In this interview with PETER OBIORA and IFY ONYE of Investadvocate, Boniface Okezie, National Chairman of the Progressive Shareholders Association of Nigeria (PSAN) reacted to questions on the current Market trend and some of the reforms announced by the new Management of the Nigerian Stock Exchange. Excerpt:

The year is almost ended your review as a Shareholder Leader of the Nigerian Capital Market.

Since the beginning of the year, the Nigerian Capital Market (NCM) has witnessed its worst at the Floor of the Nigerian Stock Exchange (NSE) in terms of fortune dwindling. On equities, the market capitalisation of hit an all time low of N6.4 trillion from N13 trillion all time high between year 2007 and 2008. The Basis point has gone down heavily in the history of the Nigerian Stock Exchange; I am beginning to ask what happened, what went wrong? The Administrators brought by Nigeria’s Securities and Exchange Commission (SEC), what are they doing, the professionals, the experts brought from abroad, what are they doing?

To give a clear picture of where the direction of the Market is going, if you look at the New York Stock Exchange, you can see a rallying point, it is not everyday it falls flat, but our own has been nose diving on a daily basis.

Consecutively in a week, you see the share going down heavily in our Stock Exchange. Companies that are quoted on it, declare impressive Results such as their Half Year, Nine Months period and even Full Year are all impressive results that can boost the Market. This can encourage the Market and can attract people to swing into action by asking their Brokers to take order, buy or hold.

But we are not seeing this happening in the Market, even with these impressive results that we have been seeing so far because those Half Year been announced by Companies gives hope, a ray of hope for these Companies, that even at the end of their Full Financial Year and barring unforeseen circumstances some of them will be paying dividends; even bigger ones for that matter that can water the appetite of any new investor in the Capital Market.

But we are not seeing that with these results which ought to motivate investors to take position, taking advantage even as the shares are dwindling, going down you take advantage of the low price and move in. They say there is no money people are crying, but we can see money changing hands. Government as a big spender, they are spending, contractors are getting money, payment for jobs done for the Government who are good spender and if we don’t float new Companies, people can also go to existing ones to invest. Companies that are already existing and are running smoothly, once you take advantage of share acquisition you move in and take position by acquiring those shares, either you invest in capital appreciation, dividends or bonus. But we are not seeing these things happening at the Exchange.

The question people have been asking is what is really happening at the Exchange? We had a Financial Meltdown that affected globally. Our so called reformers took over and a lot of things has gone wrong in the Nigerian Capital Market, including the Banking and Insurance Industry.

All the issues they have been bringing out have no solution, they have not found remedy to address the fundamental issues that they have discovered affecting the Market and that means it is not the wrongdoing they accused the previous Administrators that ran the place was the problem bedeviling the Exchange. The problem is because of lack of foresight, by the so called Experts recruited to drive the Market.

Some of the polices being churned out today have no bearing with the present situation. Therefore, what it means is that what they have been chasing all along is shadows. There approach is cosmetic and cannot tackle the problem headlong. The bottom-line is that investors’ confidence is no longer there, there is apathy amongst the investors because the Regulators have positioned themselves to become Operators; instead of Regulating; which is the reason why investors are shying away from the Capital Market.

They have failed to tackle the problems headlong. They should instead, reposition the Market and tell Nigerians that their Market is still a Market for people to make money. Also, for the economy to grow; we must access the Capital Market. We cannot take this fact away from the Capital Market; no matter the amount of barrels of oil that we sell on a daily basis. The Capital Market remains to finance Government projects and individual Companies. This should have been their message; but they are not sending that; instead they keep talking of reforms, and those who had stolen money from the Exchange; up till today no one had been brought to book; because they have no proof or evidence of stealing they are accusing people of at our Stock Exchange.

Thus, these are the basic problems and fundamental issues that have been affecting the Market and the kind of things been churned out today at the Exchange; there is no way we can attract investors; because no matter what they are doing and since the Regulators have let people know that investing in the Nigerian Capital market is like playing a Casino game, it is not attractive to anybody; even the common man on the street will not see such and put his money in the Market. This is because the Regulators corroborated that the place is not a good place to do business; this is what they are portraying.

For now if they have realised their mistake, their utterances; including that of the Central Bank of Nigeria (CBN), they way they portray the Capital Market. We need cleansing, the Regulators should sanitise themselves, apologise to Nigerians and let people know that they have failed and that the Capital Market remains the only option for the growth of the economy we are expecting. This is because the President cannot transform his agenda without the Capital market, he cannot create jobs when Companies are folding and a lot of them today need to approach the Capital market and get listed; but they are not doing so rather we see the massive delisting from the Exchange.

What does this portend to the Capital Market if Companies are approaching it to delist its shares; it is because confidence is no more there and the Regulators want what they will take from the Market and not what they will contribute. If you are appointed as the Director General (DG) of the Stock Exchange or SEC, are you an investor, do you invest? They say charity begins at Home, they should also show by example invest in the Market; even their salaries should be invested; they can buy shares.

