The Nigerian Stock Exchange (NSE) on Wednesday launched a new platform for the listing of small and medium enterprises (SMEs).
The new window, known as growth board, allows SMEs to list their shares and raise capital through the Nigerian capital market.
NSE Chief Executive Officer, Nigerian Stock Exchange, Mr Oscar Onyema, said the new board was pivotal to efforts in catering to a segment of the economy that hitherto has been neglected and perceived as a high risk and low reward venture by most service providers especially in relation to access to capital from financial institutions.
He noted that the traditional role of the Exchange as an enabler of capital flow from areas of surplus to deficit holds good promise for its capability to support SMEs, as access to capital is the prime challenge faced by companies that are active in the SME sector.
According Nigeria Bureau of Statistics, SMEs in Nigeria have contributed about 48 per cent of the national GDP in the last five years and also accounts for 96 per cent of operational businesses and 84 per cent of employment. With a total number of about 41.5 million enterprises, the SME segment accounts for nearly 90 per cent of companies operating in the manufacturing sector and 50 per cent of industrial jobs.
Onyema pointed out that despite these significant contributions by SMEs to the Nigerian economy, the reality and headwinds faced by operators in this segment have been quite daunting.
According to him, the economic landscape in recent years has been quite challenging for corporates with small and medium scale enterprises experiencing some of the difficulties observed in the Nigerian macro landscape. These companies have seen declining productivity rates largely caused by deficiencies in power supply; substandard trade facilitation infrastructure; lack of rightsized and right-priced financing, multiplicity of taxes, levies, fees; lack of innovation; and limited availability of requisite talent. This is further compounded with an absence of needed corporate governance to ensure maximised capacity utilization and profitability for the companies.
He noted that in spite of the challenges faced by operators in the SME space, this segment of the economy continues to show progress and innovation.
“The growth board aims to encourage companies with high growth potential to seize the opportunity of raising long term capital and promote liquidity in the trading of their shares. The board also presents as an avenue for companies in their growth phase to leverage the NSEs platform and varied products and services to achieve their long term business objectives,” Onyema.
He explained that the board was designed to offer relaxed entry criteria as well as less stringent ongoing listing requirements and allows for greater accessibility to capital flows, global visibility and credibility through corporate disclosures.
He added that the growth board also restructures current market segments to better meet needs along company’s entire lifecycle of entry segment – for companies with a market capitalization from N50 million and standard market for institutions with a market capitalization from N500 million.
According to him, the segmentation of the boards also provides alternative options for interested investors to participate in each company’s growth journey.
“To successfully achieve our listed company’s growth strategy and listing objective, the NSE will be collaborating with various strategic business partners and value added service providers to offer cost effective services designed to create a competitive edge for listed companies within their respective industries while stimulating investors’ interest through enhanced information delivery,” Onyema said.
He outlined that services such as pre-listing diagnostics; institutional services such as audit services, financial advisory, legal advisory, corporate strategic advisory; investor relations; analyst coverage, corporate access and corporate governance will be provided to support the SMEs while the Exchange will also provide tailored trainings on its learning and development platform –”X-Academy” for capacity development and to promote increased corporate governance for board and employees of companies on the growth board.
For any company to be listed on the growth board, it must be a duly incorporated public limited liability company with at least two years of operations, audited financial statements in line with the International Financial Reporting Standards (IFRS) and must have grown its revenue by a minimum of 20 per cent cumulatively in its last two years of operations.
Also, all companies to be listed on the growth board must undertake that their promoters or directors shall retain a minimum of 50 per cent of their shares for a minimum period of 12 months from date of their listing, and that the directors or promoters shall not directly or indirectly sell or offer to sell such securities during that 12-month period.
The framework meanwhile provides alternative requirements for listing for each segment. Under the entry segment, a new business may be considered for listing if it can provide evidence of investment in it by a core investor or a strong technical partner that has a minimum of two years’ operating track record, or a majority shareholder who is either a High Net Worth Individual (HNI) or is a director of a listed company. Under rules, HNI is an individual with net worth of more than N100 million.
Besides, companies heading for the entry segment must have market capitalisation of not less than N50 million, a minimum of 10 per cent of its shares available or to be available to minority retail investors and at least 25 shareholders.
Under the standard segment, a new business may be considered for listing if it that can provide evidence of a core investor or a strong technical partner who has a minimum of four years’ operating track record, or a majority shareholder who is a HNI. The company must also have a minimum market capitalisation of N500 million, at least 15 per cent of its shares must be held or will be held by minority retail shareholders and it must have a minimum of 51 shareholders.
