The House at its plenary session of Wednesday, 28 February 2018 mandated its Committees on Capital Market and Institutions, Insurance and Actuarial Matters to investigate the prolonged market dysfunction of the Nigerian Stock Exchange. The Committees are also supposed to confirm the pricing template used in recent acquisitions of publicly quoted Nigerian Insurance companies and liaise with the Nigerian Stock Exchange (NSE), the Security and Exchange Commission (SEC) and the National Insurance Commission (NAICOM) to take steps necessary to curtail the trend as well as draft new NSE listing requirements.
Presenting the motion on the floor of the House, Hon. Femi Fakeye (APC:Osun) stated that Mrs Kemi Adeosun, Honourable Minister of Finance had recently described the performance of the Nigerian Stock Exchange (NSE) as the best in the world based on the upward appreciation of some shares in some Public Limited Companies (PLC’s) that it listed. He also explained that investors could choose to invest money in buying shares of publicly quoted companies by exposing their money to risks inherent in a Company’s operations in return for profit through its dividends and/or appreciation in the price of the Company’s stock.
Speaking further, Hon. Fakeye said although media reports on the daily trading performance of some Companies on the NSE indicated positive earnings and profitability profiles; there were also many non-performing stocks, which prices have remained pegged in one position for up to two or three years in some cases. He also expressed concern that the non-performance has direct effect of short-changing investors in stocks of such companies, as they would neither earn dividend nor receive the benefits of appreciation from a rise in the quoted prices of their investments.
In addition, he expressed worry that the trend could become a disincentive to the investing public, if left unchecked and could stifle the growth of the stock market. In particular, he stressed the importance of the Securities and Exchange Commission and the Nigerian Stock Exchange as regulators charged with the responsibility of protecting the interests of the investing public in order to sustain growth in the stock market. Hon Fakeye highlighted that quoted companies in the Insurance Industry (the largest sector on the market) were the worst affected as nearly all the twenty-six insurance companies quoted on the NSE have had their stock prices trading at 50 kobo per value for many years.
The House mandated the aforementioned Committees to report the findings of its investigation within eight (8) weeks for further legislative action.
