Vanguard, MONDAY, FEBRUARY 4, 2013 — 29
Interview
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We are still in the roll out period and we only have 39 companies that have been rolled out. We are very fixated on the fact that we want to complete the roll out within six months. So, once we complete the roll out, we will hold them to the obligations and then we start working on the roll out of complementary market makers
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complete the roll out, we will hold them to the obligations and then we start working on the roll out of complementary market makers. So, the complete thing is that you have primary market makers and you have complementary market makers. In the roll out, we have been collecting and sharing data with each market making firm and fathoming out where we think they can do more or where we think they can move in. So, it is a collaborative set up. However, in terms of market participation rate, the last set of number I looked at, the market participation rate was less than one percent for the primary market makers. However, I can tell you that their presence has brought a lot of confidence that there is somebody willing to make you a market such that you can get in and out at their prices. You said that with the inauguration of SEC board, more activities will be seen in the demutualisation exercise. Is it that the NSE is depending on SEC to demutualise the Exchange? No! You will recall that there was a technical committee that was set up last year to work out a framework that the SEC can approve that will then allow anybody that wants to do a demutualisation to go
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I think there are some other reasons, but I don’t want to go into specific companies, but for a number of them, I would have given you the reason why they are delisting. They haven’t even met the delisting requirement and we want to enforce our rules. Some companies listed on the exchange have not submitted their results yet the Exchange is insisting that their share prices cannot go below par. Don’t you think it is advisable for the NSE to allow free fall where possible, especially when information is not available? Is it not also likely that the present structure is encouraging more abuses? There will be a shift on the statute. We are going to set up a working committee to work with the industry, the companies and everybody else to see if the market structure today, when you have par value as the lowest you can go is the right market structure. We will see what other markets are doing and actually come up with something. You talked about cooperation with other like organisations, will you be willing to cooperate with another Exchange operating in Nigeria market space? If a new Exchange comes up in Nigeria whether we will collaborate with them? I will need more explanation on that. Are you saying if an Exchange that wants to compete with us comes up we should be giving them tools to fight us? I don’t understand. When I say collaboration, I mean international Exchanges so that we can get best practices from them and in some cases, their technical know-how in some of the areas that we want to go into. How has the primary market makers performed in relation to the mandate given to them at inauguration? I will give you some numbers, but I want to put a context to the numbers. You remember when we started the market making in September; we said it was a six months roll out period. In those six months, we said we will not be holding the market makers to the private obligations that we want to give them because we want them to complete their roll out and get some experience on how to do market making. Even the market structure that we had introduced, which was unique in Nigeria, has never been done before. We are still in the roll out period and we only have 39 companies that have been rolled out. We are very fixated on the fact that we want to complete the roll out within six months. So, once we
So, we appeal to the National Assembly to approve the PIB bill even if they have to make changes to it, but to pass. This is because the oil and gas sector is kind of slowed down because everybody is waiting to see what gets passed.
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through and implement a demutualisation process. So, let me give an example, if we decide that we don’t want to wait for the rule from the SEC to demutualise and we go ahead and do so and come up with a document that says we are now demutualised and we take it to the SEC for approval, on what basis are they going to be doing the approval? So, the technical committee’s report is at the SEC waiting for their board to review and come out with the guideline on how demutualisation will occur. Then the Exchange will then take a decision whether we want to demutualise or not and then follow the law that has been set down to achieve the demutualization exercise. The exchange very often places a company on either technical or full suspension for not meeting post-listing requirements. Don’t you think the Exchange should look at the companies’ management instead of just slamming them with suspension? If you have been following the market, you will know that last year, we introduced markers. We said we will no longer be doing technical suspension right away. We will first of all, put a mark – Below Listing Standard, BLS, and three other marks depending on what it is next to the symbol of the company so that the buyers will know that this company is either below listing standard, restructuring or in delisting process or this company is awaiting regulatory reapproval as the case may be. That’s the first thing. Then the second thing is that we increased the fine from N10, 000 to N100, 000 and then we brought in all the company secretaries and their Chief Finance Officers, CFOs. We told them we are not interested in their money; we are interested in them submitting their financials on time. We also told them that will work with them proactively to submit their financials on time. So, we started calling them two months before time that their financials were becoming due. What are the challenges you
•Oscar Onyema are having; let’s see whether we can help you. So, we have done a lot of things, because it is a whole programme. Technical suspension is the last option. If we see that the exchange has tried its best, the affected company has also tried its best but can not meet the standard, that’s when the company is placed on technical suspension. When a company goes on technical suspension, it is the first step in delisting such a company. A company on technical suspension will not be there forever. It will progress from there to full suspension and be delisted. When a company is delisted, the shareholders suffer. Now why do the shareholders suffer? It is because they are the owners of the company. When you see your company on technical suspension, you should call the management. You are the owners of the company. If you want to know why they are on technical or full suspension or why they are getting delisted, you can call them for clarification. If we follow corporate governance and if we have interest on how the companies are being run, it will benefit all of us. Now going after the management individually, we will look at that and see whether it makes sense and whether it is even possible. Beyond saying that a listed company wears a barge of honour, what else does it get as a listed entity from the system? Companies benefit many things, I have told some of the reasons why they list. We have also increased the buyer by introducing value added services. So, we are giving visibility to the companies, we are helping them in terms of
institutional service, which helps them to meet corporate governance standards, structure themselves very well for continuity. There are so many reasons companies come to the market. Do we need to do more by advocating for improvement and additional government benefits for listing on the Exchange? The answer is yes and we are doing a lot in those areas. I think we have written a position paper to the government talking about things like listed companies should have a first bite of the apple on government contract. For example, listed companies should have a low tax rate. So, if you are a listed company, you get a lower tax rate. We have made that argument and we will continue to pursue it. Don’t you think there is need to increase the depth of the market? We agree to that. We believe that the value we have seen is on the back of foreign investors. We are happy to note that local investors are beginning to come back to the market. We are working very hard to bring in new products. We are also working hard to bring in new quality companies and we believe that what we saw in the market in 2012 is encouraging for issuers. Hopefully, we will see a lot more companies coming into the market this year. Already, we have listed two and the projections are higher. However, the listing decision is entirely that of the companies, it is not the Exchange’s decision. So, we do not want to give you numbers. We are actually very bullish that the primary market will pick up this year. We are two year away from 2016, and you are targeting