March 1, 2012

Strong indications emerged on Wednesday that the demutualisation of the Nigerian Stock Exchange, which is meant to reposition as well as ensure an efficient and competitive capital market, may begin in the second quarter of this year.

The indications emerged at the submission of the report of the Technical committee on the Demutualisation of the NSE to the Securities and Exchange Commission on Wednesday, in Abuja.

The committee was set up by SEC on September 22, 2011, to advise the commission on how to develop an appropriate framework for the demutualisation of the NSE in an open and fair manner, in accordance with international best practices.

It was also charged with the responsibility of advising SEC on regulatory issues in a demutualised environment, with a view to ensuring adequate and effective supervision of the NSE’s demutualisation process by SEC.

Demutualisation refers to the legal structure of an exchange, whereby the ownership, management and trading rights on the Exchange are segregated from one another.

Presenting the report to the Chairman of SEC, Senator Udo Udoma, the Chairman of the committee, Mr. Asue Ighodalo, said the adoption of a demutualised securities exchange would fast-track development as well as deepen the capital market.

In making the recommendation, he said the committee considered potential conflict of interest and measures to deal with them, reviewed various demutualisation models as well as examine regulatory ownership, management, operational, governance and financial issues of a demutualised stock exchange.

He said, “Access to investment, technology and strategic relationships as well as improved governance and competitiveness are some of the numerous advantages of demutualisation.

“In the context of increased globalisation of securities markets and increased competitive tensions, demutualisation can set an exchange well on the path to rapid and sustained development.

“However, demutualisation in itself is not a magic pill. The demutualisation of the NSE has to be undertaken in line with the current reforms in the Nigerian capital market.”

The committee also warned that in order to ensure transparency and engender confidence, the demutualisation of the NSE must be achieved within the framework prescribed by the SEC.

Responding, Udoma said the board would study the report and begin its implementation as soon as possible.

He said since the tenure of the current management would soon be coming to an end, there was the need to lay a foundation for the implementation of the report.

He said, “Right from the inception of this board three years ago, we have been focusing on how to reform the capital market to make it more transparent and internationally competitive.

“We will study this report and make sure we implement the report because this board is coming to the end of its tenure. So, we may not be able to fully implement it but we will surely lay the foundation for the incoming board to continue.”

Source: Punch