It was a momentous rebirth for the Nigerian Stock Exchange (NSE) on Tuesday in Lagos as members of the six-decade-old Exchange voted to change its status from a non-profit member-owned mutual company limited by guarantee to a public limited liability company with issued share capital and shareholders.
In probably the most momentous decision after its formation, members of the Exchange at the court-ordered meeting in Lagos endorsed resolutions that sealed the conversion of the self-regulatory organisation to a public limited liability company. The approval was the final and most critical stage of the conversion process, known as demutualisation.
The Federal Government, which holds stake as a founding member of the Exchange, also voted in favour of the conversion. To achieve the demutualisation, not less than three-quarters of the interests of members present and voting either in person or by proxy, must vote in favour of the scheme. Voting at the meeting was by poll with each member representing one interest or one vote for or against the resolution.
At the trading floor of the Exchange, the bulls staged a major recovery as bargain-hunters drove the market to a net capital gain of N232 billion. Aggregate market value of all quoted equities on the NSE rose from its opening value of N13.449 trillion to close at N13.681 trillion. The All Share Index (ASI) also rose by 1.70 per cent to close at 26,255.11 points as against its opening index of 25,816.57 points. There were 23 advancers to 12 decliners. With these, the negative average year-to-date return moderated to -2.19 per cent. Turnover also improved to 387.9 million shares valued at N6.08 billion in 4,901 deals
President, Nigerian Stock Exchange (NSE), Otunba Abimbola Ogunbanjo, said the successful demutualisation of the Exchange was one of the main objectives when he assumed the Presidency of the Exchange.
Ogunbanjo, who was appointed as the first chairman of the board of the demutualised Exchange, noted that it was particularly historic that the demutualisation was achieved during the lifetime of Mr. Akintola Williams, the only surviving member of the initial signatories to the founding charter of the Exchange.
“I feel elated that 19 years after initiating the process to demutualize and on the 60th anniversary of the Exchange, we are close to achieving the goal. In telling the story of how we have achieved this milestone, we recognize the efforts of several actors involved in this project – including the management and staff of the Exchange, our members, professional advisers, the Federal Government of Nigeria, the Securities and Exchange Commission (SEC) and other capital market stakeholders – without whom it could not have become a reality,” Ogunbanjo said.
He explained that in rounding off the process, the Exchange would file the necessary resolutions from the court-ordered meeting and all other required documents at the Corporate Affairs Commission (CAC) and SEC, obtain the court order sanctioning of the scheme, complete all necessary registrations and seek the final approval from the SEC to ultimately demutualise.
Onyema, who was reappointed as the first chief executive officer of the demutualised Exchange, said the new board and management will work to ensure effective management of the post-demutualisation activities.
Former president of Chartered Institute of Stockbrokers (CIS) and former council member of the NSE, Mr Ariyo Olushekun, said the conversion was a good development that would enable the Exchange to grow competitively and make returns for all stakeholders.
He noted that while the post-demutualised entity may face the challenge of cultural adaptation because of the long years of running as a non-profit organisation, the new board and management have the capacity to resolve issues that emerge from the process.
Former Director-General of the NSE, Prof. Ndi Okereke-Onyiuke, said the conversion would enhance the competitiveness of the Exchange and the stock market, urging Nigerians to embrace the capital market to benefit from the envisaged growth.
Under the arrangement approved yesterday, the NSE will transit into a holding company, Nigerian Exchange Group (NEG) Plc, which will be the parent company for the Nigerian Exchange Limited, the successor that will carry on the securities trading business of the Exchange, and other subsidiaries. Shareholders will own shares in NEG Plc while NEG will own the main company and other subsidiaries.
According to the scheme of arrangement for the conversion, the post-demutualisation shareholders’ base will consist of 255 institutional shareholders and 177 individual shareholders. The post-demutualisation shareholding arrangement was arrived at by converting the existing dealing members of the Exchange to institutional shareholders and ordinary members to individual shareholders.
Shareholdings will be on equal basis in the immediate conversion period with each institutional shareholder holding 6.01 million ordinary shares of 50 kobo each while each individual shareholder will hold 2.44 million ordinary shares of 50 kobo each.
Thus, each institutional shareholder will hold 0.3 per cent equity stake while each individual shareholder will hold 0.1 per cent equity stake, in line with the current membership-share conversion ratio of 78 per cent for dealing members and 22 per cent for ordinary members.
The NSE will transit into a non-operating holding company with an authorised share capital of 2.5 billion ordinary shares. About 2.0 billion ordinary shares of 50 kobo each are expected to be issued in the immediate period of the conversion.
The NSE will transfer its securities exchange licence and other assets necessarily required to carry out the securities exchange function; which will include human resources, securities exchange function related contracts, the trading facilities comprising of the trading floors, work stations, telephones and other office equipment such as cabinets and others, quotation board, stock price electronic display device, stock printers, inquiry display equipment and other assets to Nigerian Exchange Limited pursuant to the scheme.
According to the scheme, the demutualised NEG will take off with authorised share capital of N1.25 billion comprising 2.50 billion ordinary shares of 50 kobo each, which will be registered with the Corporate Affairs Commission. The NEG will subsequently set aside 2.0 billion ordinary shares of 50 kobo each as issued share capital, which will be registered with the SEC.
