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Unlisted securities: NASD records N2.3bn transactions

By BusinessNews Staff on January 22, 2015

The trading of unlisted securities in the formal over-the-counter market is on the rise as more investors become aware of the benefits of the market, the NASD Plc, which operates the OTC market, has said.

According to the NASD, the shares of the recently privatised power distribution companies and generation companies, which are not listed on the Nigerian Stock Exchange and are registered with the Securities and Exchange Commission as public investment instrument, can also be traded in the OTC market.

This, it said, was because the market could capture all legitimate capital market flows, especially secondary trades.

Reviewing the performance of the market in 2014, the Managing Director, NASD Plc, Mr. Bola Ajomale, said 120 million shares worth N2.32bn were exchanged in 417 deals by investors on the NASD OTC market from January to December 2014, compared to 239,165 shares worth N76m that were exchanged in 34 deals from July to December 2013.

Before the establishment of the NASD OTC market, shareholders had challenges selling their holdings in unlisted companies with some of them turning to the black market where they are exposed to exploitation.

According to Ajomale, since the market commenced operations it has recorded steady growth with more companies being traded and investors adopting the platform.

“The market continues to grow in size and intensity each quarter of the year. This reflects improved investor confidence in the OTC market and better understanding of the market on the part of brokers,” Ajomale told journalists in Lagos.

Commenting further on the state of the market, Ajomale said it closed 2014 with a nominal value of N41bn and total market capitalisation of N590bn, adding that the total number of issued shares that could trade on the market was, therefore, 83 billion shares.

The NASD MD, however, said the dematerialisation levels were still low at 2.05 billion shares or 2.48 per cent, while expressing optimism that it would improve.

He said, “We expect that this will increase significantly as shareholders become more aware of the safety and liquidity advantages of dematerialisation.”

Stressing that 2014 marked the opening up of the NASD OTC market, Ajomale said its ‘forward-looking initiatives’ for 2015 included the introduction of new product lines, increased interactive sessions with market participants, and road shows across the country.

“We started the market with equity, we anticipate growth in the equities market and we also anticipate the introduction of other asset classes for trading on our platform,” he said, adding that increased interaction with participants would increase the number of trades and level of dematerialisation.

According to him, the NASD will also try to build a closer relationship with issuers and expand the scope of formal capital market coverage by capturing bilateral capital market deals in infrastructure and venture capital to bring it under proper coverage.

Specifically, Ajomale said the NASD expected growth and expansion in the numbers of securities trading, volume of dematerialised securities, number of participating institutions, turnover volume and value and product line.

Although he said the NASD as a self-regulatory organisation would do its best to protect investors, he said it would not recommend a separate capital base for stockbrokers on the platform.

On the forthcoming general elections and the decline in crude oil price, Ajomale said, “Both events create an added layer of uncertainty to the investment decision making process.

“We have seen more people take a wait and see approach to investing which to a certain extent has led to increased supply and reducing demand for the shares that are currently being traded on NASD. We expect this to reverse after the elections and as investors get a better perspective of where oil prices are going to settle.”

[Punch]

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