By MICHAEL EBOH

Investors who participated in private placements of some private companies a couple of years ago, are in dire strait as their funds, put at about N300 billion by analysts, is in jeopardy following the failure of the Nigerian Stock Exchange (NSE) to implement its plan to accommodate such companies in the stock market through the Alternative Securities Market/Private Placement Exchange (ASEM/PRIPEX) window.

It’s more than three years since most of the companies conducted private placements raising funds in excess of N100 billion and a number of the companies are yet to be listed on the NSE or approach the authorities for listing, thereby making it impossible for investors to access their investments in these companies.

The NSE, as part of efforts towards mitigating the effect of the global economic crisis on the Nigerian capital market, had in 2009, through its erstwhile Director-General/Chief Executive Officer, Professor (Mrs) Ndi Okereke-Onyiuke, announced plans to set up the ASEM/PRIPEX market, which is expected to replace the Emerging Market segment or Second-Tier Securities Market of the NSE.

Ms Arunmah Oteh DG, Securies and Exchangge Commission, Governor Raji Fashola SAN, Senator Udo Udoma, Vice President, Namadi Sambo at the commemoration of 50 Years of Stock Market Trading in Nigeria on The Exchange on Monday.

Okereke-Onyiuke admitted that a significant portion of funds that left the stock market for private placement are still locked-in as many of the issues have not applied to the NSE for listing.

She had explained that the platform, when functional, will enable small and medium scale companies to seek listing on the NSE, with fewer and more stringent listing requirements and also integrate private placements to the secondary segment of the capital market where it will be joined to the emerging market segment.

This, she said, will ensure that the abnormalities prevalent in the conduct of private placements are addressed and controlled effectively, making sure that private placements abide by the rules and regulations guiding capital market activities.

Less than a year later, specifically in May 2010, the Securities & Exchange Commission (SEC) gave the NSE the nod, following the approval of the NSE’s application to that effect.

The ASEM/PRIPEX market was a major tool proposed by the NSE to deepen the Nigerian capital market, boost liquidity, increase the number of listed companies and address the problem of largely unregulated private placement offerings.

To encourage the targeted companies to list, the NSE offered a number of waivers, ranging from a reduction in application or entry fee, a 50 per cent discount on the  Central Securities Clearing System (CSCS) Limited’s eligibility fee, acceptability of audited accounts older than nine months on the condition that the issuer provide all interim management accounts. Where the issuer already has a full year un-audited accounts, such issuer is expected to provide an undertaking to the exchange that the outstanding account will be audited and submitted within 90 days, among others.

However, two years after, the market is yet to commence and no company has applied to the NSE to be listed in this yet-to-be established segment of the market. A major factor for the non-commencement of the ASEM/PRIPEX platform, according to sources, is the exit of Okereke-Onyiuke from the helms of affair of the NSE.

No mention was made of the platform by the former Interim Administrator of the NSE, Mr. Emmanuel Ikhazoboh and the new Chief Executive Officer of the NSE, Mr Oscar Onyema in their future plans for the NSE, a pointer to the fact, according to analysts, that the idea has been discarded.

Some of the companies which conducted private placements running into billions of naira, but are yet to be listed on the NSE, are Globe Reinsurance Plc, Swap Technologies Limited, De-United Foods Limited, Producers of Indomie Noodles, Food Concepts Limited, Geofluids Limited, Reltel Wireless Limited, MTN Limited, Industrial and General Insurance (IGI) Plc, Credit Registry Services Limited, PrimeWaterView Limited, Shoreline Dredging & Oil Services Limited,  Asset & Resource Management (ARM) Properties Plc, BGL Plc, MoneyBox Nigeria Limited among others.

Meanwhile, Ade Bajomo, Executive Director, Market Operations and Technology, NSE, explained that the delay being experienced in the commencement of the market is as a result of the fact that it is currently re-examining the proposed platform to ensure it best meets the intended goals.

The NSE, according to him, remains committed to attracting small and medium scale companies to the secondary segment of the capital market thus putting them in a better position to gain access to long-term funding among other benefits provided by being listed.

He said: “The Exchange remains very keen to attract small and medium sized companies, so they can enjoy greater access to long-term funding which a listing provides.

“The Exchange is also desirous of ensuring that private placements undertaken with the explicit intention of seeking a subsequent listing are more closely controlled in order to protect investors and deter misrepresentation and unprofessional practices.

“The NSE CEO, Oscar Onyema, in the Press briefing of 19th May, 2011, highlighted a refocus on business development as part of the re-structuring of the Exchange. He said: “In this regard, we are currently re-examining our ASEM/PRIPEX offering to ensure it best meets the goals stated above in consultation with stakeholders and will duly notify the public in due course.”

In his own view, Mr. David Adonri, an analyst in the capital market and Managing Director, Lambeth Trust and Investment Limted said the delay in inculcating the private placements into the secondary segment of the NSE has served as a major drawback to investors and the capital market in general.

He said, “The objective of transforming the Second Tier Market into ASEM/PRIPEX Market by Okereke-Onyiuke was well thought out. However, I do not know how far the transformation agenda has progressed. Before the financial meltdown, all segments of the formal and informal new issues market were very active thereby satisfying the basic essence of the Capital Market for formation of development capital.

“Failure of several informal new issues by way of Private Placements to migrate to the formal platform of The NSE has been a setback to investors as well as the Capital Market. Delay in addressing this problem by the regulators has already damaged Private Placement which was rapidly growing as entry point of SMEs to the Capital Market. Right now, most of them are illiquid thereby denying investors the ability to en-cash their holdings in times of need. Listing of the issues would have further deepened the equities secondary market of the NSE.”