One of the main focus of the management of the Nigerian Stock Exchange (NSE) led by Oscar Onyema since assumption of office in 2011 has been to re-package companies quoted on the NSE and make them globally acceptable. To achieve the objective, the Exchange had over the period set certain standards which quoted companies are required to adhere to. It has also organised road-shows to some international markets to show-case Nigerian brands. The quest peaked two weeks ago in the launch of a prestigious listing platform, the Premium Board, writes Nkiruka Nnorom

The Nigerian Stock Exchange (NSE) avowed objective of making quoted companies on the stock market globally relevant received a boost penultimate week with the launch of a new listing platform, Premium Board.

The landmark event is in consonance with the transformation journey embarked upon by the Exchange since 2011 in order to position it to carry out its business in accordance with established global best practices.

DG/CEO, NSE, Oscar Onyema

The philosophy behind the creation of the new board is to provide a platform for local entities that meet the required standard to be exposed to accessing cheap capital from the global market. This is confirmed in the listing rules of the Premium Board which states: “The Exchange through the Premium Board aims to provide for greater global visibility for eligible Nigerian entities, which will make it easier for them to attract global capital flows and reduce the cost of borrowing.”

Prior to the launch of the Premium Board, the NSE had two listing platforms – the Alternative Securities Market (ASeM), and the Main Board.

Already, three companies met the stringent requirement of the NSE to qualify for the pioneer listing on the Premium Board. They are Dangote Cement Plc, Zenith International Bank Plc, and FBN Holdings Plc, with market capitalisation of N2.87 trillion, N587.43 billion and N277.70 billion respectively. According to the NSE, the all passed the Corporate Governance Rating System (CGRS) before applying for the Premium Board.

The CGRS comes in three stages and directors of prospecting companies are expected to pass the NSE’s fiduciary test for the entity to qualify.

Qualification:

According to the rules guiding the operations of the new board, an issuer aspiring to be listed on the Premium Board will have to seek admittance by making a written request to the Exchange as well as execute the General Undertaking for listing on the board. Such entity must have been listed on the Main Board of the Exchange. However, new entrances wishing to list on the board may be admitted provided they meet the stipulated standards. This includes submitting itself for evaluation under the Exchange’s CGRS test and scores a minimum rating of 70 per cent. In addition, the entity must have achieved a market capitalisation that is equal to or in excess of N200 billion at the point of applying for listing. The test is a threefold practical assessment process which involves each director of the company carrying out a self-evaluation. The result of the self-evaluation is then presented to the company’s stakeholders, while the NSE carries out independent survey of the self-evaluation to collaborate it with the stakeholders’ assessment. The next stage is to get experts, who then take the inputs from that survey, go ahead to analyse them with a view to making sense out of them.

The last stage is the fiduciary awareness test. Here each director of the company is required to do a test. The results of all assessments are then put together and appropriate weighting done to score their performance. The standard is that each director must score 70 per cent to be adjudged to have passed the corporate governance rating.

Furthermore, the issuer is also required to have a minimum free float of 20 per cent of its issued capital; this implies that not less than 20 per cent of the entity’s outstanding shares must be available for trading in the secondary market. Issuer will also be admitted where the value of the free float is equal to or above N40 billion (US$500 million) at the point the issuer is seeking admission into the board. However, the National Council of the Exchange reserves the right to determine the market capitalisation and free float requirements from time to time. Remaining on the Premium Board once listed, an issuer is expected to keep to the highest standard of corporate governance as well as keeping the post listing requirements of the NSE. To ensure that listed companies comply with the required standards, the Exchange from time carries out evaluation on the performance of issuers. The period for such evaluation is determined by the NSE.

Corporate Governance Requirement

Given that one of the reasons for establishing the Premium Board is to ensure that issuers operate by stringent corporate governance standards, the NSE says entities opportune to be listed on the board must comply with the Securities and Exchange Commission’s (SEC) Code of Corporate Governance. The issuer is further required to disclose in its annual report a list of its codes of corporate governance to which it subjects itself.

