Listing by Introduction: Strengthening Structure, Not Scrapping Pathways

Kayode Tokede

The recent debate around listing by introduction reflects a broader anxiety about the depth and liquidity of Nigeria’s capital market. That frustration is not misplaced. At a time when global capital is rotating towards emerging and frontier markets in search of real economy exposure, Nigeria should be positioning itself as a serious destination for durable long-term investment. The question, however, is whether eliminating a recognized listing pathway meaningfully addresses the structural issues that constrain market depth, or merely offers the comfort of a visible but incomplete solution.

Listing by introduction has been portrayed in some quarters as a shortcut to public markets, a way for companies to obtain listing status without submitting to the discipline of price discovery or investor scrutiny. That characterization oversimplifies both the structure and its intent. In many well-regulated markets, listing by introduction is an established admission route that allows companies already meeting eligibility requirements to list their securities without raising new capital at the point of admission. The distinction between an initial public offering and a listing by introduction is straightforward: one is a capital-raising exercise; the other facilitates public trading and market visibility for existing securities.

The structure itself does not dilute disclosure standards, weaken governance requirements, or reduce oversight. Companies seeking admission must satisfy financial reporting obligations, demonstrate operational track record, and comply with corporate governance expectations. Once listed, they are subject to continuing obligations that include periodic financial disclosures, timely release of material information, and adherence to established governance standards. The responsibilities of being a public company do not depend on how one enters the market; they begin at admission and continue thereafter.

A further misconception is that companies admitted through listing by introduction list at assumed or protected prices are detached from market realities. In functioning securities markets, no institution guarantees the value of a listed share. Issuers and their advisers may determine an initial reference price using recognized valuation methodologies, but once trading commences, price discovery rests squarely in the hands of investors. If a security is perceived to be overpriced, demand adjusts accordingly. If undervalued, buying interest increases. The corrective interplay of demand and supply is not a weakness of the system; it is the very mechanism through which markets determine fair value.

The more pressing concern in Nigeria’s equity market is liquidity. Liquidity, however, is not determined by listing route alone. It is the outcome of several interlocking factors: meaningful free float, broad shareholder distribution, active institutional participation, credible research coverage, effective market-making frameworks, macroeconomic stability, and consistent transaction pipelines. An IPO with limited free float can trade thinly just as easily as any other listing. Conversely, a well-structured admission accompanied by sufficient distribution can generate healthy trading activity regardless of the route taken.

Reducing the liquidity challenge to listing by introduction risks mistaking symptoms for causes. Markets do not deepen simply because pathways are narrowed. They deepen when structural incentives align to encourage transparency, participation, and sustained investor engagement. Strengthening free float thresholds, encouraging wider domestic institutional involvement, enhancing disclosure quality, and maintaining macroeconomic clarity will do more to build durable liquidity than eliminating an established mechanism.

None of this suggests that reform is unnecessary. On the contrary, reform is essential. Nigeria must continuously refine its market architecture to compete effectively for global capital. But reform must be deliberate and comprehensive. It must focus on outcomes, liquidity, transparency, governance, and investor confidence, rather than concentrating solely on how companies enter the market.

Public markets demand discipline from issuers, investors, advisers, and policymakers alike. The objective should not be to restrict legitimate pathways, but to ensure that every company that lists contributes meaningfully to depth and long-term value creation. A strong capital market is defined less by the mechanics of entry and more by the integrity of its structure and the confidence it inspires.

Nigeria possesses the scale, sectoral diversity, and entrepreneurial energy to sustain a far more vibrant equity market than current volumes suggest. Capturing that potential will require structural strengthening, not symbolic adjustments. Scrapping mechanisms may signal action. Strengthening architecture will deliver progress.