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Is multiple stock exchange system the solution to listing problem?

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By Nkiruka Nnorom

SINCE 2008 when the stock market crashed activities, both in the secondary and primary segments of the market have been down, particularly in the primary end of the market. Even in the primary market only very few Initial Public Offers, IPOs, and Public Offers have been recorded, while 2016 record zero following low investors’ confidence and fears by issuers of the possibility of investors taking up the offers. As a result, quoted companies have resorted to rights issues to raise money to support their operations.

Constant delisting

The situation is worsened by constant delisting of already quoted companies either as a result of regulatory action or voluntary delisting..

It is believed in some quarters that this is so simply because the stock market no longer fulfils one of its basic roles of creating access for long term funding for the quoted companies.


Added to this, is the fact that prices of already quoted companies are highly undervalued, suggesting that any newly listed company may soon toe the same line.

This has become one of the major sources of concern to all stakeholders in the market, including the Securities and Exchange Commission, SEC, the Nigerian Stock Exchange, NSE, the operators and shareholders alike. The positive step to be taken to drive more listing has therefore become a major discourse in the market. Previously argument was on whether to force the listing on the companies, especially the multinationals or woo them through incentives.

State of the market: Unfortunately despite the argument back and forth of whether to coerce or cajole companies into the listing, not much has been achieved. What is obvious is that more companies are leaving the market.

For instance, between 2008 and 2016, not less than 76 companies have exited the market, while some of them were delisted due to merger with other companies or take-over by another company, others were delisted due to their failure to comply with one regulatory requirement or another.

Renewed effort: Only recently, the SEC said that it is planing to create multiple stock exchanges to cater for Small and Medium Enterprises, SMEs, in Nigeria that are interested in listing but are encumbered by the stringent listing requirements of the NSE as part of efforts to drive equity listing in the stock market.

According to the Director General, SEC, Mr. Mounir Gwarzo, the process when completed would lessen the strident listing rules that have been hindering such companies from listing in the stock market.

He explained that under the new arrangement, the stock market would be classified under tier one, tier two and tier three markets, thereby allowing companies that want to set up small exchanges do so. He stated that the move would allow more SMEs to list in any of the exchanges that would be set up other than the NSE.

He said: “As at today, our law provides the registration of Exchange’s trading platform, cashless trade point and what we have at the Nigeria Stock Exchange are three boards. We have the Premium Board, the Main Board and the Alternative Securities Market, AseM, Board and it has been hard for companies to list under the existing Boards.

Cashless trade point

“What we are doing is to also stratify licence for an Exchange; what we have today is a unified requirement for companies to set up an exchange. So, the stratification will lessen the requirement. If you want to set up an exchange and you want to be in tier 2, the requirement will be lesser than that on tier one.

“If you are also going to set up an exchange under tier three, the requirement will be lesser than tier two and the kind of company that will also be listed will be lesser than the other two,” Gwarzo said.

“We think that it will, probably, drive some of these SMEs to be listed because over the last 20 -25 years, we have not seen much progress with the existing status. There are few companies that want to come in and set up small trading platforms and we think we have to give the necessary backing to do that,” he added.

Stakeholders’ view

However, stakeholders are dividend on the viability of the idea. For some, while creation of multiple exchanges is not enough to propel listing, others believe that it is the right step in the right direction.

According to Johnson Chukwu, Managing Director/CEO, Cowry Asset Management Limited, creating multiple exchanges would have little impact on the quest to get more companies to list. He noted that what is of utmost importance is for companies to have incentives for listing. “We have had two tier market for a long time.

We had a second tier market and we now have the ASeM that took over the second tier market and we have seen the performance of the AseM.

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