‘Demutualisation will boost retail investors’ confidence in capital market’

NSEStakeholders in the Nigerian capital market have identified demutualisation of the Nigerian Stock Exchange (NSE) as a major factor that would significantly increase the confidence of the local investor and spur activities in stock market.

Besides, they argued that the exercise would also reduce to the barest minimum, over-dependence on foreign investors in the nation’s capital market.

In demutualisation, the members give up their rights and receive shares from the company in return, which the (now former) members may then sell.

Demutualisation happens mostly when a stock exchange owned by its members goes public. The exercise, when completed would give the investing public the opportunity to trade on the shares of the Exchange just like any other quoted company.

The Director-General of the Securities and Exchange Commission (SEC), Mounir Gwarzo, at the fourth Capital Market Committee (CMC) meeting held recently in Lagos, explained that the commission is currently reviewing the Companies and Allied Matters Act (CAMA), which would provide an easy route for the exercise.

“The role of SEC in demutualisation is to come up with guideline and rules and regulation. SEC has come up with rules and is committed to support any institution in the capital market that wants to demutualise.

“NSE has appointed some consultants to drive the process. Again the review we are having in CAMA will provide an easy route, any company that is mutualised that wants to demutualise to have an easier way to do that.”

According to stakeholders, when membership of the NSE is opened to majority of Nigerians and they are called upon to own shares in the stock market, it would help create awareness of activities in the market, give investors a ‘sense of belonging’ and more local investors would participate.

Similarly, they pointed out that with demutualisation, corporate governance would be well structured and investors would have more confidence to stake their fund in the market.

Specifically, the President of the Progressive Shareholders Association of Nigeria, Boniface Okezie said the exercise would attract more local/retail investors into the stock market if it is done in an ‘all inclusive’ and transparent to enable investors get real value on investment at the end of the exercise.

“If the process will carry all Nigerians along, that will foster growth and woo more local investors to the market.The Managing Director of Stanwal Securities Limited, Augustine Ofonagoro admitted that demutualisation would go a long way to reduce overdependence on foreign investors and attract local ones into the market.

He explained that when the NSE is fully demutualised and the ownership structure clearly spelt out, “As NSE demutualises and sell its own shares to the people, more people will know what is happening here and they will bring all the money they are stocking else where here because they will believe that the place belongs to them.

He added that effort to bring awareness of activities on the Exchange reached a reasonable height in 2012 when a lot of road shows were organised in the country.

The Chief Executive Officer of High cap Securities, Imafidon Adonri said demutualisation will enable the Stock Exchange operate efficiently like a commercial business.

According to him, this would give it greater latitude to explore more income generating possibilities, adding that with more income, it can acquire world-class facilities, which will enhance its competitiveness.

He added that it is also believed that as a business limited by shares, the standard of corporate governance and transparency will be enhanced and with this, several retail investors would have opportunity to be shareholders in the Exchange and hence be able to influence its development.

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Mounir GwarzoNSE
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