Concord Times (Freetown)
Tanu Jalloh
15 December 2008
Freetown — Expert business executive said the need for listing companies on the stock exchange owes it to the fact that owners would always want to see operations grow as the demand for their products and services increase.
Dr Mohamed Jalloh, who works in the Sierra Leone stock exchange office at the Bank of Sierra Leone, said the benefits are huge to include additional financing through subsequent issuing of securities.
"Also the credibility of both investors and potential creditors can be enhanced because of the high standards that must be met and maintained by listed companies. There is increased visibility of the company through the comprehensive disclosure of information on the public and publishing of trading statistics by SLSE," said Dr. Jalloh in his article titled 'The Sierra Leone Stock Exchange: Understanding Capital Markets.
Be sides the exchange creates a market place where the securities of all listed companies can be bought and sold. This in turn increases the demand for securities and adds to the value and acceptance of the securities because the purchaser knows that there is a ready market for shares.
However, he believes that sometimes it may be very difficult to raise additional finances to support expansions in the company's operations.
Bank loans may be very expensive, short-term and limited in amount available. With the Stock Exchange, a company can raise a huge amount of long-term capital by issuing financial securities tradable at the floor of the Exchange.
Although capital markets provide both the government and the private sector with access to the types of long-term investment capital necessary to achieve accelerated economic growth, sitting at the heart of the capital markets is the stock exchange, which provides the link between businesses that need money and investors, both individual and institutional, with money to invest.
Therefore, the government and indeed the nation as a whole could only benefit from the stock exchange if it could be able to raise money to invest in the country's infrastructure and public services, as well as private business ventures.
Meanwhile, critics fear that the establishment of a full-fledged formal stock exchange could be a time consuming and technically demanding process.
However, the bank said there were already in existence a few public companies in Sierra Leone, with shares being traded informally on an over-the-counter (OTC) basis at the discount houses.
It could be recalled that in recognition of the situation, the Stock Exchange Technical Committee, SETC, decided to establish an interim stock trading facility to provide a regulatory framework for the existing share transactions consistent with international financial practice, and create a structure for more widespread trading of shares.
In early November this year and despite continuous fall in the prices of Nigerian stocks, Sierra Leone Stock Exchange indicated interest to cooperate and partner with the Nigerian Stock Exchange (NSE) in the area of capacity building and manpower development.
Dr. Jalloh also observed that the global financial crisis which rocked the United States and other European countries should serve as a lesson to the African continent in terms of formulation of policies that would ensure regional integration and effective management of the continent's resources.
On the areas of partnership with the NSE, he said: "We are looking at manpower development and capacity building which is very important because a Stock Exchange could only be efficient if its manpower are well equipped with international best practices. We also want to leverage on the experience of the NSE on how to handle issues relating to the stock market since we are an emerging market."
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