Nigeria: NGX, SEC Review Free-Float Rules to Enhance Market Liquidity

Nigeria’s capital market regulators, the Nigerian Exchange Group (NGX) and the Securities and Exchange Commission Nigeria (SEC), are reviewing existing free-float requirements for listed companies as part of efforts to improve market liquidity, deepen the equity market, and attract a broader base of investors.

Free-float rules require companies to make a minimum portion of their shares available for public trading, excluding holdings by insiders, founders, or government entities. These requirements are designed to enhance liquidity, reduce price volatility, and ensure efficient market functioning. In Nigeria, listed firms are currently required to maintain a minimum public float of 20 percent or at least ₦40 billion worth of tradable shares.

The ongoing review follows concerns that many of Nigeria’s largest listed companies are tightly held by dominant shareholders, limiting the volume of shares available in the market and increasing susceptibility to price swings.

Speaking on the development, Temi Popoola, Chief Executive Officer of the NGX Group, said the review aims to ensure that more companies comply with free-float requirements while also improving the overall structure of the market.

According to Popoola, regulators are evaluating how to optimise existing thresholds, improve the accuracy of free-float data captured by the exchange, and determine whether current requirements remain appropriate in a rapidly evolving market environment.

“This includes assessing how we optimise existing free-float levels, ensuring the accuracy of free-float data captured by the exchange, and evaluating whether current free-float requirements remain appropriate as the market evolves,” he said.

As part of the reform efforts, the NGX is also considering integrating free-float metrics into the construction of market indices, rather than relying predominantly on market capitalisation.

This approach aligns with global practices adopted by leading index providers such as MSCI Inc. and FTSE Russell, which incorporate free-float adjustments to better reflect the investable portion of listed equities.

“We are considering whether elements of free float should play a greater role in how some of our indexes are structured, given that many indexes are currently based primarily on market capitalisation,” Popoola added.

The proposed changes form part of broader efforts to strengthen Nigeria’s capital market infrastructure and support increased investor participation.

Recent market performance reflects growing activity on the exchange. On March 16, the NGX All-Share Index (ASI) crossed the 200,000-point mark for the first time, rising by 1.55 percent to close at 201,474.89 points, up from 198,407.30 points recorded in the previous trading session.

Market capitalisation also increased to ₦129.33 trillion, compared to ₦127.36 trillion in the prior session, signalling continued momentum in the domestic equities market.

Regulators say the review of free-float requirements will play a key role in sustaining this growth by improving liquidity, enhancing price discovery, and positioning Nigeria’s capital market to better compete for both local and international investment.