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Emmanuel Ikazobo
The recent sack of the Director General of the Nigerian Stock Exchange (NSE), Professor (Mrs) Ndi Okereke-Onyiuke, and the ongoing investigations into the grave allegations surrounding her sudden exit, could not but raise some serious questions about the future of the nation's capital market.

The first question that may agitate the mind of every ardent watcher of the scenario is this: would all this razzmatazz add up to boosting investors' confidence? Or should we be expecting another barber's chair gyration; all motion no movement?

This question is particularly relevant now since it was a considered opinion of many that the low patronage witnessed in the market before the August 4 intervention was as a result of vote of no confidence passed on the ousted market leaders by the investors.

According to Mr Oladipo Aina, a former president of the Chartered Institute of Stockbrokers (CIS), investors who should have invested in stocks are taking their money elsewhere because of no-confidence vote they had already passed on the market leaders.

His words: 'Any investor that puts money in the market today is certainly buying cheap, but these same people are saying that they do not have confidence in the leadership of the market, that they will rather minimize their loss by putting their money in the bank or government bonds instead of investing in equities in the market. It is my personal opinion that our regulators can do better than they are doing at the moment. An impression is being created that some stakeholders are untouchable when it comes to discipline especially issuers and operators. This has become the biggest issue in the market today.'

Aina, who dropped this bombshell two years ago in Lagos at a symposium organized by the Yoruba Tennis Club on the Global Economic Meltdown-Nigerian Experience, then called for a change in the leadership of the Nigerian capital market as investors had lost confidence in their ability to revitalize the market. To get out of the woods , Aina , who is also the Managing Director of Signet Investments and Securities Ltd, called for total restructuring:

'Our market needs a complete restructuring and overhaul .The governance structure of Nigerian capital market needs to be reviewed with the aim of improving investors' confidence which is at its lowest ebb at the moment. All the efforts now being made by our regulators appear very good but they are certainly not adequate because the structure as it is today can not carry all the intended superstructure that the various committees have recommended'.

Like Rome, the investors' apathy did not surface in a day. It started in 2008 during the share price meltdown that saw investors losing close to N3trillion in the market. For instance, some one like Aremo Olusegun Osoba, the former governor of Ogun State, clearly provided a face behind the figures. According to the ex-governor, the hundreds of millions of Naira he sank on stocks had all gone down the drain.

His regrets: 'If I had known it would be like this, I would have stuck to my strategy of buying property. I wasn't a stock person. I believe more in property .But I was persuaded into it and it hit me hard. You can imagine when First Bank went from N48 to N13.Then Access Bank went from N20 to N3;Transcorp from N9 to seventy something kobo.

So you can calculate how much I would have lost. It is not that I am buying one million, two million. We are talking of hundreds of millions, not tens of millions. I was buying and selling and making money until it collapsed .The whole thing crashed overnight. To make matters worse, one of the banks gave me credit to buy their shares. And when the market crashed, they sat on my money to offset the loan.'

Osoba is just one out of million investors trapped in the abyss of the meltdown. Lamenting the situation, Dr Oba Otudeko, the immediate past president of the Nigerian Stock Exchange(NSE), said while sympathizing with the likes of Osoba who had lost considerable value in the decline of investment on the Exchange:

'I have never seen something like this before. The Director General, Professor (Mrs) Ndi Okereke-Onyiuke, has been in the market for 27 years, there has been nothing like this ever. Even the 1929 Great Depression was not like this. The situation is tricky, it defies the strong fundamentals of the market'. Various reasons were adduced by various analysts on what hit the capital market.

According to Mr Fabian Ajogwu, the chairman of Leadership Effectiveness, Accountability and Professionalism (LEAP) Africa, poor ethical conduct by regulatory authorities and other questionable issues among banks led to the huge loss of money by investors in the stock market. Ajogwu was only toeing the line of argument of Mr Charles Udora, of the Securities and Exchange Commission (SEC), who opened the can of worms on what brought down the market. According to him, it was the chief executives of the banks that opened the Pandora box and let out all manners of evils that crashed the share prices.

