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NSE restructures secondary market, Sectors reduced from 33 to 11

By on July 25, 2011

THE Nigerian Stock Exchange (NSE) last week said it had concluded arrangements to embark on an intensive restructuring of the secondary segment of the capital market.

From the current 33, the number of sectors has been reduced to 11 while the three markets – Equities, Industrial Loan and Government Stocks – were collapsed to two, Equities and Bond markets.

In his presentation to chief executives of stock broking firms in Lagos, Mr Oscar Onyema, chief executive officer of the NSE, said that the restructuring will help to streamline the market, boards and industry sectors for accurate representation of investment instruments and ensure that they are a true reflection of the sectors in Nigeria’s economy.

According to him, the 11 sectors to be created are: Agriculture/Fishing/Forestry, Construction/Real Estate, Finance/Insurance, Information and Communication Technology (ICT), Manufacturing, Mining/Quarrying, Oil and Gas, Services, Transportation & Storage, Wholesale/Retail Trade, and Utilities.

He explained that vehicles in the proposed Bond Market include corporate bonds/debentures and government bonds — federal and state, while the Equities Market will consist of the main board and the alternative securities market.

Onyema said that the NSE is holding consultations with dealing member firms and management of listed companies on the proposed restructuring, with brokers expected to submit their feedback on the proposal, latest, July 28. He reckoned that the restructuring exercise is borne out of the fact that the current sectors are fragmented and too many and are not representative of Nigeria’s economic sectors.

The NSE boss noted that the current markets are ill-defined, with no boards, while investment instruments appear in the wrong market and are not in line with practices in other exchanges across the world.

“The current sectors,” he said, “do not encourage harmonisation of companies that perform similar economic functions, facilitate unnecessary market vulnerabilities, confusing to international investors and index managers and are not in line with global exchange best practices.”

Onyema affirmed that the proposed restructuring will afford listed companies numerous opportunities presented by been listed and help facilitate market harmonization of companies performing similar business functions.

“To investors, it will create simplicity for this category of market stakeholders and drive informed retail investing, while it will afford the stock exchange the opportunity to streamline the market, to make it efficient and more attractive, remove unnecessary vulnerabilities from the market and align the market with global best practices,” he said.

On the benefits to dealing members, he added that the restructuring will make it possible for the creation of new products in the market and the development of tradable indices among others.

TheMoment