SEC: Need to strengthen the capital market

No doubt, the former Director-General of the Securities and Exchange Commission (SEC), Mounir Gwarzo brought great attention to the Commission but, was he working against the tide by trying to make the capital market one of the best in the world? BENJAMIN UMUTEME reports
When former Director-General of the Securities and Exchange Commission (SEC), Dr. Mounir Gwarzo was suspended from office, many felt the Nigerian Capital Market is in for another crisis, one week after the market continues to go about its business.
Over the years, the capital market regulator has been able to reposition the market from its near collapse to its present state.
From bringing back the market out of the pit it fell into during the 2008/2009 global financial crisis, to restoring confidence in the market, the Commission has been unflinching in its bid to put the Nigerian capital market among one of the best in the world.

Coming out of the cold
Between 2008 and 2009, there was a bubble in the Nigerian capital market following a financial crises that rocked the entire world, causing investors to lose billions of naira.
From a total capitalization of only N1.4 trillion in 2003, the stock market grew 7 fold to N10.2 trillion by 2007 and peaked at N12.65 trillion by March 2008.
This was a highly concentrated market where 15 of the 20 most capitalized companies were banks, together accounting for almost 60 percent of market capitalization. However, there was subsequently a painful unprecedented market correction in which the market lost about 70 percent of its value.
This experience decimated investors confidence and contributed to systemic banking crisis. The implication was that many Nigerians who had rushed into the market to invest were left with the short end of the stick as they lost their hard earned money to insider abuse and other related infractions that eroded confidence in the market.
When Arumah Oteh, was appointed to head the Commission, she knew that she had an uphill task of restoring confidence to the market, but she knew it was one that was surmountable.
So the Oteh-led management went about its business with vigour and zest to right the wrongs of the past and return the market to the pre-2008 era.

The reforms
In a bid to ensure the capital market started working again, the Oteh management came up with a ten-year master plan for the capital market.
Speaking at the launch of the master plan, Oteh noted that the capital market is the most important source of these long term funds and making the development of world class capital market in Nigeria a matter of urgent national priority.
According to her, “The Nigerian economy will require massive amounts of medium to long term capital to address its infrastructure deficit and to support the entrepreneurial zeal of Nigerians so that businesses can grow and create jobs.
“Beyond serving as a source of long term finance, I believe capital markets play more profound roles in our society. They are enablers of socioeconomic development because they hasten the rate of capital formation, foster a meritocracy and promote good corporate governance, innovation and entrepreneurship.
“In addition, capital markets broaden access to economic prosperity by allowing ordinary citizens participate in the successes of businesses, they help accelerate wealth creation and wealth distribution by facilitating access to capital for small and medium scale enterprises (SMEs). Capital markets can equally catalyze housing finance which does not only provide shelter but also creates jobs and collateral for businesses.”
While admitting that regulatory lapses opened the door for many cases of wrongdoing, the former DG asserted that the market was way below its potential in terms of breadth, depth, liquidity, sophistication and governance.
She however insisted that where others saw gloom, “we saw an opportunity to build a world class capital market made up of world class institutions operating in a conducive environment.”
In order to achieve its objective, the Commission started by adopting a posture of zero tolerance to wrongdoing while strengthening our enforcement machinery through partnerships with the Office of the Attorney General of the Federation and the Nigeria Police Force.
“We instituted legal proceedings against over 260 individuals and entities for various forms of market infractions seeking to disgorge all illegally gotten wealth and restitute investors.
“We have revamped our investor protection and dispute resolution mechanism by strengthening the SEC’s quasi-judicial Administrative Proceedings Committee (APC), developing a robust complaint management framework, setting up the National Investor Protection Fund and strengthening Anti-Money Laundering and Counter Terrorism Financing (AML/CFT) framework,” she said
And when, Dr. Mounir Gwarzo was appointed by former President Goodluck Jonathan to head the capital market regulator, he continued in the same vein leading to the establishment of the Capital Market Development Fund (CMDF). The result is that different categories of investors have been attracted to the market and which has further led to favourable rating by rating agencies.

Gwarzo: Those in glass houses…….
When Gwarzo came into office, he promised to work in accordance with the mandate of the Commission to make the capital market one of the best in the world.
And he did go about his job with a one-track mind. The highpoint of this the initiation of a forensic audit of Nigeria oil and gas giant Oando.
Before he was appointed the DG, Gwarzo served as commissioner in the Commission, however, when he was elevated to the plum job of head of the Commission, he chose to pay himself off. Therein began his troubles and eventual suspension from service.
When he muted the idea of auditing Oando Plc, capital market analysts felt he was entering shark infested waters that he might not come out of. And so it turned out as few days after that, it was alleged that he had engaged in some fraudulent activities since his appointment.
One of the major allegations against Gwarzo is that he paid himself the sum of N104.8 million as severance package in respect of the end of his appointment as Executive Commissioner, a position he occupied for two years and four months.
Also, documents showed that the DG collected N84.4 million as monetised car grant/allowance for four cars. According to the documents, the money was paid into Gwarzo’s bank Guaranty Trust Bank Plc account (No. 0023868895) among several others.

And the beat goes on
When the Minister of Finance, Mrs. Kemi Adeosun, announced the suspension of the Director-General of the Securities and Exchange Commission, Mounir Gwarzo, over allegations of financial impropriety levelled against him it was seen by many as a blacklash of the Audit of Oando.
Also suspended were two management staff members of the commission.
They are the Head of the Media Division, Mr. Abdulsalam Naif; and the Head of Legal Department, Mrs. Anastasia Braimoh. They were also alleged to have engaged in financial impropriety.
According to the Minister, the suspension was to allow for unhindered investigations of the allegations levelled against the embattled DG and the two other officials.
And to show that that Qwazo’s suspension is not a fallout of the Oando audit, the management led by the acting DG, Dr. Abdul Zubair, insisted that the Commission would not back down in its bid to audit Oando.
A statement by the Commission read in part: “The Securities and Exchange Commission has reiterated its decision to conduct a Forensic Exercise into the activities of Oando Plc.
“This commitment is contained in a letter dated December 5, 2017 addressed to Oando Plc.
“The Commission wishes to assure the general public of its zero tolerance to infractions in the Nigerian Capital Market,” the statement said.
And to underscore the fact that it will continue in the track set by his predecessors, Dr. Zubair assured that SEC will not deviate from its mandate of protecting the capital market.
In the meantime, the good work of the Commission has not gone unnoticed as the International Monetary Fund (IMF), gave a tacit approval by saying Nigeria is still an investor’s destination.
With this approval, the future outlook appeared good especially with initiatives that have already been rolled out.

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