Goddy Egene writes on what the acting Director General of the Securities and Exchange Commission, Mounir Gwarzo, should do to restore investors’ confidence in the capital market.
It is an indubitable fact that many stocks in the Nigerian equities market currently have attractive prices that investors can take advantage of and reap significant returns going forward. Some of these stocks have hit their record lows not necessarily as a result of poor fundamentals but because of the weak demand by investors.
Given the low valuations of stocks, investors ought to be swooping on some these stocks. However, this is not currently happening because investors are rather exiting. Foreign investors, who used to dominate the market, are leaving in droves due to political and economic uncertainties.
Domestic retail investors, who ought to cash in on the opportunity, are also not interested because of low morale given their past experiences. Many of them are not convinced enough to return to the market based on the losses they suffered during the 2008 market meltdown. They need to be reassured by the regulators that the operating environment is different and better regulated now compared to 2008.
It is, therefore, a consensus among capital market stakeholders that one man who has the task of ensuring the positive change in the fortunes of the capital market now is the Acting Director General of the Securities and Exchange Commission (SEC) Mounir Gwarzo.
He took over the leadership of the apex capital market regulator in an acting capacity last week following the exit of Ms. Arunma Oteh.
Although Oteh, who became the DG of SEC in 2010 and finished her first tenure on the January 6, was entitled to another term of five years, her appointed was not renewed by the federal government.
Hence, she handed over to Gwarzo, who was the executive commissioner operations, while Oteh was DG.
As he settles down to pilot the affairs of SEC, market stakeholders have continued to advise him on what to do in order to take the commission and market to the next level.
Oteh’s parting words
Speaking at the handing over ceremony, Oteh said, “When I joined SEC in January 2010, I was absolutely certain about why the SEC was important and what its role and what the agenda was. I was able to articulate it in one phrase, ‘building a world class market’.
“To have a vision and have everyone being able to connect and align around it for me whether it is capital market operators, whether its shareholders and other stakeholders for me, it is something that I find very rewarding. But I don’t think it would have been possible without each and every one of you accepting the challenge to try something in a different way or to do something in a way that you are not quite sure what will happen.”
According to her, the commission has been able to lay a foundation for the nation to see a capital market that will help tackle its infrastructure challenges that will help people who are setting up businesses, who own businesses raise millions of naira in capital.
“Our aim is to build a meritocracy so that it is the good things that get funded, not necessarily the things that have connections so that we can also tackle some of what we are seeing in our world today, whether it is security challenges we face or the security challenges that everybody faces. My view is that one of the things that will address it is if people can feel that they are included, that they have economic access that they can create wealth, that the income inequalities that we see around us can be addressed. And I believe that the capital market is the answer and what we have done in the last five years is to lay a foundation; there is still a lot of work to be done” Oteh said.
She therefore appealed to the staff to continue to work hard and support the leadership to ensure that the brand that has been built is not taken away.
Stakeholders’ expectations
Market operators have been advising the new SEC boss on what to do to ensure the market regains investor confidence and play its role of capital formation and wealth distribution. The advice ranges from sustaining the reforms introduced to the market, reconciling staff members of the commission to intensifying investor education in order encourage more participation by local investors.
Managing Director (MD) of Partnership Investment Company Limited, Mr. Victor Ogienwonyi, said Gwarzo is an insider with very good knowledge of how SEC works and should know what to do to position the commission so as to effectively play its regulatory role.
According to Ogienwonyi, who is also the Chairman of Association of Issuing Houses of Nigeria (AIHN), the SEC boss must work quickly to reconcile and get the support of all staff of the commission.
“The acting DG is an insider, with very good knowledge of how SEC works. He must quickly work to reconcile and get the trust of all staff of SEC to be ready for the work ahead. The reforms of the last few years need to be sustained,” he said.
However, he observed that the Investment and Securities Act (ISA) places too much unnecessary responsibilities on SEC and needed to be reviewed to make the commission more effective.
The MD of Finawell Capital Limited, Mr. Babatunde Oyekunle, said the first thing Gwarzo should do is to restore the confidence of local investors and ensure their participation in the market.
“Market awareness must be taken to rural communities. There should be more aggressive investor education. There must be zero tolerance for market infractions and preservation of market integrity by monitoring self-regulatory organisation. He should also engage in dialogue and interaction with all market stakeholders on how to move the market forward,” Oyekunle said.
