Investors lose N1.3b in NSE’s alternative securities market

Investment on the Nigerian Stock Exchange (NSE) Alternative Securities Market (ASeM) declined by N1.33 billion at the end of trading on June 14, 2018.ASeM is a specialised board of the Nigerian Stock Exchange (NSE) for emerging enterprises with high growth potential.

ASeM index fell to 949.59 points at the end of trading on June 14, 2018, from 1,087.32 points at the beginning of the year, representing 12.67 per cent decline.Capital market operators attributed the poor performance of the companies listed on the sector to lack of information flow and poor corporate governance structure.The NSE-ASeM capitalization, which opened for the year at N10.432 billion declined by N1.33 billion to close at N9.099 billion as at June 14, 2018.

The NSE had on April 6, 2018 delisted the shares of Afrik Pharmaceuticals Plc worth N12.45 million from the market segment.Also, on January 29, 2018, the NSE began the implementation of new pricing rules, which removed the stopgap that has supported stocks at their nominal value to allow shares of quoted companies to trade for as low as one kobo.

Unfortunately, companies on the sector were affected by the rule, while some of the stocks experience inactive performance, as prices remain unchanged.Chellaram, Juli, Smart Products Nigeria, Amino International and Rak Unity Petroleum Company shares’ price remain at N3.08, N1.67, 54 kobo, 25 kobo and 50 kobo per share, respectively.
Mcnichols shares went down by 18.33 from N1.20 at which it opened for the year to 98 kobo as at June 14, 2018. Omoluabi Mortgage Bank recorded a year-to-date decline of 5.33 per cent to close at 71 kobo. The Initiates depreciated by 7.32 per cent, while Capital posted a year-to-date decline of 34 per cent.

ASeM provides smaller companies the avenue to access the capital market and raise long-term finance through less stringent listing rules and requirements in line with regulatory requirements of the Corporate Affairs Commission (CAC) and the Securities and Exchange Commission (SEC).With the numbers of small and medium scale enterprises (SMEs) in the country, yet the NSE has been able to attract and list only eight SMEs companies on the NSE ASeM sub-sector.

Despite regulatory efforts at reviving the alternative securities market (ASeM) of NSE, companies listed on this segment of the market are yet to attract the needed liquidity from local and foreign investors.

The Managing Director of Pivot Capital, Dare Adejumo, said the companies listed on the ASem board are small firms, noting that some cannot meet post-listing requirement of the NSE.He pointed out that the performance of those stocks is not good enough to attract investors into that market segment.

“The stocks are not liquid to attract investors. What lures investors to buy a particular stock are capital gain and dividend payout and any company that cannot deliver on this two will remain dormant.“The shares are not appreciating to compensate investors on the dividend they are not getting. You can not compare them with GTB and Zenith stocks that have good fundamentals.”The Managing Director of Dependent Securities Limited, Chinenye Anyanwu, said that apart from having small float, the number of companies listed in the sector is few.

He explained that information flow on the financial performance of these companies would increase their attractiveness to investors.“They are not the drivers of the index. For some obvious reasons, the activities are low, but a few of them have been very consistent in paying dividend.”The President of Lagos Chamber of Commerce and Industry (LCCI), Babatunde Ruwase, had recently called on the management of the NSE to jointly work together and explore options of financing small businesses in the country.

He said like other economies, SME’s are critical to economic development, especially the creation of jobs and the promotion of inclusiveness in the Nigerian economy, adding that funding SMEs has remained a major challenge.“It has been difficult to unlock the potentials in the sector partly as a result of this problem. We would like to partner with the NSE in the promotion of good corporate governance and scaling up of business ethics. We are concerned about the deterioration of values of trust and integrity in business practices,” he said.

Ruwase noted that monetary, fiscal and trade policies have significant impact on the performance of the stock market and private sector investments generally, adding that it would be useful for the two organisations to collaborate and promote investment friendly policies in the economy through regular engagements with the relevant authorities of government.

“We seek collaboration with the NSE in making this happen, especially in mobilisation of capital for investors, especially the indigenous ones. The costs of fund in the money market as well as tenure of funds are not in tune with the yearning of investors, especially those with a long term perspective. This has constrained the growth of key sectors including agriculture, manufacturing, property, construction and infrastructure.”