The President of the Chartered Institute of Stockbrokers and Managing Director, Capital Assets Ltd., Mr. Ariyo Olushekun, says that the Sovereign Wealth Fund should be invested in the Nigerian economy. He spoke with Udeme Ekwere

 Different levels of instability has been recorded in the capital market and people believe the recovery process has been slow, what is your take on this? 

Well, there are a lot of issues in the market that need to be addressed before we can achieve total market recovery. For instance, there is the issue of debt overhang. We need to address the current situation where a good number of stockbrokers have debt hanging over them.  It is important that the issue of forbearance for margin loan, which the Minister of Finance, Dr. Ngozi Okonjo-Iweala, spoke about some time back, be treated urgently. So, we believe that government needs to move very fast in this regard if the market is to be more stable. There is also the problem of liquidity. Even when you solve the problem of margin loan, you need to put some liquidity in the market. The CIS, has in recent time, emphasised that stabilisation fund be set up. These funds can be used to mop up quality stocks from the market. Of course, it is obvious that most of the quality stocks in the market are undervalued right now.  It is something that government can make a lot of income from. If one is buying some of these stocks at their current prices, after some time when the market recovers fully, the special  purpose vehicle that the government is using such as Asset Management Corporation of Nigeria can then sell the stocks in an organised manner and make income for the government.  So the taxpayer actually stands to gain from this action.

What about the issue of pension funds, are you satisfied with the amount of pension fund invested in the equities market presently? 

   The issue of Pension Fund Administration is another interesting aspect that needs to be looked into. Right now, you have limit of 25 per cent content for equities in the portfolios of PFAs. That is being reviewed. What we have been made to understand is that they are looking at three classes; the aggressive fund, the medium fund and the short term fund. They are looking at 50, 30 and 20 per cent respectively as the maximum content. There is also a need to fix a minimum. We understand that the minimum they are looking at  is 10 per cent for aggressive fund and five percent for medium fund, however, we think the minimum should actually be higher than that because our pension funds  are supposed to  be long term funds. Pension funds have a major role to play in pooling savings of Nigerians.  Such savings can then be channelled into developmental activities in the economy.  So, we need to get PFAs to invest more in the market. The minimum should be something like 25 per cent for the aggressive fund, 13 per cent for the medium fund and 10 per cent for the short term fund. That would be another way of improving activities within the market.

What is the CIS position on the Sovereign Wealth Fund?

Well, our position remains that the fund should be well utilised, especially the future generation aspect of the fund. The fund should be invested in the Nigerian market. It does not make sense for Nigeria to take funds out of its own economy and deposit such funds with investment banks abroad or for them to be invested abroad, because that would mean that they will be using the fund to develop such economies.  We should use our savings and our reserves to develop our own economy. In any case, we have heard of countries that even lost major part of their funds in the process of sending the funds abroad. Libya is a good example. I understand Libya lost about 80 per cent of its Sovereign Wealth Fund. We do not want to do that here in Nigeria, therefore, we should use our funds here to develop our economy.

 So, what do you think are the factors responsible for investor apathy in the capital market?

Well, I would say that the average investor in the market felt that certain things that happened in our market ought not to have happened, and they also felt that the regulators, who should have offered protection, did not do that. This could have happened in several ways. It could be that some issuers were not keeping by the rules. It could be brokers. It could be registrars. Even some of the investor themselves did not play by the rules.  In such a situation, therefore, the regulators should have been able to checkmate some of these things, so presently, if those things are not checkmated, investors’ confidence will not return to the market, and that is why we feel that regulators still have a lot of work to do to attract investors back to the market.

What are the steps that could be carried out to ensure that investor confidence is restored to the market?

 I would say that the first thing to be done is that regulators need to be up and doing. They need to reassure investors that anybody who engages in any market infraction would be duly punished.  On the part of the CIS, we make effort to thoroughly investigate every complaint that we receive, and when a case is made against our member we have a tribunal that deals with such cases. This tribunal is made up of some of our past presidents and principal officers of the institute, and we have a prosecutor who is a Senior Advocate of Nigeria. We also have an assessor who is a retired judge of the Supreme Court. It is a high powered tribunal. I can tell you that the cases are so thoroughly dealt with that none of our judgement in the past has been challenged successfully, therefore, brokers fear facing the institute’s tribunal or the investigative panel. This is just one of the things we do on the part of the CIS to ensure that investors are attracted to the market. We are also constantly updating the knowledge of our members such that in giving service to their clients, they give qualitative service.

How many of your members have been sanctioned within the last year? 

I cannot give you that figure off hand. But I know a lot of people have been penalised. When we do so, we make it public. We give the information to the media all the time. I must also say that because of our activities, market infractions have been reducing drastically. This is because we have had cause to remove some people’s name from the register. We have suspended some people. We have actually done quite a lot.

What is the position of the CIS on the proposed constitution of the Nigerian Stock Exchange Council?  

 Well, the issue bothers on the corporate governance of the exchange.  It is very clear. The NSE is a company limited by guarantee. There are rules and there are laws governing how companies will be governed. In particular, the exchange, just like any other company, has memorandum and articles of association. So, in constituting its council, which is like a board of company, the NSE  has to abide by the content of the memorandum and article of association. It is not much of a problem. What brokers were against was the appointment of eight members into the council of the exchange. You would have noticed that the last board of Securities and Exchange Commission accepted the request of those members to withdraw from the council.

 What is your view on the planned demutualisation of the exchange?

  On the issue of demutualisation, a committee was set up by SEC and that committee submitted its report. The World Bank also appointed a consultant to advise SEC on the matter, that consultant has also submitted its report. We expect that SEC will make it known whether it has accepted both reports and come up with guidelines on demutualisation of the Exchange. The old board of SEC could not do that before they left. We expect the new board to be able to take position on that.

Source: Punch