NGX Group 2020 Financial Report Strong, Resilient 

Yemisi Izuora

The Board of the Nigerian Exchange Group, NGX Group has made public its audited financials for 2020 showing the resilience of NGX Group in turbulent and challenging market conditions.

The shareholders of the NGX Group, Plc convened in Abuja, recently for its first Annual General Meeting (AGM) after the demutualisation of The Nigerian Stock Exchange (NSE).

Shareholders approved all the resolutions proposed at the meeting including the re-election of the Non-Executive Directors who were retiring by rotation; the election of the members of the Audit Committee; the proposed remuneration for the Board and Non-Executive members of the erstwhile National Council of the NSE; and the introduction of equity-based incentives to employees’ remuneration, including an Employee Share Ownership Plan (ESOP) and a Performance Based Long-Term Incentive Plan.

NGX Group, leading by example as a new corporate entity, is committed to the highest governance standards, recognising its role in critical capital markets infrastructure.

Much like leading exchanges in the world today (London Stock Exchange Group, Intercontinental Exchange, Singapore Exchange, Japan Exchange Group) and other African exchanges such as Johannesburg Stock Exchange and FMDQ, the demutualised NSE gave rise to a group structure with attendant benefits. Today, NGX Group stands as the non-operating holding company with three (3) subsidiaries – the operating Exchange, Nigerian Exchange Limited led by Mr. Temi Popoola, CFA, as the Chief Executive Officer (CEO); the independent regulatory company, NGX Regulation Limited led by Ms. Tinuade Awe as the CEO; and the real estate company, NGX Real Estate with Mr. Gabriel Igbeka serving as Acting CEO. Each of these entities is governed by independent boards, the composition of which was not only strategic but in line with acceptable practices.

At the Extra Ordinary General Meeting (EGM) of the then Members of NSE in March 2020, a resolution was passed pertaining to the appointment of the inaugural board of NGX Group, post demutualisation.

The process relating to selection of council (board) members was duly followed and the identified candidates were taken through a rigorous due diligence exercise before passing through the internal governance process, being submitted to the Securities and Exchange Commission for approval and thereafter, presented to previous members  at the 2020 EGM.

The members agreed to the importance of maintaining continuity and preserving The Exchange’s collective knowledge and learned experience (institutional memory) as well as retaining stakeholder confidence and maintaining market stability.

It was therefore agreed that the composition of the Boards would comprise individuals selected from the erstwhile National Council and external candidates. This understanding was contained in the Scheme of Arrangement dated 20 January 2020 between The Nigerian Stock Exchange and the Dealing and Ordinary Members of The Nigerian Stock Exchange in respect of the demutualisation of The Nigerian Stock Exchange (The Exchange) (the Scheme).

The Scheme was approved at the Court Ordered meeting held on 3 March 2020. The approved Scheme of Arrangement was sanctioned by the Court on 14 May 2020 and filed at the Corporate Affairs Commission (CAC) on 1 June 2020, and it became effective on the date it was filed at the CAC.

NGX Group’s Board currently has eleven (11) members and out of the 11  directors, five (5) have direct or indirect shareholdings in the company providing strong representation for the company’s shareholders. In addition, going above the statutorily required minimum that a public company shall have at least three (3) independent directors (S.275 (1) CAMA 2020), NGX Group went with four (4) independent directors.

Transition Agreements expected to last for 18 months, were also agreed and it was recognized that subsequent composition of the Board following this transition period will evolve in line with existing rules and regulations, market standards, competitive realities and succession planning policies. The composition of the inaugural board – comprising some members of the erstwhile Council and New members – was approved at the EGM, on the condition that their appointment would become effective post demutualisation.

The market continues to repose confidence in NGX Group evidenced by the statement from the Chairman, Association of Securities Dealing Houses of Nigeria, representing the largest shareholder group in the company, Chief Onyewenchukwu Ezeagu, who stated prior to the recent 60th AGM, “As major shareholders, we were involved in all the processes of demutualisation. We are comfortable with the agenda of the meeting as we have been part of the whole process. The proposed resolutions had been made public in the course of the demutualisation. The meeting will bring about a renewed relationship between the NGX Group and its stakeholders.”

To align the interests of internal stakeholders with those of shareholders in long-term value creation, the establishment of ESOP was also approved at the 60th AGM, further to the approval by way of special resolution at the March 2020 EGM granting authorization to directors and subject to regulatory members / shareholder approvals.

The creation of an ESOP for the benefit of employees (who will pay a discounted fee per share) had been proposed by the Membership Verification Panel and the Demutualisation Advisory Committee in 2016.

The Group held several stakeholders’ engagement sessions regarding the resolutions to be presented at the Court Ordered Meeting and EGM, and these sessions addressed concerns hitherto held against any of the proposed resolutions. As such, the decision to establish an ESOP was evidently predicated upon the authority granted to directors by Members at the EGM in 2020.

Further to this authorisation, the Council commenced the process for the establishment of the ESOP by undertaking a robust request for proposal (RFP) and competitive pitching which resulted in the appointment of a seasoned External Consultant (the Consultant) following a rigorous selection process. The draft ESOP which was developed by the Consultant was not only benchmarked against global best practices, but also subjected to scrutiny by both the erstwhile National Council and the Board of NGX Group Plc, before a revised version was approved by shareholders at the recent AGM

It was also made clear at the meeting that the authority being sought from members is to issue and allot existing ordinary shares from the authorised share capital of Nigerian Exchange Group Plc for the ESOP. No new shares are being created for this purpose.

Evidently, NGX Group has already begun to actualise the benefits of demutualisation including the alignment of stakeholders’ interests in the value created by the new Group under a revised Corporate Governance framework. With its new structure, the HoldCo, NGX Group, sits at the apex of several organisations and is tasked with the implementation of strategic value-creating initiatives and services that strengthen the Group. Under the leadership of Mr. Oscar N. Onyema, OON, the Group is better positioned to realise its vision to be Africa’s leading integrated capital market infrastructure group.

Some of the key activities Mr. Onyema is undertaking include overseeing the financial planning activities of the Group including Group capital allocation as well as the investment activities of the Group with emphasis on treasury management, capital allocation, fund raising, private equity investments, Mergers and Acquisitions as well as overseeing integration processes to maximize returns. Onyema’s contributions to the development of Africa’s capital market is not lost on stakeholders as he just got elected to the board of the World Federation of Exchanges.

Recently, Mr Oscar N. Onyema, The Group Managing Director and Chief Executive Officer, NGX Group Plc, had commented, “As the Group progresses its plans to list on Nigerian Exchange Limited, there are exciting days ahead. The financial performance of the Group in 2020 showed strong resilience and prospects for growth. The Group ended 2020 in a sound financial position with net asset growth of over 10% to N31.28Bn, and income and resulting surplus after tax valued at N6.02Bn and N1.84Bn respectively. In the context of COVID-19 pandemic, we maintained tight cost controls, which reduced expenses by 13% despite investments in technology that allowed remote operations with zero downtime.”

With these in view, the capital markets look forward to exploring this new phase of growth for the benefit of all.

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