No To Forced Listing Of Companies

THERE are worrying signals that unless due caution is brought to bear, a law that will force some blue chip private companies to sell their shares at the Nigerian Stock Exchange may be enacted. Such a law is reported to be nearing the public hearing stage at the House of Representatives.

If the law becomes operative, big companies, such as the successful telecoms giants (MTN, Globacom, Etisalat and others) as well as oil majors like Shell and Chevron, will be compelled by law to float their shares on the Nigerian bourse. Those behind this initiative argue that Nigerians should be given the opportunity to share in the large amounts of profit that these companies are raking in from the Nigerian market, thus allowing their profitability to have a trickle-down effect.

This argument is myopic and dangerous, because it will eventually frighten investors who may feel threatened that their companies may be “nationalised” through the back door. It will foil the current standing of Nigeria as the African continent’s number one destination for foreign investments.

Making laws to force companies already operating successfully to share their ownership is like changing the laws of a game midway. It is inimical to private business and will surely injure the economy. Besides, Nigeria will be repeating a serious blunder it committed and forced many multinational companies to fold up, while some of them moved their operations to more friendly environments in the sub-region.

The advent of the oil boom in the 1970’s increased the purchasing power of Nigerians and saw a boom in the mainly multi-national companies operating in Nigeria. The military government then issued the indigenisation decree, nationalising foreign blue chip companies. No sooner did Nigerians take control of their boards than these companies lost control and a vast majority of them could not survive. We had to embark on aggressive shopping for private/foreign investors to get back on track.

Since we have chosen the Western capitalist model of economic operation, we must allow profitable private businesses to decide if they want to share their ownership with the public or not. It is only companies seeking to raise funds that may want to go to the capital market, and indeed, many of the companies in question have already done so in other countries in tune with their local needs.

Successful companies can continue to share their wealth through adequate taxation and policies to compel minimum levels of corporate social responsibility to promote scholarship, the arts, entertainment, youth, sports, culture and communal development. Many corporate organisations are not doing enough of this due to apathy on the side of policy makers.

Forcing successful companies to sell shares is a policy volte-face which once burnt our fingers.  Let’s not go there again.

- Culled from: http://www.vanguardngr.com