NSE Productivity/Surplus Sharing Paid to Council Members


Tuesday, October 05, 2010, 2315hrs

Proshare NI Exclusive:


Having reviewed the detailed analysis of the productivity and surplus sharing paid to the council members of the Nigerian Stock Exchange (NSE) between 2005 and 2008; it begins to figure how the forensic exercise has gone and the trend of disclosures yet to come.


The forensic audit carried out, under the direction of the Securities & Exchange Commission (SEC) has determined that the NSE, being a company limited by guarantee is not expected/allowed to declare surpluses as bonuses to its council members. The report did not state how such sums should however be treated or whether the council had any leeway to exercise discretion on such matters.


The payments paid to members, as provided below, relate to the period between 2005 and 2008 financial year; though the demand now being made on members for a refund cover only the period between 2006 and 2008.


It is understood that this practice have been in existence for a while but changed in relation to the higher surpluses achieved during the stock market boom years, which coincided with the Oba Otudeko presidency.


Council members on the board during this time have made the case that the NSE is a unique organisation in the market place – that being limited by guarantee, is not allowed to keep surpluses, not able to invest for profit purposes and is not allowed to keep reserves and that the practice has been to apply these windfall/surplus as productivity bonuses to staff and council members alike.


However, some stakeholders have questioned this position given the huge capital and recurrent expenditure the NSE has to confront with in future years – especially when one considers the market downturn that will significantly impair its earnings.


Perhaps in response to this, some insiders in the market familiar with the inner workings of The Exchange have however questioned this position as an after-the-fact hypothesis because the NSE enjoys a tax exempt status and is not able to return surpluses earned back to the Inland Revenue.


Analysts who have followed the developments so far however contend that this situation not only presents the opportunity to resolve the questions now being raised by auditors and SEC alike (both of whom have audited the accounts of the NSE all these years) but the status of the company as non-profit entity.


The time has come for the NSE’s status to be properly defined they say, to avoid the corporate governance trap, it has found itself.


We await the final approval of the audited financial accounts for the year ended 2009 by the SEC. This report will enable an informed analysis of the accounting treatment of the affairs of the exchange in line with the Memart guiding a company limited by guarantee.


Information available to Proshare NI at this time indicates that the deficit-result accounts may be qualified on account of developments such as highlighted this.



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Source: Proshare


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