By Modupe Gbadeyanka
A bill to allow change of ownership of the Nigerian Stock Exchange (NSE) has passed second reading in the House of Representatives.
The bill, titled ‘Demutualization of the Nigerian Stock Exchange, Bill, 2017,’ is sponsored by Mr Yusuf Ayo Tajudeen, a member of the lower legislative chamber of the National Assembly.
Mr Tajudeen presented the bill to the House on Wednesday, March 29, 2017, when it scaled through the first reading.
At the plenary this week, the lawmaker explained that the demutualisation of the local bourse was necessary to better enhance investors’ confidence in the capital market, which has been experiencing rising profile lately.
He argued that with the bill passed and assented to, it will give NSE the opportunity to convert and re-register itself into a public company limited from its present company limited by guarantee.
According to him, the Johannesburg Stock Exchange (JSE), the biggest bourse in sub-Saharan Africa, has already done this since 2006.
In his words, the “demutualisation will improve liquidity, promote the competitiveness and attractiveness of the domestic capital market, as well as engender good corporate governance and boost investors’ confidence.”
After a voice vote, Speaker of the House, Mr Yakubu Dogara, directed the House Committee on Capital Markets and other Institutions, chaired by sponsor of the bill, Mr Tajudeen, to take further legislative action on it.
Recall that on Thursday, March 30, 2017, a day after Mr Tajudeen presented his bill to the House, members of the NSE, at its Extra-Ordinary General Meeting (EGM), approved the demutualisation scheme of the exchange.
The members authorised the National Council and Management of the exchange to proceed with the process leading up to the demutualisation of the NSE subject to applicable laws and regulations and obtaining the approvals of members and the relevant regulatory authorities.
President of National Council of the NSE, Mr Aigboje Aig-Imoukhuede, had noted that, “The approval of the NSE demutualisation plan marks the achievement of an important milestone towards completion of the exercise.”
“The demutualization of the Exchange will bring the Nigerian capital market on a par with other international jurisdictions, result in enhanced governance, transparency and visibility whilst attracting strategic partners, investors and good quality issuers. These are historic times indeed,” he had explained then.
At the same meeting, Chief Executive Officer of the NSE, Mr Oscar Onyema, had also noted that, “The approval of the demutualisation process will generate substantial motivation for the development of an agile Exchange thereby consolidating its innovativeness and strengthening its leadership both at local and international levels, whilst also adding value to its stakeholders.”
According to Wikepedia, demutualization is the process by which a customer-owned mutual organization (mutual) or co-operative changes legal form to a joint stock company. It is sometimes called stocking or privatization.
As part of the demutualization process, members of a mutual usually receive a “windfall” payout, in the form of shares in the successor company, a cash payment, or a mixture of both.
Adedapo Adesanya