NGX: Corporate governance principles as imperative for global competitiveness

NGX: Corporate governance principles as imperative for global competitiveness

On August 25, 1961, when some entrepreneurial minded Nigerians opened the doors of the Lagos Stock Exchange) now the Nigerian Stock Exchange, with only 19 securities listed on its main board, perhaps many could have taken it as another exclusive club for few privileged money bags looking for avenues to flaunt their wealth.

With just four firms including Inlaks, John Holt, CT Bowering and ICON (Investment Company of Nigeria) as Market dealers, it’s total market volume then was about £250,000, largely made up of government securities.

But sixty years down the line, that little foundation has become a veritable window through which the global business community sees the Nigerian economy and a platform for investment capital inflows.

Over these years too, the exchange had continued to mobilise capital for allocation for companies in various sectors of the economy to expand their capacities and create wealth.

The significance of this function lies in the exchange’s capacity to funnel capital resources through demand and supply forces to firms with relatively high and increasing productivity to contribute to economic expansion and growth of both quoted companies and the nation’s economy as a whole.

The transformation Nigerian capital market needs

In over 60 years, the Nigerian bourse has metamorphosed into a global entity capable of competing with any other elsewhere in the world in terms of its legal structure, trading system, clearing, settlement and delivery system, number of listed companies and securities, corporate governance and in the deployment of Information and Communication Technology (ICT).

Assessing the prospects of the Nigerian capital market against the backdrop of its transformational journey into the years ahead, Group Managing Director/Chief Executive Officer, NGX Group Plc, Oscar Onyema said, “At Nigerian Exchange Group Plc, we have a vision to be the premier Exchange hub for Nigerian businesses and for the wider African economy, building on the strong reputation and corporate governance the NSE has established over the years. As we march bravely into the NGX era, we look forward to impact creating partnerships that will unlock value for our stakeholders, whilst improving the state of the Nigerian economy. It is a period to reinforce on the global stage, our great African pedigree and the Stock Africa Is Made of.”

Today for instance, it’s record of activities show that between 1996 and 2001, a total of 172 new issues (securities of public companies amounting to N56.40 billion) were floated in the market.

The new issues were valued at N5.85 billion in 1996 but this quickly rose by about 532 per cent to N37.198 billion in 2001 and improved to N61.284 billion in 2002, N180.079 billion in 2003 while the year 2004 and 2005 accounted for N195.418 billion and N552.782 billion respectively. NGX capitalisation however crossed the trillion naira mark at N1.935 trillion in 2007 when the market was at its peak.

Similarly, the number of listed securities on the local bourse grew from 19 in 1961 to 60 in 1971, 194 in 1981, 239 in 1990 and now stands at over 300 securities in 2021.

In terms of market capitalisation, which is the most widely used indicator for assessing the size of a capital market to an economy, it was recorded at about N10 billion and N57 billion 1988 and 1994.

It is currently standing at N20.290 trillion as at September 17, 2021.

As at 1984, the All Share Index (ASI) stood at 100 basis points, but Friday’s closing session of 38,943.87 points shows that the market has grown significantly over the years, with market value hitting a peak of N15.67 trillion in first quarter of 2008 before the global meltdown rocked the market’s excellent run hurting scores of investors.

Reforms and Demutualisation

Meanwhile as part measures to make the market attractive and globally competitive, the Securities and Exchange Commission (SEC) and the management of the Exchange flagged of the process of reform and demutualisation in addition to bringing on board the FMDQ and NASD platforms to further widen public participation in the market.

Beyond the above initiatives, both SEC and the NGX have committed to restoring market integrity through stringent enforcement of operating rules.

The Commission further strengthened disclosure requirements leading to the implementation of international financial reporting values for listed companies.

But the game changer was the 10-year Capital Market Master-plan, which is currently being implemented to transform the market.

Prior to becoming a demutualised entity, the NGX got the Senate to give its assent to the demutualisation Bill in 2018 and regulatory approvals from the SEC, the Corporate Affairs Commission (CAC) as well as its shareholders.

These approvals however culminated in the unbundling of the Exchange on May 17, 2021, to new structure tagged “The Stock Africa Is Made Of” to amplify NGX Group’s positioning and commitment to the African financial market as a leading capital market infrastructure provider, connecting Nigeria, Africa and the world, as well as spotlighting the growth potential of the African continent.

Delivering his remarks prior to sounding the closing gong and bringing the day’s trading to a close, President Muhammadu Buhari, congratulated the NGX on its demutalisation, noting that the NGX Group history was tied to that of Nigeria itself founded 61 years ago when it gained independence.

He stated that the NGX had continued to play its part in nation building by stimulating economic growth and providing a platform for businesses and individuals to save and raise capital through innovation, diversified products and services, enabling regulatory environments and much more.

“The occasion of the demutualisation of Nigeria’s stock exchange is yet a proud moment for all of us, and indeed all Nigerians deserve congratulations for this feat as it is the beginning of a new era for the capital market,” President Buhari added.

