NGX Moves to Reduce Trading Costs Through Technology

Temi Popoola, the Chief Executive Officer, Nigerian Exchange Limited (NGX), has revealed that the exchange is exploring ways to leverage technology to focus on reducing brokerage costs.

Popoola disclosed this while fielding questions from stakeholders at the MTN Capital Markets Day which held in Abuja recently.

He noted that NGX recognizes the high cost of trading in and out of Nigeria and added that it is looking at incorporating digital technology to enhance overall trading experience and make it more cost-effective for investors.

Popoola, while specifically stating that the exchange is focused on reducing brokerage costs, said this will encourage more participation in the stock market and attract a broader range of investors and added that the NGX wants to emulate other digital market platforms that offer zero-cost trading on their platforms.

He explained, “Looking at many other markets, there are many digital platforms that allow them to trade for free at zero cost and today there are people (brokerage) who charge around 130 basis points to do business and so we think that with digital and tech transformation, trading costs on NGX can be addressed.

Of course there are costs that we charge as a business but a lot of our stakeholders are looking to see whether lowering trading costs can be addressed whether in a short or long term and relax the costs to build the market.

Another thing that brings these costs are people who bring deals and issuances to the market and a lot of feedback has been that it is very expensive and so we think we will address these things”.

Weighing in on the spate of delistings which is currently ongoing in the market, the NGX boss, quoting PitchBook, said that Initial Public Offerings (IPOs) have witnessed a slowdown of more than 60 per cent in the last two years globally, adding that there has been a noticeable scarcity of smaller cap stocks on public exchanges due to various factors such as voluntary and involuntary delistings, mergers and acquisitions, and liquidations.

Emphasizing NGX’s strategy around delistings, Popoola said, “What most exchanges aim to do is replace those delistings faster than they occur, and that has formed the crux of our strategy at NGX.

“We have had notable listings within the last two years including BUA Foods, Geregu – which is our first power sector listing, MeCure Industries, VFD Group, and interestingly our first listed Investment Trust, Nigeria Infrastructure Debt Fund.

“NGX has experienced a remarkable surge in market capitalization, with new listings contributing over 10 per cent in the past two years and we think that there is a need for government advocacy and policymaking in enhancing listings in our markets”.

Whilst acknowledging the global availability of capital for sustainable initiatives, he further revealed that the exchange places a strong emphasis on sustainability and said it is planning to launch a sustainability framework and work with listed corporates to address current carbon footprints to promote responsible corporate behavior.