You cannot tell a Company not to pay dividend if they make profit; somebody the other time was emphasising that the shareholders are putting undue pressure on Companies to pay dividend even when they are not doing well; Nigerian Shareholders do not do such. Without investors, those who work at the Exchange cannot earn their salaries. So those people who are investing, their own salary is dividend; if a Company does well, nothings stops them from paying dividend. I have seen cases where Nigerian Shareholders have turned down a Company that proposed to reward investors with dividend at the venue of an Annual General Meeting (AGM); because declaration of dividend is the Board’s prerogative, the shareholders have no input, it is when the Board have proposed a dividend that shareholders at the AGM will look at what they are presenting to them, if that Company is lacking liquidity to drive their operations, we will not approve it.

Why propose dividend when you are borrowing from the Banks to run your business? Rather we advise them to put back the money into the business in order to pay shareholders an enhanced dividend in future. We have done it to some companies in the past when we considered the amount to be paid and what will be spent in process the dividend payment, we turned it down. In some cases, we have received bashing as Shareholder leaders for supporting such a move; a Company has been relying on Banks to run its business and now they want to justify that they are performing well, working hard and want to impress their shareholders; if they have not done that for sometime and its Shareholders are looking up to them to pay dividend, they may decide to propose dividend to prove to their shareholders that they are still alive. In this case, nobody put pressure on this Company; but in our wisdom, we rejected such and requested they put the money back into the business so that they can pay a better dividend in future. These are some of the things we do when we understand the current predicament of a Company; but the Regulators do not understand this, they ask Companies to pay their listing fees whether the Company does well or not. The reason they are clamouring for Companies to submit their results, it is not only for transparency; but to also get their fees; this is why Firms are pulling out from the Exchange.

FACTS CHECK:

“The Nigerian Stock Exchange (NSE) All-Share Index, that opened the year at 24,770.52 basis points closed at 19,925.97 basis point on October 12 2011. This is consequent upon a persistent bear run that had dwindled a significant portion of investors’ fortunes in the Nigerian Capital Market”.

Assessment of Oscar Onyema and his new team

To me some things they have done; such as changing Blazers has nothing to do with the Ordinary Investor on the Street. What they have been wearing to the trading floor before this time does not stop them from making profit or losing. Introducing a new Blazer is not a reform, it does not entice any investor; whether they are wearing it or not does not entice me as an investor to go and patronise any Broker, what Brokers need to do is to talk to people to come and invest in the Market.

EDITOR’s PICK:

“The Nigerian Stock Exchange (NSE) October 03 2011 launched a new Trading Blazer for its Authorised Dealing Members.

The Trading Blazer is one of the most familiar sights associated with modern Trading Floors of any Stock Exchange in the world”.

They should encourage people to take advantage of the meltdown occasioned by the Global Financial Crisis to invest and take position in the Market. The platform already put in place by Professor (Mrs.) Ndi Okereke-Onyiuke was working and she had already in her plans to upgrade the Trading Platform to world class standard prior to this time that the new team are saying they are committed to introducing as part of reforms in the Nigerian Capital Market.

All these reforms are a ways of spending money and awarding contracts; because Nigerians are busy awarding contracts to make their own money. The Exchange in the past; especially the past administration were accused of reckless spending. The interim administration of Emmanuel Ikhazoboh should have gone low profile to show that the Exchange was broke; but we never witnessed such; rather we see price tickers outside; allowing people outside to see the price movement, those things are nothing. Also, people were barred from coming to the Gallery to watch live trading activities on the Floor; anywhere in the world, people are allowed to go to a Public Gallery to watch trading activities when it commences. They can stay at the Gallery to make orders by calling their Broker; if they observe the price movement; maybe the shares the person wants to sell, orders can be issued from there and the transaction takes place.

On Security at the Stock Exchange

The Exchange is not handling money, the Central Securities Clearing System (CSCS) handles only papers; in the areas of boom, the Exchange never had such a Security; spending huge sums of money to pay these people; nobody is saying that it is not good to put in place a security system. Some of the offices that Stockbroking Firms and other Companies were occupying at the Stock Exchange Building, the Management drove them out, some of these offices in the building may be laying fallow, what money is the Management generating through these action, prior to this time, the Exchange was making some money through rent from these Occupants. The Stock Exchange is a public place; therefore people should have access to it; if you are going to visit the Chief Executive Officer (CEO), you schedule an appointment. Whatever reforms they have embarked upon; having extra security personnel or employing ladies to be at the reception cannot make an impact to bring back investors confidence that has been eroded all these while.

These are reforms that are not yielding positive results as expected from the NSE Management. What they are doing has no impact whatsoever in the Market and that is why when you go to the office of some Brokers, they are sleeping; nothing is going on, some of them have retrenched their workforce; because they go to the Trading Floor doing nothing. They just go their looking at what is happening, maybe that was why they barred the public and the Journalist to be coming into the gallery to observe proceeding; Journalist are suppose to get live updates which they will use for their reports. If they get updates and inform people, these may create awareness of what is happening and motivate people to come and invest in the Market. However, if they have decided to run it as a secret organisation, everybody will distance themselves from the Market place. The Exchange as it is now looks like a Secret Organisation.

Why Companies are delisting?

