Requirements for Listing on the Main Board of the Nigeria Stock Exchange

The Nigeria Stock Exchange [NSE] is the ideal destination in terms of equity capital for companies with sound corporate fundamentals.

These companies must be imbued with a growth mentality and a genuine desire to compete on a global stage. Getting listed on the NSE is like getting into an exclusive club, which explains the number of publicly traded companies on the Exchange – 71, as at August 10 2018.

Though there are only 71 at this point in time, the conditions for being enlisted on the NSE are not so daunting for brands that have made corporate governance their watchword.

The first recorded enlistment of a capital market-like financial transaction in Nigeria was in 1946 – “the flotation of a 300,000 pounds bond by the colonial government to implement its 10-year development plan.” More than 70 years on from that epochal event, the Nigeria Capital Market has grown to a valuation of over N13 trillion by August 3, 2018, with more than 70 companies listed and being traded – both local and foreign.

The CEO of the NSE, Oscar Onyema was reported by the Punch Newspaper, after the recent admission of Notore Chemical Industries Plc. onto the main board of the NSE, to have stated that “We encourage more local players to explore the different opportunities in the capital markets for raising long-term capital.”

Listing on the main board of the Nigeria Stock Exchange has 3 standards i.e. Standards A, B and C with each standard having its own degree of compliance in relation to a specific requirement[1]. Consequently, the requirements of listing on the main board of the Nigeria Stock exchange are set out below with the corresponding degree of compliance under Standards A, B and C.

The requirements for listing on the Nigeria Stock Exchange are as follows:

1. Pre-tax profit
Standard A requires that a company seeking to list on the main board of the NSE must provide cumulative pre-tax profits from continuing operations of not less than NGN300million over the last 3 years, with at least NGN100 million pre-tax profit in 2 of those years.

Standard B requires that such a company as described above must provide cumulative pre-tax profits from continuing operations of not less than NGN600 million over the last 1 or 2 years

Standard C makes no requirement for a company as described above to provide cumulative pre-tax profits

2. Market Capitalization
While Standards A and C make no market capitalization requirement concerning a company seeking to list on the main board of the NSE, Standard B requires that such a company’s market capitalization must not be less than NGN 4 billion at the time of listing (based on the issues price and issued share capital).

3. Operating Track Record
Standard A requires that a company seeking to list on the main board of the NSE must provide 3 years minimum operating track record. Standard B also requires a minimum of 3 years operating track record. However, as an alternative, it also permits evidence of 3 years minimum operating track record of a core investor in the company.

Standard C requires a company as described above to provide 2 years minimum operating track record

4. Financials
While Standard A requires that a company seeking to list on the main board of the NSE must provide 3 years financial statements, the most recent of which must not be more than 9 months old at the time of submission of the listing application, Standard B also makes the requirement provided under Standard A but in addition provides an alternative requirement which is evidence of a strong technical partner with substantial equity holding and involvement in the Issuer’s (the company) management, who has a minimum of 3 years operating track record and financial statements.

Standard C requires a company as described above to provide financial statements with the date of the last audited accounts not being older than 9 months

5. Public Float
While Standards A and B require that a company seeking to list on the main board of the NSE must offer a minimum of 20% of each class of equity securities of its shareholding to the public to hold,

Standard C requires a company as described above to offer a minimum of 15% of each class of equity securities of its shareholding to the public to hold

6. Shareholders Equity
While Standard A requires that a company seeking to list on the main board of the NSE must have not less than NGN3 billion in shareholders’ equity, Standards B and C make no requirements of such a company as described above in terms of shareholders’ equity.

7. IPO Lockup Period
Standards A, B, C require Promoters and Directors of a company seeking to list on the main board of the NSE to retain 50% of shares pre- Initial Public Offering (“IPO”) for 12 months from the date of listing.

8. Public Shareholders
Standards A and B require that the number of public shareholders in a company seeking to list on the main board of the NSE must not be less than 300 (for equity shares) while Standard B requires that the number of public shareholders in a company seeking to list on the main board of the NSE shall not be less than 51 (for equity shares)

9. Annual Listing Fees
All companies seeking to list on the main board of the NSE under Standards A, B, and C are required to pay annual listing fees based on market capitalization subject to a maximum amount as prescribed by the NSE fee schedule which is currently NGN4.2 million.

10. Business Operations
All companies seeking to list on the main board of the NSE under Standards A, B, and C are required to be registered as a Public Limited Liability Company under the provisions of the Companies and Allied Matters Act CAP C20 Laws of the Federation of Nigeria

 

11. Accounting Standard
All companies seeking to list on the main board of the NSE under Standards A, B, and C are required to comply with the International Financial Reporting Standard (IFRS) in line with the Securities and Exchange Commission (“SEC”) regulations.

12. Allotment
All companies seeking to list on the main board of the NSE under Standards A, B, and C are required to have their securities to be fully paid up at the time of the allotment in line with SEC requirements for minimum threshold for a successful offer.

 

13. Continuing Obligation requirement of the NSE’s Listing, Disclosure & Transparency Rules
Companies listed under Standards A and B are required to submit quarterly, semi-annual and annual statements together with annual certification on the adherence to corporate governance. Companies listed under Standard C are also required to submit quarterly, semi-annual and annual statements together with annual certification on the adherence to corporate governance. However, an additional requirement for companies Listed under Standard C is that they must retain a designated adviser for as long as they are listed

Undoubtedly, the NSE’s objective is to get as many Nigerian companies to pass the 10 rules set by the Exchange because listing a company means it has passed stringent checkups, and the more compliant companies listed on the NSE, the better the economy.

The most influential factor in the growth [expansion] of an enterprise is funds, and there is no better source of relatively cheaper funds than the capital market as opposed to the comparatively higher cost of funds securable from financial services institutions owing to high interest rates.

Apart from the listing requirements above, an interested party must comply with “the relevant provisions of the Companies and Allied Matters Act, Cap. C20, LFN 2004, the Investments and Securities Act, 2007, the Rules and Regulations made thereunder and other relevant statutory requirements.”

 

[1] See Listing Requirements issued by the Nigeria Stock Exchange

 

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