Business
‘There is no confidence problem in the market’
Okey Onyenweaku
In the past eleven years, there has been traction in the Nigerian capital market. Its growth trajectory, market observers say, has been generally phenomenal.
One man’s name keeps re-echoing as having creatively poured all of his energy in galvanising his team on the path of stirring progressive evolution in the market which today boasts of millions of investors, both internal and international, and even other stakeholders. That man is Oscar Onyema, the Group Chief Executive Officer of the NGX.
In addition, there is a consensus that the managers of the NGX have not only been visionary and displayed large bouts of integrity but have also left no stone unturned in bringing focus and innovation to bear on the state of affairs in the market, against all odds. After all, the growth of the market takes its bearing from a healthy and strong economy. Unfortunately, economists believe that such optimism is a scarce commodity in the Nigeria of today.
At the moment, over100million poor Nigerians, the World Bank and International Monetary Funds (IMF) otherwise known as the Bretton Woods institutions have all depicted and portrayed the drowning economy in variegated dismal colours.
Nevertheless, the capital market community today celebrates the growth of its total market capitalization which has jumped by 191 per cent from N14.80 trillion in 2012 when Onyema assumed office as the Director General of the NSE as it was called then, on January 18, 2012 to N43.12trillionin 2021.
The NGX today
Putting in perspective the current state of affairs in the Nigerian capital market first requires appraising its own internal definition of itself.
‘’NGX is a multi-asset exchange providing a home to the best of African enterprises listed on our Premium, Main, and Growth Boards; diverse fixed income securities; Exchange Traded Products (ETPs); Mutual and other investment funds. Through our vibrant secondary market, we provide domestic and international investors access to these securities. In addition, NGX provides licensing services, market data solutions, ancillary technology services, and more in our quest to be Africa’s preferred exchange hub,’’ the bourse says of itself.
In pursuit of the above vision, the leadership team of NSE (NGX) diligently engineered the soundly touted demutualization. Though conceived by the enigmatic Prof. Ndi-Okereke Onyiuke, Mr. Onyema’s predecessor, nonetheless where ever Prof. Onyiuke, may be today, she would readily testify that the demutualization exercise was clinically and effectively executed.
The exercise, in fact, among other opportunities opened the vista for investor participation which many enjoy today and will continue to benefit from even in the future.
While the exercise of demutualization of the NSE could not have ushered in an el dorado, a thorough breed former spokesman of the exchange and chief executive officer, Sofunix Investment and Communications, Sola Oni in his article titled,‘NGX Group Hedging against Black Knights’ and published in the Guardian Newspaper dated 26 September, 2022 made it clear to the market community that,
‘’ one thing that we held sacrosanct through reports of some of us that visited some demutualised markets in other countries was that demutualisation would never be a silver bullet as some people wanted us to believe that time. All of us had high hopes that the project would be successful and we were planning to sensitize the entire masses to become shareholders after demutualisation and listing of The Exchange’’
Mr. Sola Oni who is also a Chartered Stockbroker, also affirmed that,
‘’Thereafter, the bourse was listed by introduction. The Demutualisation gave birth to 432 new shareholders, comprising 255 Dealing Members- the stockbroking firms and 177 Ordinary Members who are individuals.’
Market analysts have observed that recent criticisms of the NGX group accountsmay not be out of place since the company now wears a public toga, but some of them seem cautious about accuracy of the facts.
Also explaining the natural ups and downs of pressures that arise from demutualization, Oni said, ‘’No fewer than 58 stock exchanges havedemutualised across the globe. But they all transited from their core areas, attract investors and adjusted to the opportunities and challenges of demutualisation’’.
But this notwithstanding, the NGX group in only 18 months of transition has proved to be stable and profitable.
For instance, its audited report ended in December 2021 but announced in March, 2022, NGX Group PLC’s Profit after tax (PAT) grew by 22.2 per cent to N2.3 billion from N1.84 billion recorded in the corresponding period of 2020.
