• Friday, March 29, 2024
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NSE demutualisation holds these 3 benefits for shareholders

Onyema

Nigerian shareholders are few steps away from joining their peers in 56 other Exchanges globally who are reaping the reward of a demutualised bourse as members of Nigerian Stock Exchange (NSE) have assented to demutualisation.

The NSE members passed requisite resolutions for the demutualisation of the Exchange at a Court Ordered Meeting (COM) and an Extraordinary General Meeting (EGM) held in Lagos on Tuesday.

At the COM, members voted and assented to the re-registration of the Exchange as Nigerian Exchange Group plc; the transfer of its securities exchange licence and other assets required to carry out the securities function to Nigerian Exchange Limited, and the establishment of a separate subsidiary company to be charged with the regulatory functions of the Exchange post-demutualisation to be called NGX Regulation Limited, the total share capital being N1.250 billion comprising 2.5 billion ordinary shares of 50 kobo each to be registered with the Corporate Affairs Commission (CAC).

The members also assented to the allotment of 1.964 billion ordinary shares to dealing members and ordinary members on the basis of a ratio of 78:22, respectively; the provision of Claims Review Shares totalling 40.083 million ordinary shares, representing 2 percent of the Issued Shares of Nigerian Exchange Group, will be set aside for allotment to parties who are adjudged as being entitled to shares in the demutualised Exchange; and the transfer of the assets of NSE Consult Limited, NSE Nominees Limited and Coral Properties Limited – existing subsidiaries of the NSE – to the Nigerian Exchange Group plc.

Following the COM, members reconvened for the EGM to determine the Board of Directors of the demutualised Exchange and explore the implementation of an Employee Share Ownership Plan (ESOP).
During the business of the day, the following directors were nominated and appointed: Abimbola Ogunbanjo, chairman and non-executive director, and Oscar N. Onyema, chief executive officer and managing director.

Others are Umaru Kwairanga (member and non-executive director), Fatimah Bintah Bello-Ismail (member and non-executive director), Oluwole Adeosun (member and non-executive director), Chidi Agbapu (member and non-executive director), Patrick Ajayi (member and non-executive director), Okechukwu Crescent Itanyi (member and independent non-executive director), Nimi Akinkugbe (member and independent non-executive director), Enase Okonedo (member and independent non-executive director), Ikpobe Apollos Oghooritsewarami (member and independent non-executive director), and Ojinika Nkechinyelu Olaghere (member and independent non-executive director).

Onyema said by demutualisation and opening up of the Exchange, the NSE would run like any other corporate entity, meaning it would have board of directors, and have appropriate governance over management activities.

“There will be improvement in corporate governance, and because we are restructuring, we are going to be implementing a new business plan that is designed to allow the new entity to access all the forms of capital that can be available,” Onyema said.

He added that the Exchange has plans to use the best technology, and the best people to enable it to attain new heights that couldn’t be reached before the demutualisation.

Demutualisation is defined by industry experts as a process that changes a mutual or co-operative association into a public company by converting the interests of the members into shareholdings. These holdings can then be traded like the shares of a company.

According to industry sources, the idea is to change the structure of exchanges that were originally formed as trusts. Demutualisation allows such associations to conduct commercial business to make profits just like a normal company.

Aigboje Aig-Imoukhuede, former president, National Council of the Exchange, told BusinessDay on the sidelines of the COM that the benefit and advantages of demutualisation are quite obvious in several countries around the world.

According to him, demutualisation was the most important thing for him when he was president and he consulted the past president.

“After they shared with me their experiences, it was clear to me that it was not an ordinary task to make demutualisation a reality but it was one that required significant preparation not just of the council but of the management,” he said.

Aig-Imoukhuede, while explaining how the demutualisation of NSE officially started on March 30, 2017 after the shareholders approved the proposal that was presented by the council, outlined these three benefits of demutualisation.

Competitiveness
According to Aig-Imoukhuede, every demutualised exchange becomes significantly more competitive, meaning that the bourse has the ability to serve the market, which “is very critical”.

“I know that one fundamental driver that causes institutions and organisations to serve customers excellently is the pursuit of profit and a demutualised exchange means you will become accountable to shareholders, and the agency theory will be fully effective,” Aig-Imoukhuede told BusinessDay.

Industry sources also expressed their optimism towards the demutualisation.

“I think the world is going to see a completely different Nigerian Stock Exchange after the demutualisation; it’s going to be faster and it’s going to be much more customer-oriented and I think it going to be even more transformative,” a senior executive at the NSE told BusinessDay on the condition of anonymity.

Improved governance
Aig-Imoukhuede said demutualisation of the NSE would bring about improved governance which will hold benefits for shareholders. He said mutual organisations are like clubs and organisations that are managed by participants or users of the services of that organisation.

“As members of a club, for example, both of us use the services of a club and amongst us, we will appoint those who are governing the club. For obvious reasons, that is not the best from governance standpoint,” he said.

He added that an exchange is a public interest institution which has a greater national economic interest to serve. As such, “we need to strip the governance role of the Exchange from its members who are now shareholders and that is one step that demutualisation also brings”.

Access
For the Nigerian public to truly enjoy the capital market and have the opportunity for wealth creation, Aig-Imoukhuede said it would have to be democratised using technology. He said the intermediaries in the capital market, the licensed securities dealers, should no longer be viewed in the traditional sense that they are.

Addressing how demutualisation will impact access to funds, Onyema said it will provide room for de-risking of access to capital.

“Right now there is a huge concentration on the banking industry, so with this effort, we believe that we will provide an incredible compliment to the banking industry in terms of financing business activities,” Onyema said.

IHEANYI NWACHUKWU & ENDURANCE OKAFOR