NASD OTC Securities Exchange Plc is refocusing its enterprise portal as a fund sponsor to provide amenable capital to micro and small enterprises as part of efforts to open up the over-the-counter market to growing companies.
At its Annual General Meeting (AGM) in Lagos, which was held through virtual proxy attendance due to COVID-19 restrictions, NASD said its enterprise portal, known as NASDeP, which was initially expected to match pre-initial public offering (IPO) companies with private equity investors, is now being refocused as a fund sponsor that will directly match pre-IPO companies with amenable funding.
Pre-IPO companies include micro, small and medium enterprises and emerging growth companies, either as a private limited liability company or public limited liability company, that have not issued their maiden public share issuance, otherwise known as IPO.
SEC had in April 2018 granted NASD a no-objection approval, paving the way for the OTC platform to operate a restricted primary market for pre-IPO companies and accredited investors.
Chief Executive Officer, NASD OTC Securities Exchange Plc, Mr Bola Ajomale, said while the NASDeP was initially expected to match pre-IPO companies to private equity investors who would provide managerial capacity in addition to capital, it was discovered that funding requirements for such pre-IPO companies have been below the minimum investment thresholds of private equity firms.
“We are therefore refocusing NASDeP as a fund sponsor to match these companies. Discussions started towards the end of 2019 to raise such a fund from multilateral companies. We shall continue to express courage and our entrepreneurial spirit in this venture,” Ajomale said.
He said the NASD will continue to improve its operational efficiency by investing in existing structure, using scalable technology and driving innovation.
According to him, the implementation of an asset class agnostic trading platform, which was approved by the board of directors of the Exchange in 2019, is expected to significantly improve trading volumes and speed at the market.
Ajomale said the Exchange remains optimistic that its investments in technology and innovation would mitigate the adverse impact of the COVID-19 pandemic on the Exchange in 2020 and beyond.
“NASD has since inception been committed to providing innovative solutions that are reliable, resilient and functional. We recognise the new opportunities that are rising out of this situation and intend to remain versatile and flexible to maintain market operations while providing capital raise services to enterprises that now have an even more pronounced need for the capital market,” Ajomale said.
Chairman, NASD OTC Securities Exchange Plc, Mr. Olutola Mobolurin said the Exchange exposed some draft rules to the public in 2019 in furtherance of its efforts to ensure an orderly market and expand service offerings.
According to him, the rules included rules for executing negotiated deals, admission of rights issues, admission of commercial papers and registration of sub brokers.
“We expect these rules will further improve transparency and price discovery on the market,” Mobolurin said.
He noted that NASD had fortuitously in 2019 reassessed its strategy and redefined its focus to facilitate its becoming the hub of first call for capital formation in West Africa as the Exchange continues to expand its product offerings and services to cater to the new business and capital raising environment.
According to him, the NASD has embarked on a material technology overhaul that will improve its scope, efficiency and effectiveness as an over the counter market in line with its commitments to continue to deliver on its objectives to all stakeholders.
With macroeconomic challenges, NASD generated transaction fees of N139 million while it recorded investment income of N65.5 million. It generated listing fees of N2.62 million. Total expenses amounted to N196.7 million in 2019 compared to N163 million in 2018. NASD recorded a profit after tax of N45.01 million.
The report for the year ended December 31, 2019 showed that the volume of shares traded on NASD decreased by 85.82 per cent while the value traded declined by 65.61 per cent compared to 2018.
The bond market on the other hand recorded trades valued at N4.01 billion during the year under review. Market capitalisation closed at N501.14 billion compared to the market value of N514.77 billion. As at December 31, 2019, the value of transactions executed on the market was N10.45 billion.
Inaugurated in July 2013, NASD is registered by Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC) as a Self-Regulatory Organisation (SRO). It provides the platform for trading of a broad range of instruments over-the-counter (OTC), including equities, bonds and other securities not listed on a formal general securities exchange.