NGX, SEC weigh new free-float framework to deepen market activity

REGULATORS in Nigeria’s capital market are set to revisit the rules guiding free float for listed companies, as part of broader efforts to enhance trading activity, expand the equity market, and attract a wider pool of investors.

Free float refers to the portion of a company’s shares that are available for public trading, excluding stakes held by insiders, founders, or government entities. The requirement is meant to improve liquidity and stabilise price movements, with companies generally expected to keep at least 20 percent of their shares in public hands or meet a specified value benchmark.

The planned review, reported by Bloomberg, is being carried out jointly by the Nigerian Exchange Group (NGX) and the Securities and Exchange Commission (SEC).

This move follows concerns that a number of the country’s largest quoted firms are largely controlled by a few dominant shareholders, leaving a limited volume of shares available for trading and increasing susceptibility to volatility.

Current listing rules require companies to either maintain a minimum of 20 percent public shareholding or ensure that shares worth at least N40 billion are accessible to investors in the open market.

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Regulators eye stricter alignment

Commenting on the development, CEO of NGX Group, Mr Temi Popoola, noted that the initiative is aimed at driving better compliance among listed firms.

He said the exercise will examine how to make better use of existing free-float levels, improve the reliability of data on tradable shares, and determine whether the current thresholds still reflect market realities.

Popoola also indicated that regulators are exploring the possibility of factoring free float into index construction, instead of relying mainly on market capitalisation. This would align Nigeria’s market more closely with global standards used by benchmark providers such as MSCI Inc. and FTSE Russell.

According to him, these efforts are part of a wider strategy to build a more resilient market structure capable of supporting increased investor participation.