The Nigerian Exchange (NGX) Group and Securities and Exchange Commission (SEC) Nigeria have opened discussions ’s on the review of free-float requirements for listed companies on the Nigerian Exchange in a move aimed at deepening the equity market and attracting more investors.
The Nigerian Exchange (NGX) Group gave this hint on Monday amid experts’ concerns about the low levels of publicly tradable shares in some listed firms, which are limiting the market liquidity and increasing the risk of price volatility.
Under the proposed requirements, large companies listed on the NGX are required to make available for public trading a minimum of 20% of their shareholding or at least N40 billion worth of shares while entities listed on the Growth Board, usually small and medium-sized enterprises (SMEs), are required to float at least 15% of their share capital.
The NGX confirmed that the collaboration with the capital market regulatory commission, the SEC, to review the free-float framework and introduce measures that will ensure more companies comply with the requirements, is also aimed at addressing concerns around liquidity and the accuracy of free-float data captured by the exchange.
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Commenting on the initiative, Chief Executive Officer of the NGX Group, Temi Popoola, clarified: “This includes assessing how we optimize existing free-float levels, ensuring the accuracy of free-float data captured by the exchange and evaluating whether current free-float requirements remain appropriate as the market evolves.
“We are considering whether elements of free float should play a greater role in how some of our indexes are structured, given that many indexes are currently based primarily on market capitalization.
“All of these efforts form part of our broader objective of deepening the market and ensuring that its structure continues to support growing investor participation”, he added.
The investment expert maintained that regulators may revise public shareholding rules and consider basing equity and index weightings on shares outstanding rather than mainly on market capitalization.
