Why SMEs are not attracted to list on the Nigerian Stock Exchange

The Chairman, Integrated Supreme Shareholders Association of Nigeria, Mr. Owolabi Peter The Small and Medium Enterprises, SMEs, are not attracted to list on the Nigerian Stock Exchange, NSE for a number of reasons. Firstly, many of them do not have adequate capital base and structure that will attract investors to invest in them. Secondly, many of the SMEs are struggling with the economic recession and harsh operating environment which had made it difficult for them to break-even let alone declaring profit. Again, many of the SMEs don’t have financial records that the NSE may require prior to listing. Even those that are listed in NASD OTC market are not doing well and that is why investors are not attracted to invest in them. It is just two companies that are doing well in that market. No investors would like to invest in a firm that are not posting profit. Investors go for firms that constantly declare dividend. From top L-R: •Owolabi Peter, • Adeniyi Adebisi, •Bisi Bakare & •Sola Abodunrin The NSE stringent requirements could be another reason scaring those companies from listing on the NSE. The Securities and Exchange Commission, SEC should revisit the listing requirement for the SMEs and direct the NSE to review its listing requirement in order to accommodate this sector of the economy. The National Co-ordinator, Independent Shareholders Association of Nigeria, ISAN, Mr. Adeniyi Adebisi Businesses, including those of the Small Scale Enterprises, SMEs do not go to the Nigerian Stock Exchange for the fun of it .When economy is booming and business opportunities are sprouting all around, big and small businesses would want to raise funds for expansion of the existing operations or start new ones by way of forward or backward integration. That is the ideal time to go out to NSE or any place for that matter, to raise money. There is recession now, and this is not an ideal period. The NSE may have to go back to the drawing board to see how the processes of listing on its Exchange can be made to be simpler and various costs streamlined to be affordable for SMEs. The processes are presently lengthy and cumbersome – needing the services of several experts and professionals. Another point is that many regulators have grown to be arbitrary in the ways they do things and often treat the regulated and their agents without due respect. They have installed a sort of servant and master relationship. In this relationship, the master must always be right, and the servant must obey. This is not good enough in business relationship. Mrs Bisi Bakare, National Coordinator, Pragmatic Shareholders’ Association of Nigeria I think one of reasons why the Small Scale Enterprises, SMEs do not want to be listed on the Nigerian Stock Exchange, NSE is as a result of the stringent listing conditions and unfavourable business climate. The business climate in Nigeria is very tough coupled with regulatory challenges on wrong policies of government. NSE needs to introduce fragmentation of industries into the system. For instance, they ought to classify this segment of small scale companies into three or four categories. That is, A, B, C, or D. Their listing fees /Quarterly filing fees should be charged according to the different categories. This will encourage more small scale companies to be listed on the Nigerian Stock Exchange. What government should do to encourage small scale enterprises to list on the NSE is that government need to create a very conducive business climate, reduce listing/quarterly fees. Secondly, government should review the NSE rules and regulations and tax reduction should be granted to these scale enterprises. Government should also provide affordable loans to the SMEs to make them improve on their production and as well make reasonable profit that can attract them to list on the exchange. The former Chairman of Ibadan Zone Shareholders Association of Nigeria and 2nd Deputy President of Ibadan Chamber of Commerce, Chief Sola Abodunrin I think the cost of listing on the Nigerian Stock Exchange, NSE could be one of the reasons why the Small Scale Enterprises, SMEs are not attracted to list on the NSE. If the listing requirement is reduced, they will come for listing. A lot of advantages are derived when companies are listed on the exchange. You can even see that some big companies already listed are delisting voluntarily. This could be as a result of difficult operating environment. The conditions that business owners are facing are tough, imagine the Foreign Exchange problem as well as high cost of fund from the financial sector. So many companies are finding it difficult to make profit. Another reason could be that many of the owners of SMEs do not want to reduce their stake and thus relinquish their position in the company. You know if a company is listed on the stock exchange, it has to relinquish some portion of shares to the investing public which many of them do not want.