In the opinion of the Managing Director of Standard Union Securities Limited, Sehinde Adenagbe, Gwaro must play by the rules, carry staff and stakeholders along on policy formulation.
“He should put the good of the market above self-interest. He should be detribalised and embark of awareness campaign to meaningful and beneficial audience and think of how to bring back confidence and integrity to the market,” Adenagbe said.
For the MD of Highcap Securities Limited, Mr. David Adonri, the DG should continue his oversight function with undiminished intensity.
“He should devout a lot of attention to the primary market which is yet to recover. He should discontinue the recapitalisation policy, which is a wicked plan by the ex DG to chase several operators away from the capital market,” Adonri said.
Speaking in the same vein, the MD of Crane Securities Limited, Mr. Mike Ezeh, said Gwarzo should come up with enlightenment programme that would bring investors back to the stock market.
“A lot is expected from him particularly bearing in mind the fact that he has a superlative training advantage of both being an operator and also having worked at several levels as a regulator as well. A lot needs to be done by him in order to cover lost grounds. As a seasoned technocrat, he does not need the services of consultants from outside SEC in place of well- trained SEC commissioners, directors, deputy directors and other myriad of professionals to move the market forward,” Ezeh said.
Another stockbroker and MD of Perfecta Securities Limited, Mr. Emma Eze said the DG should put aside the recapitalisation of stockbroking firm currently being pursued by the commission and restore investor confidence.
“He should put aside the recapitalisation process for now, the issue of new capital requirement will not reactivate the market, what will reactivate the market is restoration of investors’ confidence. Local investors’ confidence is number one because foreign investors are not helping the market. What concerned foreign investors is profit. Recapitalisation would be easier to embark upon if there is positive sentiment in the market,” he said.
Shareholders have also suggested how the new SEC helmsman can succeed with his new task.
For instance, National Secretary, Independent Shareholders Association of Nigeria (ISAN), Mr Bayo Adeleke, said Gwarzo must introduce a workable agenda that would protect the interest of retail investors, saying they are hold the ace to the market recovery and stability.
According to him, the former DG concentrated on foreign investors to the detriment of the domestic investors.
“If you cannot sustain confidence of retail investors there is no way you can sustain the interest of foreign investors,” Adeleke said.
Some market operators maintained that for Gwarzo to succeed he should avoid a one man show and to ensure the implementation reports of committees awaiting the approval of SEC board.
They cited the report of the committee on the demutualisation of the Nigerian Stock Exchange (NSE) and complaints management . Many investors refused to return to the market because of poor treatment and poor resolution of their complaints.
In order to address this issue, SEC through the Capital Market Committee CMC) set up a sub-committee headed by the Chairman of Association of Stockbroking Houses of Nigeria (ASHON), Mr. Emeka Madubuike. The committee came up with a harmonised Complaint Management Framework (CMF) that was submitted since 2013.
The CMF is expected to make the process of complaints handling more efficient and investor friendly. However, the report is yet to approved by the commission.
Currently, investors resort to as many as six different places to lay their complaints, a process that is plagued by delays, partial, selective and non-resolution of complaints that most times lead to frustration and loss of confidence.
Hence the committee was set up to a uniformed CMF for the market. Oteh had said the CMF would entail a systematic and well-articulated education of the investing public on ‘where to go, what to do and what to expect’ in lodging and following up on complaints related to capital market transactions.”
Despite this expected benefits, the report has not been approved. Market operators said approving this report and making it operational will assist in restoring investor confidence back to the market.
The man Gwarzo
Gwarzo, who was born in Kano, attended Bayero University, Kano and graduated with a Bachelors Degree in Economics in 1987. In 1991, he proceeded to the University of Birmingham in the United Kingdom where he obtained a Post Graduate Degree in Development Finance. Mr. Gwarzo is an associate and fellow of the Chartered Institute of Stockbrokers (CIS).
Gwarzo first joined SEC in December 1999 as the Special Assistant to Suleyman Ndanusa, who was then the DG. He left 2004 and returned in January 2013 as executive commissioner in charge of operations. Gwarzo occupied that position with until his appointment as acting DG of the commission.
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