According to him, the banks granted to investors loans totaling N388 billion which were not backed by collaterals, a practice said to have impacted negatively on the market. He was further quoted as saying that many bank chiefs heavily enriched themselves through this means and became richer than the financial institutions they are heading, savouring their gains to the detriment of the investors. Ajogwu added thtat 'ethics and corporate governance are more than ever very critical to addressing the challenges of the decline in the Nigerian capital market'.

As for the immediate past president of the Chartered Institute of Stockbrokers (CIS), Mr. Oladipo Williams, the blame for the situation should be laid squarely on the shoulders of stockbrokers, the market regulators as well as other stakeholders in the market, According to him, the problem originated from over-speculation by the market participants which led to the overpricing of some stocks and the inevitable market correction. Williams explained that the fundamental problem of the price slide is due to credit induced illiquidity in the banking system.

He stated that CIS in its findings discovered that 'the problem has three major components which are loss of confidence, liquidity issues and overhanging sale of equity orders, adding that the regulatory agencies have no harmonized position on how to tackle the capital market situation and that there are inconsistencies and lack of harmonization in government monetary, fiscal and financial systems policies'.

On investors' vote of no confidence on the market, the CIS boss lamented that this considerable loss of confidence by the generality of investors is causing low patronage in the market. Barely a month after she assumed office as the Director-General of SEC, Ms Arunma Oteh, promised tougher sanctions for anyone who infringes on capital market regulations.This was against the background that her predecessor was criticised for being too close to stockbrokers and operators of the stock exchange which undermined the commission's credibility as a regulator.

She spoke against the backdrop of her renewed effort to help restore investor confidence in the Nigerian capital market. Arunma Oteh, a former vice president of the African Development Bank (AfDB), who took over in January as SEC chief executive, pledged to improve transparency in the nation's capital market which at one point was among the fastest growing in the world. She stressed her determination to eliminate sharp practices, deter malpractice and change behaviours by ensuring that both the institutional and personal costs of any wrongdoing are extremely high.

She said that the commission would embark on a major reform to rebuild the capital markets, which were characterised by weak governance that had allowed infringements such as insider trading and share price manipulation to go unpunished. Oteh said that SEC would push for higher levels of disclosure and better regulation of accounting practices, including the adoption of International Financial Regulatory Standards (IFRS) by companies listed on the stock exchange.

She said: 'The absence of transparency undermines the market and creates perverse incentives for those individuals determined to bend the rules. 'I am determined to eliminate sharp practices, deter malpractice and change behaviours by ensuring that both the institutional and personal costs of any wrongdoing are extremely high,' Oteh told a press conference in Lagos last February.

'The absence of transparency undermines the market and creates perverse incentives for those individuals determined to bend the rules,' Oteh said, adding the SEC would enforce a comprehensive risk management framework. This is the context in which her actions of August 4 could be situated.But will she live up to expectation? Market operators and analysts expressed divergent views:

An operator in the Market, Mr. Vincent Adubuo of the ICMG Securities , however, criticized the bandwagon approach adopted by Securities and Exchange Commission (SEC) in dealing with issues relating to capital market regulation. Mr. Adubuo in a television programme criticized the idea of the apex capital market regulator taking 260 entities and individuals to Investment and Securities Tribunal (IST) saying it is a follow up to what the Central Bank of Nigeria (CBN) did with the first five Banks declared sick in August 14, 2009.

According to him, the problems that resulted in taking the entities and individuals to court did not start today. He said that if the predecessors of current SEC DG have been handling the matter bit by bit, it would not have degenerated to the level that a whole 260 will have to face the investment tribunal. Adubuo bemoaned the method of allowing the defaulters to swell to such magnitude before actions are taken against them saying that such could picture the market in bad image. 'It is improper to allow a problem to assume a magnitude dimension before actions and solutions are taken on them,' he said.

SEC, by some of the recent actions expressed its determination to deal with companies that fail to comply with rules guiding the market which include dispatching investors' share certificates three months after the conclusion of their public offers. To this end, the commission advised investors who have not received their share certificates and return/surplus moneys in respect of all public offers that closed on or before October 31, 2007, to forward their complaints to the office of its DG within 14 days, through any of its offices in Abuja, Lagos, Port Harcourt and Kano.

