The Nigerian Exchange (NGX) has recently introduced changes to the mechanisms governing how share prices respond to trading activity. To many investors, the announcement may have appeared technical and obscure, but its implications for the Nigerian capital market are both practical and far-reaching. Essentially, this reform is not about changing the value of any company. Rather, it is about ensuring that share prices move in response to genuine and meaningful market activity, not the isolated transactions of a handful of investors executing insignificant trades.
The reform operates through two interrelated instruments: a minimum quantity threshold and a revised tick size. The minimum quantity threshold specifies the volume of shares that must change hands before a stock’s price is permitted to move at all. The tick size, on the other hand, determines the smallest increment by which that price may change once the threshold has been crossed. To be
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