Stakeholders of the capital market are expectant that the return of Aliko Dangote as the president of the Nigerian Stock Exchange will boost the market and restore its past glory
Already, reactions are trailing the return of Aliko Dangote as the president of the Nigerian Stock Exchange, NSE. He was recently re-instated by the court of appeal, sitting in Lagos, two years after he was removed from the position amid allegations of share market manipulation. As the news of the court decision filtered in, expectations were rife that Dangote’s reinstatement would positively affect the capital market.
To Shehu Mikail, national president, Constance Shareholders Association of Nigeria, Dangote’s return is a welcome development, as he believes it would have a positive impact on trading activities on the floor of the stock exchange. According to him, his return is coming at a time the market indicators have maintained a slide for about a month, shedding about N500 billion. “The indicators are controlled by the information and confidence investors have on the leadership of the exchange. If the indicators are down and investors still have confidence in the regulators, the market may not crash,” he explained.
Mikail described Dangote as one of the pillars of the Nigerian economy and the leader the market deserves because he has many of his companies listed on the exchange and he is a great achiever. “He will do all he can to ensure the market does not crash even if the country’s economy goes into recession because he knows he will be affected as a stakeholder,” he added. To Mikail, Dangote is ‘Mr. Fix It.’ Dangote is believed to have earned his new position due to his strategic investments and good business decisions, which account for the remarkable performance of his companies in the stock market. “He has turned moribund companies like National Salt Company of Nigeria, NASCON, and Benue Cement Company, BCC, in five years. This is an indication that he can turn the market around too,” he argued.
Similarly, Ade Ajayi, a stockbroker, said Dangote’s goodwill would restore investors’ confidence that has been dwindling since 2008 when the market almost crashed. “This would attract some foreign investors to reconsider investing in the market and would send signals to his foreign partners that the market may soon pick. Already, the market has witnessed some growth since the news of his reinstatement filtered in. It shows the public that we are beginning to get it right,” he said.
Ariyo Olushekun, president, Chartered Institute of Stockbrokers, who lamented that domestic investors have abandoned the market having lost money in recent past, urged Dangote to bring domestic investors back, and quickly enough, “we should not leave the market at the mercy of foreign portfolio investors who have more options available to them and can quickly bring volatility to the market from their country’s allocation actions. The exchange, which currently services approximately five million registered investors, is bedeviled by lack of investor confidence raising concerns over the possibility of attaining the $1 trillion market capitalisation target by 2016,” he said.
Dangote admitted that his tenure would be tough and challenging due to the global economic downturn, but he is optimistic that the challenges would provide the opportunity to reposition the stock exchange and capital market to become the leading exchange in Africa for capital formation driven by transparency, innovation, efficiency and liquidity. At his first meeting with the management and council of the exchange, the business mogul emphasised five major transformation keys that would guide his tenure. They are: improved governance of the market, improving liquidity, turnover of the market, enhancing market efficiency through clearer and updated rules, processes and procedures, provision of world class infrastructure and technology and massive capacity building and rapid skill enhancement of the staff of the stock exchange.
“The effect of the global financial meltdown and the subsequent massive outflow of investments from our stock market led to a precipitous slide in the value of securities in our market. This has greatly shaken confidence in the market. This will be accomplished by ensuring that we have a more open and fair market, improving the disclosure standards, forging a closer and better collaboration with other regulators, particularly SEC while still protecting the independence of the NSE,” Dangote said while outlining his vision for the capital market.
He described his tenure as a zero tolerance regime that will be emboldened to ensure speedy penalties on operators who flout rules. He emphasised that the surveillance, compliance and enforcement units of the exchange would be strengthened to operate optimally. The corporate governance rules for listed companies, operators and the council would also be restructured under the new regime.
If the exchange and its dealing members must continue to remain viable economic units, Dangote insists they must ensure that the liquidity and turnover in the market are increased. He adds: “One of my first missions will be to lead and intensify discussions with other relevant parties in the economy to put in place a plan to improve the liquidity and turnover in our market, particularly in the secondary market. We have to discuss and agree on what to do with the ’toxic assets’ in our market and very critically how to provide funding for our stockbrokers to refloat their businesses. If we are to compete with other markets on the continent, then we have to begin aggressively to market all the high quality companies in the sub region to make sure that they are listed in our market.”
Dangote also urged market operators to ensure that they strictly implement the ongoing enterprise business transformation exercise that aimed at improving the efficiency in the operations of the market and update the entire business processes of the stock exchange. He confirmed that the economic transformation team was working on the detailed operating process for each business unit of the NSE. What is left, according to him, is to ensure that market rules are reviewed, aligned and harmonised with issuance and trading practices and technology.
The general expectation is that as Dangote’s vision begins to unfold, crucial indicators of the performance of the capital market will move northward, bringing succour to the once vibrant capital market.