Private Coys Listing Bill may crash capital market, expert warns

 As the bill to compel top companies operating in the country to list on the  Nigerian Stock Exchange (NSE) is about to go into public hearing, expert has warned that the bill may crash the capital market if eventually passed into law.

Oyedele

According to Mr Taiwo Oyedele, a partner with PricewaterhouseCoopers (PwC) on Tax and Regulatory Services, if all the companies operating in Nigeria with shareholders' funds in excess of N40billion or with annual turnover of over N80billion are forced to list on the Nigerian stock market, the market would crash because it does not have the capacity to absorb their share capital.

The sponsor of the bill, Hon. Chris Azubogu, had said last week that, if the bill passed into law, it would build strong institutions and ensure that the nation has stronger companies that are well supported and run. The bill also makes provision for tax waivers as a sort of incentive for the companies to list, adding that “if government decides to privatize all the businesses and they are not complying with the laws of the land, how can government even confirm that they are collecting the right tax? The tax collection to GDP ratio is weak because we don't have strong institutions. This bill “will give us room to have what is called complete financial inclusion; to move away from the informal sector to formalized economy, to account for the strength of economic activities going on in the country.”

But picking holes in the bill, Oyedele said there is no connection between tax avoidance and forcing the the companies to list. “MTN, for instance, is unquoted company, but it paid N180 billion in taxes in 2013.This is far bigger than the taxes of all Nigerian banks put together. I disagreed with the approach”.

Giving reason why the  stock market could not absolve the share capital of the entities, he blamed it on the low capitalization of the market which he put at $80 billion, a fraction of the market capitalization of some of the targeted companies.

He stated: “When Dangote Cement came to the market, because of the market capitalization, it could only list 5 per cent of its shares.The $80billion market capitalization of  the Nigerian Stock Exchange is just a fraction of the market capitalization of a company like Apple with $500billion.If all the telecom companies, the International Oil companies in the country are forced to list, the market will crash.This is because investors will want to sell their shares in other companies to buy MTN stock; they want to get Glo stock, Chevron stock and so on.So if everybody is selling and nobody is buying, prices will tumble and this will crash the market.