The Securities and Exchange Commission has approved the reduction in the transaction costs of raising funds from the capital market.
Speaking on the development during an interview, the Acting Director-General, SEC, Ms Mary Uduk, said that the commission had given approval for the reduction of the transaction costs for both equities and fixed income securities.
She also confirmed that the decision was based on the recommendations of the committee set up to look at the transaction costs.
Specifically, Uduk said the commission had approved that the cost of listing equities should be reduced from 3.17 per cent (of the value of what is being listed) to 2.83 per cent.
For fixed income securities, she said an approval had been given for its reduction from 3.97 per cent to 3.28 per cent.
She said the reduction had started to have positive impact on the capital market as more issuers of capital market securities were already coming into the market.
She said, “What we did in terms of trying to enhance issuance is to try to look at the entire value chain holistically and look at the issues that actually impede on issuers coming to the market.
“One of them was transaction cost. There was a committee that was set up and a study was conducted and it was observed that our market is very expensive in terms of issuance at the primary level and the commission in collaboration with other stakeholders looked at the cost of the issuance. If you are coming to the market, how much will the issuer pay? The rule has provided a limit of 3.17 per cent for equities and 3.97 per cent for fixed income.
“What we did in conjunction with other stakeholders was to look at those entire costs and do a haircut. Everybody agreed on how to reduce the cost in other to incentivise issuers to come to our market and that is what we did. We reduced the cost of equities from 3.17 per cent to 2.83 per cent and then for fixed income from 3.97 per cent to 3.28 per cent.”
She said the reduction in the listing fee would last for one year after which a review of its impact would be done by the commission.
The review, she noted, would determine whether a further amendment was needed in the light of the economic realities.
“It was a pilot for one year after which we will do an impact assessment to see how it will impact in the market. I can say it has started impacting because issuers are coming and they are happy that these transaction costs have been reduced.
“It’s a value chain, but it has started giving result. At the end of one year, the commission will conduct an impact assessment to decide if we can move forward or make some amendment,” she added.
The move, according to findings, is one of the measures aimed at making listing on the capital market attractive to companies.
It was learnt that the reduction in the transaction costs for capital market securities was approved following recommendations made by a committee, which was set up to work on the cost of raising funds.
There had been complaints in the past by companies that the listing costs for both equities and fixed income securities were high.
This development, according to experts was one of the reasons why many companies had refused to list their shares on the floor of the Nigerian Stock Exchange.