In his opening speech, the Group Chairman, NGX Group Plc, Otunba Abimbola Ogunbanjo stated that exchange has come a long way, through different political regimes – civilian and military – that have overseen multiple boom and bust economic dispensations to emerge as a leading integrated market infrastructure in Africa and the engine of growth for Africa’s largest economy.

He explained that the exchange’s story was one birthed from resilience, collaboration, determination and continued focus on our vision.

Ogunbanjo said, “With demutualisation, the NGX Group is well positioned to enable stronger economic growth and contribute its quota to the development of the Nigerian capital market and the African Continent.”

Today however, the NGX Group has three operating subsidiaries, namely: Nigerian Exchange Limited (NGX Limited), the operating exchange; NGX Regulation Limited (NGX REGCO), the independent regulation company; and NGX Real Estate Limited (NGX RELCO), the real estate company.

At its first Annual General Meeting (AGM) as a demutualised entity, shareholders of the NGX had approved the exchange’s proposals to introduce equity-based incentives to employees’ remuneration, including an Employee Share Ownership Plan (ESOP) and a Long-Term Incentive Plan, aligning the interests of internal stakeholders with those of shareholders in long term value creation.

According to NGX, the ESOP is for the benefit of qualifying employees of the exchange and its subsidiaries and this came after concerns were raised that demutualisation of the NGX was not in any way representative of the new exchange’s shareholding structure.

The NGX board had recommended that shareholders approve the issuance and allotment of 200,419,990 ordinary shares of 50 kobo each out of the authorised share capital of NGX for the operation of a Long Term Incentive Plan consisting of a Deferred Bonus Plan (DBP) and an Employee Share Purchase Plan (ESPP), with effect from January 1, 2021, subject to obtaining the requisite regulatory approvals.

It was further gathered that with both plans offering appropriate equity incentives to scheme participants, this will encourage wider employee ownership of shares and thereby aligning the NGX workforce with shareholders’ interest.

From all indications, the NGX Group appears to have since begun to actualise the benefits of its demutualisation policy, including the alignment of stakeholders’ interests in the value created by the new Group under a revised corporate governance framework. Under its new structure, the HoldCo sits at the apex of several organisations and is tasked with the implementation of strategic value-creating initiatives and services that strengthen the Group.

Led by the indefatigable Mr Oscar Onyema, the Group today looks well positioned to realise its vision of becoming Africa’s leading integrated capital market infrastructure group.

Since taking the job as NGX HoldCo helmsman, Onyema has listed some key initiatives and priority projects that he intends undertake to include overseeing the financial planning activities of the group including group capital allocation as well as the investment activities with emphasis on treasury management, capital allocation, fund raising, private equity investments, Mergers and Acquisitions (MA) as well as overseeing integration processes to maximise returns.

Stakeholders’ assessment

Addressing participants at a recent National Workshop themed; Leveraging the financial markets to achieve double digit economic growth for Nigeria”, organized by the Chartered Institute of Stockbrokers (CIS) in Abuja, the Minister of Finance, Budget and National Planning Mrs Zainab Ahmed stated that the Buhari led administration will work along with the regulators and operators of the capital market to address issues that would accelerate investment opportunities.

Ahmed noted that the Nigerian Capital Market (NCM) had contributed immensely to the long term growth and development of the economy and added that the Federal Government shall continue to enact laws that would further globalize the NCM.

“There is a lot of work to be done in building the Nigerian economy and achieving the pace that is needed to make double digit growth a reality. I wish to pledge government’s continuous support and partnership with the SEC, NGX and the CIS as we continue the task of nation building. The NCM has provided, over the years, access to significant long term development capital to the Federal Government and other tiers of government and private sectors”, she said.

In a statement from the Chairman, Association of Securities Dealing Houses of Nigeria (ASHON), Chief Onyenwechukwu Ezeagu, said the Association’s members had always partnered with the Exchange and that the current narrative will enhance the effective transformation of the entire securities ecosystem.

For his part, President, Chartered Institute Stockbrokers (CIS), Olatunde Amolegbe, said that although the demutualization process had already enjoyed the support of all market stakeholders, more of innovation and growth is expected to herald a new vista in the growth trajectory of the NGX.


Given Nigeria’s economic growth prospects, the challenge for investors is to identify the best avenue for entering the market and the stock market holds an advantage in that regard. However, Illiquidity, declining investment flows and slow regional integration could hinder the growth prospects of the NGX. Hence, it is important that the Federal Government creates the enabling policies, effective technical and regulatory systems to improve the visibility of bellwether stocks and also provide continuous opportunities for investors to access equities market seamlessly.

By Chinwendu Obienyi

The Sun Newspaper September 20th, 2021

FMAN aim to address all the issues affecting the industry’s development and represent its members at levels in ongoing discussion about the regulatory framework for the industry.

FMAN aim to address all the issues affecting the industry’s development and represent its members at levels in ongoing discussion about the regulatory framework for the industry.

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