Oscar Onyema, NSE need to grow local companies

By

Sampson I. Onwuka

I take interest in the argument this afternoon that after a dismal show in Nigeria stock market without newly listed companies and the failures of the exchange to attract local based businesses, I call on the exchange to look at the activity of Oscar Onyema, to draw a measure of indictment necessary to remove his leniency to Europe. For him to stay in office, he has to prove that the true measure of Nigerian economy which is the rate at which small companies transition to mid-income companies and mid-income to higher, is achieved in Nigeria Stock Exchange.

The transition strategy necessary for growth in any stock market has not been achieved in Nigeria for almost 10 years, therefore the NSE is not healthy and may have been cornered with a recycle of old list of businesses with preferred in the exchange. It might not seen obvious that the NSE has technical glitch with their current rate of performance that attracting foreign investment with persuasion to grow the local market is a theme that has yielded grounds to a stock exchange of anyone who can have it. With the NSE, we want to argue that it is necessary that Nigerians participate in the exchange for it seems that the rate we allow banks dominate the markets determine the weakness of the market, that any stock exchange without financial institutions other than Banks is destined to one linear equation.

Whereas it can be argued that Nigerian stock market has attracted a lot of companies from Africa and perhaps abroad, the gap between companies registered with the exchange and new local companies operating on their own has widened. Above all, it can be further argued that many of these companies making over a million dollars in Nigeria are headquartered elsewhere and their annual filling and reporting is headed that direction away from NSE balance sheet. Shouldn’t be compulsory that in other to do business in Nigerian long term, that some terms are to be committed to the exchange?

We might begin to argue against Onyema, that the chief essence of a stock exchange is to create environment for company growth, or to monitor the growth of the market through performance in the open market, that the question of new list of companies has not made it to the NSE this year from Nigeria? It is necessary that new breakthroughs in nearly every economy in the world - Nigeria to mention is publicly traded and not get boxed in and cornered by some banks many of them with preferred foreign customers, and Nigeria may be linked to foreign markets especially London, but it is really a local stock exchange reflecting the trend in local market. It is this new companies that some of the shocks possible.

A market may suffer from two types of shocks, exogenous and endogenous. Exogenous shocks are based on foreign and external shocks to the system dynamic or the market, sometimes, these are natural disasters and sometimes they are man made, but endogenous shocks are internal shocks from changes within the market especially through the listed companies showing all kinds of surprises, for instance active companies may be underrated due to its comparative performance to the general market and with huge financial attraction or fully operating as it were, it could create a shock to the market. In essence, an underrated performance could force the managers to take action and this has a way with investor confidence.

In essence outcomes in any market may be different if we allow the market to operate freely, but up to a point that it has to accommodate the possibility that the failure of an exchange to attract new companies and list new local business groups year to year in such an exchange means reverting to foreign investment. Foreign investment is important but nothing ruins an exchange and its financial sectors when there is up to 70% foreign investment weight on such exchange. U.S to start is growing more businesses from within U.S than migration of business from oversea and it is helping American and it's currency hold up.

A new margins requirement for NSE is necessary to place the listed companies in top shape, but it is always a higher call for money in these markets that are important, a new margins requirement may however mean lowering the capitalization to accommodate new companies from local market to list themselves with the stock exchange, state by state, or in this case, Nigeria Stock Exchange has to shed its recent pounds to make room for growth of small businesses. It has no encourage to get a group and get listed publicly at the exchange small businesses to participate.

A new system requirement is the introduction of new business models, new accounting procedures for companies, for instance an accounting software from Oracle can provide the details on all transactions that take place on the NSE floor and other necessary settlement within a publicly traded business framework. A system requirement may mean new and better accessibility of the list of companies at the Nigerian Exchange with emphasis on the exit strategy of the investors and those looking

There is something wrong with any market in Africa overweight with European or foreign based companies, it means that the market may attract huge foreign investment but the balance sheet for continues investment without for instance Nigeria or such African stock exchange creating a transition strategy for small companies (if there is such a thing) or newly listed companies, only suggest that the country has been turned into an extension of European market offering the same price in a different and difficult market environment is the rate at which the stock market introduce new companies, and the transition strategy of the companies.

In a separate argument, the most lucrative market in Africa is not Nigerian stock market, it does not experience any surprises, it is saturated with banks, it does not hold the collapse of its currency, it is not weighted on precious metals, it has limits of accountability, it is not the drive-in for American based business managers in fortune 500 saving a handful of others from Goldman Sachs. Above all, there is nothing wrong in suggesting that Nigerian Forex to mention is not important at all in world markets, that is just a slush over view.

If Nigerian Film industry is rated third in the world, behind Bollywood and Hollywood, and it does not have a single International Studio or does not have any Nollywood company or group of companies listed and publicly traded in Nigerian Stock Exchange, I think Onyema got to go.