The Nigerian Stock Exchange (NSE) has taken a huge step towards enhancing access to funding for small and medium enterprises with the launch of its Growth Board, which became operational from Wednesday, January 29, 2020.
With the launch of the Board, the Exchange is looking to encourage listing of growth companies, particularly Micro, Small and Medium Enterprises (MSMEs). There are around 41.5 million of businesses that fall within this category operating in the country, the majority of which face financing and expansion constraints despite their high-growth potential.
According to Olumide Bolumole, Head of Listings Business Division at the NSE, the new board is expected to attract small to medium-sized companies that exhibit the potential for fast growth in their corporate earnings and are in the growth phase of their business cycle.
For such companies, the Growth Board represents a cost-effective platform where they can to raise the capital needed to scale, attract investors, enhance corporate visibility and put in place a regulatory structure that fosters growth.
Under the board, issuers are provided with the opportunity to leverage on the Exchange for listing, raising long term capital and facilitating liquidity in the trading of their shares. While investors also get the opportunity to invest in such companies with the potential for high returns/capital gains.
Prior to this development, the Nigerian bourse had three boards – the Main Board, Alternative Securities Market (ASeM) and the Premium Board. The first targets well-established companies with a demonstrable track record of commitment to high standards of disclosure and corporate governance, while the ASeM Board is a platform with an additional focus on small to mid-sized companies. The last, which was added in 2015, is for companies that meet the Exchange’s most stringent listing criteria of capitalization, corporate governance, and liquidity. Meanwhile, the ASeM Board, which is a second-tier market, will be phased out according to NSE CEO Oscar N. Onyema.
Thus, the new Board demonstrates the NSE’s initiative to meet the needs of businesses at every phase of their lifecycle while elevating the Nigerian capital market. The initiative “further re-affirms NSE’s long-standing tradition of supporting the development of SMEs in Nigeria by offering entrepreneurs opportunities to access finance and scale their businesses,” said Bolumole.
The Growth Board offers two ways of listing, the entry and the standard segment. The former is for companies with a market capitalization from ₦50 million while the standard segment for institutions with a market capitalization from ₦500 million. The segmentation of the boards also provides alternative options for interested investors to participate in each company’s growth journey. Essentially, the board offers relaxed entry criteria and less stringent ongoing listing requirements and allows for greater accessibility to capital flows, global visibility and credibility through corporate disclosures.
Companies aspiring to list or are listed on the Growth Board, after having met stated requirements, will get access to the NSE’s Value Added Services program such as institutional services, investor relations; analyst coverage, corporate access, and corporate governance. Other benefits include expanded designated advisers, reduced NSE fee structure, reduced pre and post-listing obligations as well as increased turnaround time for approvals and time to market.