Monday, 18 June 2012 00:00

Written by SEGUN EDWARDS

SEGUN EDWARDS writes that while the recent cherry news about the much expected government’s bailout for the capital market  by the country’s Minister for Finance and  Coordinator of the economy, Dr. Ngozi Okonjo-Iweala, may have been jolted by the change of guard at the apex regultor’s arm of the market, stakeholders remain doubtful of the intention until  it is actualised.

Though the much expected bailout for the Nigerian capital may be on its way, as the Finance Minister and Coordinator of the Economy, Dr. Ngozi Okonjo-Iweala, announced recently that the Federal Government would release a forbearance package to operators (stockbrokers), there are indications that the measures, which are aimed at stimulating confidence in the market and hopefully increase liquidity, might not be actualised.

Okonjo-Iweala’s good news, which came after over four years of the near crash of the market and disclosed to audience at the annual general meeting (AGM) of the African Development Bank (ADB) in Arusha, Tanzania, was said to have been considered based on assumption that it was the key hindrance to market recovery rather than the unresolved fraud cases involving key and leading players in the market.

While unraveling government’s intentions, she pointed out that the Federal Government, through the Assets Management Corporation of Nigeria (AMCON), had intervened successfully and safe-guarded the banks.

She said: “We are working on the forbearance; we have now agreed on it, and that we are going to implement it. We are having discussions about how to do it. We must remember that we don’t want any moral hazard, we don’t want those stockbrokers who did the right thing to think that they are not appreciated or that they have been neglected.

“So we must honour them too by looking at the type of forbearance to be accorded to the stockbrokers who are having difficulty. But there would be forbearance and there would be some conditions attached to that and we would spell that out,” she stated.

Finance Minister, however, did not disclose when the forbearance package would be released to the stockbrokers, but assured that “the nation’s capital market will rebound”.
Market sources, who pondered on what she premised this on or why she chose this time to make such pronouncement as it was not provided in the typical ‘government speak,’ said they would not expect any concrete issue out of the statement.

According to them, the Coordinator of the Economy should know she had been ‘absent’ on matters related to the capital market and its genuine concerns, which had gone beyond photo-opportunities and grand speeches.

Making the pronouncement, Okonjo-Iweala had said that while it appeared that it was taking government a long period, “our commitment is to make sure that we provide sustainable policy guidelines for growth and wealth creation for both the investors and stockbrokers”.

But critics said: ‘’We have heard this similar speech before and wonder why it took so long to arrive at a common sense decision’’.

Stakeholders in the capital market had, in the last two years, insisted that forbearance would remain the only financial instrument needed to re-stimulate market participation of operators and provide some form of ‘market liquidity’ at the Nigerian stock exchange.

But sources said it was yet to be seen whether the clock had started tickling for a turnaround of the market with Minister of Finances’ pronouncement.

As it is presently, stakeholders in the market may still have to wait longer than expected with the current development that unfolded within the regulatory arm of the capital market, where there a change was effected at its leadership.

Precisely, the Board of the Securities and Exchange Commission (SEC) sent its Director-General,  Ms. Arunma Oteh, on compulsory leave last week to allow independent investigations into her activities as head of the commission in the almost five years.

Investigations are to be carried out by a new board, as the board said it would probe, among others, the Project 50 programme which Oteh’s leadership of the commission embarked upon in 2011, packaged by her to celebrate 50 years of capital market regulation in Nigeria.

The tenure of the board, which suspended her, ended its tenure last week Friday.

Other issues the board said were the revelations that emerged during the capital market probe by the House of Representatives in March and later in April to May this year.

The board was said to have been dismayed by the level of disharmony within the organisation, which was believed to have been displayed by Oteh and her executive commissioners, and the toll and loss of confidence her administrative style had taken on SEC, as her tenure as DG witnessed various intrigues alleged to have plagued the Commission, leaving  investors confidence in the nation’s capital market to dip into its lowest since her assumption of office since 2007.

The Commission’s board had directed her to proceed on compulsory leave, while it announced the appointment of the Executive Commissioner (Operations), Ms. Daisy Ekineh, as acting DG, pending the conclusion of investigations.

Ekineh has, however been replaced with Mr. Bolaji Bello, Director of Finance and Administration in SEC by the Federal Government as Ekineh tenure had lapsed with the Udoma Udo Udoma, led SEC board on Friday June 15 2012.

Okonjo-Iweala, said there would  be no tenure elongation for Udoma, Ekineh and other board members of the commission.

According to her, Bello, now SEC’s Director of Finance and Administration, would assume office on Monday, June 18, 2012 as the Acting Director General.

The belief that the reprieve being expected for the market, may yet be delayed if it would be actualised with the schemings among the gladiators. The stage was set with the suspended DG meeting with Dr. Okonjo-Iweala, over her suspension by the SEC Board.

