Nigeria Stock Exchange to implement stronger regulatory reforms

Nigerian Stock Exchange

The NSE will also implement a pilot scheme for corporate governance rating
The Nigerian Stock Exchange, NSE, said it will implement stronger and tougher regulatory reforms for listed companies to meet up with global best practices in 2014.

Top among the means to achieving this objective is the implementation of the Corporate Governance Rating System, CGRS, which was officially introduced in Lagos on Wednesday. The Chief Executive Officer of the NSE, Oscar Onyema, who was represented by Haruna Jalo-Waziri, the Executive Director, Business development, NSE, said a number of reasons necessitated this move.

He said the implementation of a stronger regulatory reform would help listed companies be fully aware of their responsibilities, have access to more variety of financing options, higher market valuation, be more attractive to investors, locally and on the whole, own and present better managed firms that are able to compete with their foreign counterparts.

“It would help listed companies attract foreign and local investors for long term loans and make them more eligible for cross border listings as well as lower the cost of funds for high ratings firms” he said, adding that “some firms have signed up on the programme already.”

The Executive Director, Convention on Business Integrity, CBi, Soji Apampa, said weaknesses in the business environment, amongst a host of other factors, caused the crash of the stock market/financial institutions years ago.

“If we wait for the government alone, we would continue to have gaps in our regulation. Self-regulation too, also has its pitfalls. In Nigeria, we need collective action,” he said.

Mr. Apampa said self-regulation by businesses, stakeholder activism and government regulation should all be interwoven to achieve the desired outcome.

“It is true that the figures we are getting from the government shows things are bouncing back to normal by the rising figures, but we should ask ourselves, is this what we really want? Are we where we want to be? Are we not just having a false sense of security?” he said.

He said the nation had not yet attained its desired target, despite the rising investment figures reported.

“Investor confidence is still not high enough, there are still weak institutions, extraordinaire levels of corruption still exists, lower credit ratings from S&P and Fitch”.

Mr. Apampa said it is believed by some that for every $1 that enters into the country, $1.4 leaves.

“Except we do something, we would not get the kind of Foreign Direct Investment, FDI, we need for Nigeria. What we need is a control mechanism for direction. We need a robust corporate governance system, but we need to find the appropriate one. We cannot just import anyone,” he said.

Mr. Apampa said the NSE and the CBi will not be involved in the rating system; hence, there would be no conflict of interests as the scheme would be run independently.

The programme brought together senior executives from listed companies across varying sectors in Nigeria. They discussed corporate governance, one of the critical fundamentals for ensuring a healthy investment environment and maximise investor returns for sustainable growth of the nation’s capital market.

NSE said its partnership with the CBi is to create a corporate governance rating system where an index will be introduced for companies that will meet certain threshold within that ranking.

The objectives of the rating system the NSE said are to raise overall corporate governance standards in the country by providing companies with an incentive to develop global best practices. It will also provide opportunities for companies to differentiate themselves in the market place.

According to the NSE, the ratings and subsequent rankings will feed into other important projects of the Exchange. The NSE said it intends to launch a Premium Board which will comprise of companies that adhere to the highest corporate governance standards based on the ratings from the CGRS. The Exchange also intends to use the ratings to develop a tradable Corporate Governance index.

The NSE and CBi would start up the process with a pilot scheme which would begin immediately and run till April 2014. The results of the pilot scheme would be announced in May, at the World Economic Outlook scheduled to hold in Abuja.


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