The Commission also explained in a statement that 'any public company found to have violated the commission's rules and regulations relating to the dispatch of share certificates and return/surplus money, will have its listed securities suspended indefinitely from trading on the floors of the Nigerian Stock Exchange.' It stated further that 'all such defaulting companies shall not be allowed to access the Nigerian capital market until all outstanding complaints against them are cleared to the satisfaction of the commission'.

Also, it said that it would no longer entertain any application for preferential allotment just as it bars any registrar from administering the register of its parent company. It stated: 'With effect from April 1, 2008, no registrar shall be allowed to administer the register of any public company to which it is a subsidiary, a holding company, a related company or which has substantial shareholding in the said registrar or in which the said registrar has substantial shareholding. Any violation of the above directive shall attract severe sanctions including outright withdrawal of registration to operate in the Nigerian capital market.'

The recent action of the apex capital market regulator that climaxed in the sacking of the NSE DG attracted reactions from operators in the market who are directly affected by such change. Mr. Okechukwu Unegbu, former President of Chartered Institute of Bankers of Nigeria (CIBN), said that SEC is using the power of a court. According to him, the development was long foreseen but that government and all its agencies should be proactive in all their actions.

He said that investors are operating the capital market like the money market or short term market. According to him, the capital market is not where you go, put money today and reap it tomorrow. He said the market is a long time market that guarantees a long term income and long term stability, adding that because the market is operated in such a way that it looks like you come in today, three months you are going with 100 per cent returns. 'It is not done and once you have such impression factored in your investments, the moment you fail to get it you start losing hope. So there is still a lot of confidence in the market.

Those who are still in the market are those who believe that the capital market is a long term and not a short term market. So I don't know why people should lose confidence now. May be they are losing confidence because of the pronouncements of the regulators. But they should know they are not buying the regulators, they are buying the stocks as managed by managers behind those stocks. If the managers are competent, then you should trust them. So what regulators say should be taken with a bitch of salt and analyse them before you start loosing confidence in the market. I don't see any reason why one should lose sleep over the crisis with regulators'

There is no reason why investors should stay away because there is crisis among the regulators. There is no doubt he said that every body lost money in this market and not only in Nigeria that people lost money in the capital market. He stated that there is wide world economic downturn saying that in the case of Nigeria, those people who came into the capital market that time are not really investors.

'They are people who came to speculate and being a speculator we know that speculators don't have that knack to really stay in the market for long. They come with such money and so such money flies out. So I don't see why they should loose confidence. If they loose confidence, then they are not candidates for the stock market'

Unegbu said that the crisis in the petition that resulted in crisis ought not to have risen because the petitioner himself was part of the Exchange. The first question that comes to mind he said is whether the financial mismanagement started the day he petitioned the SEC and whether it is done five years ago, three years ago and if it has been happening, why did he not mention it earlier than now.

'I am really in doubt if the person mentioned really wrote the petition; why did he not come out all these days. I don't think it is real that former President of the NSE wrote the petition as read on the pages of Newspaper. This will erode the remaining confidence of investors in the market. The fact that he decided to blow hot because he has issues with the management of the NSE, shows that he was pursuing personal vendetta. Investors should not look at what transpires between the management of the Exchange or the regulators rather they should concentrate on the performances of the stocks they want to buy.

He said that these blame them game cannot help the market, rather it will bring that investor confidence question to worse and deny the market the expected stability that is being addressed. He said that despite the crisis the real stock market investors will continue to petronise the market. Knowing that this is a long term market, the crisis will come and pass over time while their investment in the companies with good fundamentals remains. He said that what is happening between former leadership of the Exchange is left for them.

'I don't believe that because those who managed the NSE are in imbroglio then investors desert the market. The stockbrokers are still there and the fundamentals of the stocks should be the criteria for judging the market and not the regulators. These are the people who provide leadership to the Exchange in terms of ensuring that things move on fine. Like I said the blame game should stop and every body should focus on how to restore investor confidence in the market.

