Wednesday, February 15, 2012 12:13 / by A. Bello
Major changes are proposed in the rules of The Nigerian Stock Exchange. This is good, if only for the fact that it would enable the market to adjust to internal and external developments impacting on its operations. The problem is that the commnication flow on this all-important issue has been decidedly one-sided. It makes you wonder what manner of discussion is going on by way of public response to the advertised priority initiatives. In fact, to talk of a discussion is to exaggerate the situation; there is no discussion going on, except for the self-serving kicks from ASHON with regard to the issue of licensing requirements and reclassification of market intermediaries.
Nothing has been said on the draft Revised Listing Rules. Zilch on the issue of New Symbol Tags and zippo on Share Buy-Back, among other initiatives. As has been pointed out, stockbrokers have only spoken - painfully narrowly - on the issues as they understood them to affect their members, forgetting that by their profession and the nature of their business everything in the market should attract their attention and their response to emerging issues should be comprehensive, rather than selective. Apart from ASHON, you would expect CIS (or the informal Capital Market Roundtable) to be the fulcrum of discussion on issues pertaining to the market, but what we see is a shameless pre-occupation with afghanistanism. They chase rats while their house is on fire! But we digress.
On the draft Listing Rules, you want to ask why the public float has been reduced to 20%. Is this informed by the logic of markets or mere acquiescence with the powerful forces in the system? It would be interesting and enriching for the system to hear a decent argument for and against this proposal. How about the Lock Up Period? That lacks clarity. Is it 50% of shares held by promoters or 50% of the share capital of the company? If it is 50% of the shares held by the promoters, the proposed rule is redundant because from our recent experience, rogue promoters did not have to sell down to 50% of their pre-IPO holding to make their killing in the market. In any case, how does this proposed rule affect venture capitalists who may seek liquidity through stock exchange listing?
On accounting standards, it was said that "International Financial Reporting Standards in line with SEC regulations" would apply. The question is, does SEC regulate IFRS? Does SEC in Nigeria direct the adoption of IFRS by Nigerian companies? On this issue of accounting standards and IFRS, why is the applicable accounting standard for ASEM companies different from the one for Main Board companies and subject to Financial Reporting Council Standards? Would IFRS operate in Nigeria without adoption by Nigerian Financial Reporting Standards Council? What is our definition of ASEM companies today? Are they still small companies that cannot bear the high costs of IFRS compliance?
Furthermore, on the issue of observing continuing listing obligations, dual-listed companies were excused the burden of interim reports if they are listed on "foreign stock exchanges with WFE status". If WFE does not make quarterly reporting compulsory for companies listed on its member exchanges, why are Nigerian companies being subjected to the burden of quarterly reporting? Whatever happened to the principle of level playing field if we can discriminate so brazenly against Nigerian companies? And it is not even like the foreign companies with secondary listing on The Nigerian Stock Exchange are doing us a great favour. Yes by listing here they are adding to the mix of instruments in our market and boosting our market capitalisation, but at the end of the day they are taking capital out of our economy, at least in theory. What more, even the draft rule says they do not have to have business operation in Nigeria, as if incorporation under CAMA is simply about operating a business in Nigeria only. It's principally about regulation in areas far removed from actual operation of the business. The other issue on this matter of exempting dual-listed companies from the interim reporting requirement is how it affects Nigerian companies like Oando which have secondary listing on WFE-member exchanges. Should they say goodbye to interim reporting?
One did not read anything about financial forecasts by listed companies. Has this been put in the rubbish bin?
Finally, there are issues with the proposed symbol tags for company compliance status. More information is needed on the categorisation. Beyond providing justification for each symbol, the nagging question is - what goes with each symbol in terms of its implication for trading in the shares of an affected company?
For more information on the priority initiative, visit the links below.
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