A total of 40.08 million ordinary shares, representing 2.0 per cent of the proposed issued shares of NEG will be set aside for allotment to parties that may lay claims to entitlement to shares in the demutualised Exchange. This was pursuant to the provisions of the Demutualisation Act 2018. The apportionment of two per cent as the claims review shares is based on an analysis of the probable quantum of shares that would be required to settle each claim. However, each claimant will be expected to provide irrefutable evidence of membership or circumstance that confers such claim of ownership.
However, in the event the claims review shares are insufficient to satisfy successful claims, additional shares will be allotted from the demutualised Exchange’s authorised share capital.
A total of 1.96 billion ordinary shares, representing 98 per cent of the issued shares, the balance of the issued shares following the reservation of the claims review shares, will be apportioned between dealing and ordinary members on the basis of a ratio of 78:22, respectively.
With the approval of the scheme, all assets, liabilities and undertakings including real property and intellectual property rights of the NSE- with the exception of the securities exchange licence and all assets and appurtenances in relation to the securities trading business of the NSE – shall be retained by NEG.
The NSE will set up a separate company, NGX Regulation Limited (NGX Regulation) that will be charged with the regulatory functions of the Exchange after demutualisation pursuant to an arm’s length agreement. This is in order to safeguard the neutrality of the regulatory system.
With demutualisation, the Memorandum and Articles of Association of the re-registered Exchange will be amended to indicate the new name, NEG, the authorised share capital and all requisite provisions for a public company limited by shares.
Other non-executive members of the new board of the demutualised Exchange approved yesterday included Dr. Umaru Kwairanga, Mrs. Fatimah Bello-Ismail, Mr. Oluwole Adeosun, Mr. Chidi Agbapu, Mr. Patrick Ajayi, Dr. Okechukwu Itanyi, Mrs. Nimi Akinkugbe, Prof. Enase Okonedo, Mr. Ikpobe Oghooritsewarami, and Mrs. Ojinika Olaghere.
Members of the NSE had earlier approved the demutualisation of the Exchange at an extraordinary general meeting in March 2017. This was followed by the signing of the Demutualisation of the Nigerian Stock Exchange Bill into law in August 2018.
Last December, SEC in a “No Objection letter” gave its consent to the NSE to hold the court-ordered meeting and extra-ordinary general meeting that would facilitate its conversion from a not-for-profit entity limited by guarantee into a profit-making, public limited liability company owned by shareholders.
The Federal Government, through the Bank of Industry (BoI), many state governments including Adamawa State and several prominent businessmen and policy experts are among a total of 432 individuals and institutions that will hold shares in the immediate period of the demutualised Exchange. Under the scheme, the Exchange will allocate shares to all members with shares due to deceased ordinary members and expelled or liquidated dealing members being allocated to their legal representatives.
A list of post-demutualisation include Mr Akintola Williams, late Senator Theophilus Adebayo Doherty, the late Sir Odumegwu Ojukwu, late Alhaji Shehu Bukar, late former President Umaru Yar’Adua, late Bashorun MKO Abiola, late Dr Abdul Lateef Adegbite and the late Mr Gamaliel Onosode.
Other individual shareholders will include Chief Ernest Shonekan, Alhaji Aliko Dangote, Alhaji Abdul Rasaq, Alhaji Aminu Dantata, Mr Tony Elumelu, Mr. Oba Otudeko, Mr. Pascal Dozie, Chief Bayo Kuku, Chief Christopher Ogunbanjo, Dr Christopher Abebe, Mr Goodie Ibru, Alhaji Isyaku Umar, Otunba Adekunle Ojora, Mr Phillip Asiodu, Rear Admiral Allison Madueke, Rabiu Gwadabe, Mr Raymond Obieri, Senator Udo Udoma and Senator David Dafinone.
Institutional shareholders will include GTI Securities Limited, CSL Stockbrokers Limited, Capital Assets Limited, Cowry Asset Management Limited, Meristem Securities Limited, APT Securities and Funds Limited, Capital Bancorp Limited, Centre-Point Investments Limited, Chapel Hill Denham Securities Limited, Emerging Capital Limited, Stanbic IBTC Stockbrokers Limited, Trust Yields Securities Limited and Vetiva Capital Management Limited.
The NSE was established as the Lagos Stock Exchange on September 15, 1960 under the Companies Ordinance 1922, with a share capital of £5,000 divided into 500 ordinary shares of £10 each. At incorporation, each of the original subscribers subscribed to five shares in the Exchange.
Subscribers at incorporation included C. T. Bowring & Co. (Nigeria) Limited,Chief Theophilus Adebayo Doherty, John Holt Nigeria Limited, The Investment Company of Nigeria Limited, Sir Odumegwu Ojukwu, Akintola Williams and Alhaji Shehu Bukar.
The share capital of the Exchange was increased to N20,000 consisting of 1,000 ordinary shares of N20 each, pursuant to an ordinary resolution dated December 2, 1977.
The name of the Exchange was then changed from the Lagos Stock Exchange to the Nigerian Stock Exchange on December 15, 1977.