Sequel to the Federal Government’s efforts to ensure that multinational companies in both the Telecommunication and the oil industry are listed on the domestic stock market, an expert in the market have proffered solution to having them quoted on the market.
The analyst said like what is obtainable in other climes, the regulators and the government should create enough incentives to encourage listing of telecoms companies, oil and gas firms as well as other multinationals operating in the country.
The Managing Director of Cowry Asset Management, Mr. John Chukwu said “We should ask ourselves what we need to do to lure the telecoms majors and Oil Gas majors to come to the market. Among the things I have always advocated is the use of fiscal instruments such as tax incentives to attract these companies to list on the Nigerian Stock Exchange.
“For instance, the government can offer lower corporate tax rate to publicly quoted companies; instead of a tax rate of 30 per cent, government can grant quoted companies concessionary tax rate of anything between 15 and 25 per cent. If this is done, shareholders on unquoted companies will compel them to seek listing. The government can also consider exempting dividends of quoted companies from tax.
“This will encourage more people to invest in the secondary market as the effective dividend yield of quoted companies would be higher than those of non-quoted companies (though they may be paying the same amount of cash dividend and have the same market value). I believe that if you waive tax on dividend and have a differential corporate tax rate for quoted companies, the telecoms companies, the Oil Gas companies and other multinationals will have compelling reasons to list on the Exchange. I strongly believe that we should use incentives instead of sanctions to attract more companies into the market.
He said that, “As for the upstream oil companies, aside from the above incentives, the government first have to address their fiscal framework. At present they operate as unincorporated joint ventures with NNPC but for them to get listed, they first have to be incorporated as Nigerian companies. If the government is serious with getting these oil majors to be listed on the NSE, it should make sure that the Petroleum Industry Bill makes provision for incorporating the joint ventures.
According to him, “If this is not done, then the only avenue under which the upstream Oil Gas companies can be listed on the NSE is through a cross-border listing. This may be a tall order as no company has yet come from outside the country to get listed on the NSE. Our market is still at the early stages of its development, maybe when we develop to the level of South Africa or other advanced economies; it may then be attractive to companies to seek cross-border listing in Nigeria. As part of determination to deepen the equities market through employing the services of multinationals, the NSE, recently organised a one- day stakeholders meeting with Chief Executive Officer of Information and Communication Technology in the country to explain the inherent benefit on listing of the companies on the Exchange.
The NSE had said that with the Exchange having five million investors wherein foreign investors’ constituting 81 per cent and local investors making up with 19 per cent, there is need for multinationals domiciled in the economy to participate on the Exchange.
The NSE Chief Executive Officer, Mr. Oscar Onyema noted that listing of companies especially from the information and communication sector will in no small measure deepen the equities market.
According to him, “listing on the exchange will cause companies coming for quotation to have access to lower of borrowing, bring about great public confidence through listing discipline, a basis for company valuation and surviving beyond founders, improved brand and helping to spread risk of long term investment project.
“The sector should not rely predominantly on short term borrowing given the capital intensive nature of the industry. As you know, the capital market possesses a comparative advantage over other sources of finance in the provision of long-term funds compared to the generally higher cost of bank financing for long-term capital infrastructural projects. The stock market, promotes efficiency in capital formation and allocation; it provides the platform that enables companies to raise capital for financing new projects, expanding and modernizing industrial and commercial concerns. If capital resources are not provided to those economic areas, especially industries where demand is growing and which are capable of increasing production and productivity, the growth rate of the economy suffers.
Oscar said that, as an operator, The Exchange plays an important role in setting rules to ensure fair, orderly and transparent markets and in enforcement and general oversight. “Despite recent challenges, the capital market remain an indispensable vehicle to ensure Nigeria’s continued development”, he added.