However, the market community does not seem to fully appreciate this impressive performance, more so when it is put in the context of a weak economy that has suffered various shocks caused by the devastating effect Covid 19, Russian/ Ukraine war and the equally huge discomforts of insecurity, huge sovereign debts, high unemployment, inability to harness the opportunities of high crude price among other challenges.
Views are that this feat was achieved in a macro-economic environment where many firms have closed down; others are struggling and a significant number are merely surviving.
However, the seemingly high standards and confidence built in the bourse have, in fact, yielded clear positive results such that it attracted heavy stocks which were skeptical to list in the market. Some of these stocks include; Dangote Cement, MTN Nigeria, Airtel Nigeria Plc, Seplat, GTCO, FBNH and ETI and BUA Cement.
These heavy stocks have boosted impressive total market capitalisation at the NGX.
Accordingly then, it can be argued that the NGX has continued to build market confidence on the path of its pre-defined five pillars: targeted business development efforts, stronger regulatory environment, deployment of 21st century technologies, growth enabling market structure and first rate investor protection programmes.
Also, the fact that the Nigerian capital market emerged best performing in Africa and third best in the world signifies that the policies of managers of NGX are on track.This is a feat that has been achieved again and again.
For Mr. Oscar Onyema, the focus has been to build a strong capital market of international standard that would be a beehive for investors, irrespective of where they are located or come from in the world.
But most of this grand plans can only be effectively achieved in a very stable political environment which does not gradually erode stakeholders confidence and deny the NGX the opportunity of attaining its full potentials of being African and world notable destination of investment.
Despite these challenges, Managing Director of HighCap Securities, Lambert Adonri reckons that, ”under Onyema’s watch, numerous achievements have been made. He has proved to be humble, intelligent and resourceful. He has moved the market to unexpected heights and to international standards. Under him the market has grown in leaps and bounds, in addition to maintaining integrity and confidence.”
For the Managing Director/ CEO of Heritage Investment & Securities Limited, Chidi Ajaegbu, the Nigerian Capital market is indeed deep and has what it takes to attract international confidence and investment. He adds that in his view the NSE also has the technological sophistication and international best practices to compete anywhere in the world.
“There is no confidence problem in the market. Some of the international firms not playing in the market today have been here with us even when the economy had not become this weak. There not listing on the exchange is rather a mindset thing. Some are not ready to dilute the ownership of their company and are not ready also to subject themselves to the post listing requirements”, said Ajaegbu.
On his part, Oni noted that: “The Chief Executive Officer of NGX Group PLC, Mr. Oscar Onyema, knew from the outset that every listed company must undress in the public and face the constant scrutiny of the shareholders. The High Priest of NGX Group must face the stark reality that managing a company limited by guarantee is a different ballgame from that of a profit making entity’’
NGX Reaction
Against the confidence backdrop, NGX said while it is the Company’s practice to refrain from commenting on frivolous claims, “we believe it is in the interest of the investing public to correct the errors/misstatements in recent media reports following the release of the Company’s notice for its upcoming annual general meeting.”
According to the statement, NGX Group has also identified viable investment opportunities in line with its strategic expansion plans, including deepening investments in the existing portfolio companies to ensure high and steady dividend returns.
The announcement made pursuant to Rule 17.10 of the Rulebook of the Nigerian Exchange, 2015 (Issuer’s Rule), added that NGX Group is therefore on course with its long-term strategy which will ensure it provides competitive returns for its investors.
“NGX Group would therefore like to assure the investing public that it will continue to uphold the highest corporate governance standards, as it has historically done. We are extremely mindful of due process, our records are verifiable and we are on course with our long-term strategy execution”, the statement said.
The material misstatements and the NGX Group’s responses are detailed as follows:
i. Corporate Governance: The NGX Group’s operations are built on an effective corporate governance framework and the highest corporate governance standards.
