- The stock market continues to bleed; NSE must do more
It is indeed not the best of times for the Nigerian Stock Exchange (NSE). The recession has continued to take its toll on quoted companies. The operating environment has been particularly tough in the last two years; what with the naira exchange rate snafu and unrelenting infrastructural challenges.
It is in this context that the NSE authorities raised the red flag, placing shareholders on notice over the health condition of some of the companies listed on the NSE. The NSE actually put investors on notice over the state of about 44 quoted firms. This number represents about one-quarter of the total quoted companies.
More remarkably, more than a dozen notable firms are among those flagged. These include Union Bank; Skye Bank; Transcorp Hotels; Evans Medicals; Academy Press; Nigerian-German Chemicals; Ekocorp; Ikeja Hotels; Union Homes and Savings; Aso Savings & Loans; Goldlink Insurance; Juli; Capital Oil; and DN Tyres and Rubber.
It must be noted that not all of these flagged companies are necessarily in trouble or on the brink of bankruptcy. Some have been placed under observation because they have unresolved compliance and governance issues that place them below the standards required of quoted companies.
At the centre of this development is the current NSE tracker report on Corporate Governance, Regulation and Compliance; it uses a code, Compliance Status Indicator (CSI), to mark out companies which fall below post-listing requirements of the Exchange. It is updated regularly with delinquent companies falling in and newly compliant ones falling out. It is noteworthy that there were 49 companies on the list in the last exercise which appreciated to 44 in the current report.
In order to enhance market integrity and ensure that investors have full disclosure about quoted companies so as to make informed investment decisions, NSE has devised a series of about 10 codes to tag companies with compliance and regulatory issues. Some of these codes are: Below Listing Standard (BLS); Missed Regulatory Filing (MRF); Delisting Watch-List (DWL); Delisting In Progress (DIP) and Awaiting Regulatory Approvals (AWR).
For instance, MRF means that the company concerned missed the deadline for statutory filings like annual report. In other words, when the requisite reports are filed, such a company would be un-flagged by the NSE. This may be the case for a number of the firms mentioned in this current report.
There are companies tagged in this report that are in the BLS category, which means that they are not fit to be listed on the Exchange any longer and, therefore, investors must desist from transacting in their stocks.
We are worried that notable and respectable institutions like Union Bank; Skye Bank; Transcorp and Ikeja Hotels; Ekocorp; Aso Savings, are among the flagged companies. It is hoped that theirs are minor infractions that would be corrected in no time.
But it is troubling that some companies that have technically, and indeed practically, ceased to operate are still listed on the NSE. For instance, what are firms like Thomas Wyatt Nigeria and Golden Guinea Breweries still doing being quoted on the NSE?
We expect the authorities of the Exchange to be a bit more proactive and pick out companies that are going under before they are completely dead. Some of the firms mentioned in this report are belly up and do not have even scrap value anymore. Some have their assets stripped while gullible investors imagined they are still quoted and may still be trading in their stock.
NSE should improve on its early warning system and ensure that the interests of the shareholders are not entirely jeopardised when a company fails.
