Nigeria’s capital market regulators have begun a review of free-float requirements for listed companies in a move aimed at improving liquidity, strengthening market transparency, and attracting more investors to the equity market.
The development was confirmed on Monday by Nigerian Exchange Group (NGX Group), which said it is working with the Securities and Exchange Commission (SEC) to reassess existing rules governing publicly tradable shares.
The review follows concerns that low levels of publicly available shares in some listed firms are limiting trading activity and increasing the risk of sharp price volatility in the market.
Under the current framework on the Nigerian Exchange Limited (NGX), large companies are required to make available for public trading at least 20 per cent of their shareholding or shares valued at a minimum of ₦40 billion.
Companies listed on the Growth Board—typically small and medium-sized enterprises (SMEs), must float at least 15 per cent of their share capital.
However, regulators say the structure may need to evolve as the market expands and investor participation increases.
Temi Popoola, Chief Executive Officer of NGX Group, said the ongoing review is designed to strengthen the market’s structure and ensure compliance with free-float requirements.
According to him, regulators are examining ways to optimise existing free-float levels, improve the accuracy of data captured by the exchange, and determine whether the current rules remain appropriate as the market continues to develop.
Popoola also noted that regulators are considering whether free-float levels should play a larger role in determining the structure of stock market indexes.
Currently, many indexes are primarily weighted based on market capitalisation, but a revised framework could place greater emphasis on shares outstanding and publicly tradable shares.
“All of these efforts form part of our broader objective of deepening the market and ensuring that its structure continues to support growing investor participation,” he said.
Free-float levels have come under increased scrutiny globally, especially after global index provider MSCI tightened its definition of the metric earlier this year.
In Nigeria, some major companies have relatively low proportions of shares available for public trading. For instance, Dangote Cement Plc has a free float of about 11 per cent, while BUA Cement Plc has less than 3 per cent of its shares available to investors.
Despite the small percentages, both companies still meet existing rules because the value of their publicly tradable shares exceeds the ₦40 billion threshold.
Market analysts say tightly held controlling stakes can limit liquidity and contribute to large price swings when trading volumes are low.
