Transaction Charges on the NSE- Time to consider a reduction



March 31, 2013/ The Analyst

High transaction charges on trading done on the floor of the Nigerian Stock Exchange is potentially, if not currently; a key indicator or/and tool in our drive for global competitiveness and pull-factor in our sales pitch to foreign investors.

Trading activities on the Nigerian bourse (with consideration for the recent upsurge) can be fairly considered to have been relatively sluggish in a sense, when considered within the context of and reaction to - the global financial meltdown and the Nigerian banking crisis in tow.

The NSE All-Share Index which peaked at 66,121.93 basis points as at 7th March, 2008 plunged to 21,813.76 basis points by the end of January 2009; and closed Q1 2013 at 33,536.24 basis points, slightly above half of its original peak.

Partly in recognition of the need to weigh in on the recovery drive through fiscal side impetus, the Coordinating Minister for the Economy and the Finance Minister, Dr. Ngozi Okonjo-Iweala in December 2012 announced measures aimed at giving impetus to the Nigerian Capital Market by lowering the cost of engagements though the elimination of stamp duties and VAT on stock market transaction fees.

According to the minister, the Federal Government consented to:

  • Waive the 0.075 percent stamp duties payable on stock exchange transaction fees; and,
  • Exempt from VAT, commissions: (a) earned on traded values of shares, (b) payable to the Securities and Exchange Commission (SEC), and (c) payable to the Nigerian Stock Exchange (NSE) and the Central Securities Clearing System (CSCS); by including these commissions in the list of VAT-exempt goods and services.

These announcements have yet to take effect as at end of Q1 2013 and there is yet to be a confirmed date/period for it to go into effect. This does not reflect well on the goal congruence pitch being sold by the private sector players. If anything, it reflects a disconnect between the aspirations of the sovereign and the priorities ascribed to actions initiated by another MDA of government.

In this case, as with all things relative to the time value of money; there are serious financial and economic consequences from the delay. We hope that this will be resolved much sooner than later.

Staying with the aspiration sphere, it would seem plausible that a reduction in charges for secondary market activities remains a boost or pull-factor for the retail market and it should be on the table of options for the market recovery and ramping up of investor appetite for the new issues lying in waiting and those actively courted by the NSE to come in to the bourse.

Perhaps, more than any other competitiveness reasons that can easily be adduced for consideration in a retail market build up must be that of price consideration.

This consideration will be better examined in a follow up analysis, but suffice to say, a preliminary review of the ground facts should lay down the foundation for further discourse.



A sample study of the buying and selling charges on the Nigerian bourse shows both charges could amount to something between approx 1.8% to enter and to complete a two-way transaction i.e. buy and sell; it would come to a total cost of 4.05% of the sum invested. To illustrate, assuming a hypothetical transaction for a buy and a sell transaction for 1,000,000 units of Skye Bank Plc, currently trading at N6.23k per share; viz:


In a global competitive market place which this market has embraced as the benchmark for assessing the service, process and practice changes we have made (including the contentious market data change which for all intents equates very well with the global best practice standards we all seek on all other parameters); the charges in other African bourses in comparison to Nigeria’s will suggest that the charges stated above are quite low compared to what is obtainable in other climes/bourses; on the average.



It is about time, we begin the conversation about the ‘compact’ between operators and regulators on market reform. One of the key items in such a discussion must include that of a reduction in the cost of doing business across the board; outside of the other important agenda items which will include the recent market data charges and required reduction in brokers fees conundrum that will ensue; relative service offerings; implementation of GON’s directives by the MoF; the revised negotiating band for operators with clients; and the charges for products and services created outside the provisions of the ISA and guidance of the SEC.

The market is desirous of a reduction in fees across board and a rethink of how the market recaptures the retail market. In this discourse, the possibility of a reduction in fees should encourage those who believe that these move is helpful to the effort in place; along with the introduction of online engagement platforms – that enables payment channels to meet diverse needs and a confidence building customer service that takes away the rigours and stigma of the past; to enable the rebuilding to develop trust & integrity anchor points.

What do you think?


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