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Still on NGX Group listing by Introduction

The Nigerian Exchange Group Plc (NGX Group) recently confirmed its listing of shares by introduction on the Main Board of Nigerian Exchange Limited (NGX). The listing earlier scheduled for Wednesday, October 13 follows the successful completion of the demutualisation and restructuring of the former Nigerian Stock Exchange and its related operations within the new NGX Group. Ahead of the listing by Introduction of its shares on NGX, Nigerian Exchange Group Plc in line with its commitment to uphold best global practices had on Monday October 11, 2021 leveraged the Facts Behind the Listing of the Nigerian Exchange Limited (NGX) to engage stakeholders.

In line with the practice of demutualized exchanges, NGX Group listing on the operating Exchange is expected to support its liquidity and enhance transparency. The listing of the shares of NGX Group follows the fulfillment of all regulatory requirements and the approval of NGX Regulation Limited.

Shares to listed by introduction

A total of 1,964,115,918 shares are expected to be admitted to trading and the shares will trade under the ticker NGXGROUP. The NGX Regulation Limited has approved the listing of Nigerian Exchange Group (NGX Group) Plc by introduction. At the start of demutualisation, NGX Group had just 432 shareholders, a number that has doubled since Over-The-Counter (OTC) trading commenced. The approval on September 22 ,2021 for listing of the Nigerian Exchange Group Plc shows its will be listing 1,964,115,918 ordinary shares of 50 Kobo each on the Nigerian Exchange Limited (NGX) by way of introduction at an indicative price of N17.17kobo per share. If successful at that indicative price, the listing by introduction of the said shares of Nigerian Exchange Group Plc will translates to an issued share capital of about N32.62billion.

What does listing by introduction mean?

The NGX Group listing by way of introduction means that it is not looking to issue new shares nor seeking to relinquish some of the existing shares of its majority shareholder to raise equity capital in the immediate term, but existing shareholders will now be provided with the opportunity to sell to the public leveraging the platform of the Nigerian Exchange Limited.

But issues arising

Recently a rights and transparency group, Nigeria for All Nigerians (NAN) called on the concerned regulatory authorities to stop violation of the Nigerian Investments and Securities Act. This call comes ahead of the forthcoming Listing by Introduction of the shares of Nigerian Exchange Group (NGX Group) on the main Board of Nigeria Exchange Limited with effect from October 13, 2021. The concern of NAN relates to the likely infringement of SEC Rule 184(2)(a) on the status of Oscar Onyema as the Chief Executive Officer of Nigerian Exchange Group while also serving as a Non-Executive Director of Nigerian Exchange Limited.

Rule 184 (2) states that a securities exchange shall have a code of conduct for its council members or Board which shall be approved by the Commission and shall contain provisions that the council members or Board shall not be staff of a quoted company and its subsidiaries.

According to the group, “The purpose of this provision is to forestall a situation where a Council or Board member of an Exchange would be in a position to extend special privileges or exercise undue influence towards a listed company which he/she works for.”

“The impending listing by introduction of the shares of NGX Group on the main Board of NGX Limited with effect from October 13, 2021 vis-a-vis Mr. Onyema’s portfolio in the two companies will be a violation of Rule 184(2)(a) on the status of Mr. Oscar Onyema as the CEO of NGX Group while also serving as a Non-Executive Director of NGX Limited,” according to a statement from Dele Ajanaku, NAN’s Secretary General.

Read Also: NGX Group upholds global best practices ahead of planned listing by introduction

“In the scenario under review, by virtue of his position as CEO of NGX Group, Mr. Onyema is a staff/employee of the company. Given that he also serves a non-executive on the NGX Limited, the Exchange on which NGX Group is set to be listed, Mr. Onyema would (if permitted to hold both portfolios), be in contravention of Rule 184(2).

“On the basis of the foregoing, it is recommended that the Commission should request Mr. Onyema to relinquish one of the portfolios he is currently occupying so as to comply with Rule 184(2),” the rights and transparency Group concluded.

It is to preserve collective knowledge, institutional memory, others

Meanwhile, rising from the NGX Group Facts Behind The Listing on Monday October 11, market sources said the Board membership seems to preserve collective knowledge and institutional memory, as well as retain stakeholder confidence and maintain market stability.

Research has shown that this approach is also being used by the holding companies of leading international exchanges, including the Intercontinental Exchange (popularly known as ICE) which is listed on the New York Stock Exchange (NYSE) which it owns, and the Japan Exchange Group (popularly known as JPX) which is listed on the Tokyo Stock Exchange (TSE) which it owns.

NYSE is the largest stock exchange in the world by market capitalization, whilst TSE is the third largest stock exchange in the world by the aggregate market capitalization of its listed companies, and is the largest in Asia. It would therefore seem that NGX Group stands in good company and has benchmarked in line with leading integrated capital market infrastructure groups globally, and leading exchanges in the world.

The stockbrokers to the listing

The stockbrokers to the listing of NGX Group are Chapel Hill Denham Securities Limited and RMB Nigeria Stockbrokers Limited. The Financial Advisers to NGX Group are Chapel Hill Denham Advisory Limited and Rand Merchant Bank Nigeria Limited.

NGX stakeholders speak on the listing

During the Facts Behind the Listing, Temi Popoola, Chief Executive Officer, NGX Limited said, “I am pleased to congratulate the Board, Management and staff of NGX Group for the successful completion of the demutualization and restructuring of the Nigerian Stock Exchange, and subsequent listing on the Main Board of NGX.

“Demutualization strategically places NGX Group in a position to provide liquidity to members while stimulating the capital market ecosystem to grow at the same pace as the economy. Furthermore, this move will see NGX Group evolve in a fashion similar to other demutualized exchanges, which have experienced significant periods of growth following their demutualization”.

