Capital Market: Reps to probe trading stagnation of some companies

House of Reps
House of Reps

The House of Representatives on Wednesday resolved to investigate the stagnation of some publicly-quoted companies, especially insurance firms listed on the Nigerian Stock Exchange (NSE).

This followed a motion by Femi Fakeye (Osun-APC), who expressed concern over allegations of malpractice in the market.

Moving the motion, Mr. Fakeye called for the intervention of the House by examining the declaration by the Minister of Finance on the performance of the Exchange.

According to him, the minister asserted that the exchange is the best in the world at the moment, based on the upward appreciation in the shares of some Public Limited Companies (PLCs) listed on it.

“The investors who choose to invest money in buying shares of publicly-quoted companies expose their money to the risks inherent in the operations of the companies.

“This is through dividends per share as declared by the companies and the appreciation in the price of the companies’ stocks, from time to time.

“There are media reports on the daily trading performances of some companies quoted on the NSE indicating positive earnings and profitability profiles.

“But, also listed on the Exchange are many other non-performing stocks, whose prices have remained pegged in one position, typically trading at par value over long period of time, for two to three years in some cases.

“This situation has the direct effect of shortchanging investors in the stocks of such companies; as such, investors neither earn dividend nor have any growth in the quoted prices of their investments,” he said.

The lawmaker maintained that “if this trend continues unchecked, it could be a disincentive to the investing public, thus stifling the growth of the stock market’’.

“There is the fact that the stock market is regulated by the Securities and Exchange Commission (SEC) and that NSE and SEC have the responsibility of protecting the interests of the investing public to sustain the growth of the stock market.” he said.

He expressed concern that quoted companies in insurance industry (the largest sector on the market) were the worst affected in this discouraging trend.

“This is made obvious by the fact that nearly all the 26 insurance companies quoted on the Stock Exchange have had their stock prices trading at 50 kobo par value for many years now,” he said.

Some of the lawmakers who spoke in favour of the motion, including Deputy Speaker, Yussuff Lasun, Uzoma Nkem-Abonta (PDP-Abia) and Sadiq Ibrahim (APC-Adamawa) expressed regrets over malpractices perpetuated by operators at the expense of investors.

The lawmakers stressed that stock market operators collected huge remuneration at the expense of investors who staked their livelihood in the market.

The motion was unanimously adopted by members when it was put to a voice vote by the Speaker Yakubu Dogara.

The House therefore mandated its committees on Capital Market and Institutions, and Insurance and Actuarial Matters to investigate the prolonged market dysfunction of the NSE.

The committee was also mandated to review and confirm the pricing basis of the recent acquisitions of public-quoted insurance companies.

It will also liaise with NSE, SEC and National Insurance Commission (NAICOM) to take steps necessary to stem the trend.

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