The Anatomy of Leadership at the Stock Exchange


August 30, 2009


“Blessed are those whose lawless deeds are forgiven, and whose sins are covered; Blessed is the man to whom the Lord shall not impute sin.” Romans 4:7-8


The Nigerian Stock Exchange will next year be celebrating its Golden Jubilee Anniversary. Established in 1960, trading began on the local bourse in 1961. In December 1977 it became The Nigerian Stock Exchange, with branches established in some of the major commercial cities of the country. Lagos is the Head Office of The Exchange.


The Exchange started operations in 1961 with 19 securities listed for trading. Today there are over 250 securities listed on the Exchange. Most of the listed companies have foreign/multinational affiliations and represent a cross-section the economy, ranging from agriculture through manufacturing to services.


Over a 50 year period, the NSE, then known as the Lagos Stock Exchange has maintained a monopoly on ‘Broad Street’.  This status was briefly broken when the Abuja Stock Exchange, later reconfigured as the Abuja Stock and Commodities Exchange (ASCE), was set up under the administration of the late General Sani Abacha.


The highly-controversial establishment of the moribound Abuja Stock Exchange (ASE) was based on the report on capital market reform put together by the committee led by an investment banker and capital market expert, Dennis Odife.


One of the arguments for the setting of a competing Exchange as contained in the Odife Panel’s report was premised on the structure of leadership, both at the Council of the NSE and its management team.


Dennis Odife and the rest of his team found an ally in the then Director General of the Securities & Exchange Commission, Mallam Suleyman Ndanusa, with the support of the late General Sani Abacha’s administration took an unprecedented step of issuing an order of removal of Alhaji Abdul Razak as the President of the NSE and Ndi Okereke-Onyuike, the Director General. 


This action, now fondly referred to as “The Ndanusa’s removal order” was premised on the refusal of the Nigerian Stock Exchange to revert to its original name: The Lagos Stock Exchange in order to accommodate the newly formed Abuja Stock Exchange.


The matter went to court and was eventually settled out of court after several months of a bruising ‘war’. This was the first and most openly played out leadership challenge for the control of the soul of the capital market ever witnessed in the Nigerian financial market.  The rest, as they say, is now history.


History Re-invented

Right now another history is unfolding. But the history now unfolding is somewhat different in some respects.


The current impasse may not have at stake a much more ‘bruising’ objective but the goal and means of achieving control of the soul of the market appears to be following the same trend.


First, the Nigerian capital market was at best local. Today, the NSE has been placed on the world map of Stock Exchanges: all thanks to factors including the 2006 bank consolidation exercise, roadshows by the NSE and other market institutions to Europe and America, the increasing local investors’ participation, the extensive local and foreign media coverage, the superior returns on the NSE supported by the strong fundamentals of the listed companies, the economic and market reform policies of the Obasanjo’s administration between 1999 and 2009, the innovations of market operators (issuing house, fund managers, brokerage firms, etc) in the areas of products and services, competence, global exposure and information technology. 


Second, the Ndi/Ndanusa ‘War’ was fought during the tyrannical reign of the military leader, General Sani Abacha when the acclaimed winner of the June 12, 1993 Presidential election, MKO Abiola was the President of the Nigerian Stock Exchange.


The NSE stood behind its President, Chief Abiola until death and beyond. Hence, until the death of the Head of State, General Sani Abacha in June 1998, the Stock Exchange was an avowed enemy of the maximum ruler and his henchmen. Now, a decade of civilian democracy has been celebrated and the nation had somehow healed itself.


Odife – The Report that nearly was

The Odife Panel Report of 1996 in spite of being hundreds of pages in volume, its contents could be put down to two very simple issues viz: the need to break the monopoly of the NSE (as constituted) by establishing the Abuja Stock Exchange to serve the personal interests of some powerful socio-political elite, and questionable doubts regarding how the Nigerian Stock Exchange was been run at the top level.


The stockbrokers’ Rebellion

Lets we forget, not too long after the NSE/ASC face-off came a rebellion against the Nigerian Stock Exchange, this time from within the rank and file of the stockbrokers, under the umbrella of the Chartered Institute of Stockbrokers (CIS) then headed by Mr. Remi Bakare, then Registrar of the Institute. 


The CIS, it was reported, had sent a bill to the then House of Assembly, allegedly pushed by Honourable Lanre Laoshe on behalf of Mr. Bakare.  The Bill sought to allow the CIS licence the Stock Exchange and other capital market operators. The Bakare-led rebellion was crushed as the NSE weighed in on the National Assembly, the House Committees on Human Rights, Legal Matters and Judiciary and other power blocs.


The consequences of the ‘initiative’ by Mr. Remi Bakare have proven a lesson in how not to take on the NSE. Others have learnt this lesson well by heart and have chosen to avoid such open confrontations.


