The newly launched Premium Board of the Nigerian Stock Exchange (NSE) is yet to gain traction as economic headwinds prevent investors from increasing their patronage of the stocks listed on the board.
The Premium Board, which was launched by on August 25, was meant to feature companies that meet the exchange’s most stringent listing criteria of capitalisation, governance and liquidity. It aims at providing a platform for greater global visibility for eligible African corporates to make it easier for them to attract global capital flows and reduce the cost of funding.
Dangote Cement Plc, FBN Holdings Plc and Zenith Bank Plc are the first companies to qualify for the Premium Board with a total capitalisation of N3.704 trillion on the day of launching of the board.
However, THISDAY checks on Monday showed that rather than improve, the total market capitalisation of the Premium Board has declined to N3.66 trillion. An analysis of the performance of the individual stock indicated that Dangote Cement Plc appreciated while FBN Holdings Plc and Zenith Bank Plc went down.
For instance, Dangote Cement rose from N2.87 trillion on the day of launch to N2.89 trillion on Monday. But Zenith Bank Plc fell from N586 billion to N533 billion, just as FBN Holdings Plc closed lower at N227.2 billion on Monday compared with N227.7 billion on August 25.
Although considering the criteria for listing on the Premium Board, the three companies ought to attract high patronage from both domestic and foreign investors, analyst said the economic headwinds prevalent in the country are impacting negatively on the performance of the board.
“Investors are not investing as expected because of the delay in the constitution of cabinet by the federal government that is expected to give the economic direction of the administration. The banking sector continues to grapple with new regulatory headwinds. The latest being the single treasury account (STA) directive by the government. All these factors have affected the performance of the Premium Board. I strongly believe that once the general appetite for the stock market improves, the Premium Board will enjoy higher performance,” a broker said.
Chief Executive Officer of NSE, Mr. Oscar Onyema had explained that Premium Board is one result of “our commitment to place corporate governance front and centre as a way to improve the climate for doing business in Africa. We expect that companies on the Board will enjoy the highest levels of visibility and appeal to investors looking for large companies with the highest standards of corporate governance.”
Speaking in the same vein, the Executive Director, Business Development, NSE, Mr. Haruna Jalo-Waziri, stated the launch of the Premium Board was in line with the NSE’s commitment to promoting and continuously developing a more transparent, liquid, accessible market.
The Premium Board is for issuers with minimum market capitalisation of N200 billion and highest corporate governance standards. Companies aspiring to be listed on the Premium Board must achieve a minimum score of 70 per cent on the stringent Corporate Governance Rating System (CGRS). In addition, they are required to maintain a minimum free float of 20 per cent of their issued share capital or a free float value equal to or above N40 billion,”Jalo-Waziri said