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‘Demutualisation will reduce dependence on foreign investment’

By Helen Oji
21 April 2015   |   1:33 am
OPERATORS in the Nigerian Capital market have identified demutualisation of the Nigerian Stock Exchange (NSE) as a major factor that would help reduce to the barest minimum, over dependence on foreign investors and woo more local/retail investors into the stock market
NSE (Nigerian Stock Exchange)

NSE (Nigerian Stock Exchange)

OPERATORS in the Nigerian Capital market have identified demutualisation of the Nigerian Stock Exchange (NSE) as a major factor that would help reduce to the barest minimum, over dependence on foreign investors and woo more local/retail investors into the stock market.

Demutualisation, is the process of converting exchanges from non-profit, member-owned organisations for-profit, investor-owned corporations .In demutualisation, the members give up their rights and receive shares in the company in return, which the (now former) members may then sell.

Demutualisation happens most often when a stock exchange owned by its members goes public. According to them, when membership of the NSE is opened to majority of Nigerians and they are called upon to own shares in the stock market, it would help create awareness of activities in the market, give investors a ‘sense of belonging’ and more local investors would participate.

Similarly, they pointed out that with demutualization, the ownership structure of the NSE would be properly put in place, noting that when this is done, corporate governance would be well structured and boost investors confidence to stake their fund in the market.

They added that the Nigerian Stock market was worst hit by the global financial crises due to over dependence on foreign investors as they dump their shares during the crises and moved their investment outside the country.

Specifically, the Managing Director of Stanwal Securities Limited, Augustine Ofonagoro admitted that demutualization would go a long way to reduce overdependence on foreign investors and attract local ones into the market. He explained that when the NSE is fully demutualized and the ownership structure clearly spelt out, the generality of the populace would come to the knowledge that the Exchange is not government enterprise.

“As NSE demutualizes and sell its own shares to the people, more people will know what is happening here and they will bring all the money they are stocking else where here because they will believe that the place belongs to them.

Right now, many of them think it is government enterprise. He however lamented over dependence of foreign investors in the nation’s bourse. “This does not augur well for the country. If anything goes wrong in their country, like in the global financial meltdown, they would sell off their investment in Nigeria to go and survive over there and that way, the Nigerian Stock Market would be at the receiving end. That is why we incurred the a lot of losses here because they dump their shares and moved outside.’’

The Chief Executive Officer of Lambeth Trust & Investment Company Limited, Imafidon Adonri said demutualization will enable the Stock Exchange operate efficiently like a commercial business.

According to him, this would give it greater latitude to explore more income generating possibilities, adding that with more income, it can acquire world-class facilities which will enhance its competitiveness. He added that it is also believed that as a business limited by shares, the standard of corporate governance and transparency will be enhanced and with this, several retail investors would have opportunity to be shareholders in the
Exchange and hence be able to influence its development.

Corroborating this view, a stockbroker who spoke on the condition of anonymity said, “ With demutualization, corporate governance would be structured and people that are credible would eventually come on board of the Exchange. With this investors would have more confidence in the market.

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