The Nigerian Stock Exchange

The Nigerian Stock Exchange was established in 1960 as the Lagos Stock Exchange. In December 1977 it became The Nigerian Stock Exchange, with branches established in some of the major commercial cities of the country. At present, there are six branches of The Nigerian Stock Exchange. Each branch has a trading floor. The branch in Lagos was opened in 1961; Kaduna, 1978; Port Harcourt, 1980; Kano, 1989; Onitsha, February 1990; and Ibadan August 1990; Abuja, October 1999 and Yola, April 2002. Lagos is the Head Office of The Exchange. An office has just been opened in Abuja.

The Exchange started operations in 1961 with 19 securities listed for trading. Today there are 262 securities listed on The Exchange, made up of 11 Government Stocks, 49 Industrial Loan (Debenture/Preference) Stocks and 194 Equity / Ordinary Shares of Companies, all with a total market capitalization of approximately N287.0 billion, as at August 31, 1999. 

Most of the listed companies have foreign/multinational affiliations and represent a cross-section the economy, ranging from agriculture through manufacturing to services.

The market has in place a tested network of Stockbrokerage Firms, Issuing Houses (Merchant Banks), practicing corporate law firms and over 50 quality firms of auditors and reporting accountants (most with international links). The Stock Exchange and most of the nation’s stock broking firms and issuing houses are staffed with creative financial engineers that can compete anywhere in the World. Therefore, the market has in place a network of intermediating organizations that can effectively and creditably meet the challenges and growing needs of investors in Nigerian.

Integrity: is the watchword of The Stock Exchange. Market operators subscribe to the code “Our word is our bond”. Thus, public trust in the Nigerian stock market has grown tremendously, with about three million individual investors and hundreds of institutional investors (including foreigners who own about 47% of the quoted companies) using the facilities of The Exchange.  The Stock Exchange’s 39-year history is devoid of any fraud, shocks, scandals or insider dealings.

Trading: The call over trading system was in April replaced with the Automated Trading System (ATS), with bids and offers now matched by stockbrokers on the Trading Floors of The Stock Exchange through a network of computers. This is done every business day from 11.00 a.m. till all bids and offers have been executed (about 1.30 p.m. on the average).

Pricing: Prices of new issues are determined by issuing houses/stockbrokers, while on the secondary market prices are made by stockbrokers only. The market/quote prices, along with the All-Share Index, are published daily in The Stock Exchange Daily Official List, The Nigerian Stock Exchange CAPNET (an intranet facility), The Nigerian Stock Exchange website (www.nigerianstockexchange.com), Newspapers and on the stock market page of the Reuters Electronic Contributor System. Our on-line code in the Reuters Network is NSXA-B.

Pricing and other direct controls gave way to indirect controls by the regulatory bodies (Securities and Exchange Commission and The Stock Exchange) following the deregulation of the market in 1993. Deregulation has improved the competitiveness of the market, in addition to making it more investor-friendly.

The All-Share Index: The Exchange maintains an All-Share Index formulated in January 1984 (January 3, 1984 = 100). Only common stocks (ordinary shares) are included in the computation of the index. The index is value-relative and is computed daily.

Clearing, Delivery and Settlement: Clearing, Settlement and Delivery of transactions on The Exchange are done electronically by the Central Securities Clearing System Limited (CSCS), a subsidiary of The Stock Exchange. The CSCS Limited (“the Clearing House”) was incorporated in 1992 as part of the effort to make the Nigerian stock market more efficient and investor-friendly. Apart from clearing, settlement and delivery, the CSCS Limited offers custodian services. (See the write-up on the Central Securities Clearing System Limited for more about clearing, delivery and settlement on The Exchange.)

Stock Market Legislations: Transactions in the stock market are guided by the following legislations, among others:

Investments & Securities Decree No.  45, 1999.

Companies and Allied Matters Decree 1990.

Nigerian Investment Promotion Commission Decree, 1995.

Foreign Exchange (Miscellaneous Provisions) Decree, 1995.

Regulation: Transactions on The Exchange are regulated by The Nigerian Stock Exchange, as a self-regulatory organisation (SRO), and the Securities & Exchange Commission (SEC), which administers the Investments & Securities Decree 1999.

Internationalization of the Stock Market: Following the deregulation of the capital market in 1993, the Federal Government in 1995 internationalised the capital market, with the abrogation of laws that constrained foreign participation in the Nigerian capital market.

Consequent upon the abrogation of the Exchange Control Act 1962 and the Nigerian Enterprise Promotion Decree 1989, foreigners can now participate in the Nigerian capital market both as operators and investors. Also, there are no limits any more to the percentage of foreign holding in any company registered in the country.

Ahead of this development, The Exchange had since June 2, 1987, linked up with the Reuters Electronic Contributor System for online global dissemination of stock market information - trading statistics, All-Share Index, company investment ratios, and company news (financial statements and corporate actions).

In November, 1996 The Exchange launched its Internet System (CAPNET) as one of the infrastructural support for meeting the challenges of internationalisation and achieving an enhanced service delivery.

The Internet System facilitates communication among local and international participants in the market, as subscribers to the system  include stockbrokers, quoted companies, issuing houses, etc, who now use the facility to receive and send e-mail, globally and locally. But more importantly, they can, through this medium, access key market information - trading statistics (current and historical), corporate trading results, etc.