Economic Confidential, June 2007

BUSINESS

Trade Alert: SEC, NSE Slash Fee by 40%

Securities and Exchange Commission and the Nigerian Stock Exchange have jointly agreed to a 40 per cent reduction in the cost of subscription to the Trade Alert facility for all categories of investors in the nation’s capital market. A statement issued by the SEC’s Head of Corporate Affairs, Ismaila Ville, said the reduction was aimed at encouraging the investing public.

The Trade Alert facility, which was introduced in the capital market in 2006 by the Nigerian Stock Exchange (NSE), is to check unauthorized sale of investors’ shares by stockbrokers. The facility gives alert to investors who subscribe via the mobile phone’s Short Messaging Service (SMS) whenever any transaction takes place in respect of their accounts.

Ville said, “This new action attests to the commission’s resolve in ensuring that the reduction in the cost of participating in the market is significant, and thereby encourage more people to take advantage of the vast opportunities presented by the market.”

The Trade Alert system promotes the fairness and transparency of the Nigerian Capital Market, and is fully in line with the Federal Government’s efforts to restore confidence in every aspect of the nation’s life, while creating an investor friendly environment for the participation of the foreign investors. He added that the reduction in Trade Alert subscription fee has been communicated to the Federal Ministry of Finance.

The cut in Trade Alert subscription fee is coming on the heels of the recent approval by the Federal Government of a comprehensive reduction in the general cost of doing business in the Nigerian capital market, towards making Nigeria the preferred investment destination in Africa.

Finance minister had on April 23, 2007 approved a reduction in transaction cost in the Nigerian capital market by 40 per cent for both primary and secondary markets transactions. Other approvals by the minister included a new capital base for capital market operators in Nigeria, 80 percent mandatory underwriting for Public Offers and a Code of Conduct for Shareholders’ Associations in Nigeria.

All offers are henceforth to be 80 percent underwritten. SEC spokesman explained, “The cost reduction is the culmination of industry wide efforts at ensuring that the domestic capital market is made more competitive, to attract both local and foreign investments into the country…With these reductions, the SEC hopes that the Nigerian capital market would attract foreign direct investment, which will impact positively on the economy.”

By the cost reduction approval, average equities transaction cost in the primary market, which currently stands at 6.92 per cent has been reduced to 4.32 per cent, while transaction cost on bonds has been reduced from 7.03 per cent to 4.79 percent. For the secondary market, total transaction costs on equities have also been reduced. Specifically, equities transaction cost on the buy side has been reduced from 4.07 per cent to 2.36 per cent, while the sell side is now 2.65 per cent from the earlier cost of 4.12 per cent. 

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