By Peter Egwuatu & Michael Eboh

The Securities and Exchange Commission (SEC) is set to commence the process of demutualising the Nigerian Stock Exchange (NSE), as a 21 man technical committee has been inaugurated with the mandate to advise the commission on how the Exchange could be demutualised.

The SEC’s Chairman, Senator Udo Udoma, weekend, revealed that the committee has been given three months mandate to complete its tasks as a starting point to making the demutualization of the NSE as transparent as possible.

Demutualization means the public ownership of an Exchange, where its shares is sold to the public and listed on its daily official list. It is a process by which a member-owned Exchange is converted to a shareholder-owned Exchange.

The 21 member committee is chaired by a distinguished legal practitioner, Mr. Asuerinme Ighodalo. Members of the committee include: Enase Okonedo , Dean of Lagos Business School, Oscar Onyema, CEO, NSE, Abdul Muhtar, MD, Abuja Investment; Chairman, Aso Savings, Yemisi Ayeni, Chairperson, Demutualization Committee, NSE Council and MD, Shell Nigeria, Tola Mobolurin, Vice Chairman & CEO, Crusader Investments, Ahmed Makele, Associate Director, Legal Risk Compliance, DTZ Holdings Plc, Rotimi Oyekanmi, CEO, Renaissance Capital, Haruna Jalo-Waziri, MD, UBA Asset Management Company Ltd, Dimeji Saludeen , Partner, KPMG, Deji Alli, CEO, Asset Resource Management, Chuka Eseka, CEO, Vetiva, Femi Akingbe, CEO, Ventures & Trust, Nsikan Ekure , Former MD of First Trustees Ltd., Ike Chioke, MD, Afrinvest Nigeria Ltd., Kemi Adewole,Vice President, Citibank Nigeria.

Others are : Chike Obianwu, Templars Law Firm, Femi Akinsanya,CEO, Felicity Schemes Limited, Akeem Oyewale, CEO, Stanbic IBTC Stockbrokers, Yinka Edu, Secretary, Capital Markets Solicitors Association, Moses Isiaku , Director, Registration and Recognized Investment Exchanges Department, SEC Nigeria, Edosa Aigbekaen ,Director, Legal and Secretary to the Commission, SEC Nigeria, Reginald Karawusa, Assistant Director, Enforcement and Compliance, SEC Nigeria, and Rachel Olenloa, Manager, Securities Investments Service, SEC Nigeria

The committee was given mandate to review the current structure and ownership of The NSE; Examine regulatory, ownership, management, operational, governance and financial issues in demutualization of Exchange; Review various demutualization models and experience including valuation model for demutualization.

Other responsibilities of the committee include: To recommend best demutualization model for the Nigerian market and recommend practical timeline for the completion of demutualization of NSE ; Examine potential conflict of interest and measures to deal with them, in the demutualization of the Exchange; Examine any other issue necessary for the demutualization of the Nigerian Stock Exchange.

The SEC Chairman noted that the Commission had taken steps to improve the governance structure of the NSE in order to ensure that capital market operations are conducted in accordance with the highest global standards.

According to him, “An illustration of this was the highly transparent process, conducted by the Council of the Exchange, in line with the directives of the Commission, for the appointment of the new executive management team of the Exchange.”

Udoma stated that the next big challenge in improving governance of the Exchange is that of ensuring that the Exchange is demutualised by a process that accords with the best global standards. “This must be a process that ensures fairness and openness, as well as the protection of the national interest. The committee is to assist the Commission to achieve this task by making recommendations on how it can discharge its supervisory role.”

It should be noted that the idea of demutualising the NSE has been on the front burner for a long time. It received the greatest public attention under Ndi Okereke-Onyiuke, former director general of the NSE, and Arumna Oteh, Director General of the SEC is continuing with it.

With demutualisation, the NSE should be exposed to robust corporate governance, enhanced efficiency and transparency associated with publicly quoted companies.

Stakeholders believe, however, that as important as demutualisation is, adequate preparation should be made to ensure that investors, and indeed Nigerians, benefit maximally from it. Therefore, the ongoing reforms in the capital market which include proposed updating of current infrastructure should be pursued with vigour, particularly, a deliberate effort should be made to fully restore investor confidence in the market; investors should be assured of transparency, zero tolerance for exploiting insider knowledge, and other forms of malpractices.

Meanwhile, it will be recalled that the current Board of the Commission, at its inauguration, took up the responsibility of making the Nigerian Capital Market more internationally competitive. A number of measures were put in place by the Commission including the setting up of two Committees: one to review the structure of the market under Mr. Dotun Sulaiman, and the second to review the Code of Corporate Governance for public companies under Mr. A.B. Mahmoud SAN. The recommendations of the two Committees have since been largely implemented.

In particular, a new Code of Corporate Governance for public companies has been issued by the Commission. It became effective on April 1, 2011