Financial Mkts: Restoring Confidence Via Dialogue




Goddy Egene writes that the dialogue sessions held by the Minister of Finance, Olusegun Aganga, and other regulators with stakeholders in the financial sector last week was  a  step in the right direction.


Last week will remain memorable to many investors and other stakeholders in the nation’s capital market following two crucial meetings that took place in Abuja and Lagos. It was a week that regulators of the financial sector in general and the capital market in particular made bold steps aimed at restoring investor confidence to the financial markets. 


Specifically, the Central Bank of Nigeria (CBN) held a meeting  last Thursday in Abuja with shareholders, directors  and managements of the rescued banks on how to move the banks forward. The following day, the Minister of Finance, Mr. Olusegun Aganga, accompanied by the Director-General of Securities and Exchange Commission (SEC), Ms. Arunma Oteh and Commissioner of Insurance, Mr. Fola Daniel, met with   operators in the manufacturing sector, insurance industry and capital market.


At the Abuja meeting, the Governor of the CBN, Lamido Sanusi, said that the shareholders of the  rescued banks  would now  be allowed to recapitalise the banks contrary to  the apex bank’s initial  plans to sell them to foreign investors.


CBN’s New Stance

Sanusi was reported to have told stakeholders that the apex bank would not usurp the rights of shareholders, assuring them that the final decision on recapitalisation rests with them.The CBN governor was also said to have reassured the stakeholders that having secured the depositors’ funds with the reform programme, the focus of the CBN now is to salvage some value for the shareholders.


He made it clear that the CBN would not sell the banks, as it is not the business of the banking watchdog to do that. The CBN, according to Sanusi, only recommended some reputable financial advisers who are working with the board and management of the banks to source and negotiate with any of such investors. He emphasised that the process of repackaging the banks is being driven by their boards, some of which have held discussions with strategic partners, without direct involvement of the CBN.


“The Governor reassured the stakeholders that the shareholders would definitely play an important role in the recapitalisation exercise and that the process of giving value to their shares is already assured with the coming on board very soon of the Assets Management Corporation Of Nigeria, (AMCON),” the CBN  explained in  a statement. After the initial delays, President Goodluck Jonathan eventually signed the AMCON into law last Monday after his lawyers had scrutinised it.


However, the CBN said that if the on-going process to recapitalise the affected banks were not successful, the apex bank would have no other option than to go for liquidation as provided by the existing legal framework.Sanusi noted that liquidation and nationalisation are not desired options for the banks, stating that he is convinced that fresh injection of capital through strategic partnership remains the best approach.


Finance Minister’s Perspective

On his part, Aganga  told the stakeholders at separate meetings held that the government was committed to creating the enabling environment for the private sector to operate. According to him, despite the challenges of the global economic downturn, the Nigerian economy has recorded significant growth.The minister noted that the economy, which he said is currently doing well, can still do better when the government and promoters of businesses play their respective roles well.The minister explained that policy formulation without carrying along stakeholders in the economy would be counterproductive to the goals and objectives of developing the economy. 


He said the population of the country is an added advantage to rapid growth, stressing that engaging and consulting with leaders in the economy has become a necessity in the growth of the economy. Aganga explained that one of the policy thrusts of the current administration is to achieve a double-digit rate annually and assist the real sector to have access to cheap fund in driving the economy.


He said that knowing well that the government cannot meet all the demand of its citizenry, an enabling environment is being created to encourage the real sector operators to invest in the power sector and other infrastructure for the transformation of the Nigerian economy. Aganga, who was a member of the Committee set up by SEC in 2008 on the reform and transformation of the nation’s capital market, emphasised the need to enforce rules guiding operations in  nation’s financial markets.He said  while it is good for regulators to issue rules, they must be enforced so that their objectives would be achieved.


SEC’s Standpoint

In her contribution, Oteh  said the Commission will issue new guidelines on margin trading  so as to prevent another stock market downturn. 


