Stakeholders say mergers and acquisition will end firms’ illiquidity

Capital market stakeholders have identified mergers and acquisition as the best option to tackle liquidity challenges among stockbroking firms, and also restore confidence in stock market. This follows the recent expulsion of 35 stockbroking firms by the Nigerian Stock Exchange (NSE), over corporate governance issues,

The stakeholders, who spoke in a chat with The Guardian, suggested that stockbroking houses should consider mergers and acquisition, or any form of business combination to enable them wriggle out of current macroeconomic challenges.

The stakeholders, who admitted that business combination also had its challenges, including the possibility of creating market oligopoly in the future, however argued that it remained the best option at the moment.

Specifically, a chartered stockbroker and Chief Executive Officer, Sofunix Investment and Communications, Sola Oni, insisted that mergers and acquisitions or any form of business combination is a better alternative.

“It is good to own 10 per cent in a viable firm than 100 per cent in a sinking one,” he said, and described the expulsion the 35 firms as part of the oversight functions of market regulators to protect investors and uphold market integrity.

“Investors in the embattled firms called inactive houses shall move to any of the active firms within a short period. There is a procedure for this, and the Exchange’s Clearing House, the Central Securities Clearing System (CSCS) Limited, plays a pivotal role in this regard,” Oni said.

Also speaking, the Chief Operating Officer, InvestData Limited, Ambrose Omordion, commended the NSE for the expulsion aimed at sanitising the market.

“The NSE’s action is a welcome one, since their client’s and investors are not losing anything because all their holding records are with CSCS,” Omordion said.

He noted that the development showed that the economy was still struggling, as more people are losing their jobs.
Omordion urged investors to be more prudent before opening an account with any stockbroking house by considering the firm’s capital base, operations, research team, online presence or platform, staff strength and volume of transactions.

“Mergers and acquisition option is left for the firms involved if they want to continue operations,” he said, adding that the expulsion of the affected firms were long overdue, as many of them had been moribund.

“Before the expulsion, the stocking firms have been given opportunities to update their records, renew their licences and comply with other directives, but they were unable to meet up. Most of the stockbroking firms are sole proprietorship, which can make it difficult for expansion, efficiency and effectiveness.”

He urged the Exchange to be more decisive and fast in taking actions on stakeholders’ activities in the market, to minimise infractions and loss of confidence by the investing public.

The NSE, last week, expelled 35 stockbroking firms for non-compliance to corporate governance rules and regulations.

Some of the affected firms included Andruche Investments Plc, Angela Eccies Limited, Associated Trust Investment and Finance Ltd., and Beaver Securities Ltd., and a host of others.