A financial expert has warned that the planned demutualisation of the Nigerian Stock Exchange (NSE) could create danger for the country in future.
The Managing Director of Maxifund Securities Limited, Mazi Okechukwu Unegbu who made this remark in Lagos while calling for the establishment of more stock exchanges across the nation said that the recent move to demutualise the Exchange without providing alternative trading points could endanger the entire economy.
He said that provision of alternative markets would not only break the stranglehold of monopoly, but promote competition among the various exchanges.
He pointed out that the demutualisation of the current stock exchange without an alternative would ground the activities of the stock market to a halt in case of any eventualities.
“It is dangerous to have monopoly in business. That monopoly holds all the power. If you now say you want to demutualise that particular monopoly without other competing organisations, you are going to have problems.
Supposing something happens to that privately owned business, like some banks that have failed in this country; supposing in those banks that failed there was no NDIC to pay people their N100,000, N200,000, and there is no other bank to go to, what will happen? The system will be grounded to a halt.
“So why I am personally calling for establishment of more exchanges is that if we demutualise the current stock exchange and something goes wrong with it, there will be an alternative one that can go to refinance his stock,” he added.
“Assuming you have the shares of First Bank of Nigeria (FBN) and they demutualise the Nigerian Stock Exchange, and because of the greed of capitalism, because of the greed of one director or a staff, or because of so many other things that can affect that business, because it has to compete with other exchanges outside Nigeria and something happens to it, and you have the shares of First Bank to sell, but there is no alternative window, there will be problem.”
He said that in situation where there were eventualities at the exchange, people that want to raise money will find it difficult and it will lead to the problem of illiquidity and problem of not being able to raise developmental capital for the market.
He however, maintained that if there were alternatives, one didn’t need to depend on the Exchange but the investor could take his or her shares to another exchange to raise money for other purposes.
He further stated that efforts should be concentrated in encouraging the local investors to patronise the market rather than pursuing the foreign investors, stressing that the exit of over 80 per cent of foreign investors in 2008 worsened the impact of the global crises in the market.