“Beginning from August, we will issue new guidelines on margin  trading, which will prevent what happened in the stock market recently. We have resolved to deepen the depth of the capital market by broadening the market and encouraging the oil and gas companies and other conglomerates to come for listing. We are also looking at product offering and the development of the bond market,” she said.


The SEC boss added that the government has concluded plans to deepen the depth of the capital market and make it virile so that it can stand the test of time. This, she said, would be achieved by   encouraging multinationals to come for listing on the NSE, while also focusing on the bond market and other product offerings. She explained that   encouraging   foreign companies in the oil exploration, telecommunications would diversify the capital market and deepen its value.


Insurance Commissioner’s Viewpoint

On his part, Daniel noted that the insurance sector should be  seen as a stronger industry with a improved capacity after the last recapitalisation exercise. According to him, the National Insurance Commission (NIACOM has been strengthened to better regulate the insurance sector.


Stakeholders’ Comments

Stockbrokers and shareholders have commended  the minister and  the regulators for  engaging  stakeholders on issues affecting the financial sector in particular and  economy in general.
A frontline stockbroker and Managing Director of Partnership Investment Company Limited, Mr. Victor Ogiemwonyi, said that  the dialogue sessions with stakeholders were very fruitful and would go a long way in finding solutions to the challenges facing the financial markets.


He said: “The dialogue has an obvious benefit in the fact that you cannot prescribed solutions and make correct policies unless you know what the problems are. The dialogue was important in bringing out the most of the issues that need to be addressed in the market. It definitely gave investors the feeling that the regulators are alive to their duties and working to restore confidence. Many operators agreed that the minister’s approach is a fresh one.” 


The National Coordinator of Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, said that while the engagements were good, the minister and regulators in the financial markets should not pay lip service to the outcome of the discussions.He said  it is obvious that Aganga has good intentions for the growth of the economy given his comments. However, he said, those good intentions would not come to reality if the CBN does not align itself with the position of other regulators.


“If you are talking about fighting unemployment, if you are talking about growng the economy by allowing companies to have access to funds, if  you are talking about encouraging private participation in the economy, then  the current stance  of the CBN regarding the rescued banks contradicts  the good aspirations of the  minister.


“The CBN should  complement the efforts of the minister by ensuring that  the banking sector begins to lend again and that  private sector is not driven away from the banking industry – because the way the Asset Management Corporation  of Nigeria (AMCON) is structured, we are going back to the nationalisation era since AMCON will be more or less buying shares on behalf of the government,” he said.


Speaking in the same vein, the National  Chairman, Progressive Shareholders Association of Nigeria (PSAN), Mr. Boniface Okezie,  said that  the regulators should work together and ensure that decisions taken at the meetings are implemented.He specifically called on the CBN to allow the shareholders to recapitalise the banks, adding that Sanusi should guide his utterances going forward.


“The CBN governor and other regulators should guide their utterances because whatever they say have far reaching implications on investor confidence. The controversies over the sale of the banks have not only affected the shares of the affected banks in the stock market but also their level of deposits,” he said.


Okezie stressed that  foreign investors cannot take  us serious  given the way the CBN is going about resolving the  rescued banks crisis. He said that if AMCON is allowed to  use public funds to buy into the banks as being proposed  in bill, it amounts to nationalisation,.“And this is what we have been kicking against. Foreign investors cannot regard us (Nigeria) as being serious because they will feel that if they invest in the market, one day the government can wake up and decide to buy over their investments without  due process,” he said.


A stockbroker, who spoke on the condition of anonymity said that the finance minister and CBN should not overlook the issues raised about the AMCON particularly as it affects stockbrokers. He noted that the stockbrokers had earlier pointed out that the way the bill is structured, it only favours  the money market. He therefore said  before the bill is assented to by President,  some of these  issues should be tackled so  that the operations of  AMCON will not bring more problems instead of solutions.


