By OLUSHOLA BELLO |
To address the funding challenges facing about 41.5 million Micro, Small and Medium Enterprises (MSMEs) in the country, the Nigerian Stock Exchange (NSE) remodeled its Alternative Securities Market (ASeM) to become the Growth Board,
The Growth Board provides issuers, especially Small and Medium Enterprises (SMEs), with opportunities to leverage on the Exchange for listing, raising long term capital and facilitating liquidity in the trading of their shares.
With a total of 41.5 million MSMEs in the country, poor access to finance constitutes a major constraint for this sector. In order to address financing challenges that are facing them, capital market solutions are increasingly being adopted.
Experts had said, capital markets are clear alternative to bank lending and MSME funding could be sourced from the capital markets, giving credence to the launch of Growth Board.
They implored listing of growth companies and provide them with a cost-effective platform to raise the capital needed to scale, attract investors, enhance corporate visibility and put in place a regulatory structure that fosters growth.
The Growth Board is established as part of the NSE’s initiative to elevate the Nigerian capital market and meet the needs of businesses at every phase of their lifecycle. Up until 2015, NSE maintained two boards, the Main Board and Alternative Securities Market (ASeM).
The Main Board targets well-established companies with a demonstrable track record of commitment to high standards of disclosure and corporate governance, while the ASeM Board is a platform with an additional focus on small to mid-sized companies.
The Board has four companies, which are the pioneers, Chellarams Plc, LivingTrust Mortgage Bank Plc, McNichols Plc and The Initiates Plc and as at January 28, 2021, the market capitalisation stood at N5.263 billion. While, on February 5, 2021, the NSE admitted 10 million shares of Briclinks Africa Plc by way on introduction into the Growth Board.
Specifically, the company listed 10 million ordinary shares of N1 each at N6.26 per share, adding a value amount of N62.6 million to the Board and the NSE market capitalisation.
Capital market analysts stated that SME listing on Stock Exchanges will add significantly to the creation and distribution of wealth in any economy, noting that Bank loans might either be too expensive or not even an option for most SMEs at this time because of bank stringent measures which often require assets to back the loans.
They pointed out that “Access to long-term financing enables SMEs to solve their financing needs over the long term and this has a positive effect on economic growth and employment generation. The stock market can provide this and have always played a role in bringing together those with savings to invest and those who need capital thereby supporting economic growth.
The Stock Exchange can be the most appropriate form of acquiring long-term financing for structured SMEs and the cost of equity capital can be lower than other forms of finance particularly bank loans.”
Speaking to LEADERSHIP, senior stockbroker with Calyst Securities Limited, Mr Tunde Oyediran said, “We know SMEs find access to funding difficult, this is where capital market is relevant. If the SMEs looks promising and can deliver values to investors, they will surely attract funds for their businesses and enhance their accelerated growth.”
Oyediran said the NSE has used this vehicle to propel some SMEs, saying that small companies that came to the market have been able to attract investors and grew overtime through this platform.
A capital market analyst, Dr Timi Olubiyi, explained that “World over, SME operators primarily depend on bank loans or government schemes for financing. More so, SMEs have a heavy dependence on debt rather than equity in their business operations.
“The stock market can provide diversification of funding sources if well harnessed by structured SMEs significantly, the stock market is a critical and distinct alternative to traditional bank lending and financing. If accessed, it can provide a cost effective medium- to long-term finance for SMEs.
“In Nigeria the Alternative Securities Market (ASeM), recently remodeled to become the Growth Board, specifically design for SME’s to raise funds. This is a laudable and commendable feat from the management of the Nigerian stock exchange.
“The platform is strictly for SMEs and is characterised by lower, attractive listing requirements, and reduced listing costs than the main board.”
Head, listings business division of NSE, Mr Olumide Bolumole, said, “The launch of the NSE Growth Board further re-affirms NSE’s long-standing tradition of supporting the development of SMEs in Nigeria by offering entrepreneurs opportunities to access finance and scale their businesses.
“The Growth Board is expected to attract small to medium-sized companies that exhibit the potential for fast growth in their corporate earnings and are in the growth phase of their business cycle. It will also offer investors the opportunity to invest in such companies with potential for high returns/capital gains.”