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Thursday, December 19, 2013

NDI OKEREKE AND OSKA ONYEMA: A LOOK AT THEIR MANAGEMENT STYLE AND LEADERSHIP OF THE NIGERIAN STOCK EXCHANGE




…and tips to guide current and prospecting investors in the market

    My first encounter with Mrs. Ndidi Okereke Onyiuke (the former President of the Nigeria Stock Exchange) was on Monday 27th October, 2003 at MUSON centre Onikan Lagos during the awards presentation ceremony of the Nigerian Stock Exchange Annual national essay competition (2003) which I was one of those to be presented with awards in the university category. That was not the first time I knew of the woman and the power he was wielding as the President of the NSE, but it was the first time that I would sat very close to her and even shake hand with her. It is now ten years but my memory of her is still fresh as an iron lady of the exchange who many men fear and respect; built with huge body frame like many other powerful women of Africa and among the few women holding important public position as at that period in Nigeria. Her tenure at helm of affairs in Nigerian stock exchange started smoothly but later clouded by intrigues and controversies that were to characterize her final years as the head of the exchange. It was said of her that he was a power-hungry lady who control not only the Nigerian stock exchange but what was supposed to be the supervising agency of the exchange, the security and exchange commission (SEC) whose head Al Faki was rumored to be appointed to the chair at the instance of Mrs. Ndi Okereke. 



     One of the controversies that would later sink the career of Mrs. Ndi was the controversial raising of money for the election campaign of a PDP presidential candidate. Many Nigerian (at that time) accused her of delving into issue that was not her business at the expense of her official assignments in order to get favours from the Presidency. In the process of the fund raising, she used her influence on the exchange to ask for contributions from major companies and actors in the Nigerian private sector. Her fund raising jamborees took place on about two different occasions, before general elections to support the candidates of the ruling party, as well as fund raising activities for the election campaign of US President Barack Obama whose campaign office later denounced ever asking Mrs. Ndi to do so on their behalf. Unlike people holding similar position in other countries (take for example the US) who eschew from politics, Mrs. Ndi want to hold political relevance (at any cost) by dragging the exchange and her self into Nigeria’s murky political waters. At the end he had to pay the price of her naked desire for power and visibility, he was sacked out of her office by another lady who was in control of the Security and exchange commission. He was later to be accused of falsifying documents related to her education in the US and her claims of working at the New York stock exchange. Like many other Nigerian elites Ndi was busy chasing all kind of awards and honorary titles during those period, he was bestowed with professorship of entrepreneurship by University of Nigeria Nsukka, and traditional titles from traditional institutions.
   Ndi Okereke started working with the Nigerian stock exchange back in January 1983 during the civilian regime of Alhaji Shehu Shagari and some 27 yeas later she rose in rank to become the chief executive officer of the exchange during another civilian regime this time around of Olusegun Obasanjo. At the time she was appointed the head of the exchange she was fifty years old, an age that one could say she was at her prime and full of energy and experience to spear headed the needed reforms in the exchange. The controversies that followed the issue of lying about her academic qualifications and work in the US would later damage her reputation and image in the country. As condemnation came from all quarters and people asked the authorities concern to make sure they made a through investigation on any individual before appointing him to the highest position in the exchange. Another controversial issue that Mrs. Ndi was involved with was that of the Transcorp shares (a conglomerate created at the instance of the former President Obasanjo who wanted to create South Korea type Chaebol Companies in Nigeria) that acquired 75% of the shares of former National Telecom company NITEL. She was quizzed by EFCC because of the $750 million accusation of NITEL by Transcorp where she was the chairwoman. EFCC also quizzed her on the controversial raising of N100 million for Obama campaign; and when it was time for her to response to the arm load of criticism against her, she quipped “I want to make it clear that I am a Nigerian and I have the right to do anything I want with my time and my money”.



    Under her management the exchange reached the highest peak in its history and not long after sink to it lowest point. The spectacular rise in the fortune of the exchange was associated with the growth in the economy (partly contributed by the increased in price of crude oil in the international market), reforms introduced during her period and activities of speculators who were allowed to have their field day. Among the many reforms introduced by the big Madam of the exchange were computerizations of the activities of the exchange, strengthening of the all shares index, as well as her efforts at initiating the authorize clerkship examinations program for those working in the capital market. After the financial crisis of 2008/9 issues like that of poor corporate governance in the market and inadequate regulatory framework became prominent. The amount of portfolio investment that came from outside the country during her period was unprecedented in the history of the exchange making it one of the fastest growing in the world. All these help to boost the ego of Mrs. Ndi Okereke making her to acquire more powers and wrongly think she can do as she like. May be because of her large body frame some people (wrongly) mistake her for current finance minister Dr. Ngozi Okonjo-Iweala who is more clever in not showing (outward) her desire for power, which Mrs. Ndi cannot found way to cleverly hide away from public eyes.



