Stakeholders hope for a more vibrant market

Nigeria Stock Exchange

Nigeria Stock Exchange

As the new government emerged on May 29, the National Association of Securities Dealers [NASD] has said that it is looking forward to some changes in areas that will create new vibrancy in the economy.

According to the weekly newsletter of the association, it expects a change in the perception of Nigeria as a difficult place to do business (current World Bank ranking puts Nigeria at 170th out of 189 on the ease of doing business chart).

“A positive change in this direction will encourage confidence in the economy, an inflow of critically needed long term investments and increased Private equity activity’’, said the newsletter.

Recently, the association held the first Over-The-Counter [OTC] private equity conference in anticipation of this and expect to see more activity on the secondary side of the private equity industry in future.

On power generation and distribution, the association expects the new government to focus on creating a level playing field for power generation and in turn the development of a self-sustaining industry.

“A first step in this direction is making capital available to the brave entrepreneurs in the industry. NASD is positioned to assist companies; particularly those in the power sector raise capital in order to meet their overarching objectives’’, said the newsletter.

On significant public accountability and integrity in governance, the association expects this will boost trust in Nigeria’s policy making process and encourage better reporting and accountability even in the private sector.

“NASD’s objective is to encourage transparency in the capital market – we therefore hope the incoming administration will strengthen structures that will support the creation of transparency and liquidity,’’ said the newsletter.

On securities valuation on the NASD OTC market, the newsletter said that in the traditional OTC markets, traders in these markets identify counterparties in other to consummate transactions.

When counterparties meet, their bilateral relationship is strategic; prices are set through a bargaining process that reflects each investor’s alternatives to immediate trade.

However, on the NASD OTC Market technology is employed as the search for and matching of bids against offers is undertaken electronically.

The newsletter explained that when companies are introduced to the NASD platform for trading, participating institutions provide the fair valuation of the introduced security.

In reality, the commencement of trades on a security more often than not establishes fair value for the security which is a reflection of investors’ ability to spot an investment opportunity, bargaining powers, risk appetite.

This ultimately translates to the price at which a buyer is ready to purchase a security and the price a seller of the security is willing to part with it, regardless of the valuation supplied by the broker at the time of introducing that security.

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