A number of other sectors are recapitalising, the Central Bank of Nigeria (CBN) has given the banks notice to think about it. We are also asking our capital market operators to also think about it because sooner or later, it would happen.

“If we have 20 or 50 big firms playing as supposed to 255 that we have now, I think the market will be better. We want strong firms, so it is something that should happen. Well capitalised firms as supposed to the situation we have now.”
Analysts believe that given the current situation, recapitalisation of stock broking firms would give rise to mergers and acquisition, and enable the emergence of stronger firms that would handle big-ticket transactions in the market, instead of the prevailing fragmentation.

On plans to attract new issues to the market, Uduk said the Commission is working closely with various exchanges in the market to assist companies with governance issues and other areas that would encourage them to list on the market as happening in other emerging economies.

According to her, SEC is also engaging the Central Securities Clearing System (CSCS), to address legacy issues that have given rise to high level of unclaimed dividend in the market.

Furthermore, she added that the Commission is currently working with the government to grant palliatives and tax incentives that would aid listing of blue chips on the Exchange.

The Deputy Director, HOD (Investment Management Department) SEC, Efiok Ekpenyoung-Efiok said for the capital market to drive investment and spur economic growth, tax incentives are very critical.

“Government cannot fund infrastructure, the private sector should do that. So infrastructure fund, which is an investment vehicle, should enjoy tax incentives. We have private equity funds that drive investment in SMEs and venture capital, which are critical areas.

“Just like India, government can look at private equity fund operators, who invest in savings and other core areas of the economy like mining, and agriculture and grant certain incentives, and these incentives would drive inflow from capital market into these sectors.”

Speaking at the 2020 Budget Seminar, the Head, Economic Research and Policy Management, SEC, Dr Afolabi Olowookere, expressed optimism that barring unforeseen circumstances, the stock market would close year 2020 on a positive note.

According to him, the antecedents of market behaviour in the past 10 years have showed that whenever the market starts on a positive note and sustained the momentum for two to three weeks, there is tendency that the market would close the year upbeat.

More so, he posited that the removal of multiple tax footprints for securities lending and real estate investment schemes in the Finance Act 2019, would enable operators unlock value on both sectors and deepen the market this year.

Olowookere said: “If government can ensure that the budget performance this year is good, that would also portend a positive outcome for the market, in addition to some policies in the Finance Act and the ones the SEC is trying to push.

“For instance, for securities lending, this means that some of the shares that were static and illiquid before can now be borrowed and traded upon, will increase activity in the market.

“Again, the real estate investment trust where companies will not have to suffer double taxation will also help investors to invest in infrastructure. Shareholders can have higher value and some of these firms can be listed on the market.  We see that as positive in the market.

“Furthermore, we are working with the Central Bank to make margin loan happen, we will have a positive outcome at the end of the year.”

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