All Motion, No Movement?

Since then, nothing really has changed in terms of the leadership at the Stock Exchange. 


The recent buffeting of the NSE has its roots in the not too distant past, compounded by the recent worldwide financial markets turmoil that has wiped-off several trillions of dollars of investors’ money.  Added to the global market malaise was the increasing discovery of malpractices by market operators, some quoted companies, the inconsistencies on policy matters by the regulators as well as the ‘perception’ among the investing public and the government, that the market regulators and supervisors are as much of the problems themselves rather than the solutions.


Specifically, both the Securities & Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) received damning assessment of their supervisory independence, capabilities, relevance, efficiency, effectiveness, competence as well as sincerity.  Both the out-gone SEC Chief, Musa Al-Faki and NSE amazon, Professor Ndi Okereke-Onyuike were severally asked to resign from office at the peak of the market crisis by those able to summon the courage to do so publicly.


The well-decorated apostle of bank consolidation, Professor Chukwuma Soludo, who at the time was in charge of the Central Bank of Nigeria, also received not a few snide comments and downright criticisms for the state of the banking system, the management of the external reserves, the Naira/Dollar relationship, the excess crude account management, management of the bank consolidation exercise, handling of the margin loans and creation of the expanded discount window, among others.


For the first time in Nigeria’s recent history, three key market oversight institutions viz: CBN, SEC and NSE, came under intense leadership question, at the same time for their perceived lack of co-ordination of initiatives and suspect response to the crisis.


See the Proshare NCM 2009 report where we conclusively said that the market meltdown was due to a leadership meltdown at the highest levels of the market governance and political governance. We offer no apologies for this conclusion which we re-iterated in the BULL IN THE CHINA SHOP – a report inspired the actions fo the CBN Governor but which no less extended to all regulators and the Presidency. We have again been vindicated on this with recent decisions and actions taken by the CBN, SEC and lately the NSE.


Ex-President Umaru Yar’Adua was forced to respond in the light of a continued agitation for a government response to save the financial sector (in the most open admittance of lack of faith in the leadership).


The President moved to replace the CBN Governor, Professor Soludo with a risk management inclined banker, Sanusi Lamido Sanusi. The new helmsman has since conducted his own management clean-out at the apex bank with a view to meeting the challenges of the extra-ordinary events taking place at home and around the world.


The leadership of the capital market regulatory body, the SEC was keenly watched by all and sundry.  Its conflicted chairman’s status defended by those clamouring for change today is the highest hypocrisy this market has been served with.


The Adedotun Sulaimon-led committee on capital market reform reported made a case for change, specifying the need for the “reviewing of the current market structure and processes as well as the regulatory institutional framework and make recommendations for ways to improve the operational efficiency and transparency of the market.”  Musa Al-Faki, the humble gentleman and a stockbroker at SEC dropped his letter of resignation and left the Commission early in May.  He did not wait until his five year term expires in October. The government moved to nominate Ms Arunmah Oteh, a technocrat from Africa Development Bank to replace Musa Al-Faki.  That move is yet being contested by some on Customs Street who believed that the SEC DG job should go to a practicing stockbroker in line with the provisions of the Investment and Securities Act of 2007 (3(2a).


So what happens at the Nigerian Stock Exchange?

The NSE leadership issue is quite a different ball game. The NSE is a company limited by guarantee and led by a body of individuals and organizations called the Council of the NSE. Its day-to-day affairs are run by a management headed by the Director General (the appellation CEO or Chief Executive Officer was added by the current head, Ndi Okereke-Onyuike).  The NSE is not an organization that comes under the direct oversight of the Presidency or any government institution with the exceptions of the SEC and the National Assembly.


The Council of the NSE is the body responsible for the overall policy direction as well as the preparation of financial statements.  The NSE operates as a voluntary and honorary organization with its ordinary members and its Council members deriving no financial gain or benefit for their membership. Over the years, things have gone smooth and quiet at the Council and management of the NSE. The rotation of the office of the President as well as first and second Vice President have been with little or no rancour or cause for public information. Change of guards on the Council and at the management level during the NSE annual general meetings that last just an hour or sometimes less, make few headlines in the media, perhaps for a day or two only.


But times have changed.  People have changed. The system has changed. The institution itself has changed.


