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The newly appointed Director-General of Securities and Ex-change Commission (SEC), Ms Arunma Oteh, has not hidden her intention to bring positive changes to the Nigerian capital market.
Having accepted the onerous responsibility of transforming Africa’s second-largest capital market after South Africa, Ms Oteh has concentrated on restoring investors’ confidence, market integrity, and deepening the market using effective technology. "It is extremely important that we create a capital market that is strong, fair, efficient and robust. We must do this continually by raising the standards of our regulatory environment, revitalising enforcement programmes, introducing new products and enhancing our processes so as to build a world-class market," she said at a conference organised by the Nigeria Economic Summit Group in Lagos. Part of the reforms was the approval of a new window on the emerging markets from the floor of the Nigerian Stock Exchange (NSE). It is to be known as the Alternative Securities Market/ Private Placement and is designed to accommodate companies that cannot meet all the listing requirements of the Exchange. Assistant General Manager/ Head, Corporate Communications of NSE, Sola Oni, said that the approval was granted to give investors more opportunity to invest on the Exchange.
Ms Oteh’s agenda is to build a world-class capital market where there is investor confidence, adequate product offerings and efficient processes, market integrity, a sound regulatory framework, strong and transparent disclosure and accountability regime, good corporate governance, and a fair and efficient marketplace. This, she said, will transform the country’s capital markets from crisis to opportunity. She is equally aware that the capital market has the capacity to support entrepreneurship, grow the real sector and create jobs for the population.
Oteh insists that building a world-class capital market will start with boosting investors’ confidence. “The greatest asset of any capital market, and indeed financial market, is its investors. It is investors, whether retail or institutional, who provide the savings which are needed for productive investment. If investors lose confidence in the capital market, the ability of the market to mobilise and channel long-term funds, which are very vital for economic development, will be marred," she said.
The SEC boss supports a sound regulatory environment with strong enforcement framework that deters securities law violations. “We shall build capacity in people and technology to enable us deal with infractions much more efficiently. We shall also place strong responsibilities on Self Regulatory Organisations (SROs) in monitoring brokers/dealers and enforcing their rules," she said.
Market analysts insist that much has been invested to build the capital market but not much has been achieved. The growth of the capital market will, to a large extent, depend on how well the economy grows in the coming months. "We need a capital market that is resilient and built on a robust platform, especially on good corporate governance principles," said Albert Okumagba, Managing Director, BGL Securities Limited. He advised regulators have to be cautious in regulating the industry because the operators and regulators contributed to the decline in activities presently crippling the market. "I am not against regulation and punishment of operators who have deviated from the standard best practices in this business. But I must make bold to say that the operators and regulators will have to share in the blame as to why the market crashed," he said.
The Managing Director of Afrinvest Limited, Ike Chioke, said investors are still willing to put down their money but the challenge is whether operators have left behind the unlawful practices that brought the industry to square-one in the recent past. He said the banking reforms, especially scrapping the universal banking regime, will affect the performance of the market.
The new SEC regime intends to leverage on technology to police activities in the market. Such application of technology will improve the capacity of the commission to detect insider dealings, market manipulation and other forms of abuses which were said to have been prevalent during the bull-run. The SEC understands that promoting good corporate governance practices in public companies and intermediary firms will therefore be a priority of the commission. Nigeria cannot afford to be weak on corporate governance as this would not only affect the quality and integrity of its institutions and market, but also international perception and capital flows into the country.
Ms Oteh said the SEC will continue to issue corporate governance codes, monitor compliance very closely, take necessary regulatory actions on poor governance practices, and educate directors and corporate managers on the consequences of poor governance for their companies.
World-class capital markets, experts say, are open and fair, enjoy free flow of capital and have a skilled workforce, fair reporting of physical infrastructure and stable political/economic environment. The SEC DG is therefore advised to find a balance between over regulation and proper regulation. She should strive for a market environment where the sanctions are greater than incentives for malpractices.
The Crisis in the capital market started when cracks in the sub-prime market which came to the fore in 2007 became deeper, taking a significant toll on financial institutions and markets and driving the global economy into a recession. Emerging markets which initially appeared to be insulated found themselves well enmeshed in the crisis. As at the end of 2008, most emerging markets, including Nigeria, were literarily bleeding with unprecedented losses. Nigeria was down by 45.77 percent in 2008, in what was clearly the most traumatic period in the history of its capital market.
PULL-QUOTE
The greatest asset of any capital market, and indeed financial market, is its investors. It is investors, whether retail or institutional, who provide the savings which are needed for productive investment. If investors lose confidence in the capital market, the ability of the market to mobilise and channel long-term funds, which are very vital for economic development, will be marred.
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