Chinwendu Obienyi

Over the last two decades, technological advancement in the financial world has significantly increased competition among stock exchanges globally and this competition has pressured many exchanges to adopt business models, which have greatly improved their efficiencies and effectiveness in various economies.

Some stock markets have also had to demutualise, as well as build alliances or consolidate within and across borders, in order to enhance their attractiveness in the face of strong global competition. For instance, in 2007, the New York Stock Exchange (NYSE) merged with Euronext, the European electronic stock exchange based in the Netherlands, to form NYSE Euronext, the world’s largest stock exchange.

However, the story in Nigeria is different as its stock exchange, NSE, is yet to be demutualised following its proposal to do so in June 2002 by Abdul Razaq, a former president of the NSE. Daily Sun investigations reveal that the proposal was again presented in 2008 by Ndi Okereke-Onyiuke, its former Director-General,  but it was stepped down, perhaps, because of the then global market downturn.

Ever since then, the Securities and Exchange Commission (SEC), the NSE as well as other capital market stakeholders have been working hand-in-hand to ensure the process is speedy and transparent to fully restore investors’ confidence in the market, particularly indigenous investors.

Specifically, the NSE Chief Executive Officer, Oscar Onyema, in a media parley this year, said the demutualisation was particularly important to the Nigerian capital market and the wider economy, noting that with it, the exchange would serve the capital market ecosystem and economy more effectively than it had done in the past.

What is demutualisation?

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Demutualisation is the process by which a mutually owned organisation transforms to a shareholder- owned entity. Put in another way, it is the changing from a not-for-profit organisation to a limited liability company where members of the mutual organisation become shareholders and ownership and management are separated. When the legal structure of a stock exchange is transformed through the process of demutualisation, the ownership, the management and the trading rights at the exchange are segregated.

Thus, a demutualised NSE will become a company limited by shares, having share capital and subscribers to the share capital or shareholders, a board of directors, management that is separate and independent from the board and subject to rules and regulations of company operations in Nigeria.

Already, the process is in its final stage as members of the NSE, who are mostly stockbroking firms, have assented to the proposal of the council to demutualise the exchange and appoint a board of directors that will steer the affairs of the organisation. This recent development has seen stakeholders in the market throw more light on the benefits of demutualisation.

Speaking during the Stockbrokers’ Conference of the Chartered Institute of Stockbrokers (CIS), Chief Executive Officer, World Federation of Exchanges (WFE), Nandini Sukumar, said the conversion of the NSE from a mutual member-owned organisation to a public limited liability company owned by shareholders will make the exchange more efficient and dynamic, opening up many global opportunities for the advancement of the market.

According to her, every member of a stock exchange embraces demutualisation because of its benefits which include realisation of the value of historical assets, improvement in market quality, liquidity, trading costs and price volatility.

She noted that there would also be realisation of unique opportunity that can create value through the demutualisation and Initial Public Offering (IPO), allowing the members to become owners and customers while providing opportunity for investment in market infrastructure.

For his part, the Managing Director/CEO, APT Securities, Mallam Garba Kurfi, said the demutualisation would lead to greater investor participation in the governance of the exchange and unlock capital for stockbrokers who may decide to trade their shares for liquidity.