Monday, 22 Nov 2010

When the Securities and Exchange Commission said in August that it would probe the activities of the Nigerian Stock Exchange under the watch of its former Chief Executive Officer, Ndi Okereke-Onyiuke, many stakeholders knew that they had to prepare for the many-headed monster that would emerge with only a scratch on the surface of the Exchange’s books.

Though no one, except those in the NSE mafia, knew the exact anti-market activities that led to the alleged insolvency of the bourse, a few displeased workers were able to guide the forensic auditors’ searchlight in the direction of palpable mess. Before anyone could say Jack Robinson, unimaginable skeletons began to creep out of the books even before Okereke-Onyiuke could drive home her political interpretation of allegations of mismanagement of funds against her.

Stockbrokers, who had been gagged by the seeming ‘oath of secrecy’ during the iron lady’s era, also let their tongues loose in line with the new air of freedom, giving close associates minute-by-minute account of proceedings in the purportedly mismanaged capital market. However, while the forensic audit was ongoing and various mind-boggling unethical practices were being revealed by the day, some spectators had predicted that the full report might not see the light of day. They based their pessimism on the political clout of the star players in the NSE imbroglio.

But while erstwhile controllers of the Exchange’s account were still going from pillar to post, trying to use fund-thirsty politicians to stop the auditors, the full forensic report, with its messy details, had already become public knowledge. Some people on the other side of the divide, privy to the auditors’ findings, forwarded the report, as prepared by the auditors – KPMG and Aluko Oyebode & Co – via the Internet to key stakeholders. The action was probably a calculated one aimed at making sure the report, with all its many-headed monsters, was not swept under the carpet.

And the strategy is working, at least for now, never mind the House of Representatives’ recent unpopular restraining arms. Stakeholders are currently demanding explanations from centre-stage players as regards findings of “questionable contracts awarded to companies owned by members of staff (or companies in which members of staff owned shares); and purchase of assets by the NSE, which either disappeared from the books of the company or were subsequently written off the books under questionable circumstances.”

Aside from the initial news of council members sharing N1.205bn surplus in the three years, details of the full report, a copy of which was sent to my e-mail box three weeks ago, showed that Okereke-Onyiuke and four other top officials of the NSE also shared N1.13bn productivity allowance between 2006 and 2008.

According to the report, the former DG received N58.10m, N334.45m and N200m in 2006, 2007 and 2008, respectively, under the payment category, called, “Total Productivity/Surplus Sharing Paid to Management”. It is interesting to note that, while bonuses were being forfeited in the advanced communities over professionals’ reckless fund management in 2008, when the effects of the global financial crisis were most severe, our own Amazon at Customs Street could, allegedly, still smile home with N200m ‘lack of productivity’ allowance. This was at a time investors were groaning under the excruciating weight of about 60 per cent loss of value on their investments.

That same year, the auditors found that N1.9bn was spent on “business travel overseas” prior to reclassification. After reclassification, the report said N953m was classified as “software upgrade” and immediately expended. Besides these, there is still the issue of the controversial N500m allegedly spent by the former management on the inauguration of the NSE modern trading floor, which insiders say was not captured in the audit.

The jamboree of wickedly-inflated in-house contracts, which allegedly enriched Madam’s close allies; and, perhaps, prepared them for life after a ‘crashed stock market’, is another important aspect of the audit that cannot be ignored.

However, SEC must be committed and honest with its market cleansing move if it must match the end results with auditors’ efforts. That is if findings are proved to be genuine at the end of the day. The current leadership of the commission has a lot of work to do in restoring the confidence of some of us, who, at the outset, had seen SEC boss, Arunma Oteh, as a no-nonsense DG that would help clip the wings of recalcitrant market looters.

The commission must release the full list of the 260 entities and individuals it said it dragged to the Investments and Securities Tribunal in July, 2010 to prove critics, like me, who can almost vouch that some names have, along the line, become too sacred to be released, wrong. This, it must address, as a matter of urgency, to avoid a situation where the list is eventually caught in the web of political influence. SEC must also refuse to be intimidated, in the case of genuine findings, by concerned politicians, who are known to be kingmakers in Nigeria’s political landscape.

Already, the House of Representatives Committee on Capital Market has reportedly criticised the forensic report, saying it is biased. The committee, headed by Umar Jubril, allegedly faulted the report on the grounds that SEC did not give the affected NSE officials the benefit of fair hearing.

It said that “the forensic report was ready by September 30, but the accused were invited to appear and defend themselves on October 4,” adding that “it is tantamount to using a legal means to effect an illegal action.” But wait a minute, does the commission not need a preliminary report that will highlight the grey areas to be addressed by the accused? Should we conclude that a group of representatives are about to defend their pockets again, at the expense of investors? Or is the SEC DG also pursuing a “hidden agenda” like her counterpart at the CBN? Whatever answers are found for these questions, the fact remains that the investor’s interest is paramount.

All the parties involved must, therefore, ensure that the exercise produces a clean capital market, by bringing offenders to book, if found guilty. This, however, depends on whether the auditors’ monsters are daring enough to survive the last-minute moves of sacked Exchange officials, regulator’s seeming slow pace of action, and legislators’ new-found binoculars! God help Nigeria’s capital market.

Yemi Kolapo, ykolapo@punchontheweb.com

 

 

Source: Punch