Stop the fireworks at capital market probe

by Gbenga Kayode

Recent disconcerting developments in forms of grandstands, vituperations, bribery allegations and tendencies to work at cross-purposes being exhibited by most of the key market stakeholders invited by the Nigerian House of Representatives’ Ad-Hoc Committee on investigation of the Near-Collapse of the Nigerian Capital Market, headed by Hon. Ibrahim El-Sudi, could further aggravate the already sagging investor confidence in the nation’s all-important stock market.

Put differently, some stakeholders’ passing the buck over the crash and continual decline in the market’s fortune yet, will deepen the crisis besetting the Exchange. That is why it becomes more crucial than ever before that the foremost stakeholders –market regulators, operators, makers, movers and the investing public– determinedly think up practical measures towards regaining mutual trust and confidence-building, a fundamental component for sustainable success, in the once thriving but currently beleaguered Nigerian Capital market as soon as possible.

One recalls clearly, that during the much-publicised boom period, particularly between 2007 and 2008, the Market Capitalisation of equities listed on the Nigerian Stock Exchange (NSE) reportedly soared to about N15.64 trillion with 319 listed securities during the period. And the market fortune snapped, following the landmark worldwide economic and financial meltdown that virtually tossed the global economy to its very foundation.

Sadly, the hitherto unprecedented, well-celebrated fortune recorded in the Nigerian Capital market equally plummeted, and has continued to experience a free fall in the last years. The Market Capitalisation was N7.13 trillion as of Friday, May 18, 2012.

As causative factors responsible for the deepening recession in the nation’s Stock market, several market analysts and stakeholders have attributed the sudden disruptions in market operations to observable weaknesses in corporate governance, poor risk management, internal control, greed and insufficient oversight of brokerage firms and listed companies. Similarly, other financial pundits have linked the disturbing drop in the market activities to issues of low integrity quotient, defective ethical backgrounds, managerial incompetence by the regulatory agencies as well as existence of too many but dysfunctional regulators.

Perhaps, initially dazed by the allegation of mismanagement of fund regarding hotel accommodation and feeding bills running into tens of millions of Naira she had allegedly incurred, by the dissolved Hon. Herman Hembe Ad-Hoc Committee, it was apparent that Ms. Arunma Oteh, Director-General (DG), Securities and Exchange Commission (SEC), was set to spill the beans and defensively too at the re-constituted panel.

Aside from accusing the dissolved Hembe’s Ad-Hoc Committee of inappropriate demand for bribe to bankroll the investigation into the market activities, during one of her appearances before the new panel, Ms. Oteh said the inability of the former leadership of NSE, headed by Prof. Ndi Okereke-Onyiuke, has contributed largely to the distasteful market trend now.

The SEC boss further disclosed that Okereke-Onyiuke’s leadership at the NSE helped also misappropriated about N1.5 billion, aside from purportedly purchasing 195 Rolex wristwatches for N186million. According to Oteh in her submission at the panel, 92 of the “expensive” wristwatches valued at N99.5million could not be accounted for by the ousted NSE leadership. Pronto the following day at the panel, Prof. Okereke-Onyiuke, when responding to the allegation by Oteh, said the Rolex wristwatches her NSE leadership bought were for awardees who had spent 48 years in the service of the Nigerian Capital Market.

As the former Director-General of the NSE, under whose regime the market attained the zenith in 2007, but came crashing down in 2008, Okereke-Onyiuke rather, blamed the unfortunate development on the sudden, unlawful invasion of her office on NSE at the instance of the Oteh-led SEC in August 2010; indiscriminate granting of margin loans to share investors and market operators with limited management capability by Nigerian banks, which reportedly bankrolled 60 per cent of quoted equities; and the failure of the regulators, including Central Bank of Nigeria (CBN) and SEC, which supposedly shirked their responsibilities at the time.

Thus, besides a Deputy Governor of the CBN who before the panel, honestly acknowledged that “all” of the market regulators and operators, including the CBN, were culpable in near crash of the Nigerian Capital, other stakeholders invited by the panel have either been defensive of their roles, or unprepared to take responsibility for their purported shoddy part played in the market meltdown.

Instead of washing their dirty linen in public by engaging in needless grandstanding, brickbats and vituperations against one another, a situation which could exacerbate the misfortune of the dying market, the likes of former NSE Director-General Okereke-Onyiuke and SEC’s DG Oteh, rather should help in proffering measures towards reviving the much-needed investor confidence and fortune of the Nigerian Stock market.

Ms. Oteh, particularly needs show leadership by making earnest efforts at reconnecting to her Management team at SEC. An embarrassing scenario that played out right at the probe panel where all the SEC Commissioners in attendance pointedly denied their leader’s (Oteh’s) assumed corrective measures on recruitment drive and roadmaps to the world capital market and operational functions, is unacceptable. As a prime regulatory body of the Nigerian market, such a development only indicates that there is a fundamental disconnect in the Management of the Commission.

The Government, again, must revive the nation’s economy by creating an enabling environment for more Nigerian businesses, particularly Small and Medium Enterprises (SMEs) to get listed on the Nigerian Stock Exchange in order to access relatively cheap funds for growth and expansion. The current practice of high dependence on foreign institutional investors, who incidentally make up about 70 per cent of daily market activities and reportedly take profits at 5-20 per cent marginal gains, should be discouraged.

As part of the confidence-rebuilding endeavour, market regulators, operators, makers and movers need to resume public enlightenment programmes on the market fundamentals, dynamics, and differences between value investing and share trading for investors and shareholders’ associations, and intimate them with realistic measures being taken to revitalise the market.

This is crucial, as many who had lost even their lives’ savings to share investment, and subsequently got their fingers burnt on the NSE, have since stayed away since the global financial meltdown set in. Leading stakeholder need to intensify efforts at addressing the biting insufficient liquidity challenge affecting the Stock market. Why? The capital market still remains a veritable barometer with which to measure the health or otherwise of the Nigerian economy.

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