* As Exchange Proposes Tougher Rules For Large-Volume Trades
The continued instability in the nation’s exchange and interest rates have continued to impact negatively on the economy, with consequential effect on foreign inflows .
Specifically foreign inflow into the Nigerian Exchange Limited declined to the lowest point of the year at N11.26bn in September, according to the latest Domestic & Foreign Portfolio Investment Report of the NGX.
This is even as the Exchange has proposed new rules on block divestment and large-volume trades.
The amendment, which is to Trading Licence Holders Rules (Part XIIIA), has proposals including that: “trade shall be treated as a block divestment where it involves: a) a transfer of shares amounting to five per cent,” it used to be 30 per cent.
“A transfer of shares or acquisition of additional shares amounting to five per cent or more of the company’s total listed shares within a period of one year from the date of first transfer or acquisition of shares.
Market stakeholders were invited to share their feedback on the proposed rules in a notice to trading licence holders signed by the Chief Executive Officer of the NGX Regulation Limited, Olufemi Shobanjo, on Friday.
However, the report indicated that foreign inflow into Nigeria in the first nine months of 2024 stood at N310.99bn higher than N108.93bn in 2023. The highest value of inflow was recorded in May 2024, N54.87bn, and it has steadily declined since then to N11.26bn in September.
But, in terms of foreign outflow, it worsened to N30.15bn in September compared to N24.38bn in August, as experts have continued to point at the volatility in the markets as responsible.
For instance, the naira closed trading on the Nigerian Autonomous Foreign Exchange Market at 1652.25/$ on Friday and at its last meeting, the Monetary Policy Committee of the Central Bank of Nigeria pegged the benchmark interest rate at 27.25 per cent.
Despite all the tight monetary policy measures, the inflationary pressures have not abated as the rate hit 33.88 per cent in October, raising fears of possible more hikes.
But the Exchange has promised to maintain a firm grip on the market, through the new rules,insisting that where it identifies a pattern of transactions suggesting a continued divestment process beyond the one-year threshold, such transactions may, at the discretion of The Exchange, be treated as a Block Divestment and subject to the applicable rules and requirements.”
Another proposed rule change said that a transfer of shares or acquisition of additional shares of 80 million units or more of the company’s total listed shares or trade value equal to, or above N800m within a period of one year from the date of the first transfer or acquisition of shares, shall apply for and obtain the written approval of the exchange before executing such large volume trades.
NGX warned that should its approval not be sought and it notices a pattern of transactions suggesting a continued process of large volume trades beyond the one-year threshold, “such transactions may, at the discretion of The Exchange, be treated as large volume trades and subject to the applicable rules and requirements.”
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Explaining the rationale for the proposed rules, Shobanjo said that since the rule became effective on February 12, 2018, it has served as a guide for monitoring and reporting the transfer of shares that are likely to have a significant impact on the total daily volume/value of executed trades on The Exchange and material changes in the shareholding/control structure of the Issuer.
Commenting further, he said, “However, in reviewing applications and monitoring such trades, The Exchange has observed that certain market participants may be structuring trades to circumvent the Rules’ disclosure and compliance requirements. In response to these risks, The Exchange proposed amendments in Q2 2024 to lower the respective thresholds for Block Divestments and Large Volume Trades in a company’s total listed shares.
“The Exchange further reviewed the said amendments and is also defining permissible parameters for cumulative trades that meet or exceed the defined thresholds to ensure full disclosure, whether the transfers occur as a single transaction or through multiple transfers.
“The Exchange believes these amendments will help close gaps that could allow non-compliant behaviour, reinforcing transparency and accountability. The changes are designed to ensure that any significant share transfers are fully disclosed, enhancing NGX’s ability to monitor meaningful changes in shareholder structure and safeguard market integrity.”
