The Nigerian Stock Exchange, NSE, on Thursday stepped down resolutions to make the bourse a shareholders’ company.
Demutualisation is transforming a stock exchange from being a self-regulatory organisation, with no shareholders, to a public company that is shareowner-based and profit-seeking. It allows the shares of an exchange to be quoted on its floor.
This action was taken at the NSE’s 55th Annual General Meeting held in Lagos, as the council of the NSE sought for further deliberations with the market operators.
The members agreed to NSE council’s proposal to have an Extra-Ordinary General Meeting, EGM, on the demutualisation to allow for more consultation, urging the council and management of NSE to fast track the demutulaisation process and pick a date for the EGM.
Speaking at the meeting, the President of the council, Mr Aigboje Aig-Imoukhuede, said, “In 2016 we will focus on demutualization of the Exchange for maximum efficiency in our operations and decision making processes, increase in our quoted asset classes to include exchange traded derivatives and monetization of our market services suite, as we explore untapped business opportunities to diversify and grow our income streams.”
He noted that the Exchange weathered the impact of capital flight shocks experienced globally through effective fiscal discipline and tight budgetary controls.
According to him, although 2015 was characterised by recessionary pressures including a slump in crude oil price, uncertainty in Nigerian economic policies and significant local currency exchange rate pressures, our management and staff successfully delivered on a number of ambitious operational and strategic initiatives.
He said the council is acutely aware of its role in the local and global community and will continue to proactively collaborate with the federal and state governments, regulators, businesses and investors to develop solutions to challenges central to market and national economy.
It should be recalled that there have been several unsuccessful attempts, by the previous and current managements of the Nigerian capital market and its regulator, to demutualise the nation’s bourse.
The former President of the NSE, Alhaji Abdul Razaq, was the first to propose, in June 2002, that the NSE be demutualised.
The sacked NSE’s Director General, Prof. Ndi Okereke-Onyiuke, later represented the proposal in 2008, but it was stepped down, perhaps, because of the then global market downturn.
Some stock markets have also had to demutualise, as well as build alliances or consolidate within and across borders, in order to enhance their attractiveness in the face of strong global competition.
For example, in 2006, the Australian Stock Exchange merged with the Sydney Futures Exchange to form the Australian Securities Exchange, ASX, one of the world’s top-10 listed exchange groups.
The New York Stock Exchange, NYSE, in 2007, also merged with Euronext, the European electronic stock exchange based in Netherlands, to form NYSE Euronext, the world’s largest stock exchange.
Demutualisation has provided exchanges access to more capital that they were incapable of raising. Such capital has enabled them meet their needs and stay competitive without necessarily placing additional financial burden on participants.
Since the first demutualisation of a stock exchange in 1993, by Stockholm Stock Exchange in Sweden, over 25 stock exchange demutualisations have taken place; predominantly, in developed market jurisdictions.
Furthermore, over 80 per cent of members of the World Federation of Exchanges, WFE, are currently demutualised, with some publicly listed while others are not.
Meanwhile, the NSE financial highlights for the 2015 financial year showed that revenue dropped by 32.95 per cent, other incomes was up by 44.82 per cent, total income was down by 16.84 per cent while operating surplus before tax was down by 52.95 per cent.
The Chief Executive Officer of the NSE, Mr. Oscar Onyema, explained that despite declines in core income streams, alternative sources of income continued to play an important role in supporting the financial performance of business.
At the AGM, members of the Exchange re-elected to the national council, Mr. Aigboje AigImoukhuede, as the President; Engr. Muhammad Daggash; Mr. Oluwole Abegunde representing Meristem Securities Limited; Mr. Oladipo Aina representing Signet Investment & Securities as members of the national council.