   Unlike Mrs. Ndi, the US career record of Mr. Oscar is not much in doubt as he rose in his career in the US to level of senior Vice President and chief administration officer at American Stock Exchange (AMEX); with about 20 years working in the US financial markets and Nigerian IT industry. The process that led to the appointment of Mr. Oscar was very rigorous involving globally recognized bodies such as Accenture, Johannesburg Stock Exchange (JSE), and Council members of the NSE. He received his university education in both Nigeria and US. Now more than two and half years since he assumed office as head of the exchange Mr. Oscar has surely done well as the exchange has gotten back to its pre 2009 peak this year, thereby setting another record. But, before that was made possible he has to battle with some major challenges that were at the heart of the collapse of the market in 2008. The left over issue of margin loan is still not over, as the bad loans that resulted from that altercation is not cleared despite the intervention of Asset Management Company of Nigeria (AMCON). Recently, the performance of the exchange has gone down which some analysts blame on the activities of speculators. Issues that border on unethical practices of some major actors in the market are still part of the problems that Oscar has to work harder to solve.
       It is too early at this moment to compare him with Ndi who spent 10 years in that post and who also was a bit of an insider on the exchange, as she spent most of her working career there. While Ndi was in her early 50s when she assumed that position Oscar was in his early 40s. Both of them spent more than a decade living in the US, either studying or working. But, their approaches are a bit different, so far Oscar has keep to himself not showing off in front of the cameras or looking for too much publicity which was the hallmark of Ndi tenure at the exchange. As part of the ongoing reforms in the exchange listing rules were revised, introduction of Islamic share index as part of measures to diversified the exchange and attract more investments, market makers introduced, demutualization, as well as segmentation of the market. The fact that foreign investors (who own about 60% of the quoted companies on the exchange today) would come back quickly not long after they had left in hurry during the last crisis period that led to the crash of the market is testimony of the level of confidence these investors have on the current management of the exchange. This year alone the market has gone up 41% thanks to the activities of these foreign investors.
      Many analysts view the current position of the market as overvalued due (mostly) to the speculative actions of foreign portfolio investors; thus, putting words of caution here and there for new investors in the market. Unlike Mrs. Ndi who was distracted by loads of controversies outside her official engagement, Mr. Oscar seems to be focused on his job for now. The lost of confidence by the investment public on the leadership of Ndi Okereke did much damage to the performance of the exchange, and the same confidence they seem to show on the leadership of Oscar is affecting the exchange positively. The sober manner of Oscar which contrasts with ego boosting habits of Mrs. Ndi is good for the management of the exchange - which is very sensitive to not only external happenings but what is taken place internally. Thus, the need to put people who are very careful and watchful of their own actions and its effect on the performance of the market. Looking at the number of reforms currently being undertaken by the management of the market with view to improve performance and efficiency one feel optimistic about the future. But, caution should always be exercise to avoid unexpected surprises.

Wednesday, December 4, 2013

10 REASONS WHY SANUSI LAMIDO SANUSI SHOULD BE RETURN AS CBN GOVERNOR COME JUNE 2014

     Regular followers of this blog will be wondering why shall I be advocating for second tenureship of Sanusi Lamido Sanusi (SLS) after his current tenure expired at the end of May 2014? Adding more weight to their argument by citing my past write ups on this blog, where I criticized the man and some of his policies. But, a lot has changed since then, and looking at the longer view and the uncertainty of appointing a new person with its impact on investors’ confidence on the economy, the man Sanusi deserves a second tenure. Beside, as the saying goes, ‘the devil you know is better than the angel you don’t know’. The outgoing US Federal Reserve chairman Ben Bernanke was allowed to finish his complete two terms as reward for the good jobs he executed in managing the US economy at a period of a serious global economic catastrophe. Thus, the same apply to the case of SLS who has done what Ben Bernanke did to US economy to our Nigerian economy. Though, SLS himself has continuously said he was not interested in second return at the CBN, I will here suggest that he reconsider his stand in the interest of the Nigerian nation and its economy who needs him the most at this period of transition. Below are ten reasons why I see it advisable for the Nigerian authorities to consider given SLS second chance:
One, control of inflation; in almost a decade our inflation rate has never come down this low, this is possible thanks to good management from the apex bank. In a period of global inflation this is no small achievement; especially now that the apex bank has promised a far lower rate as time moves on. Hence, the more reason why SLS should be return in order to continue with the good work he started in the fight against inflation.
Two, stabilization of the banking industry; at the eve of the appointment of SLS into the apex bank’s top job, a sizeable number of Nigerian banks where at a point of collapse, at the same time millions of Nigerian depositors were afraid of what would happen to their deposits in these banks. Thanks to SLS that was not allowed to happen, the rest is history as no single individual depositor was allowed to lose his money. Nigerians banks, as they are today, are more stable and sound than when SLS found them when he was appointed in 2009.  
      