One of Nigeria’s leading business newspaper in 2008 reported that the Council of the Nigerian Stock Exchange was in crisis.  It was reported that certain individuals and institutions were ‘unhappy’ with the process of who is admitted into the Council and who gets removed from the elite list.  Apart from influential businessmen and technocrats, the Council of the NSE includes institutions such as the New Nigeria Development Company (NNDC) as well as some brokerage firms. In actual fact, the symbolic walls of the Council’s culture club began to crack during the heydays of the Remi Bakare-led CIS rebellion. Informed market watchers were aware that the Council was ‘purged’ of the dissenting voices as part of the necessities to ‘prepare for future conflicts.’ That was the beginning of the so-called “zero tolerance” policy of the Nigerian Stock Exchange. For example, Centre-Point Investment Limited was an institutional member of the NSE Council as at 1997, but that changed when Dennis Odife, the Chairman of the company took up the Abacha’s capital market reform committee job.


Over the past five years, there have been dramatic changes of individuals and institutions that make up the Council. Even the once smooth turn-by-turn Presidency of the Stock Exchange is no longer business as usual. And to find the facts has since become akin to looking for needle in a haystack.


One of the responses to the setting up of the Abuja Stock Exchange and the Chartered Institute of Stockbrokers’ rebellion was the plan by the Council of the Stock Exchange to demutualise or become a company limited by shares with a commercial structure and operations.  That was in 2002 under the Presidency of Alhaji Abdul Razak.  He stated in a memorandum to the NSE Council meeting in July 2002, that the resolution by the Federal Government of Nigeria (FGN) of the crisis between NSE and SEC over the aborted change of name of NSE has “thrown big challenges to the operation of (the) NSE.”  According to Alhaji Abdul Razak’s proposal, the Council of the NSE would be restructured.  Implementing his demutualization plan would see members of the Council of NSE ‘compensated with the allotment of properly evaluated shares of NSE, commensurate to their hitherto honorary services to NSE.  Thereafter, member of the Council of NSE will be restructured to reflect proportionately all the stakeholders or interest groups of the Nigeria capital market and, of course, the shareholders of NSE.  Under the Abdul Razak implementation plan, it will be the responsibility of the Council of NSE to assess the value of ordinary shares of NSE, and the proportion in which they are to be held between members of the council of NSE on the one hand and existing ordinary members of NSE. Razak recommended the proportion of 100:1 ordinary share.


Since then, things have moved rapidly and differently. Many vested interests have emerged with their eyes on the Council of the Stock Exchange and its management ahead of the planned demutualization. But the demutualization plan seems to have been shelved or so it seems.


Meanwhile, the top management cadre of the NSE is being gradually taken out ahead of 2010 exit of the current Director General, Ndi Okereke-Onyuike.  Last year, she announced that she will leave office at the end of 2010 alongside seven other top managers of the Exchange as part of the planned demutualization. That has since changed.  Two of the officers scheduled for 2010 exit had since left: the General Manager of Emerging Markets Department, Henry Onyekuru and Corporate Affairs GM, Yinka Idowu.  Their positions are still vacant.


The key question surrounds who succeeds Ndi Okereke-Onyuike as the Director General. Right now, things are very murky. Ndi succeeded Apostle Hayford Alile after his retirement in 2000. At the time, Ndi was the Deputy Director General with Alhaji Rasak Oladejo as the Assistant Director General.  Ndi became the DDG in 1997 following the death of Chief Henry Ogirri in a ghastly motor accident in Lagos.  Since Ndi took office almost ten years ago and the exit of Alhaji Rasak Oladejo, retiring at the mandatory age of 60, the management structure of the NSE is no longer traditional.  The Stock Exchange had no DDG or ADG for several months after Oladejo’s retirement in 2004.  The appointment of Musa Lance Elakama was hurriedly done after media reports that the Council was prevaricating.  He was moved to become the ADG from General Manager in charge of Finance and Accounts. Almost five years later, the Exchange has no DDG. All staff promotions done since were at best cosmetic. As things stands, there is a clear and far distance between the DG/CEO and the rest of the management team.


But the question of who succeeds Ndi hasn’t been answered.  There is no simple answer, though.  Some sources say about a dozen staff have been recruited into the NSE and being primed to take over sensitive posts at the Stock Exchange as the existing ‘old order’ are cleaned out, at least one year before Ndi’s exit late next year.  After 2010, Ndi will remain on the Council or Board of the NSE for another three years as an ex-officio.  Simply put, if the Council decides to go ahead with the demutualization programme, she will midwife it single-handedly or at best with her ‘new team.’  If the demutualization is shelved, the entire top hierarchy of the NSE over the past 20 years would have been completely erased. That would be a new beginning for the Stock Exchange.  But there are concerns in many quarters whether that would fulfill the much-needed reforms that would solve the more recent confidence questions about the Stock Exchange.


A school of thought believes that there are more to the needed reforms than just move people around or bring in new hands to fill vacancies.  Questions have been raised about continuity.


SEC will one day have to take an action to resolve this impasse but it could consume it if care is not taken to follow due process, without creating the conditions for empowering itself.


Aug 30, 2009, Lagos



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