A very reliable inside source who spoke to BusinessDay on condition of anonymity, said the exchange may waive the requirement of track record for the generation and distribution companies, and settle for the track records of the local and foreign promoters.
At the last workshop hosted by the Chartered Institute of Stockbrokers in Abuja, the director-general of the Securities and Exchange Commission (SEC), Arunma Oteh, had hinted that SEC might do away with the requirement for track record for GENCOs and DISCOs willing to come to the capital market to raise money.
As a booster, both SEC and the NSE are willing to further reduce transaction costs in the primary market, to attract companies coming to raise money through Initial Public Offering (IPO). Speaking on Thursday last week at a world press conference, Oscar Onyema, CEO, NSE said although transaction cost in the Nigerian market is one of the lowest in the world, the bourse would consider complaints of transaction cost as one of the hindrances to listing.
Many of the GENCOs and DISCOs are said to be getting guaranties from banks for foreign and local banks’ funds . But the senior NSE official told BusinessDay that the equities market is the best option for GENCOs and DISCOs to raise the huge capital needed to finance investments in the power projects. According to him, considering the high cost of funds in the money market, it makes economic sense to use cheaper capital market funds to finance the projects.
The NSE is targeting market capitalisation of $1trillion by 2016, hinging its projection on the listing of GENCOs, DISCOs, Telcos, oil producing and Agric companies.
To demonstrate its resolve to attract these companies to list, Onyeama recently disclosed that the exchange was engaging the Bureau of Public Enterprises (BPE) and the National Electricity Regulatory Commission (NERC) to reduce the period allowed power companies to list, from 5 to 2 years.
There are concerns that the plans of the NSE to attract companies to list, may be thwarted by competition from the Over the Counter (OTC) market, promoted by the National Association of Securities Dealers (NASD) and another by the Financial Market Dealers Association of Nigeria (FMDA). But Onyema has dismissed the fears, saying the operation of both markets would be complementary, which according to him, explains why the NSE has invested in the NASD.
But the worry in the financial market is that with the seeming high cost of raising capital in the equities market and current low valuations, companies are not likely to rush for IPOs for now, leaving the OTC as viable alternative for unlisted companies wishing to raise long term capital.