The NSE was founded in 1960 and has been on a long journey in its evolution into a rapidly modernising entity servicing a growing private sector.
One of its landmark events was the unanimous approval by the board in early March this year for the exchange to demutualise. This will require a restructuring of the organisation, which will be broken up into three subsidiaries, one of which will be an operating exchange.
The process is very much on track, NSE officials say, despite the disruption of Covid-19. Exchange president Abimbola Ogunbanjo says the pandemic has undoubtedly had an impact on asset prices and volatility, but the institution moved seamlessly to remote trading as part of its Business Continuity Plan introduced in late March.
Current CEO Oscar Onyema will now become the CEO of the non-operating Holding Company, stepping aside for a new head of the exchange subsidiary once the demutualisation process is completed.
Onyema has steered the exchange through its most successful period, introducing new corporate governance and stability into the institution after the challenging years of the 2000s.
The exchange went on a roller-coaster ride in the decade from 2000. Economic reforms that began in 2003 led to an $18bn debt write-off and created pension funds that then invested in Nigerian securities. This buoyed investor confidence, which spilled over into the exchange.
Consolidation in the banking sector in 2005 saw huge balance sheet growth and the new banks became active on the NSE, raising significant amounts of capital for loans. Investment levels in the country rose from nearly $5bn in 2005 to more than $12bn in 2007 and oil prices hit all-time highs of more than $147 in July 2008.
The economy was awash with money and the NSE was a key beneficiary. Critics warned that stock prices were heavily overvalued as investors piled into the market. The 2008-9 global financial crisis burst the bubble.
The exchange was hit by allegations of market manipulation and a lack of regulatory oversight. By late 2008, it had gone from an all-time high to rock bottom.
Oscar Onyema was appointed CEO in 2011, coming to the institution from the American Stock Exchange.
His mandate was to restore the institution’s credibility. He put modern systems and greater oversight in place, improved governance and operating standards, enforced penalties for companies failing to adhere to listing requirements and gradually rebuilt confidence in the exchange.
The results of this process include the fact that the NSE is now a member of the International Organisation of Securities Commissions, the World Federation of Exchanges and the Sustainable Stock Exchanges Initiative, among other bodies, as well as a founding member of the African Securities Exchanges Association.
Currently, there are 145 companies listed on the Main Board of the exchange and nine listed on the Premium Exchange, established in 2015 for companies that meet the NSE’s most stringent listing criteria of capitalisation, corporate governance and liquidity.
The blue-chip companies listed on this exchange are some of the biggest banks, the mobile phone company MTN Nigeria Communications, as well as the Dangote Group, Lafarge Africa and Seplat Petroleum Company.
Onyema says domestic investors currently account for almost 60% of market transactions, as foreign investors moved out in the wake of the pandemic. This is a significant shift from the previous four-year average of 51% from 2016 to 2018. Foreign investor participation has dropped to 41% from an average of 49% of transactions.
“As we seek to continue to attract global flows, the growth of the domestic investor base is a key priority for the NSE,” says Onyema.
The returns have been good of late, even with the pandemic. The All Share Index returned month-on-month gains of 8.1% and 9.8% in April and May, while there have also been strong returns in alternative asset classes like the NewGold ETF, which has returned about 76% in 2020.
Onyema has also championed the institution’s “robust sustainability agenda”. It was the first African exchange to list a sovereign green bond, and was involved in the dual listing of a corporate green bond as part of its new partnership with the Luxembourg Stock Exchange, the world’s largest exchange for green bonds.