Demutualisation: Changing the face of Nigerian capital market

The move to enhance the operations of the Nigerian capital market by the Senate, holds great potential for development, writes GANIYU OBAARO

The Nigerian capital market has continually remained a critical player in the economy. It has, indeed, been impacting the economy positively, especially through investment drives locally and internationally to the extent that it won the hearts of investors as one of the fastest growing in the world.

Through investments in stocks and other trading instruments in the sector, the stock market in the country, like it or hate it, has significantly emerged as one of the pedestals on which the nation’s economy stands.

For example, big stocks like banking, industries, insurance, pharmaceuticals, construction, conglomerates, oil and gas, among others, have been driving activities at the market, under the watchful eyes of the Nigerian Stock Exchange, NSE, and the market’s apex regulator, Security and Exchange Commission, SEC.

However, in spite of these accolades, the sector has, over the last few years, faced its own challenges, such as fall in rise and fall in stocks, infractions by some unscrupulous operators, leading to huge investment losses, penalization of offenders, among other issues.

In order to rejig the sector, make it more competitive and profitable in line with global standard, the Nigerian Senate has recently proposed a Bill for an Act for the sector, in its drive to enunciate a proactive change for the industry. The upper legislative chamber of the National Assembly called it ‘Demutualisation Bill.’

Last week, the Nigerian Senate, through its Committee on Capital Market, proposed a Bill for an Act to enhance the sector.

The Bill, which has since passed through its second reading on the floor of the Red Chambers of the National Assembly, was proposed by the Senate Committee Chairman on Capital Market, Senator Foster Ogola.

According to Ogola, People’s Democratic Party Senator from Bayelsa West, South South Nigeria, while proposing the Bill, the essence of the Bill formed an “Integral element of the ten-year Capital Market’s Master Plan.”

He said the Bill seeks to enhance rapid development of the sector in the next decade, with a view to increasing value, enhancing the stock exchange in order to compete favourably within the global market; and open doors to foreign interests into Nigeria.

Ogola said that, the “Demutualisation of the Exchange will bring the Nigerian capital market at par with other international jurisdictions , resulting into enhanced governance, transparency, viability, whilst also attracting strategic partners, investors and good quality users.”

He said that, “The approval of the demutualization Bill will generate substantial impact for the development of an agile exchange thereby consolidating on its innovativeness and strengthening its leadership both at the local and international levels, whilst also adding value to its stakeholders.”

Interestingly, some of the stakeholders in the sector, apart from NSE, SEC, include Registrars, Issuing Houses and Stock Brokers.

The Senator added that, “As a demutualised entity that is profit-seeking, the NSE will be in a better position to capitalize on new investment income opportunities, from any limitations arising from conflicting member interests and existing laws; and more importantly, be able to better support the economic growth of Nigeria.”

Remarkably, Ogola got the much needed support from his colleague, as Senator Mao Ohunabunwa, PDP, Abia North, called for “speedy” passage of the Bill, arguing that it would not only “Promote transparency, but also develop the economy when passed into law.”

The proposed Bill seemed to have got the nod of several stakeholders in the country. Apart from the Senate, other critical stakeholders who favoured the Bill include, House of Representatives, Federal Ministry of Finance; Central Bank of Nigeria, CBN and stock brokers.

Now, the proposal seemed to have been given the needed muscle, as, the Federal Government has endorsed the ongoing legislative process by the National Assembly to demutualize the nation’s capital market.

This is because, a bill for an Act to facilitate the development of Nigeria’s capital market by enabling the conversion and re-registration of the Nigerian Stock Exchange from a company limited by guarantee to a public company limited by shares and for other related matters, 2017 ( Senate Bill 531) (otherwise called Demutualization Bill), had scaled second reading in the Senate.

Governor, Central Bank of Nigeria, Mr. Godwin Emefiele, who affirmed the government’s support for the Demutualization Bill, said if passed into law; the bill would bring NSE within the league of 56 out of 64 members of World Federation of Exchanges, which have demutualized.

Emefiele, represented by Mr. Adedeji Lawal from Legal Department of the apex banks’ regulator, said the dynamism presented by demutulised exchange would augment Nigeria’s debt profile and capital raising capabilities by providing a number of attractive vehicles for foreign and domestic investors.

He said, both the capital and money markets depend on each other; saying that efforts aimed at improving the operations of the market would invariably make a positive impact on the financial sector.

‎Also, the NSE is no less excited about it. Chief Executive Officer, NSE, Mr. Oscar Onyeama, who enumerated the ‎benefits of demutualization, said the proposed Bill would facilitate the development of Nigeria’s capital market by enabling the conversion and re-registration of NSE from a company by limited guarantee to a public company limited by shares.

He described the “demutualization of NSE, through the bill as the great game changer the country needs.”

Onyema listed the benefits of demutualization as facilitating development of capital market, improved corporate governance, resources for capital investment and increase global brand and visibility of the exchange, among others.

Also, the ministry of finance and the Association of Stock Brokers of Nigeria noted that the proposed bill would provide access to global capital market.

Senate President, Dr. Bukola Saraki, who declared the Public Hearing open, described the Bill as one of the instruments the 8th National Assembly hopes to use to stimulate Nigeria’s economic growth.
Saraki was represented at the event by Senate Deputy Whip, Senator Francis Alimikhena

Indeed, the Speaker of House of Representatives, Rt. Hon. Yakubu Dogara, who spoke through the Minority Leader, Hon. Leo Ogor, pledged the commitment and total support of the National Assembly for the bill, which he said, would scale up the efficiency of the NSE.

He said, “The Nigerian Stock Exchange plays a major role in the in Nigeria’s financial market and its conversion and re-registration into a public company by shares is essential to develop and strengthen the Nigerian capital market.”

Other players in the market had, in the past, praised the Nigerian capital market for its resilience and contributions to the economy. One of them is the immediate National President, Independent Shareholders Solidarity Association, Sir. Sunny Nwosu.

Nwosu, while describing the market as evolving, however advocated “respect from offshore investors” whenever they come into the market, saying that indigenous players, like his members, have what it takes to excel.

He had envisioned that the market would continue to witness changes in operations in the overall interest of the economy, like the Senate is now proposing through the Demutualization Bill.