In protecting investors from investing in non-performing or moribund companies, the Nigerian Stock Exchange (NSE) has so far delisted 85 companies from its daily official list between 2002 to date.
Delisting involves removal of listed securities of a company from a stock exchange where it is traded on a permanent basis. As listed on the official website of the NSE, some of the firms were delisted for different reasons ranging from voluntary, regulatory, nationalised, merged or acquired reasons.
So far 61 out of the 85 firms were delisted on the Nigerian bourse based on regulatory reasons; this constitutes 71.76 percent of the total number of companies delisted in the review period, while 13 of the firms delisted voluntarily.
Three were delisted as a result of their nationalisation, Bank PHB Plc, Afribank Plc and Spring Bank Plc, which emerged as Keystone Bank Limited, Mainstreet Bank Limited and Enterprise Bank Limited respectively.
However, seven were delisted base on merger with other entities, while Ecobank Plc was delisted from the NSE based on absorption by Ecobank Transnational Incorporated (ETI) and now Ecobank Nigeria Limited.
A review of companies delisted based on regulatory reasons showed Dumez Nigeria, Atlas Nigeria, Ceramics, Beverages Nigeria Enpee, Tate Industries, Maureen Labouratory, Rietzcot Nigeria, Intra Motors Nigeria, Grommac Industries, Onwuka Hi-Tek, Nigerian Lamps, Nigerian Yeast & Alcahol, Security Associate, Footwear, Ferdinand Oil Mills, Christlieb, BCN, Liz-Olofin & Companies, Oluwa Glass, Asaba Textile Mills, Aboseldehyde Labouratory, Epic Dynamic, Fadmad, Afprint, Nigercem, Daily Times, Albarka Airline, Foremost Dairies ,Wiggins Teape Nigeria ,Okitipupa Oil Palm, First Capital Investment & Trust, Flexible Packaging, Newpak, Krabo Nigeria, Tropical Petroleum, Nigerian Bottling Company, Nampak, Abplast, Udeofosin Garment, Hallmark Paper Product, West African Aluminium, Nigerian Wire Industry, Ipwa, G. Cappa, West African Glass Industries, Investment & Allied Insurance, Alumaco, Jos International Breweries, Adswitch, Rokanna, Lennards (Nigeria), P.S Mandrides & Company, Premier Breweries, Costain, Navitus Energy and Nigerian Ropes.
Most of the companies that delisted voluntarily from the bourse had sited harsh economic climate, parent company buy-out, merger and acquisation as reasons.
Stakeholders in the capital market communities said the companies were being delisting for recurring and possibly irredeemable inability to comply with the listing requirements of the Exchange, especially in the areas of timely and accurate rendition of operational and financial accounts and other corporate governance issues.
Vice president, Strategy & Corporate Services, FMDQ, Ms. Kaodi Ugorji said that Nigeria with over 180 million population,still cannot pride of 5 per cent of the population saving in the capital market, adding that the investing population of below 2 per cent, showed that there is immense opportunity for growth of the Nigerian market.
Ugorji said that investor confidence which would propel more local participation in the market should be driven by transparency and strict compliance to market rules, which the NSE is committed to delivering on.
she emphasised that delisting companies from the capital market , a practice which the NSE has sustained to demonstrate that the market is transparent and committed to ethical practices, would serve as warning to other companies as it helps to protect the investing public.
“It is important that Exchanges protect prospective investors that wanted to invest in troubled companies. Delisting is something Exchanges must do to protect investors,” she explained.
The head, Corporate Communications, NSE, Mr. Olumide Orojimi giving reasons for flushing out delinquent companies from the NSE official list, said that listed companies signed to comply with post listing rules of the Exchange, which specified that any breach attracts sanction.
He revealed that the NSE had several engagements with companies before considering delisting them.
“Listed companies have post listing requirement they need to comply with. The Exchange took a step on how to assist some of these companies’
Some of the steps towards reviving the companies, he revealed include “Facts behind restructuring” which gives companies opportunity to explain their situation to market operators and investors.
“We have done facts behind restricting for Goldlink Insurance Plc and FTN Cocoa, we are engraining with some of these companies to resolve their post listing requirement.
“What can you say of a company that has not submitted its accounts for years irrespective of NSE engagement? The delisting is for investors’ protection and to show how the management of NSE is taking transparency serious,” he added.
The president, Chartered Institute of Stockbrokers (CIS), Mr. Oluwaseyi Abe, disclosed that most of the equities were delisted due to their irredeemable inability to comply with the listing requirements of the Exchange, especially in the areas of timely and accurate rendition of operational and financial accounts and other corporate governance issues.
In order to avoid future reoccurrence, Abe urged investors to change their investment strategies and avoid falling victims of circumstances in cases where some quoted companies are delisted from the market.
He added that despite the persistent lull in the nation’s capital market, investors should leverage on the current low prices of stocks to expand their portfolio.
Abe stated that investors should buy stocks of companies that renders essential services and produces house hold goods, adding, “Investors should look out for; not only companies that have less forex exposure, but also firms that their services are essential and can generate quick money from sales.”
The managing director, Highcap Securities, Mr. David Adonri, also advised investors to identify companies that have potentials of benefitting from economic policies, before buying the stocks.
He said that the stocks of such companies stand a chance of yielding good returns in the near future, adding also that investors needed to increase their participation in the market, increase the capitalisation and stimulate the market for a rebound, especially for the prevailing bad time facing the market.
As part of efforts to further improve market transparency and integrity, provide timely information for investment decisions as well as enhance the protection of investors in the capital market, the NSE last year commenced the use of enhanced Compliance Status Indicator codes on the ticker tape for listed companies. This became effectively on May 9, 2016.
Under this initiative, the Exchange tags all listed companies with a three character code that indicates their compliance status at any particular point in time. This compliance code enables investors to make informed decisions, while ensuring a transparent market guided by timely information.
The general counsel and head of Regulation, NSE, Ms. Tinuade Awe, said, “The revision of the existing codes and introduction of new CSI codes complement existing compliance structures of the Exchange and it will work in tandem with the X-Compliance Report, which we publish weekly on our website.
“This initiative of the Exchange, which is in line with global best practices, is designed to maintain market integrity and protect the investors.”
The executive director, Market Operations and Technology, NSE, Mr. Ade Bajomo, also said, “We are implementing the CSI code to improve the quality of our market data as well as ensure transparency in providing compliance related information about listed companies.
“The delivery of market data and associated services is an essential building block in the Exchange’s strategy as it seeks to reach a wider audience to improve market integrity and facilitate informed investment decision making.”