Udeme Ekwere writes
Following the meltdown that rocked major
global economies including the Nigerian capital market in 2008,
regulators have been involved in various steps to rekindle investor
interest in the market.
This follows the fact that not a few
investors pulled out of the market as a result of the huge losses they
suffered in the market.
Market statistics during that period
showed that between 2007 and 2008, the market capitalisation of the
listed equities in the Nigerian capital market rose to about N13tn.
By mid 2008, as a result of the global
financial crisis, the market capitalisation of equities dropped to about
N8.8tn, and the slide continued as in 2009, as a result of the Central
Bank of Nigeria’s clamp down on some banks due to gross misconduct, the
market capitalisation was down to N4.989tn, while the NSE All-Share
Index fell to 20,838.90 points.
Owing to this therefore, the market
regulators including the Securities and Exchange Commission and the
Nigerian Stock Exchange have been involved in various reforms and
measures aimed at boosting the market, and also tightening the processes
and procedures for trading at the Exchange.
SEC, for instance, has increased capital
requirements for market operators and taken measures that would, in the
long term, improve investors’ confidence; while the NSE took measures
to deepen the market and expand the number of instruments available to
investors in the market.
One of the moves which both regulators
have agreed is essential to boosting activities and attracting more
investments into the market is deepening the equities market.
These stakeholders have noted that a
major way of attracting the attention of foreign players to the market
is through the listing of multinationals and oil companies on the
Exchange.
Speaking on this issue, the
Director-General, Securities and Exchange Commission, Ms. Arunma Oteh,
had said that these firms should ordinarily be listed, adding that
foreign oil majors such as Royal Dutch Shell, Exxon Mobil Corporation
and Chevron Corporation should have secondary share listings in Nigeria.
According to her, 80 per cent of
government revenues comes from the oil industry but it makes up only
five per cent of the stock market, adding that by persuading the
national oil company, NNPC, and foreign oil companies to list a portion
of their joint ventures, the stock market would better reflect the
economy for investors and Nigerians could have greater ownership of oil
firms.
“We’re in discussion both with NNPC as
well as the oil majors as to listing on the Nigerian Stock Exchange,”
she said, adding that oil companies could be encouraged to list shares
by the pending Petroleum Industry Bill, which aims to increase local
participation among sweeping changes.
It seems that the wishes of the
regulators and operators in the equities market may soon come to pass if
the PIB, which was recently forwarded to the National Assembly, is
passed as it is.
This is because the law will require the
Federal Government to divest 30 per cent of its shareholding in the
National Oil Company and sell the shares on the NSE.
Accordingly, the NOC, which is slated to
be the successor company of the NNPC and shall assume some of its
assets and liabilities, is meant to be created not later than three
months upon enactment of the Act.
By its establishment, the Federal
Government hopes that it can create a viable oil company to operate
under commercial terms and will transform into a world class national
oil firm in the mould of Saudi Aramco, Malaysia’s Petronas and Brazil’s
Petrobras.
It is expected that the NOC would
compete for acreages with private multinational oil firms and other
NOCs, but in order to broaden the scope of ownership of the oil company
and enhance corporate governance, the bill is proposing that the NOC be
made public by way of listing on the NSE.
Analysts have said that the bill, if
passed, will go a long way towards addressing the seemingly deficit of
investible instruments in the equities market.
According to them, the move will help in
boosting activities in the market and help to attract local investors
who have been wary of investing again in the market.
For instance, the Chief Executive
Officer, Mr.Greg Otsu, said that if the PIB was passed, it would be
extremely beneficial to the market as it would breathe new air into the
equities market.
“This is all we have all been waiting
for. This move is one of the super and glorious move for the deepening
of the Nigerian capital market, it is a great move and it is welcome,”
he stated.
On his part, the Managing Director,
Crane Securities Limited, said that the shallow nature of the market in
terms of number of instruments listed had always been a source of worry
to market operators.
He added that the passage of such a bill
would be a welcome development that was capable of turning around the
market and taking it to new heights.
He said, “You know that our market is
very shallow in terms of instruments available to be traded on and any
attempt to deepen it is always the prayer of stake holders.
“Yes there are plans to bring these
subsidiaries on board the stock exchange, and if it works, it may
actually be a lot easier to list the NNPC subsidiaries than the even the
telecommunication companies we have been clamouring for, because the
government can easily come up with a policy on the subsidiaries since
NNPC is basically government based.
“The implication for such listing is
that it is going to add to the number of instruments available for
trading and also help in deepening the market further, so it is a
positive implication, and we hope it sails through quickly.”
Agreeing with this, the Chief Executive
Officer, Lambeth Trust & Investment Company Limited, Mr. David
Adonri, said that apart from deepening the market, the listing of the
firms would go a long way towards ensuring competitiveness in their
operations.
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