LAGOS – The Association of Stockbroking Houses of Nigeria (ASHON), says the new par value rule approved by the Securities and Exchange Commission (SEC) would enhance liquidity at the nation’s bourse.
Par value is the nominal value of a share as stated in the Memorandum of Association of an Issuer.
Mr Emeka Madubuike, ASHON President told the News Agency of Nigeria (NAN) in Lagos that modification of shares par value from 50k to one kobo would boost trading activities in dormant companies.
Madubuike, who applauded the approval, said that stocks which had been on offer at the exchange because of 50k par value would witness increased activities with the implementation of the rule.
He said that some of these stocks had been on offer because buyers were offering below 50k par value, noting that the rule would boost investors’ confidence in the stocks going forward.
“Most stocks have been on offer for long because of the par value issue but if allowed to float the market will determine the price,” Madubuike said.
The ASHON president said that investors would no longer carry shares without seeing buyers once the rule was implemented.
He said that the market conducted an extensive study on the issue which involved shareholders and operators before it was approved.
NAN reports that SEC had on June 2 approved the par value rule submitted by the National Council of the Nigerian Stock Exchange (NSE).
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The exchange in a statement issued to stockbrokers said that price of every share listed on the exchange would be determined by the market notwithstanding its par value.
“Notwithstanding its par value, the price of every share listed on the exchange shall be determined by the market, save that no share shall trade below a price floor of one Kobo per unit,” NSE said.
It said that the price floor of the company shares traded on the NSE has been revised to 1k from the previous price floor of 50k.
Price floor is the amount below which the price of one unit of a share shall not be permitted to trade, and the minimum amount which must be paid for a share in the event of a drop in the unit price of that share.
It said that the NSE was yet to officially communicate when the implementation of the rule would commence.
The NSE in the statement said that the draft rule was considered by the Rules and Adjudication Committee of Council (RAC) on Oct.21, 2014, and approved for exposure to stakeholders for comments.
It said that the draft rule was exposed for stakeholders’ comments between Oct. 29 and Nov. 12, 2014.
The statement also added that the NSE Council approved the draft rule at its meeting on Feb. 26, 2015 for submission to SEC. (NAN)
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