Capital market investors have called on government to expedite actions, aimed at providing medium to long-term development clauses that will enable privatised companies and other multinationals in the telecoms, and oil and gas sectors to list on the Nigerian Stock Exchange (NSE) within a specified period.
NSE’s index slides by 32% in two years
In separate interviews with The Guardian, the stakeholders, who bemoaned the Federal Government’s inability to compel firms to list on the NSE, also called for an urgent overhaul of the privatisation laws to maximise the benefits of the exercise in terms of sustainable economic growth and wealth creation.
These, they believe, will boost market liquidity and investors’ confidence, while also enhancing the effectiveness of the privatisation exercise.
Respondents noted that the $1 trillion market capitalisation targeted in 2016 made by the NSE Chief Executive Officer, Oscar Onyema, could not be realised due to lack of liquidity in the market.
They argued that with the listing of the privatised firms and other multinationals like MTN, the Exchange may be on the way to achieving the projected $1 trillion market capitalisation in a near future.
Regrettably, the long reign of the bears and continued depreciation in stock prices has become a justification for their apathy to investing in the market.
The market capitalisation of quoted equities, which stood at N11, 237 trillion on January 5, 2015, now stands at N8,933 trillion as at Tuesday, April 25th, down by N2.1 trillion, while the All-share index slides by 8384.72 points or 32.8 per cent, from 33,943.29 to 25, 818.87.
Speaking on the development, an independent investor, Amaechi Egbo, argued that the present privatisation legal framework is such that would make government long-term economic development a mirage.
He pointed out that experiences from successful privatisation exercises in other countries provided their citizens opportunities to benefit in the transformation of the commonwealth of the enterprises, while attributing government’s poor management to “interest driven advice.”
He stressed that sustained growth and expansion of the nation’s employment space would remain elusive without making privatisation an all-inclusive programme.
He added that industry regulators must consciously overhaul the laws moderating businesses, especially those that are by-products of the privatisation programme to be listed on the Exchange.
The President, Association of Stockbroking Houses of Nigeria (ASHON), Patrick Ezeagu, in a telephone interview, stressed the need for government to redirect its policies to impact on businesses and the capital market.
He argued that lack of appropriate legislation impedes the ability of privatised firms to be listed on the Exchange, noting that in other jurisdictions, the sale of national assets is done through the capital market so that indigenes in Diaspora will also benefit from the proceeds.
Ezeagu said: “There should be a legislation that will say that if you buy national assets, four to five years maximum, list on the stock exchange, even the sale must be done through the capital market.
“This brings about a better pricing policy with higher level of transparency, and Nigerians in Diaspora will benefit from the purchase, and people will trade on it, which in turn, would increase market capitalisation and liquidity.”
Against this backdrop, he insisted that the sale of the electricity companies “was done under the carpet as it has not helped us. What is happening in MTN, after about five years, it should be listed on the Exchange but it has not been done. We continue to ask government to do something about it, and we are using moral suasion.”
Similarly, the National President, Constance Shareholders Association, Shehu Mallam Mikail, noted that the failure of the government to get these firms to list on the Exchange is having a multiplier effect on the market, especially in the area of liquidity.
According to him: “Our government is not being sincere when it comes to accountability and transparency, especially when the policy or transformation exercise may not favour the policymakers directly. I see no reason for the failure to list these companies till date.
“Government’s ineptitude on this issue is having a negative effect on the market. There is no liquidity and market capitalisation is depreciating on daily basis. The earlier they understand that the delay in making this decision is affecting the market, the better for the economy.”
Mikail clarified that investors are not asking the government to be involved in business activities, but “to create the enabling environment and favourable policies for businesses to thrive.
The sale of any national assets must be done through the capital market to facilitate the listing of the asset in the stock market. This is the only way to boost investors’ confidence in the market and increase participation,” he added.
Recall that the Managing Director and Chief Executive Officer, APT Securities and Funds Limited, Mallam Garba Kurfi, had blamed the federal government for the shortcomings in the Nigeria’s privatisation laws.
This, he said, is the reason capital investors are supporting moves by the legislators to open up the nation’s investment space through a legislation that will compel companies to be listed after a certain period.
He argued that government’s incentives approach to the issue since the beginning of privatisation in 1999, had failed, and as such called for a different model.
Meanwhile, the Speaker of the House of Representatives, Yakubu Dogara in a recent statement, decried the refusal of multinational companies to list on the NSE, expressing the need for a law to reverse the trend.
The Speaker maintained that there was no justification for the multinational oil and gas, and telecommunication companies not to list on the Exchange.
He noted that the listing of such companies will create employment opportunities, deepen the market, and make more capital available for investors.
He said: “Apart from the capital inflow sought, the market needs to be deepened, as most of the big international companies in Nigeria are not participating in the Nigerian Stock Exchange. This is sad because these companies account for a huge percentage of revenues in oil, communication, and energy.”
To this end, Dogara said the House may consider passing a law that will compel multinationals in oil, gas and telecommunication sectors to list certain percentage of their value on the stock exchange.