NSE’s move to sanitise market delights operators
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recent efforts by the Nigerian Stock Exchange (NSE) to sustain investors' confidence in the capital market has recieved the endorsement of stakeholders.
Some of these strategies include the restriction on stockbrokers to raise money through private placements and the rule that no share price can record any increase if it does not trade a minimum of 100,000 units in a day. The decisions were taken by the Quotation Committee of the exchange.
The step, according to some leaders of shareholders' association, will go a long way to strengthen the market and save it from price manipulation, insider trading and other negative practices.
Faruk Umar, president, association for the advancement of the rights of Nigerian shareholders, said the actions of the NSE in that direction are quite in order.
He said that these companies have learnt to carry out private placement and then list the shares on the Exchange as a way of increasing the share prices of their stocks. "It has become a tradition among these companies to come to the capital market for fresh funds without first of all utilising the funds they raised previously. This will stop some of them who do that merely for price increase from moving share prices any how," he said.
He supported the decision of the Exchange that any company coming to the Exchange for listing should make 10 percent of the shares to be listed available for trading as a matter of fact. Umar said the NSE is right in stopping companies from accessing the capital market for fresh funds twice in a year.
"I also support the regulation that 15,000 units will no longer be enough to make a stock move its price. The 100,000 units peg by the Exchange is quite in order because it has become easy for the operators to raise 15,000 units as they want. It is however, not very easy for the stockbroker to immediately raise 100,000 units just to change share price," he said.
Boniface Okezie, president, Progressive shareholders Association of Nigeria (PSAN), said the action of the NSE is a good development for the market. He said that such action would bring sanity and discipline in the market as companies had become fond of bringing little shares to the market with an injunction that a lot of people were demanding for the shares.
Like the Central Bank of Nigeria (CBN) did, the companies should have a game plan. They must have projections about the use the funds they are seeking will be put into. “It is not good to raise money before you start to find the need for the money. Doing so, would lead to reckless spending at the expense of the investors," he said.
Taiwo Oderinde, secretary-general, Corporate Investors' Forum of Nigeria, said that it was NSE's way of being proactive to regulations. He said that most of them would go to the market and make people invest more than they needed. This at times led to return of unused funds, so NSE was right in stopping them.
On the N1 billion naira capitalisation for stockbrokers, he said that it would augur well for the market as the level of productivity and transaction in the capital market would also change for the better.
However, Timothy Olufemi, president, Shareholders' Renaissance Association of Nigeria said that it was the bad precedent set by some companies that brought about the fund-raising explosion.
In his opinion, companies that have genuine needs for fresh funds should not be denied such access since that is the only way through which Nigerians become co-owners of these companies.
“As long as they have not exceeded their authorised share capital, they should not be resisted. The idea of stepping the required number of units to move share prices up is right because it will help to stop overpricing and manipulation of share prices and fraud among operators," he stressed.
Some of these strategies include the restriction on stockbrokers to raise money through private placements and the rule that no share price can record any increase if it does not trade a minimum of 100,000 units in a day. The decisions were taken by the Quotation Committee of the exchange.
The step, according to some leaders of shareholders' association, will go a long way to strengthen the market and save it from price manipulation, insider trading and other negative practices.
Faruk Umar, president, association for the advancement of the rights of Nigerian shareholders, said the actions of the NSE in that direction are quite in order.
He said that these companies have learnt to carry out private placement and then list the shares on the Exchange as a way of increasing the share prices of their stocks. "It has become a tradition among these companies to come to the capital market for fresh funds without first of all utilising the funds they raised previously. This will stop some of them who do that merely for price increase from moving share prices any how," he said.
He supported the decision of the Exchange that any company coming to the Exchange for listing should make 10 percent of the shares to be listed available for trading as a matter of fact. Umar said the NSE is right in stopping companies from accessing the capital market for fresh funds twice in a year.
"I also support the regulation that 15,000 units will no longer be enough to make a stock move its price. The 100,000 units peg by the Exchange is quite in order because it has become easy for the operators to raise 15,000 units as they want. It is however, not very easy for the stockbroker to immediately raise 100,000 units just to change share price," he said.
Boniface Okezie, president, Progressive shareholders Association of Nigeria (PSAN), said the action of the NSE is a good development for the market. He said that such action would bring sanity and discipline in the market as companies had become fond of bringing little shares to the market with an injunction that a lot of people were demanding for the shares.
Like the Central Bank of Nigeria (CBN) did, the companies should have a game plan. They must have projections about the use the funds they are seeking will be put into. “It is not good to raise money before you start to find the need for the money. Doing so, would lead to reckless spending at the expense of the investors," he said.
Taiwo Oderinde, secretary-general, Corporate Investors' Forum of Nigeria, said that it was NSE's way of being proactive to regulations. He said that most of them would go to the market and make people invest more than they needed. This at times led to return of unused funds, so NSE was right in stopping them.
On the N1 billion naira capitalisation for stockbrokers, he said that it would augur well for the market as the level of productivity and transaction in the capital market would also change for the better.
However, Timothy Olufemi, president, Shareholders' Renaissance Association of Nigeria said that it was the bad precedent set by some companies that brought about the fund-raising explosion.
In his opinion, companies that have genuine needs for fresh funds should not be denied such access since that is the only way through which Nigerians become co-owners of these companies.
“As long as they have not exceeded their authorised share capital, they should not be resisted. The idea of stepping the required number of units to move share prices up is right because it will help to stop overpricing and manipulation of share prices and fraud among operators," he stressed.
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