Regarding the tenure of the Chairman and the Group Chief Executive Officer of NGX Group, it is pertinent to note that both esteemed individuals were appointed following due process and with the applicable regulatory approvals.
The Chairman is currently serving as such as part of the transition arrangements following the demutualisation of The Nigerian Stock Exchange (“NSE”). His election is in accordance with the Scheme of Arrangement between the NSE and its Dealing and Ordinary Members dated 20 January 2020 (the Scheme) as approved by the members, the Securities and Exchange Commission and the Corporate Affairs Commission which prescribe that the members of the National Council should continue for a transition period on the board of the Group.
“Furthermore, the Group Chief Executive Officer of NGX Group exited his role as the Chief Executive Officer of NSE after ten (10) years of meritorious service and in line with good corporate governance practice.
Nigerian Exchange Limited (which is now the operating securities exchange), the entity to which the NSE transferred its securities exchanges license, is now managed by a new Chief Executive Officer. Following due process, he was subsequently contracted as the Group Managing Director/CEO of the Group in 2021, after the approval of the National Council and the Securities and Exchange Commission. These appointments do not contravene any law or governance codes.
ii. Value of Shares at Listing: While it is factual and public knowledge that the demutualisation of the NSE (during which it changed its name to Nigerian Exchange Group Plc) was eventually completed when it became a capital market holding company effective 01 March 2021, and NGX Group was listed on Nigerian Exchange Limited in October 2021, the listing price of its shares was NGN16.15 and not NGN27.90 as erroneously reported. Please refer to the cover page of the Listing Memorandum which is a public document.
iii. Employee Share Scheme: The directors were empowered to establish the Scheme further to a resolution of the shareholders at the NSE’s Extra-Ordinary Meeting held on 3 March 2020. This approval is consistent with global best practice as adopted by peer demutualised exchanges which operate employee share schemes upon demutualisation.
iv. Long Term Incentive Plan: The resolution for the allotment of 200,419,990 ordinary shares of 50 kobo each for the operation of a Long Term Incentive Plan consisting of a Deferred Bonus Plan (DBP) and an Employee Share Purchase Plan (ESPP), was made at the Company’s 2021 AGM on 9 September 2021, for the purpose of operationalising the earlier approval of the establishment of an ESOP in 2020.
Furthermore, it should be noted that part of the approval granted by the shareholders at the 2021 AGM was for half of the total number of shares proposed for the LTIP being 100,209,995 ordinary shares of 50 kobo each to be purchased by employees under an Employee Share Purchase Plan. Under the terms of the ESPP, the shares will be offered at a discount of between 15% – 20% of its market price and will be purchased by employees subject to the fixed cap per employee and availability of the pool. The other half relates to deferred bonus under the Deferred Bonus Plan (DBP), which is earned when eligible employees meet set performance standards annually. Neither the DBP nor the ESPP are gifts to the employees. Both are multi-year plans.
v. Dividend Policy: Despite the demutualisation and restructuring of NSE at the height of the COVID- 19 pandemic and its ravaging impact on the economy, NGX Group, as a testament of its commitment to its shareholders and in readiness of providing returns to them in a sustainable manner, has published its dividend policy on its website to assist investors and the general public in understanding its value proposition. It is important to stress that as at 2020, when the Company was still a mutual entity, it was not permitted under extant laws to declare a dividend pursuant to the 2020 Audited Financial Statements. It bears emphasising that the demutualisation was completed in March 2021 and the listing in October 2021, which effectively means that the NGX Group’s first full year of operations post demutualisation and as a public company is 2022. This will be reflected in the 2022 Audited Financials in due course.
vi. Proposed Capital Raise: The Company intends to raise additional capital of up to NGN35,000,000,000 to fund (i) the business expansion; (ii) the growth phase for existing business lines/investments; and (iii) investments in identified and carefully curated new targets, in line with the Company’s and NGX Group’s strategy. As captured in the notice of the AGM, the Company does not intend to raise the entire amount in USD.
