Banks, oil firms, others sanctioned for flouting NGX governance rules

Fifty one companies, including banks, oil firms and drug manufacturers, have been listed by the Nigerian Exchange (NGX) for failing to comply with extant corporate governance standards.

In its latest regulatory, the NGX Regulation (NGX RegCo)- the self- regulatory organisation (SRO) that regulates activities at the Exchange, stated that the 51 companies “fell short of the minimum listing standards in terms of timely disclosure of their audited annual financial statements.”

According to the NGX, 18 of the 51 firms were notorious for breaching rules that require quoted companies to provide timely information to the market.

The latest tracker report on corporate governance, regulation and compliance, otherwise known as X-Compliance, indicated that nearly one third of quoted companies have pending and unresolved compliance and governance issues that place them below the standards required of quoted companies.

The report was based on the Compliance Status Indicator (CSI) of the NGX, which uses three-letter codes to mark out companies that fall below the post-listing requirements at the Exchange. The tracker is updated regularly with weekly transactions and activities at the Exchange.

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Post-listing rules at the NGX require quoted companies to submit their audited annual earnings reports, not later than 90 calendar days after the expiration of the period. Most quoted companies, including banks, major manufacturers, oil and gas companies, breweries and cement companies, use the 12-month Gregorian calendar year as their business year. The business year thus terminates on December 31.

The NGX indicated that most of the companies were red-tagged for failing to submit their audited financial statements for the year ended December 31, 2022.

“The sanctions for non-compliance with periodic financial disclosure obligations are clearly spelt out in the Rules for Filing of Accounts and Treatment of Default Filing, Rulebook of NGX (Issuers’ Rules),” the NGX stated, in reference to monetary sanctions for the flagged companies.

The red-tag codes are part of the disciplinary measures against defaulting companies.

A market source said the inclusion of many banks, which used to expeditiously comply with submission of results, may not be unconnected with the delay in receiving final approval of their results from the Central Bank of Nigeria (CBN).

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The NGX uses 10 codes to tag companies with regulatory and compliance issues to draw attention to the unresolved deficiencies as part of efforts to enhance market integrity and ensure investors have full and transparent disclosures to make their decisions.

Some of the codes are Below Listing Standard (BLS), Missed Regulatory Filing (MRF), Delisting in Progress (DIP), Awaiting Regulatory Approval (AWR), Restructuring (RST) Below Listing Standard and Awaiting Regulatory Approval (BAA), Below Listing Standard and Restructuring (BRS) and Missed Regulatory Filing and Restructuring (BMR).

BLS comprises the deficiencies regarding continuing listing standards while MRF implies that a company missed regulatory filing deadline.

DWL relates to companies that have been served with a delisting notice but the delisting process has been put on hold because they have received a stay of action from the Exchange for a defined period during which they undertake to cure the issues that led to the issuance of the delisting notice.

If they fail to cure the issue within the defined period or any extension thereof, the hold on the delisting process will be lifted.