Again, in accordance with global operating standards, the annual report of the issuer should include a statement signed by the Chairperson of its Board of Directors and the company secretary, disclosing the extent of its compliance with the provision of the code of corporate governance. Where it fails to comply, a detailed statement of the facts of its non-compliance and explanation thereof must be included in the annual report.

Sanctions

Bearing in mind the fact that people and institutions will always err, the Exchange has put in place some stringent sanctions for breaching any of the listing rules. According to the NSE, such sanctions include fines, suspension from trading, delisting from the Exchange or transfer to another board or public reprimand.

 Comments:

Speaking at the launch of the Premium Board, the Chief Executive Officer (CEO), NSE, Mr. Oscar Onyema, said, “The Exchange is a member of the United Nation’s Sustainable Stock Exchange Initiative, which is designed to encourage stock exchanges to influence their ecosystem to adopt sustainable ways of doing business around Environmental, Social, and Governance dimensions. The Premium Board is one result of our commitment to place corporate governance front and centre as a way to improve the climate for doing business in Africa. We expect that companies on the Board will enjoy the highest levels of visibility and appeal to investors looking for large companies with the highest standards of corporate governance.”

Aig-Imoukhueme,

Expatiating on the Premium Board Index (PBI) which was launched simultaneously to act as a performance assessment to the listed equities on the Premium Board, Onyema said, the PBI would serve as a benchmark for investors looking to track the performance of large firms with excellent corporate governance and sustainable business models.

“Typically, similar indices outperform their market-wide index by double digits. The NSE Premium Board Index had a four year average return of 17.65 per cent versus the All Share Index return of 11.31 per cent over the same period”, he stated.

Also speaking on this development, the Executive Director, Business Development, NSE, Mr. Haruna Jalo-Waziri, stated that “the launch of Premium Board and the Premium Board Index is in line with The NSE’s commitment to promoting and continuously developing a more transparent, liquid, accessible market. The Premium Board is for issuers with minimum market capitalisation of N200 billion and highest corporate governance standards. Companies aspiring to be listed on the Premium Board must achieve a minimum score of 70 per cent on the stringent CGRS.

“In addition, they are required to maintain a minimum free float of 20 per cent of their issued share capital or a free float value equal to or above N40 billion”.

Recipient’s Comments:

The CEO, Zenith International Bank Plc, Mr. Peter Amangbo, one of the companies that made it through to the elite board while commenting on the development said, “To us in Zenith Bank, it is history being made, and we are very happy and pleased to be part of this. It takes a lot for any company to be listed on the Premium Board in terms of disclosure, in terms of corporate governance. It takes a very rigours process for any organisation to go through.

Speaking on his expectations, he said, “I will say it is even more of a responsibility; as an organisation, you are like the first among equal, you are like a flag bearer to other listed organisations, so you are expected to do everything correctly, you are expected to set standard. At the end of the day, if you do things correctly in terms of performance, you will find out that it will reflect on the valuation of the company. So, we expect that Zenith Bank will be rewarded.”

On his part, the CEO, FBN Holdings Plc, Bello Maccido, noted that to get to this stage, “You are expected to meet the highest standard of corporate governance. You can see from our records that we have maintained our reputation as an institution”.

He added that his group expects more inflow of investment into FBN Holdings as well as a positive impact on the share price of the bank on the floor of the NSE.

With the launch of the NSE Premium Board, the Exchange has joined the league of foremost exchanges like the London Stock Exchange (LSE). A Premium Listing on the LSE is only available to equity shares issued by trading companies and closed open-ended investment entities. Issuers with the LSE Premium Listing are required to meet the UK’s super-equivalent rules which are higher than the EU minimum requirements. According to the LSE, a listing on its Premium Board means the company is expected to meet the UK’s highest standards of regulations and corporate governance and as a consequence, may enjoy a lower cost of capital through greater transparency and through building investors’ confidence.

Last word:

Whether this expectation from the NSE and the pioneer listed entities will come true remain a discussion for the future. What is certain, however, is that the NSE has initiated another bold move which if given the right push can build globally competitive brands that will attract global investors into the country.