This shows people have passed a vote of no confidence on the so called reformers, if companies are delisting all the time at an Exchange, which is a vote of no confidence that they are not satisfied of what is going on at the Floor of the Nigerian Stock Exchange, this is the reason they are taking such decisions and you cannot force them to remain. If the services they ought to be getting for instance the Exchange coming to them to find out their problems, all they do is to ask these companies to delist if they don’t turn in their Results and other fees they are to collect, the Company may decide to delist.

These Companies will be of the view that since they are not making anything and the Exchange have not bothered to come and find out their problem, if they need any assistance, so, they cannot sit in their office and take a decision about a company without finding out their problems.

I don’t think the Exchange does this; they say they have a Department of Compliance, a Company can only come and list when the atmosphere is right; when Regulators had relaxed their policies; not acting as an Operator; today the Exchange is an Operator in the Market through the Nigeria’s Securities and Exchange Commission (SEC). We don’t know who owns the Exchange today; whether is SEC. This is the problem befalling the Market. There must be a clear distinction between SEC and the Exchange; they way Arunma Oteh visits SEC, it is uncalled for. At the New York Stock Exchange; when do you see the Chairman of THE United States SEC visiting the NYSE frequently? The Exchange does not belong to the Government; it is not a Government Organ so Government should stop interfering in the affairs of the Stock Exchange through SEC. Like I said earlier, this is the problem affecting the Exchange why investors are distancing themselves from the activities of the Market. The woman is not doing what is expected of her. If they recognize that they are the Apex Regulator in the Nigerian Capital Market, if they agree they regulate the entire Market and have an oversight function in supervising what goes on at the Exchange, it shouldn’t be by way of interference and dictating the pace. SEC must role out a policy that will encourage operators and investors in doing the right thing. By castigating the Operators in the Market and calling them names will not solve the current problem in our Market. They must identify what went wrong and how do we address issues and strengthen the Market; this should be the uppermost concern of the Reformers; who are the Regulators. They must identify key areas to be addressed to strengthen the Market. This is what they should be doing; but our Regulators have not been doing so.

She celebrated 50 years of the Nigerian Market; which means she doesn’t know what she is doing. If a Regulator does not know that the Capital Market has not attained 50 years, then she should resign for having deceived the nation that our Capital Market has reached 50 years. She was wrongly advised meaning that she has been relying on consultants to do the job. Instead of utilising the experienced workforce she met on ground at SEC to guide her, she is not conversant with the Market; she should have known that the Nigerian Capital market has not attained 50 years old; because the Market was not created when we had our independent. These are some of the things that are not relevant in solving the problems in our Market. I have expected her to invite shareholders and address them; though she did that once when she assumed office and we commended her; right now she doesn’t know whether the Associations of Shareholders exist. Rather she has taken offence; because of our criticisms of her to better the Market. She should call shareholders who are prominent in the Market to go along with her in wooing back investors to the Nation’s Capital Market. We also talked to the Market Women, Pepper Sellers and others in the first instance to begin to invest in the Market; we were among those who created the awareness.

FACTS CHECK:

“In March year 2011, the Nigerian Stock Exchange announced the delisting of 11 Companies from its Daily Official list, these Companies were Nigercem Plc, Albarka Air Plc, Foremost Diaries Plc, Wiggins Teape Nigeria plc, Okitipupa Oil Palm Plc, First Capital Investment, Trust Plc, Flexible Packaging Plc, Netpak Plc, Krabo Nigeria Plc and Tropical Petroleum Plc.

The reason was that the affected Companies were not meeting their obligations in terms of fees to the Stock Exchange. Also, in year 2009, 64 Firms were delisted from the NSE’s Daily Official List.

The latest delisting and most controversial is that of Nigerian Bottling Company Plc a couple of months back.

On demutualisation

Demutualisation is not the issue and cannot revive the Market, demutualisation was the brainchild of Okereke-Onyiuke, and she was pursuing it gradually, she was at the verge of implementing it when the Market meltdown began as a result of the global Financial Crisis. This was put on hold by the Council of the Exchange so that the Market would stabilise before demutualisation.

The Market belongs to all Nigerians and not to one person to hijack. We say no to it either you demutualise or not, it will not restore confidence back into the system. This is not where the problem lies; the fortune of the Exchange is not demutualisation. This can come when the right thing is done and that is by bringing the right people who are the owners of the Exchange, reconstituting a proper Council of the Exchange and not an Interim Council. Like I said earlier, demutualisation is not the problem of the Exchange, stakeholders must agree together, the Council of the Nigerian Stock Exchange must be reconstituted, what we have today is an interim Council controlled by SEC. Until they reconstitute the Council whom Oscar will be reporting to as a Board, and bringing out policies for Oscar to implement as the CEO.

EDITOR’s PICK:

Nigeria’s Securities and Exchange Commission (SEC) September 22 2011 inaugurated a 21 Member Committee to demutualise the Nigerian Stock Exchange.

The 21 Member Committee is Chaired by Asuerinme Ighodalo, Legal Practitioner. Experts in all the relevant disciplines, including Lawyers, Accountants, Investment Bankers, Stockbrokers, Market Operators, Regulators and from the Academia.

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