By Michael Eboh
The Nigerian Stock Exchange, NSE, is set to undertake a restructuring of the secondary segment of the capital market, reducing the number of sectors to 11 from the present 33 and collapsing the three markets – Equities, Industrial Loan and Government Stocks markets into the Equities market and Bond market.
Mr. Oscar Onyema, Chief Executive Officer, NSE, in his presentation to chief executives of stockbroking houses in Lagos, made available to Vanguard, said that the restructuring will help streamline the market, boards and industry sectors for accurate representation of investment instruments and ensure that they are a true reflection of Nigeria’s economy sectors.
The 11 sectors to be created from the present 33 sectors, according to him, are: Agriculture/Fishing/Forestry, Construction/Real Estate, Finance/Insurance, Information and Communication Technology (ICT), Manufacturing, Mining/Quarrying, Oil & Gas, Services, Transportation & Storage, Wholesale/Retail Trade and Utilities.
He further stated that vehicles in the proposed Bond market include Corporate Bonds/Debentures and Government Bonds — Federal and State, while the Equities Market will consist of the Main Board and the Alternative Securities Market.
Onyema said that the NSE is holding consultations with dealing member firms and management of listed companies on the proposed restructuring, with brokers expected to submit their feedback on the proposal, latest, July 28, 2011.
Onyema explained that the restructuring exercise is borne out of the fact that the current sectors are fragmented and too many and are not a representative of Nigeria’s economic sectors.
He disclosed the current markets are ill-defined, with no Boards, while investment instruments appear in the wrong market and are not in line with practices in other exchanges across the world.
“The current sectors,” he said, “do not encourage harmonization of companies that perform similar economic functions, facilitate unnecessary market vulnerabilities, confusing to international investors and index managers and are not in line with global exchange best practices.”
Continuing, Onyema noted that the proposed restructuring will afford listed companies numerous opportunities presented by been listed and help facilitate market harmonization of companies performing similar business functions.
On the benefits to dealing members, he added that the restructuring will make it possible for the creation of new products in the market and the development of tradable indices among others.
“To investors, it will create simplicity for this category of market stakeholders and drive informed retail investing, while it will afford the stock exchange the opportunity to streamline the market, to make it efficient and more attractive, remove unnecessary vulnerabilities from the market and align the market with global best practices,” he said.
Onyema said that of the current 33 sectors, 21 make up zero per cent of the market capitalization, having no contribution to the capitalization.
A breakdown of the current structure of the NSE, according to him, shows that there are 206 listed companies, 194 of the companies, including two foreign companies are isted in the 1st Tier Market comprising 33 sectors; 12 companies are listed in the Emerging Market segment while two are listed in the Preference Stocks segment under the heading Industrial Loan.
He said that the proposed Alternative Securities Market, will be repositioned as a market for Small and Medium Scale Enterprises, SMEs, adopting the same industry sectors as the Main Board.