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 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, would be marred.
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, driving the global economy into a recession.
Nigerian market like any other emerging markets which initially appeared to be insulated found themselves well enmeshed in the crisis that as at the end of 2008, these markets, were in abysmal trance with unprecedented losses.
According to analysts, Nigeria lost about 45.77 per cent in 2008, in what was clearly the most excruciating times to investors in the annals of its capital market.
At her emergence as the Director General of the Securities and Exchange Commission, two years ago, Ms. Arunma Oteh said her agenda was 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.
These, she said, would transform the country’s capital markets from crisis to opportunity. She was equally aware that the capital market has the capacity to support entrepreneurship, grow the real sector and create jobs for the population.
Oteh noted that she believed in sound regulatory environment with strong enforcement framework to deter securities law violations which according to her “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”.
In assessing Oteh’s two years in office, some market watchers believed that she has done well, noting that her scorecard was one of the key attributes that led to her re-emergence for the second term as chairperson of the African/Middle East Regional Committee (AMERC) at the just concluded IOSCO annual conference held in Beijing, China.
However, others are of the opinion that rather than restore confidence in the market, SEC’s policies and actions have not yielded enough results to help galvanise people from patronising the market, pointing out that the recent revelations at the House of Representatives’ probe of the near collapse of capital market was capable of further eroding the confidence the commission hasdgained in the market.
Meanwhile, in the last couple of years, the commission has put some policies and actions in place intended to help revamp the market. These include among other things:
New code of corporate governance
In an efforts to reinforce public companies, SEC issued a new code of corporate governance in April 2011 to align governance standards in public institutions with global best practices. The new code is quite extensive and covers all aspects of corporate governance. It was introduced to promote transparency and accountability in public companies and enhance overall market integrity through the enhancement of disclosure and reporting standards.
As at the last count, over 135 of the 198 listed companies had signed up for full compliance with the new code.
The Commission has equally hosted a number of enlightenment sessions with publicly listed companies to enable them understand and effectively comply with the code.
In addition to code of corporate governance, SEC has invested in capacity building for listed companies to ensure seamless transition to International Financial Reporting Standard (IFRS) given the 2012 cut-off date for compliance.
Enforcement and market integrity
To ensure infractions in the market are no long condoned, SEC instituted legal action against market operators found culpable of infractions and employed naming and shaming as a deterrence strategy.
Already there are suits against 260 individuals and entities at the Investments and Securities Tribunal (IST).Besides, between 2010 and 2011, the Commission suspended 52 companies for various capital market violations, while 30 companies were referred to law enforcement agencies for further action.
Going forward, the Commission has overhauled the subsisting complaints management framework. SEC has resolved 97 per cent of all complaints received in 2011 (709 out of the 729 complaints received). About 156 cases were referred to the enforcement and compliance department of the SEC for necessary action. Over the past two years (2010 to 2011), an average of 882 new complaints were received each year; while an average of 848 complaints were resolved each year.
Enhancing the fixed income market
Apart from enhancing the framework for bond issuance and introduction of rules on book building and shelf registration and simplified disclosure rules for fixed income which are sold to institutional investors and high net worth individuals, every issuance line in the market for bond has been shortened. The price discovery process for securities has also been improved.
SEC is equally promoting and supporting the creation of an over-the-counter (OTC) market designed to attract more companies to the capital market and also provide additional platform for bonds trading. To this end, the Nigerian Association of Securities Dealers (NASD) and FMDQ OTC Plc have forwarded applications to the SEC to set up Over-the- Counter (OTC) trading platforms in Nigeria.
Strengthening market institutions
One the areas SEC has done well is the overhauling of the structure, form and operations of the Capital Market Committee (CMC) to enhance its relevance to the growth and development of the Nigerian capital market. Consequently, the CMC was reorganised late last year with seven sub-committees emerging at the end of the rigorous exercise. The committees have been streamlined to correlate directly with the workings of the market.
Also, SEC has commenced discussions with the Bureau of Public Entreprise on the appropriate privatisation model to adopt for the Abuja Securities and Commodities exchange (ASCE) following consultation with the Ministry of Finance and the World Bank
The commission’s intervention in the NSE led to five-year market transformation plan of the new leadership of the NSE commencing in 2011. Besides, the new leadership has restructured the Exchange from a loss making organisation in 2009 to profitability in 2010.
Issuer education/investor outreach
In the area of investor and issuer education, SEC recorded some significant achievements. It executed various issuer education and investor outreaches to strengthen capital market awareness. Such initiatives include provision of educational materials for various cadre of bond issuers (corporate and sub-national) and investors (retail and institutional)
SEC has sponsored seminars, hosted town hall meetings, quiz competitions, and capital market studies in secondary schools and universities.
Specifically, the commission hosted an investor outreach programme in northern region of the country covering Sokoto and Kano State in 2010, at which the Capital Market Club for secondary schools was launched in 2010. The clubs have been extended to 33 schools in Kano and 31 schools in Sokoto. The strategies for migrating the club to other states are being finalised. Currently, the clubs have over 1000 student members.
Also, SEC collaborated with the Rivers State Government and successfully hosted an investor/issuer education outreach for the government and people of Rivers State in July 2011. Over 1000 participants were offered critical insights into the market as an ensemble of capital market experts facilitated during the interactive sessions presided over by the SEC.
The apex regulator has set aside one year to commemorate 50 years of capital market regulation. The anniversary began last October when SEC, in partnership with the Ministry of Finance, Ministry of Trade and Investment and the Central Bank of Nigerian organised an international investor forum in Abuja under the theme: “Nigeria, the preferred investment destination”. The event was attended by leading international and local investors, state governors, ministers of the Federal Republic of Nigeria, as well chief executive officers of and financial sector leaders. It showcased the wealth of investment opportunities in Nigeria.