NGX in the throes of booby trap

It used to be a great privilege and status symbol to work at The Nigerian Stock Exchange up till 2010, before the palace coup at the board sent virtually all of us in the management packing. The rest they say is history but our sympathy for the system remains absolute. During our days, staff attrition was almost nil, except internal restructuring that occasionally affects a couple of staff but not to the level of ‘earthquake’. The Exchange that time, a not-for-profit organisation, operated Departments and later upscaled to Directorates, but the heads report to the incumbent Director General.

NGX is a legacy that should not be allowed to lose its original identity. It is the face of stockbrokers. Its existence is a product of the sweat of different generations

It is heart-warming and commendable that the demutualisation of The Exchange, which was initiated during our administration, became operational in March 2021, under the new Management. The new structure of NGX, led by the Group Chief Executive Officer, Prince Oscar Onyema, comprises three wholly-owned subsidiaries: Nigerian Exchange Limited (NGX), the operating exchange; NGX Regulation Limited (REGCO) and NGX Real Estate Limited (RELCO). Given the Exchange’s mode of operation, the organisation is supposed to be attractive to the future drivers of the economy- Millennials, Gen Z and Gen Alfa, to build a career. But the spate of staff attrition in the last two years suggests that all is not well in the market. Since demutualisation is just two years old, one can argue that it is too early to assess the relevance or otherwise of the new group structure of the Exchange. However, if morning shows the day, there is a need to examine what is fast becoming an underbelly of the group structure, the implications on the Exchange that promises to be the Nigerian investment gateway and the way forward.

The CEOs of the three subsidiaries do not report to the Group CEO. The companies operate in silos with individual Board and Management. Since 2010, CEOs of NGX at different levels have been coming from outside. Given the current structure, if Onyema retires, I do not think his successor will automatically come from within as the job will likely be advertised. This implies that internal staff shall have to compete with the external applicants, an indication of lack of succession plan in an organisation whose business is highly technical.

The seemingly unattractive work environment that is unfolding at NGX has raised a red flag to suitability and sustainability of the group structure. The Nigeria Exchange Limited may be making money through listing and trading charges but are the other subsidiaries financially viable? Do they have enough staff to generate income?

At the pace that NGX is going, staff morale is dwindling by the day. The glamour of working at the Exchange is diminishing. There is nothing wrong with a group structure if it is properly managed. Singapore Exchange Limited (SGX Group) operates a conglomerate of nine divisions. Each division handles specific businesses. The market trades in equity, fixed income, currency and Commodity. But the divisions do not operate in silos. Brazilian Stock Exchange demutualised in 2007 and operates a comfortable group structure.

In a group structure which is practised by some leading companies in Nigeria, every staff member belongs to the group. They are technically on secondment to the subsidiary and the group Chief Executive Officer is the most senior CEO. The Group CEO can emerge from the CEO of any subsidiary as leading a subsidiary is a tutelage to lead the entire group.

The group structure model of NGX appears strange and therefore esoteric. It is at variance with all-known models in this era of dynamic and flexible management systems. There is a compelling need by the various Boards and Management of each entity to address the ugly situation. It’s either the NGX model is badly implemented or deliberately created to weaken the system and make it attractive to corporate raiders.

Corporate raiders are always on the prowl.

They simply need to pick up the holdings many shareholders, especially institutional ones at premium through a crossed- deal without infringing on the easy-to- breach Rule 17 of NGX which deals with issuers’ information disclosure. FMDQ is already poised to execute the hatchet job. For a valid peer review, FMDQ’s silver spoon background should be discounted from its financial muscle. Its heavy weights are some of the key drivers of Nigerian fiscal and monetary policy. It is only in Nigeria where one can be a judge in his own court. After some initial resistance from the shareholders, FMDQ had in June this year snapped up 16.61% holdings of Artemis Limited and 5% stake of Leadway Insurance, totalling 21.61 % in CSCS through NASD PLC. FMDQ shot into fame with trading in debt instruments when it came on board.

Those who understand the market history will agree that trading in debt instruments was the strength of The Nigerian Stock Exchange during its formative years. It was more popular than equity when uncle Olutola Mobolurin and his peers were actively engaged in manual trading. But at a point, the infectious share purchase through Initial Public Offerings (IPOs) and rise in the activities of shareholders’ associations overshadowed trading in debt instruments and the market became top-heavy in equity trading. FMDQ took advantage of the niche market. Currently, the bankers are the ones mainly reaping the dividends of the debt and currency market to the exclusion of the stockbrokers. It is not too late for NGX to reverse the trend.

The acquisition of CSCS shares would have been achieved about two years ago but for the Otunba Abimbola Ogunbanjo- led Board that strenuously resisted all the moves by FMDQ during his tenure as the President of the mutual NSE. As a seasoned corporate lawyer, he knew the implications on the future existence of the Exchange. His voluntary resignation as the Chairman of NGX PLC last year was a great sacrifice to douse the raging tension ahead of the Annual General Meeting. He shall go into the Exchange’s history as the last President of the mutual Exchange and the first Chairman of Nigerian Exchange Group PLC under demutualisation. By virtue of the monopoly it enjoys in the debt and currency markets, FMDQ has acquired sufficient financial muscle to launch a hostile takeover of NGX and turn it into its subsidiary.

It must be noted that the current management of NGX is doing a lot to further globalize the operation, increase market capitalization, boost capacity and democratise investments across financial assets. But NGX is a global brand and should not make itself a target for acquisition. The current structure is a booby trap. As a low – hanging fruit, it does not diminish the Exchange’s stature if the subsidiaries are turned into departments while the organisation operates a single but professional Board with eyes on corporate governance. This will enhance efficiency, save cost, create a level playing field for all staff and strengthen the substance and essence of the position of the Group Chief Executive. This is a tough option that may likely hurt certain top positions and affect some staff. But it is the reality.

Today, NGX is no longer a monopoly exchange and stockbrokers are multi-dimensional professionals. They can trade on FMDQ, NASD PLC, Lagos Commodities and Futures Exchange (LCFE) Afex and other platforms, including offshore. But NGX is a legacy that should not be allowed to lose its original identity. It is the face of stockbrokers. Its existence is a product of the sweat of different generations. If the current situation is not addressed, Stockbrokers may wake up one black day to discover that NGX is no more. At 62, it will be an irony of history if the premier Exchange in Nigeria surrenders to corporate raiders and loses its global identity, which has been rising for over three decades. The forefathers of this citadel of capitalism shall weep in their graves.