Three, relative stability in the value of naira: Though Naira has never gone back to its pre-crisis value against the Dollar, SLS has managed (in midst of many challenges) to restrict the gyration in the value of Naira against the US Dollar within some narrow ranges. This is commendable because a volatile and unpredictable Naira would be bad for the economy of this nation, and especially for foreign investment coming to the country.
Four, rebounding of growth in credit to business and Agriculture: credit to agriculture has increased from N3 billion in 2012 to N20 billion this year. This was made possible by CBN guaranteeing of the risks involve in dashing out credit to farmers by commercial banks; today many farmers are accessing these loans. Overall there is growth (though slowly) in credit given to the private sector by the banks. But, a major obstacle that remains to date is banks obsession with given out most of their credits to the public sector, thereby crowding out the private sector. SLS should do more to improve on this when he gets a second tenure.
Five, increase awareness on the functions and activities of the apex bank: the level of transparency in the activities of CBN in the country has increased, thanks to the level of openness with which SLS carried out his functions in the apex bank. Many Nigerians are now very much aware of what CBN is doing or is going to do, unlike in the past when a number of CBN activities are shrouded in secrecy. Around the world transparency is one of the key elements embodied in the philosophy of the most successful Central Banks around the world. With transparency comes democracy, many staffs of the apex bank have testified to the democratic way SLS is running the institution unlike what happen before his appointment.
Six, boosting of investors confidence in the economy as can be seen from the performance of the Nigerian stock exchange. The total portfolio investment that come into the country this year through Nigeria stock exchange was put by CBN at $6.7 billion making up the higher percentage of all foreign investment coming into the country. Total foreign investment coming into the country has increased from $4.5 Billion in the second quarter of 2012 to $7.79 Billion in the second quarter of this year.
Seven, restructuring of the banking industry: after the global economic crisis of 2008, the world wide obsession with universal banking by the financial industry was brought into scrutiny, looking at the devastation the banking crisis has brought to the world economy. Questions where asked about the suitability of universal banking in the midst of new classes of risks that were arising every day; that explain SLS decision to substitute the universal banking he inherited from Soludo with the diversify holding structure that would later reduce the concentration of certain types of risky exposure in the banking industry. Other models of banking were also introduced by SLS, most prominent in this regard was the introduction of non-interest Islamic banking into the economy, which was before that period seen as controversial but now more people are seeing the wisdoms behind the novel banking model.
Eight, control of interest rate and other charges by banks on their clients: though, there are still some charges that Nigerian banks unnecessarily impose on their customers, CBN under SLS has managed to reduce them. The introduction of cashless policy by the CBN is geared towards reducing the cost of transactions in the industry, thereby transmitting the same to the banks customers. The continuing hike in the interest rate charged by Nigerian banks has been controlled as CBN now monitor the interest rates at which banks issue out loans to the public.
Nine, improvements in corporate governance of the banking industry and fight against corruption: the shenanigans discovered in 2009 in the banking sector by SLS alerted the world on the rots in the Nigerian banking industry that were continued (as at then) to be shielded from the public eyes by the CBN before 2009. The rots and level of corruption was of monumental proportion, and SLS determination to expose it and all those behind it was applauded worldwide as unprecedented in the history of the apex bank. Corporate governance in the industry was strengthen by such measures as limiting of the number of years a CEO can serve as the head of a bank to ten years, who should serve as non executive director of a bank, and restrictions in credit exposure by banks to certain class of risk.
Ten, overall growth in the economy; since the inception of governorship of SLS in 2009 Nigerian economy has grown at around 5-7% despite the global economic crisis that devastated the economy in 2008/9. According to global economic watchdogs Nigeria is expected to surpass South Africa as Africa’s largest economy with GDP above $500 billion. Today, Nigerian businessman Aliko Dangote is ranked among the top 25 richest people in the world, with most of his wealth generated from investments in the Nigerian economy.