Oscar N. Onyema, Group Managing Director/Chief Executive Officer, NGX Group during his presentation highlighted that, “NGX Group has its key strategic focus geared at leveraging organic and inorganic growth opportunities for expansion of its business across relevant business categories in order to increase global competitiveness.

As a listed entity, NGX Group will have access to the widest range of new investors, including the growing pool of institutional investors, and this is just one more step in our evolution. Having successfully demutualised, we will actively forge ahead with our aspiration to become Africa’s leading integrated capital market infrastructure group.”

While speaking to the prospects NGX Group provides to investors, the Group Chief Financial Officer, NGX Group, Cyril Eigbobo presented the financials of the organisation in its pre-demutualised state.

“NGX Group boasts a diversified revenue base with significant contributions from transaction fees, listing fees, interest income from investment in treasury bills, fixed deposit etc. In addition to contributions from operating subsidiaries, consolidated Group net income includes share of income in equity investees held by the Holdco, NGX Group Plc. Evidently, The Group has a large, diversified and growing asset base which includes long and short-term risk-free securities.”

Abimbola Ogunbanjo, Group Chairman, NGX Group had said that, “The Group expects the Listing to bring significant benefits to its business and its stakeholders. NGX Group will enhance its strategic flexibility by creating new financing opportunities and partnership possibilities, while diversifying its shareholder base.

“This milestone will open up The Group’s capital to new investors within the Nigerian investing public as well as international institutions thereby reinforcing NGX Group’s presence in international capital markets, and for its current long-term shareholders, it will create the possibility to realise value.”

Building on record of accomplishment over time

NGX Group continues to build on its record of accomplishment over time, which embodies best practices, leading by example in terms of disclosures to, and relationships with the market. Beyond maintaining due process, the governance framework of NGX Group is consistent with leading corporate governance practices and complies with all laws and codes applicable to its business. The Board of NGX Group consists of 11 members, four of whom are independent.

NGX Group with three operating subsidiaries

Following the demutualization of then Nigerian Stock Exchange (NSE) earlier this year, a new non-operating holding company known as The Nigerian Exchange Group Plc (NGX Group) was formed. NGX Group has three operating subsidiaries, namely: Nigerian Exchange Limited (NGX Limited), NGX Regulation Limited (NGX REGCO), and NGX Real Estate Limited (NGX RELCO) which are duly registered at the Corporate Affairs Commission (CAC).

Group financial scorecard

The Nigerian Exchange Group financial scorecard, which is the NGX group’s first publicly circulated financial after demutualisation shows its revenue printed lower by 23.92percent in the review year to N3.76billion from N4.954billion in 2019. Operating Surplus before tax at N1.909billion in 2020 represents 17percent decrease from N2.3billion in 2019.

Though, total Operating Income of N6.018billion as against N7.782billion in 2019 implies a decrease by 22.67percent. Nigerian Exchange Group reported operating surplus after tax of N1.83billion in 2020, from N2.25billion in 2019, which represents a decrease of 18.56percent, according to its audited financial statements for the period ended December 31, 2020.

Onyema said the 2020 results reflect the challenging macroeconomic and market conditions, “as well as operational resilience of the Group with income and resulting surplus after tax valued at N6.02billion and N1.84billion respectively.”

Further look at the NGX Group results show that share of profit of equity accounted investees rose to N2.003billion from N1.531billion in 2019, representing an increase of 30.83percent.

“Staying firmly afloat during the stormy financial year, the Group recorded an operating surplus of N1.84 billion for the year, which represented a decline of 18.56percent from 2019. Our listing fees income reflected the headwinds dealt by the Covid-19 pandemic, declining by 62.66percent from the previous year driven by uncertainty of prospective issuers in the wake of the pandemic.

“Following Management’s cost containment efforts, total expenses declined by 12.86percent year-on-year without affecting The Exchange’s high operating standards and service delivery. Conversely, our net assets grew by 10.03percent to N31.28 billion providing us with greater financial flexibility to execute on our strategic agenda and respond to changes in our operating environment”, said Abimbola Ogunbanjo, NGX Group Chairman.

Employee Share Ownership Plan

At the 60th Annual General Meeting of Nigerian Exchange Group Plc (Formerly Nigerian Stock Exchange) will hold at Transcorp Hilton Hotel, Abuja, on Thursday September 9, 2021 the shareholders considered and approved among others – further to Members’ approval at the Extra-Ordinary General Meeting of March 3, 2020 for the establishment of an Employee Share Ownership Plan for the benefit of qualifying employees of Nigerian Exchange Group Plc and its Subsidiaries –that the Company issues and allots 200,419,990 ordinary shares of 50 kobo each out of the authorised share capital of Nigerian Exchange Group Plc 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 requisite regulatory approvals.

The shareholders also approved for the Board of Directors to establish and operate a Deferred Bonus Plan for the benefit of qualifying members of the Senior and Executive Management of Nigerian Exchange Group Plc and its subsidiaries and an Employee Share Purchase Plan open to all employees of Nigerian Exchange Group Plc and its subsidiaries.

The Group told shareholders that a total of 100,209,995 units of ordinary shares would be allocated for the deferrals over the cycles in which the allocated shares can cover.

The NGX Group said the DBP is expected to help the Group better retain key talent and high performers to deliver on strategic imperatives. A total of 100,209,995 units of ordinary shares would form the pool to be offered under the ESPP for purchase by the employees of Nigerian Exchange Group Plc and its subsidiaries, at a discount of between 15percent – 20percent of the market share price, subject to the fixed cap per employee and availability of the pool.

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