SEC/Shareholders Earlier Meeting 

Before the last joint engagement of Finance Ministry, SEC and  NAICOM,  Oteh had earlier  this year met with  leaders and members of over 15 shareholders’ associations.She assured the shareholders of the safety of their investments in the market, saying that  the main priority of  SEC is to protect investors. According to her, without investors there will not be the capital market.


“Investors are those who make the capital market flourish. Without investors, we cannot have the capital market and the capital market holds the key to the development of the Nigerian economy. “The Commission is committed to the protection of the investments in the market and have zero tolerance for improper behaviours capable of leading to loss of investments,” she said.


The SEC boss said the interactive meeting was part of SEC’s efforts to reposition the market after the sad experience of the past two years.  She said all stakeholders would be carried along in the process of restoring confidence back to the market.She commended the shareholders’ associations, explaining that some of them have been carrying on the role of investor education very well and urged them to continue.Oteh added that going forward, SEC would organise retreat where shareholders would be taught more about their rights. She therefore, called on those yet to register their association with the Corporate Affairs Commission (CAC) to do so.


Shareholders’ Responses

The shareholders’ leaders commended the apex regulator of the initiative, and also tasked the Commission on sundry issues. For instance, Nwosu called on SEC to look into the refund of investors’ money in the unsuccessful initial public offering of defunct Allstate Trust Bank Plc.Nwosu added that shareholders should also be given an opportunity to contribute to any policy that will affect the capital market.


President, Association for the Advancement of the Rights of Nigerian Shareholders, Dr. Faruk Umar and  Okezie, commended Oteh for the initiative and urged her to continue to carry stakeholders along. According to the shareholders, if SEC is able to successfully tackle the numerous challenges investors are facing, the market will perform better.The shareholders also suggested ways on how to handle the  various complaint against the operations of registrars,  relating to non-receipt of share certificates, dividend warrants, verification of share certificates and, delayed  non-compliance with electronic dividends and electronic bonuses instructions.


For instance, Alhaji Gbadebo Olatokunbo, who is a founding member of the Nigeria Shareholders Solidarity Association (NSSA), said that  SEC should make it a policy for all registrars to  look at shareholders who have Central Securities Clearing Systems Limited (CSCS) account in particular companies and offload the register of such companies  directly into  the CSCS system.He added that SEC should encourage other shareholders to open CSCS account by prevailing on  CSCS to make the process simpler and less cumbersome.


“If it were possible, SEC should find ways of facilitating the opening of CSCS account for  small unit holders because the stockbrokers are making a fortune out of  shareholders in the name of verification of shares certificates. Besides, given the activities of some registrars, they are a minus to the e-system for the capital market reforms,” he said.


President, Pragmatic Shareholders Association of Nigeria (PSAN), Mrs. Bisi Bakare, charged registrars  to be more effective in meeting the expectations of  shareholders especially in the area of verification of share certificates, change of address, prompt release of  notice of Annual General Meetings (AGM) among others.


But Okezie said instead shifting all the tasks to SEC,  the shareholders’ associations should be able to tackle some of these issues on their own.“Shareholders associations are more or less like self-regulatory organisations and their leaders should be able to solve issue such non- verification of certificates, delay in release of certificates among others. SEC should be left alone to handle other serious issues,” Okezie said.


The shareholders contended that one of the ways to make the companies accountable to shareholders is having a well functioning audit committee. To this end, Bakare said SEC should enforce the code of conduct given to shareholders’ associations over two years ago.“SEC should not only make laws but action and implementation should  also follow immediately. For example, tenure for audit committee should be enforced. The commission should strive towards the implementation of its provisions in the code of conduct for shareholders associations,  which prescribe three years  tenure,” she said.


Speaking in the same vein, Chairman, Ibadan Zone Shareholders Association, Chief Oluremi Oyepeju,  said  there should be tenure for audit committee members like the directors.“Also, the chairman of the audit committee should automatically be a director of the company. Such a director could be the finance director orf a member of the finance committee of the company. If the chairman is the finance director or member of the Board finance committee, the audit committee will have quick access to the financials of the company and do their job on time,” he said.





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