Regulatory Roadblocks and FX Volatility Stifle New Listings on NGX
The Nigerian Exchange (NGX) is witnessing a slowdown in new listings as companies grapple with stringent government policies, high compliance costs, and foreign exchange volatility. Analysts warn that without significant policy reforms and tax incentives, investor confidence may wane, further dampening market activity.
Government Policies and Compliance Costs Deter Listings
Experts highlight that restrictive fiscal and monetary policies have created a challenging environment for businesses considering a public listing. According to Charles Sanni, CEO of Cowry Treasurers Limited, high regulatory costs and economic uncertainties discourage companies from entering the capital market.
“The current policies are more focused on economic regulation rather than business growth,” Sanni explained. “If I list on the exchange, the capital burden increases due to high government-driven costs. This discourages new issuers.”
Sanni also noted that filing fees and quarterly reporting requirements deter businesses from listing, while foreign exchange volatility keeps portfolio investors at bay. Additionally, government bonds are crowding out private sector investment, as investors avoid long-term commitments due to economic uncertainty.
Governance and Shareholder Accountability as Barriers
Boniface Okezie, National Coordinator of the Progressive Shareholders Association of Nigeria, attributes the decline in new listings to strict governance penalties and shareholder accountability requirements.
“The governance framework is too rigid,” he stated. “Companies are hesitant to list because they face excessive regulations that limit flexibility. If the policies were more favorable, we’d see more companies going public, boosting job creation and economic growth.”
Okezie also pointed out that private companies prefer to operate outside the exchange, paying taxes quietly rather than dealing with regulatory hassles.
The Cost of Transparency vs. Staying Private
Professor Richard Mayungbe of Copperstone University in Zambia emphasized that listing on the NGX requires significant financial disclosures, exposing companies to public scrutiny and competition risks.
“Private companies maintain strategic secrecy, avoiding the costs and reporting requirements of being public,” he explained. “They save on legal fees and compliance costs while enjoying greater operational freedom.”
However, he also acknowledged that staying private limits access to capital markets, reduces share liquidity, and increases the cost of raising funds.
Corporate Governance and Market Liquidity Concerns
Johnson Chukwu, Group Managing Director of Cowry Asset Management Limited, pointed to the high cost of corporate governance and post-listing obligations as key deterrents for companies.
“It’s not just government policies,” Chukwu noted. “The administrative burden of complying with governance requirements, such as appointing independent directors and meeting reporting deadlines, makes companies question whether the benefits of listing outweigh the costs.”
Chukwu suggested that reducing corporate tax could offset compliance expenses and make listing more attractive. He also highlighted that while market liquidity is not a major issue, the high-interest rate environment affects investor decisions.
Call for Policy Reforms
Industry experts unanimously agree that easing regulatory and financial burdens is crucial to revitalizing market participation on the NGX. They call on the Securities and Exchange Commission (SEC) and NGX to collaborate on reducing listing costs, leveraging technology, and introducing tax incentives to attract more companies.
Without proactive reforms, Nigeria’s capital market may continue to struggle with low listing activity, limiting economic expansion and investor opportunities.
The Nigerian Exchange (NGX) is witnessing a slowdown in new listings as companies grapple with stringent government policies, high compliance costs, and foreign exchange volatility. Analysts warn that without significant policy reforms and tax incentives, investor confidence may wane, further dampening market activity.
Government Policies and Compliance Costs Deter Listings
Experts highlight that restrictive fiscal and monetary policies have created a challenging environment for businesses considering a public listing. According to Charles Sanni, CEO of Cowry Treasurers Limited, high regulatory costs and economic uncertainties discourage companies from entering the capital market.
“The current policies are more focused on economic regulation rather than business growth,” Sanni explained. “If I list on the exchange, the capital burden increases due to high government-driven costs. This discourages new issuers.”
Sanni also noted that filing fees and quarterly reporting requirements deter businesses from listing, while foreign exchange volatility keeps portfolio investors at bay. Additionally, government bonds are crowding out private sector investment, as investors avoid long-term commitments due to economic uncertainty.
Governance and Shareholder Accountability as Barriers
Boniface Okezie, National Coordinator of the Progressive Shareholders Association of Nigeria, attributes the decline in new listings to strict governance penalties and shareholder accountability requirements.
“The governance framework is too rigid,” he stated. “Companies are hesitant to list because they face excessive regulations that limit flexibility. If the policies were more favorable, we’d see more companies going public, boosting job creation and economic growth.”
Okezie also pointed out that private companies prefer to operate outside the exchange, paying taxes quietly rather than dealing with regulatory hassles.
The Cost of Transparency vs. Staying Private
Professor Richard Mayungbe of Copperstone University in Zambia emphasized that listing on the NGX requires significant financial disclosures, exposing companies to public scrutiny and competition risks.
“Private companies maintain strategic secrecy, avoiding the costs and reporting requirements of being public,” he explained. “They save on legal fees and compliance costs while enjoying greater operational freedom.”
However, he also acknowledged that staying private limits access to capital markets, reduces share liquidity, and increases the cost of raising funds.
Corporate Governance and Market Liquidity Concerns
Johnson Chukwu, Group Managing Director of Cowry Asset Management Limited, pointed to the high cost of corporate governance and post-listing obligations as key deterrents for companies.
“It’s not just government policies,” Chukwu noted. “The administrative burden of complying with governance requirements, such as appointing independent directors and meeting reporting deadlines, makes companies question whether the benefits of listing outweigh the costs.”
Chukwu suggested that reducing corporate tax could offset compliance expenses and make listing more attractive. He also highlighted that while market liquidity is not a major issue, the high-interest rate environment affects investor decisions.
Call for Policy Reforms
Industry experts unanimously agree that easing regulatory and financial burdens is crucial to revitalizing market participation on the NGX. They call on the Securities and Exchange Commission (SEC) and NGX to collaborate on reducing listing costs, leveraging technology, and introducing tax incentives to attract more companies.
Without proactive reforms, Nigeria’s capital market may continue to struggle with low listing activity, limiting economic expansion and investor opportunities.