The focus should be on how to solve the market collapse that resulted in lost of investor confidence in the market. If Cadbury is doing well and well managed, I will invest in it; if Nestle or First Bank is doing well and are managed well I will invest in them. As long as they are giving their returns as and when do, I will invest in them. Of course, this is the ultimate aim of any investor in any company'

He said that the AMCON Bill that has been assented into law is another boost to the market, advising that Central Bank of Nigeria (CBN) and Ministry of Finance should come out with modalities that would guide the Act. Regulators he said should come together, form a think tank on how to help the AMCON, their own working places such that would be able to show good corporate governance, market integrity, character and all the things that make for a good market for the confidence reposed. Unegbu said that despite the crisis, real investors are still interested in the market adding that players themselves by their behaviour, by what they say, what they do should know that information given out affect the confidence of the people and therefore they should know what type of information to give out.

How they manage information is very important because once information is given out it is difficult to correct the damages it created. People's mind he said would have been fixed that this is what they say and would not have the confidence in that because of the pronouncement of either CBN Governor or the DG of the Stock Exchange or the DG of the commission. They should know that information is key, information is power and once it is misused, it tends to create more trouble for the economy and before you can repair the damage caused by information mis-given in five minutes, it can cause problems you cannot repair in five years. So for confidence to return to the market he said, these players should be able to mind what they say and how to pass out information that is credible to the public.

Unegbu said, 'What we are seeing is the result of regulators not being mindful of certain pronouncements they make. Some statements are inflammable and so ought to be selected and its impact on the public considered. If SEC had asked the DG to proceed on an indefinite leave from where she would be relieved of her duties it would have been honourable. Regulators should be mindful of the impact of their pronouncements on both local and international investors. The way and manner these issue is handled would be the way it will improve on market growth and performance'

He said that the action may erode the confidence returning in the market which will be disastrous.

In his views, Boniface Okezie, Chairman Progressive Shareholders Association of Nigeria (PSAN) said that based on what is going on now, there is no confidence of investors in the market. He said the regulators are the cause of the erosion of confidence in the market. According to him, regulators should be blamed because they are not sincere to the investors. 'Their unguarded pronouncements about the market today cannot bring confidence to the market.

'The market is driven by confidence that must start with regulators who would assure the investors that their investments are protected. If you are not taking the regulations seriously, it becomes something else that would dampen the moral of the-would be investors in the capital market then there is danger' he said. He noted that this has got to do with what Securities and Exchange Commission (SEC) is doing. This is why he said people entertained fears when Ms Arunma Oteh was mentioned to be the DG of SEC taking over from former DG, Musa Al-Faki. To them, Daisy S Ekineh who was on the saddle as Executive Commissioner (Operations) after Al-Faki's exit was the right person for the job.

'We thought Ekineh would have been appointed because she has gotten the experience, the knowledge of Nigerian capital market. This woman has not been there, she has not gotten the experience. The way and manner she is handling the affairs of the Commission show that she is not capable, she is not fit to be there as DG. We said it before and it is happening in our very naked eye. Look at the policies she is introducing that are not helping the market, they are not helping to restore the confidence that has eluded investors in the market. If we continue in this trend, the market will never rebound' he ended.

According to Emeka Madubuike, CEO, Compass Securities limited who feels confused at the development; the market community is shocked at the extemporal action taken by SEC. He said that what the stockbrokers and the investing public is interested in is anything capable of increasing market performance.

Another stockbroker who did not want to be named, said that the action of the Commission may have little or no effect on the market. According to him, it is transient which is capable of fizzling out as a matter of time. He stated that SEC is only doing its regulatory functions. On whether the stockbrokers were consulted, he said they were informed before the appointment of the interim administrator. 'We were informed but not consulted as SEC was on a mediatory mission,' he said.

Prince Okafor of Silver and Gold Securities limited in his assessment of the action said it is unnecessary. He summarized the battle as the issue of two elephants fighting. He said that the actions and inactions of senior members of market are capable of driving investors out of the market. 'This battle that is being raged is on the levels of the public because tomorrow the issue will become family affair. It is really uncalled for because I can't see where the action is heading to,' he said.

He queried the rationale for appointing the man who has been auditing the accounts of the Exchange to become the interim administrator? According to him, the auditor who approved the books as correct is part of the mismanagement being talked about if at all there is. The whole thing looks absurd. We should know that banking and capital market are not the same. The interventionist theory of the banking industry cannot work effectively in the capital market. Regulators should always trade with caution not to destroy the building it is erecting. The battle has just started,' he said.