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Saturday, March 30, 2013

NIGERIAN CAPITAL MARKET: the problem with Oteh’s SEC

     Ms Arunma Oteh, the controversial head of the Nigerian security and exchange commission (SEC), in the eyes of the Nigerian national assembly is an outcast who is holding unto her office illegally; apparently with the backing of the executive arm of the government. Oteh’s problem with National assembly begins when she accused the chairman of the house committee on capital market Hon. Herman Hembe of asking for bribe from her in return for clearing her. Oteh alleged that Mr. Hembe requested for a whopping sum of N44 million as funding for the house public hearing on the agency, a business class ticket and estacode for a conference in Dominican republic, which according to her statement, he neither attend nor return the money. Ms Oteh damning revelation led to the resignation of Hon. Herman Hembe and constituting of a new committee by the house of representative leadership; the newly constituted committee after deliberations recommended the sacking of Ms Oteh to the president. The national assembly based their recommendation for the sacking of Ms Oteh on her qualifications, saying she lacks the qualifications to hold the office. Ms Oteh, the house argues, does not possess the minimum capital market experience required for a person holding her current position which demanded 15 years of capital market experience. The house, therefore, recommended to the Presidency to remove her, but the president for reasons known to him has refused to relieve her of her job.

     In one of my previous write ups on the same issue of Nigerian capital market about a year ago on this blog, title ‘Nigerian capital market problems’, I discussed among other things the suspension of Ms Oteh from the commission and her replacement with Bolaji Ibrahim (a former Director in the commission); as at then Oteh was given three weeks suspension pending the outcome of a commission of inquiry into her way of running the agency. As at that period, I have never imagine how Oteh would have come back to her seat looking at the damning allegations against her, the lack of experience issue and opposition from the national assembly. Oteh own staffs at the commission testify before the committee that she lacks the capacity to control the commission due to her poor coordination of SEC activities. The SEC top management blamed the atmosphere of mutual suspicion, distrust, and low staff morale in the commission on her.  As at then I also wrongly assumed that the people close to the presidency were against her coming back, not knowing they were the ones who are really backing her behind the scene. From that Presidency intervention, the issue at stake slips away from that of competency to hold the position to that of show of strength between the Presidency and the legislative. What ever happens to the nation’s capital market is of no one concern. While Oteh and her SEC are entangled in a tug of war bordering on her suitability and competency to chair the commission, other capital market problems in the country go unattended. These include proliferation of illegal funds and wonder banks in the country, capital market frauds, increase in the number of ill motivated fund managers and lack of enforcement of the commission regulations.

    Opposition to Oteh doesn’t only come from the National assembly, as there are insinuations that some powerful people with interest in the Nigerian stock exchange are out to truncate her. But, one of the recent courageous decisions by the leadership of the SEC applauded by stakeholders in the industry is the decision to suspend ECOBANK from the capital market over unethical conducts. This will go along way in boosting investor’s confidence in the market after bucket load of controversies that tinted the image of the regulator in the recent past. Just last year Oteh’s SEC introduced market makers into the Nigerian capital market scene to help the market out of it problems and put it in better position to compete with more advance rivals. The massive debt overload that has slow down the exuberance of the major stock broking firms in the country has been attended to, through forbearance packages (not without their own controversies) to selected stock brokerage firms. These twins’ measures analysts’ believe has helped restore investors’ confidence in the market. The forbearance program involves about N22.6 Billion worth of deadly margin loans on the balance sheet of some 84 stock broking firms. Just like in the case of the banking sector, Asset Management Corporation of Nigeria (AMCON) was the one who led the way in facilitating it.

     It is clear to everyone now that a SEC leadership that is in tussle with the National assembly cannot have the focus to implement the needed capital market reforms. This is evident looking at the fact that in the face of hundreds of capital market problems that resulted from the financial crisis of the last few years, Oteh SEC was able only to attend to few of them. In view of the massive protest by the staff of the commission sometime last year calling on Oteh to vacate her seat, the lady must by now be facing load of distractions from both the national assembly and her own internal work force. All these combine will make her job the most difficult on earth. But, these notwithstanding Oteh persevere on her job despite all odds. But, all this is not possible without the backing of the ‘who is who’ in the Economic Management team of this regime, that include Mr. President himself, Finance Minister Ngozi Okonjo-Iweala, and the leadership of the Central Bank. In show of determination and will power only some weeks ago, SEC management comes out with the newly introduce mechanism for corporate organisations in the country to tap the vast Islamic bond market. This is a welcome development, as it will further deepen the Nigerian capital market and increase the availability of different market instruments. But, her effort should not only stop there; as I had mention in my previous writings, what is most needed at this time is the entrenchment of good corporate governance in the market as most of the market participant lack it, including the SEC itself.

     Activities on the floor of the Nigerian stock exchange itself has received some boost over the last few months, after the devastating financial crisis that resulted in the NSE’s market capitalization falling from the all time height of N12.694 trillion in March 2008 to all time low of N4.48 trillion in March 2009. During the crisis period over 70% of the total capitalization of the market was lost. The new management of the exchange under Mr. Oscar Onyeama should be commended for it attempts at steering the exchange into safer territories. Likewise SEC leadership under Ms Oteh despite the controversies she is enmeshed in. For the first time in many years it seems like the NSE, who is suppose to be under the control of the SEC, is now (within certain yard sticks) under the control of the SEC; the credit for that I don’t know who should get it, whether it is Ms Oteh, Mr. Oscar, Malam Sanusi or it is the powerful finance minister Mrs. Ngozi? Lastly, the earlier the executive and legislative arms of our democracy finds a lasting solution to the current impasse, the better for our capital market and from there the larger economy. The main barometer for measuring the health of any economy is how fast it raises capital. In our own case, the comatose nature of our economy combine with bureaucracy and tussles such as the current one over Oteh makes that difficult to achieve.