By NKIRUKA NNOROM

As trading in unlisted equities commences in earnest, investors in the Nigerian capital market have said that there are still some obvious challenges, which the promoters will have to grapple with to make it more attractive.

Though generality of them believe that it is a good concept, they said there are still some unclear issues, which must be settled for retail investors to fully embrace the initiative.

They listed some of the challenges to include lack luster performance by most of the companies whose shares are yet to be listed on the Exchange and are to be traded on the Over-the-Counter market, determination of pricing, issue of corporate governance and proper understanding of the workability of the initiative.

The National Association of Securities Dealers, NASD, had on July 1st commenced transaction in unlisted securities on the OTC market with the promise of doing same for unlisted bonds in the next six months.

The NASD has Mr. Olutola  Mobolurin as its Chairman and Mr. Bola Ajomale as the Managing Director. The trading, according to the association, will cover delisted equities, companies that undertook private placement, but are yet to list their shares on the Nigerian Stock Exchange, NSE and generally all the shares of unquoted companies.

DG/CEO, NSE, Oscar Onyema

Already, 40 stockbrokers have been registered to facilitate trading in the OTC market, while more will be added in future.

According to Ajomale, the platform would offer investors the opportunity to buy and sell non-listed securities in an organised and transparent market as well as provide liquidity for shares not listed on NSE.

“We will open up with equities and bonds many of which are currently being traded on the black or grey market in the first phase,” he said.

He explained that investors could trade shares of unlisted multinational companies from the market and those acquired during private placements.

He added that the company in the second phase would have capacity to trade on commercial papers while other complex instruments like derivatives and options would be traded in the third phase.

“NASD as an OTC market will not have a trading floor, but trading will be done through the internet and a hosted platform leased from the NSE,” he added.

Reacting to the development, Mr. Abayomi Obabolujo, President, Association of Avid Shareholders, AAS, said the concept may sound elitist due to lack of proper understanding of the concept by minority investors.

He said, “To me, it is a good thing because it offers investors more basket of investments than is available at the moment, but the basic thing should have been to do enough publicity before introducing the concept. The promoters have not done enough publicity. The patronage may be low because many people do not understand what the concept is all about; they should have gone round the country to create awareness.”

Besides, he said that most of the companies that which shares will probably be traded on the Over-the-Counter market have underperformed in the past in terms of disclosure of financial position, dividend payments and regular interactions with shareholders of the company.

He noted that where financial statements are released at all, they come out very bad, while the dividend declared by some amount top nothing. Also majority of them have nt been holding annual general meetings.

He stated that the promoter would probably see more supply than demand due to the lack luster performance. Citing examples, he said that apart from companies like FrieslandCampina WAMCO, MTN and Nigerite, others have not performed.

“You cannot tell me to buy the shares of any of the companies that did private placement, but have not listed or to buy shares of any of the stockbroking firms that did private placement.

“This is going to be a major problem the problem is going to have, apart from the fact that they have not done enough sensitization. It is not by gathering the pressmen together to brief them or gathering few people together in Lagos for a launch. There should be enough sensitization and proper education,” he emphasised.

He further stated that apart from the chairman of NASD, who is a well known figure, the other members are not equally known, adding that a lot of work should go into endearing themselves to the public to create trust.

He nonetheless, stated that it would improve the attractiveness of the market and increase the possibility of having more companies listed on the NSE.

For Mazi Sam Ohuabunwa, former Managing Director, Neimeth International Pharmaceuticals Plc, anything that would help investors to cash out of several private placements they bought prior to capital market meltdown was welcome, but he wondered how the price would be determined and demand created for the shares.

Ambassador Olufemi Timothy, National President, Renaissance Shareholders’ Association of Nigeria, most of the companies which shares are still unlisted have problem with keeping faith with corporate governance, saying that it would be a huge task getting them to comply with laid down principles.

He was optimistic that with OTC platform, shareholders who will eventually buy into those companies would put them on their toes.

He also charged the Securities and Exchange Commission, SEC, to be up and doing to stem malpractices.

“It is a brilliant idea, but the operators should be honest and transparent. The Securities and Exchange Commission must ensure that it does not allow insider dealing. In all the platform will give investors the opportunity to diversify their portfolio and it will also deepen the market,” he stated.