By Udeme Ekwere

Tuesday, 8 Feb 2011

The Director-General of the Securities and Exchange Commission, Ms. Arunma Oteh, on Monday said the regulatory agency was working on reducing the number of stockbrokers from more than 300 to a manageable size.

She said at a press briefing in Lagos on Monday that consolidation was inevitable among stockbrokers.

Oteh noted that this would be part of SEC’s effort towards sanitising the Nigerian capital market.

According to her, SEC is currently working with some other committees on the modalities for the consolidation.

She added that the commission would also work towards reducing transaction cost for investors.

She noted that in some other markets in Africa, where consolidation had taken place, their capital markets had been doing well, even with fewer stockbroking firms.

She said, “We have studied some African markets on this issue, and we have seen that it is working for them. For instance, Malaysia has just 35 brokers in a market that is even bigger than the Nigerian capital market. Also, in the South African market, there are 60 stockbrokers, with a market size that is 15 times bigger than the Nigerian market.

“But in Nigeria, we have 250 brokers in our market. We know that in the economies of doing business, when there are many more players, the revenue has to be shared among these players, which of course, increases transaction costs.”

Oteh noted that findings by SEC had revealed that some operators in the market were not making profits and there had been a lot of complaints from investors of unauthorised sales, adding that “some firms have been dipping hands into the funds of their clients without authorisation.”

According to her, all these issues about funding will be addressed if there is consolidation among operators, saying some of the brokers will ease themselves out of the market without waiting to be forced out.

Speaking further on plans for 2011, Oteh said that SEC had the agenda of deepening and broadening the market and building a world-class capital market that would engender investor-confidence.

She noted that investor confidence was still very fragile in the Nigerian market, adding that “when trust is broken, it takes time for it to be rebuilt.” Citing the example of Turkey, she added that it took more than 10 years to restore investor confidence in that country.

“We do not want it to take 10 years in Nigeria, so we welcome the fact that we have seen the kind of improvement we recorded in the past years, where the index rose by close to 19 per cent,” she stated.

She added that the issues of market integrity and transparency were still top on SEC’s agenda, adding that it still maintained zero tolerance stance on market infractions.

 

Source: Punch