Last week, the Nigerian Stock Exchange (NSE) gathered stakeholders for the official launch of the Alternative Securities Market (AseM), as a specialised board of the NSE for emerging businesses (small and mid-sized companies with high growth potential).
ASeM provides the opportunity for these companies to raise long-term capital at relatively low cost from the capital market, while cr eating opportunities for growth and institutionalisation of companies listed on the board.
On the ASeM, there is no limit to the amount of capital a company can raise, as long as it is in line with other regulatory requirements, such as those of the Corporate Affairs Commission (CA C) and the Securities and Exchange Commission (SEC). In summary, objective of this market is to present a veritable platform for emerging businesses to access the capital market.
As a way of making this market attractive for companies, the NSE has completed some key initiatives like: developed brand essence with identity, purpose and target company criteria; reviewed listing requirements, making listing on ASeM readily accessible and affordable to a wide range of viable emerging businesses; introduced Designated Adviser (DA) programme to support companies listed on ASeM in complying with post-listing obligations and maintaining their listing status; introduced ASeM Growth Ambassador (GA) programme to project the ASeM brand and support the advocacy and quotations drive of the Exchange, and introduced a bouquet of value added services, including Institutional Services, to assist listed companies to maximise benefit of their listing status.
In addition to the aforementioned, there are also ongoing key initiatives by the NSE around this market. They are: Developing of consequence management process for rule violation; reviewing and currently enhancing market structure and trading mechanics for ASeM companies towards driving liquidity; introducing ASeM Index to track performance of companies listed on the board; introducing alternative capital raising instruments, other than pure vanilla equity for ASeM companies to achieve optimal capital structure; collaborating with organisations – like Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) towards developmental programmes for ASeM companies; involvement in the ongoing Micro-Small and Medium Enterprises (MSME) policy formulation to address capital market provision for SMEs, and advocacy for affordable fee regime for ASeM companies by statutory organisations – like Corporate Affairs Commission (CAC), Federal Inland Revenue Service (FIRS), and Financial Reporting Council of Nigeria (FRCN), among others.
For emerging businesses, there are benefits of listing on ASeM. This include: Access to long-term capital for growth and expansion; membership of a global platform that affords brand visibility and credibility enhancement; opportunity for initial investors to realise some or all of their investment; platform for facilitating long-term sustainability of the company; access to investors focused on high growth potential SMEs in emerging markets; liquidity for shareholders and transparent price discovery mechanism; reduction of financial burden and risk spreading among shareholders; professional guidance (Designated Adviser) to ensure company benefits from and maintains its listing status, and capacity building through access to a bouquet of discounted value added services.
Looking at the listing requirements for companies eyeing the ASeM, Oscar Onyema, CEO, NSE, said at the launch that such companies would need to present “medium term (at least two years) comprehensive business plan; operating record of two years; date of last audited accounts must not be more than nine months; minimum of 15 percent of share capital must be offered to the public; public shareholders of at least 51 shareholders, and promoters will retain 50 percent of shares held at Initial Public Offer (IPO) for first 12 months, submission of quarterly, semi-annual and annual statements; and companies must retain a Designated Adviser to assist with regulatory compliance.”
Muhammad Nadada Umar, director-general, SMEDAN, said: “The Micro, Small and Medium Enterprises (MSMEs) have been known, all over the world, to be engines of economic growth and contributors to employment generation, wealth creation, poverty alleviation and food security.
“Recent data provided by the National MSMEs collaborative survey 2010, put the number of MSMEs in Nigeria at 17,284,671 with total employment put at 32,414,884. Deliberate efforts must be put in place to grow these numbers if we must achieve our national vision of being among the 20 most industrialised nations by the year 2020. To achieve this, all the challenges confronting the MSMEs must be addressed, especially effective access to affordable finance. The ASeM provides a platform for access to long-term finance for growth.”
Looking at what is obtainable in other Exchanges around the world, according to Umar, there are lessons to learn. For instance, the National Stock Exchange of Australia (NSX) put special focus on SME listing by encouraging regional exchanges; London Stock Exchange (LSE) developed a hosted web service for SMEs, and Euronext Brussels launched free market services for SMEs and minimises listing requirements for them.
“Though over-played, finance is still a critical resource for enterprise development. The capital market is a veritable source of medium- and long-term funding, and is an alternative to the money market. The awareness must be created. While SMEDAN works towards ensuring that more SMEs appreciate the relevance of the capital market to their operations, the NSE must also ensure that the listing requirements for the ASeM are not too stringent,” he noted.
According to him, “Apart from individual SMEs, SMEDAN and NSE should partner to ensure that some SME clusters are re-organised/reformed for listing. The lessons of experience from the second-tier market should also be borne in mind to avoid same weaknesses in the proposed ASeM. In addition to this ASeM move to improve the access of SMEs to public equity, a synergy between capital and money markets is essential for improved overall financial access.”
