Analysts Urge Stricter NGX Free Float Rules for Liquidity

Market analysts are calling for an overhaul of the Nigerian Exchange (NGX) free float rules to improve market liquidity. They warn that the existing framework permits the country's largest listed companies to maintain extremely low levels of publicly tradable shares, weakening market liquidity and price discovery.

Analysts from Meristem Research argue that the exchange should abolish provisions allowing companies to satisfy listing requirements based on minimum naira value instead of a strict percentage threshold. They advocate for a mandatory 20 percent free float for eligible companies to significantly enhance market efficiency and deepen Nigeria's capital market.

Currently, companies listed on the main board and premium board must maintain at least 20 percent free float held by a minimum of 300 shareholders, with market values of N20 billion and N40 billion, respectively. Critics note that alternative compliance options enable several large-cap companies to remain listed despite having a small fraction of shares available for public trading, citing BUA Foods with an estimated 5 percent free float and Dangote Cement with less than 10 percent.