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With the Nigerian Stock Exchange (NSE) expected to become fully demutualised before the second quarter of 2020, the local bourse may be renamed as Nigerian Securities Exchange.
Nationawire gathered on Friday 07/02/2020 that the name change has become germane because the NSE when fully demutualized will not only be operating as a stock market, but will fully be engaged in other asset classes’ transaction.
According to a top manager at the NSE, who do not want his name mentioned in print, said “Offcourse the name may change because it’s expected that the NSE will not only be doing transaction in equities, but other products at a demutualised market.
It will be recall that the Nigerian capital market has continually remained a critical player in the nation’s economy, even as analysts believe that for the market to be more investor-friendly, it has to be fully demultualised.
Demutualisation is the process by which a customer-owned mutual organisation (mutual) or co-operative changes legal form to a joint stock company. It is sometimes called stocking or privatisation.
Also, analysts said demutualisation is a process by which the Nigerian Stock Exchange (NSE) will convert from a private organisation limited to a public limited liability company, which shares can be traded on an organised stock market.
With the process of demutualisation of the NSE approaching a climax and may become a reality in the year, market stakeholders are of the view that this is expected to bring the Nigerian capital market at par with other international jurisdictions, resulting in enhanced governance, transparency, and visibility while attracting strategic partners, investors and good quality issuers.
According to them, demutualisation of the NSE is expected to buoy investor confidence and attract foreign investors, believing that a demutualised exchange is crucial towards boosting liquidity and growth of the economy.
Stock exchange is an important institution of the economy. It plays dual role; on one hand it acts as a barometer of the economy and on the other hand it drives the economy, therefore efficiency of a stock exchange in broad term is the efficiency of the economy.
Some stock markets had demutualised, as well as build alliances or consolidate within and across borders, in order to enhance their attractiveness in the face of strong global competition.
Until the early nineties, majority of the world’s stock exchanges were non-profit, member owned, mutual organisations with monopoly power. However, beginning in 1993 with the Stockholm Stock Exchange, leading stock exchanges including the Australian, London, NASDAQ and New York Stock Exchanges began to undergo demutualization.
According to data from World Federation of Exchanges (WFE), the number of demutualized stock exchanges increased from 10 per cent in 1999 to 85 per cent in 2016. Of the 66 WFE members, less than 10 are currently mutual. However, there has been an uneven pace of exchange demutualisation observed between developed and emerging market jurisdictions. Within the first 10 years following the first demutualization in 1993, 21 exchanges in developed market jurisdictions successfully demutualized. In Africa specifically, out of the 27 exchanges who are members of ASEA, seven namely the Johannesburg, Nairobi, Mauritius, Seychelles, Rwandan, Casablanca stock exchanges and BRVM are demutualised with several others including the NSE in the process of demutualising or considering taking on this initiative.
The NSE’s demutualisation process has been ongoing for some years now following its initiation by the NSE. In 2015, the Securities and Exchange Commission (SEC) issued the Exposure Draft Rules on the demutualisation of exchanges in Nigeria. That same year, the NSE appointed financial advisers to advise it on a proposed demutualisation of the NSE.
In 2018, Nigeria’s lower legislative house, the House of Representatives, passed a bill amending the laws establishing the NSE. This followed the signing of a similar bill by the Senate, all part of the processes leading to the demutualisation of the Nigerian bourse. Also, the Demutualisation Act, was signed into law by President Muhammadu Buhari.
