Nigeria (Again) Contemplates Mandatory Stock Exchange Listing Legislation
Nigerian government officials are once again contemplating legislation that would require certain private companies to list on the Nigerian Stock Exchange (“NSE”). According to Speaker of the Nigerian House of Representatives Yakubu Dogara, the listing requirement would apply to companies in the oil, gas and telecommunication sectors and is necessary “in order to deepen the market and make capital available for investors and create employment.”
It is not the first time that the Nigerian government has sought to pass a mandatory listing measure. Indeed, there already is a measure before the National Assembly: the Private Companies Conversion and Listing (“PCCL”) Bill (2013) which seeks to compel all private companies that meet certain financial thresholds to convert to public liability companies and list on the NSE. Late last year, there were some who predicted that the PCCL Bill would become law in a matter of months. Those predictions have not come to pass. It is unclear if Speaker Dogara is signaling a shift away from the PCCL Bill or if the sector-specific measure would be pursued in parallel with the PCCL Bill.
The Organized Private Sector, the Lagos Chamber of Commerce and Industry and other stakeholders remain staunch opponents of the PCCL Bill. Similarly, a joint report by the Nigerian Capital Markets Solicitors Association and the Law Society of England and Wales cautioned that the PCCL Bill “could have a negative effect on the development of not only the capital markets in Nigeria, but also the development of certain sectors of the economy.”
A key concern about mandatory listing laws is their compatibility with the protections against expropriation guaranteed under the Constitution of Nigeria, domestic law and the various bilateral investment treaties that Nigeria has entered into with other countries. Importantly, a measure does not necessarily need to benefit the State in order to constitute an expropriatory measure. International investment law generally focuses on the impact of the measure on the investor — in this case, depriving investors of their private property interests in their companies — rather than the accrual of a benefit to the State.
Recent months have seen a “largely negative topsy-turvy situation at the capital market [due] to pre-election concerns and existing concerns over the macroeconomic and monetary policy direction of the new government.” And a longer standing issue is the ongoing imbalance in the NSE. Although there are over 250 listed companies, the market capitalization value of four of those companies represents approximately half of the NSE’s total market capitalization value. The fact that President Buhari included the Central Bank Governor and the Acting Director General of the NSE in his delegation for his recent trip to Washington, D.C. (during which they joined him for a meeting with the U.S. Treasury Secretary) is a sign that economic reforms in this area are a priority to the new President. Yet to be seen is whether mandatory listing measures — a “solution” that could introduce a whole new set of problems — will be one of those reforms.