Here’re three lessons NGX can learn from Johannesburg Stock Exchange

Nigeria, South Africa, and Egypt have been the largest economic giants in Africa since the start of the 21st century. The three countries have taken turns in being the largest economy in Africa over the last 60 years, with their stock exchanges being a critical feature of their economic exploits.

Apart from the Nigerian Exchange (NGX), the capital markets in South Africa and Egypt have a long-established history, with origins dating back to the 19th century. The NGX, formerly known as the Nigerian Stock Exchange, was founded on September 15, 1960—just days before Nigeria’s independence. In contrast, the Johannesburg Stock Exchange (JSE) was established much earlier, in 1887, about 73 years prior.

64 years after, the NGX is the fifth largest stock market in Africa, with a market capitalization of about $45 billion. However, it is dwarfed by the Johannesburg Stock Exchange (JSE) is the largest stock market in Africa, with a market capitalization of about $1.12 trillion. The JSE also has over 272 listed companies and about 800 listed securities.

In contrast, there are 150 listed companies with about 304 listed securities on the NGX. Essentially, the JSE is bigger than the NGX, and there are lessons for the NGX in the JSE.

The Rulebook

The NGX’s most recent comprehensive rulebook was last updated nearly a decade ago, in 2015, whereas the JSE released its latest version in March 2024. Though the NGX updates the rulebook periodically, though subject to the approval of the Securities and Exchange Commission (SEC).

Spanning 400 pages, the NGX Rulebook serves as a detailed regulatory guide for the exchange. However, several amendments have been made to its provisions since 2015. Additionally, key governing laws—including the Investment and Securities Act of 2007 and the Companies and Allied Matters Act—have evolved.

JSE’s updated rulebook reflects modern governance frameworks, risk management protocols, and sustainability practices, which are critical for attracting global investors. An outdated rulebook risks misalignment with international partners, hindering collaborative initiatives such as dual listings, carbon markets, and data-sharing agreements.

Although, the NGX is releasing new rules and regulations, its 2015 rulebook lacks provisions for emerging trends such as Halal-compliant securities, ESG (Environmental, Social, and Governance) integration, and technology-driven products.

Read also: How cheap stocks drive NGX activity

Aggressively chase dual-listings

In the NGX, there are only 4 dual-listed companies, compared to 45 dual-listed companies in the JSE and over 126 dual-listed securities. These securities contribute more than 50 percent to JSE’s market capitalization. Over the years, JSE has expanded its secondary listings framework to allow listings from companies listed on the London Stock Exchange, New York Stock Exchange, Hong Kong Stock Exchange, Singapore Exchange and even the NGX, among others. Most recently, the JSE entered an arrangement with the Saudi Tadawul Group, the parent group of the Saudi Exchange.

The NGX should aggressively start chasing bilateral agreements across the world, both with African and non-African exchanges. NGX can also take a cue from JSE’s playbook by lowering listing fees or compliance costs for companies looking to dual-list. The exchange can invest in technology and digital trading platforms to facilitate cross-border transactions.

Encourage share instalments and preference shares

NGX can create frameworks to allow for the creation of preference shares and share instalments. These instruments enhance market participation, liquidity, and market participation.

Preference shares are type of equity that offers shareholders fixed dividends and priority over ordinary shareholders in dividend payments and asset distribution during liquidation. However, preference shareholders do not have voting rights in company decisions. For income-focused investors, encouraging preference shares can drive participation in the market.

Share instalments are another instrument that can drive liquidity in the market. They are securities that allow investors buy shares by paying in instalments rather than the full price upfront. For example, if Seplat is trading at N5,700 per share, an investor looking to purchase 1,000 units—a total of N5.7 million—can opt for a share instalment structure. Instead of paying the full amount immediately, the investor makes an initial payment of N2.85 million (50 percent of the total cost), gaining exposure to the stock while deferring the remaining N2.85 million to a later date. This outstanding balance, known as the instalment amount, typically includes interest and additional fees, often financed through a lending arrangement.

By utilizing share instalments, investors enjoy full exposure to the 1,000 shares of Seplat, along with the right to receive dividends, offering an efficient and flexible approach to investing in high-value stocks.