18 January 2013

Nigeria: Delayed Demutualisation of NSE Blamed On SEC

The Chief Executive Officer of the Nigerian Stock Exchange (NSE), Mr. Oscar Onyema,thursday blamed delay in constituting a new board for the Securities and Exchange Commission (SEC) for the delay in the demutualisation of the exchange, just as he attributed the 34.5 per cent growth recorded in 2012 mostly to activities of foreign investors.

Speaking on the planned demutualisation of the exchange, which is expected to allow more Nigerians own part of the Exchange, Onyema said while the management and Council were working towards it, the report of the technical committee that set out guidelines for the process was yet to be approved by SEC because the commission was without a board for some time.

The apex regulator was without a board for almost six months until last Tuesday when a new board led by a former Director-General of SEC, Mallam Sulleyman Ndanusa was sworn in.

He explained that was a technical committee set up by SEC that came up with framework for demutualisation process, saying that report was yet to be approved and if NSE went ahead with the programme it would not have be based on any framework.

"There was technical committee set up last year that came up with a framework that SEC will approve for anybody coming with demutualisation to go through and implement a demutualisation process. So there is technical committee report is at SEC waiting for their board to review and come up with the guidelines on how demuatualisation will occur. After that, the exchange will then follow what is set down to achieve demutualisation," he said.

Speaking on the performance of the market in 2012, Onyema noted that the NSE recorded an increase in the value of shares traded, which stood at N658.22 billion up 3.67 per cent and a reversal of the 20.39 per cent decline suffered between 2010 and 2011

While he said significant share of the performance was by foreign investors, he disclosed that local investors had started coming back to the equities market, accounting for 44.3 per cent of total market activity as at November 2012.

According to him, the market capitalisation equities and fixed income securities rose by 43.9 per cent to stand at N14.5trillion($595billion) in 2012.

However, Onyema stated that the N155 trillion ($1trillion) market capitalisation target set by the NSE for the year 2016 may not be attained if the Federal Government fails to facilitate the unbundling of oil sector through passage of Petroleum Industry Bill (PIB) and encourage companies in telecommunications and energy sectors of the economy to in the market among other factors.

"The market capitalisation of the NSE is one of the lowest in Africa in terms of GDP. When we gave the target, we say the number of things needed to be aligned. Government said they want to privatise power. We need the support of the government to ensure that the 16 utilities are listed with the telecom companies. The National Assembly should approve and pass the PIB to provide unbundling of companies and enable the oil majors to take positive decision. Activities in the oil and gas sector is slowing down because everybody is watching to see what is happening ," he said.

On the outlook for 2013, he said the market would continue to face challenges around liquidity and depth, although there is a concerted effort to drive improvements in market participant experience.

He said: "The Central Bank of Nigeria (CBN)'s efforts to achieve single-digit inflation and a lower MPR should have a positive impact on the equities market. As investor confidence measures implemented by the NSE mature, we expect that a growth trend similar to that experienced in Q4 2012 will extend into 2013. On the fixed income side, we anticipate the relative attractiveness of FGN bonds will continue for local and global investors, as a result of record-high yields.

" With the upcoming inclusion of Nigerian FGN bonds in the Barclay's Emerging Market Local Currency Bond Index, this should keep the nationâ€Å¸s bonds in the international spotlight. Furthermore, foreign issuers such as the International Finance Corporation (IFC) are expected to enter the Nigerian bond market this year," he said.

According to him, other contributing factors to optimism about the capital market include: "early passage of the national budget, which creates an impression that fiscal policy is being prioritised; the pronouncement to begin investing proceeds of the Sovereign Wealth Fund (SWF) in March 2013; elimination of VAT and stamp duties, which should take effect in 2013, freeing up funds for capital market investment; and (d) continued product innovation by the Exchange, such as the commencement of secondary bond market trading, and the introduction of new indices and ETFs."

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