Stories by NKIRUKA NNOROM

There is increasing dissatisfaction among the stockbroking community over the failure of the Nigerian Stock Exchange, NSE, to begin implementation of the directive to quoted companies that statement of accounts should not be submitted separately from interim corporate action for a given accounting period.

They posited that the practice is distorting activities in the market as it does not allow investors and investment advisers to make informed investment decision.

Corporate action is an intention of a given company to reward its shareholders with either dividend or bonus issue in a given financial period.

In most cases, companies intending to pay dividend or give investors bonus shares fail to release this information alongside their financial statement for the period.

Issuing a warning last year at a training for journalists on the NSE’s X-Compliance and Brokers Trak, Hauwa Zoaka, Head, Listings Compliance, Listings Regulation Department of the NSE, said that the practice would no longer be tolerated.

She had stated that the practice is creating confusion in the market, insisting that any company that intends to propose either interim dividend or bonus should endeavour to do so alongside the financial statement being submitted.

She said, “Going forward, we will not take this kind of information to the market. We have told the companies that once there is board meeting, the Exchange should be notified immediately about the outcome of such meeting. Interim dividend and interim account should be submitted at the same time; otherwise, such statement will not be published.

“Failing to do that, we will tell the company to hold on to the account until such time it is ready to submit everything in details.”

Speaking on non-implementation of the order, stockbrokers said that it is causing confusion in the market, while calling on the NSE to make it mandatory that companies must feed the investing public with full financial details, including the  profit and loss account, balance sheet, dividend and bonus where applicable and all the things associated with it to save investors from making lopsided decision.

According to Dele Odusanya of Quantum Securities, “the practice does not allow for good investment decision because it is not only dividend that should be considered when making investment decision.

You have to consider what proportion of profit made that is being returned back into the system for further investment by the company and you want to know what proportion of profit made that is being paid out as dividend.

“At times, you have companies that pay out 80 to 90 percent of their profit as dividend. Such companies do not allow for future growth. So, you are not only considering dividend alone; you are considering the totality of the company’s performance in that financial year.

That will enable you to make investment decision. If the financial statement does not come in total, you won’t be able to review the whole financial statement using all the necessary aspects of finance to make your investment decision,” he said.

He noted that in a situation where a company sends out just part of the financial statement without stating the dividend to be paid, it distorts investment decision on that particular stock.