NSE Opens Market to Non-interest Debt Securities

• NSE Opens Market to Non-interest Debt Securities

The Nigerian Stock Exchange (NSE) will today begin the implementation of a regulatory framework for listing of non-interest debt securities on the stock market.

The move will further deepen the market and open up alternative avenues for companies to raise more capital.

A regulatory document obtained at the weekend indicated that with the commencement of the regulatory framework, governments at all levels, companies and other quasi-government and corporate entities will be able to float Sukuk and other non-interest debt securities and list such securities for trading on the Exchange.

With the Securities and Exchange Commission (SEC) and the Central Bank of Nigeria (CBN) already providing wide-ranging frameworks for primary issuance of non-interest debt securities, otherwise known as alternative issues, the launch of the NSE’s listing rules completes the transaction cycle for such securities by providing secondary market for trading in the securities.

Under the new rules, Sukuk and other non-interest debt securities would be listed as exchange traded bonds on the Exchange like other securities. The NSE opens for trading on listed securities and shares for five hours on every working day.

In addition to rules and regulations on pre and post-listing requirements, the non-interest debt securities listing framework stipulates that no short-term Sukuk or debt securities with original maturity date of less than one year shall be listed.

Also, any issue, offer or invitation of Sukuk by a public company intended to be listed on the Exchange shall be subject to the listings requirements of the Exchange.

NSE Regulation Executive Director, Tinuade Awe, who confirmed the commencement of the listing, noted that the rules had been approved by the SEC.

The framework requires issuers of listed non-interest debt securities to provide the market with material information, in line with rules on disclosures and transparency.

Material information in capital market parlance means information that is not available to the market; and if it were available to the market, it would have a material effect on the market price or value of the issuer’s listed securities. Material information consists of both material facts and material changes relating to the business and affairs of an issuer.

Sources told The Nation that the new rules would, henceforth, serve as benchmark for consideration of application for listing and subsisting listing of non-interest debt securities.

A source said the Exchange had granted waiver for the April listing of the maiden sovereign Sukuk by the Federal Government.

The government last April listed its maiden sovereign N100 billion Sukuk bond on the NSE and FMDQ OTC Securities Exchange.

The Debt Management Office (DMO), which oversees government’s debt issues, listed the N100 billion, Seven-year, Federal Government’s Ijarah Sukuk with a rental rate of 16.47 per cent on the NSE and FMDQ. Sukuk are bonds structured to generate returns to ethical investors without infringing on the Islamic law which forbids interest payments. It represents an ownership interest in the asset to be financed rather than a debt obligation.

The net proceeds from the N100 billion sovereign Sukuk would be used to finance construction and rehabilitation of 25 roads across the six geopolitical zones.

Nigeria has only one sub-national Sukuk bond issued by the Osun Sate Government. In 2013, it raised N11 billion (about $50 million) in Nigeria’s first non-sovereign Sukuk issuance. It was oversubscribed.