Currently, many of Nigeria’s largest listed companies are tightly held by controlling shareholders, leaving a relatively small proportion of shares available for public trading. This concentration can limit liquidity and contribute to sharp price swings in the market. By law, large companies are required to have a minimum public shareholding of 20%, or at least 40 billion naira ($29 million) of shares available for trading.
The spotlight on free float intensified this year after MSCI Inc. tightened its definition of the measure, prompting some passive investors to reduce exposure to stocks in countries with low publicly tradable shares, such as Indonesia. In response, Nigerian authorities are exploring rules to ensure more companies meet the requirement.
Temi Popoola, chief executive officer of the Nigerian Exchange Group, said the bourse is working closely with the Securities and Exchange Commission Nigeria to review “issues around free float and market liquidity.” In an interview at his Lagos office, Popoola said the assessment includes optimising existing free-float levels, verifying the accuracy of exchange data, and evaluating whether current requirements remain suitable as the market evolves.
Examples highlight the concentration challenge: Dangote Cement Plc has a free float of roughly 11%, while Bua Cement Plc—the country’s second-largest by market value—has less than 3% of shares publicly traded. Both companies satisfy the 40 billion naira threshold, but the proportion of freely tradable stock remains low.
Nigeria is looking to learn from international experience. In 2010, India faced similar concerns over dominant controlling shareholders and limited stock availability. Authorities mandated listed firms to maintain at least 25% public shareholding. Companies below the threshold had to raise their free float by five percentage points annually, while newly listed firms were given three years to comply. These measures helped India attract $1.25 trillion in foreign investment and foster one of the world’s largest retail investor bases.
Local market analysts see potential benefits for Nigeria. Peter Omoregie, managing director of CardinalStone Securities Ltd., said that higher free-float requirements could encourage closely held companies to release more shares, increasing liquidity and creating opportunities for broader investor participation.
Beyond revising public-shareholding rules, regulators are also considering whether equity and index weightings should be based on shares outstanding rather than market capitalisation. Popoola noted, “We are exploring 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.”
Benchmark providers such as MSCI Inc. and FTSE Russell rely on free float to determine how easily investors can buy and sell stocks. Higher freely tradable shares can increase a company’s weighting in major indices, making it more visible and attractive to institutional investors.
Popoola emphasized that all efforts are part of a broader strategy to deepen the Nigerian equity market, improve transparency, and encourage sustainable investor engagement, both at home and abroad.