A source close to Oteh, said: “Well, the DG has already taken the case to her direct supervisor on Wednesday, that is the Minister of Finance, and she is expected to look into the issue. She did not write a petition, it was a formal meeting.”

Asked if there was any official response by the minister on the issue, the source noted that the issue was still being looked into, adding that all areas had to be duly investigated.

“Of course, the minister needs time to look into what happened, and as soon as they come up with any information, she will be duly notified,” he added.

A financial analyst, Mr. Ezekiel Adeleke, noted that the directive might not have been the best step to take, as it might send the wrong signals to the market.

“I think that the committee who wanted to conduct the investigation could still have done that without sending her on compulsory leave. By doing that, she has not been given fair hearing and that is not too good in a democratic economy,” he stated.

The Managing Director, Maxifund Investments and Securities, Mr. Okechukwu Unegbu, however, said that the decision to send Oteh on leave would not negatively affect the capital market.

 “I do not see it as a negative factor that will lead to further loss of confidence in the market. This is because SEC is just a regulator and its major duty is to issue rules and regulations,” he stated.

Operators reactions
Stakeholders in the market have called on the Federal Government to expedite action on the expected forbearance (stimulus) package aimed at rejuvenating the market.

According to the stakeholders, the equities market of the Nigerian Stock Exchange, which has been recording consistent losses with intermittent positive performances since the 2008 crisis that led to a significant loss of about N8 trillion, would only fully recover after the Federal Government would have unfolded the details of the forbearance package.
They said that the market would only react positively to the Minister of Finance’s proposed forbearance, when the details become clearer.

The stockbrokers, through the Association Stockbroking Houses Owners of Nigeria (ASHON), said that what the market needed was a bailout from the government to enable them redeem their margin loan debts, running to over N2 billion

ASHON’s former Chairman, Mr. Rasheed Yusuff, who is also the Chief Executive Officer of Trust Yields  Securities and Investment Limited and the incumbent Chairman, Mr. Emeka Madubuike, had said in wake of the crisis that the government should not turn deaf ears to calls for bailout for the market.

The Managing Director of Deap Capital Management and Trust Limited, Mr. Emmanuel Ugboh, also said the government could step in to save investors of the acquired banks to ensure that their investments in the sold of banks were not completely jeopardised.

Ugboh said: “Having achieved the sale of the affected banks, may be one of the things we should look out for is for government to have mercy and look at this shareholders and say, look these people’s hard earned money were invested in these banks and we must find a way of accommodating them in going forward since these banks actually didn’t die.
“Government took them over with a view to saving them and selling to new investors that is one aspect of what can be done. Government has to temper justice with mercy in that area and make sure that investors do not lose out completely in the nationalised banks,” he stated.

SEC’S reaction
Reacting to Iweala’s pronouncement, a source at the Securities and Exchange Commission (SEC), the apex regulator of the market, said the Director General had received any directive to that effect, Ms. Arunma Oteh, who heads SEC, should be given credit for whatever development that might emerge from that effect.

According to the source, the SEC’s Director General must be acknowledged for her submission to the Coordinating Minister for the economy, which had led to the announcement of the forbearance decision for the capital market.

The source noted the overall importance of the effort to bring the issue to the front burner, which is progressing with the recent announcement by the government, stating, that it was something that should gladden the hearts of operators and every stakeholders in the market.

He said: “It’s a key issue that should be overcome. The minister’s statement is reassuring and the operators should be reassured that the process will be embarked upon for the revival of the market. The forbearance would be brought to closure with everybody better for it.”

Market reaction
However, the outlook of the market presently is yet to show a positive reaction to the announcement as activities have remained on the downward trend as the market capitalisation of the listed equities lost N126 billion or 1.8 per cent to close at N6.947 trillion down from N7.073 trillion three days after the minister’s pronouncement.

Similarly, the NSE All-Share Index fell by 1.8 per cent or 394.65 basis points from 22,180.02 points to 21,785.37 points.

In their reactions, market operators said the liquidity crisis in the market would persist until government showed understanding.

Chief Executive Officer, APT Securities and Funds Limited, Malam Garba Kurfi, noted that the stakeholders were used to such statements that would not be backed with action.

He said the issue of forbearance package had dragged for long to the extend that investors were beginning to doubt the commitment of government towards the bailing out the market.

Kurfi said that the inability of the Federal Government to give details of the forbearance package had made operators to become nonchalant about it.

“We are used to such statements without action. Remember that the promise was made outside the country where it was difficult to ask questions on when and how it is going to be implemented,” Kurfi said.

Another operator, Mr. Eugene Ezenwa, Chief Executive of Pac Securities Limited, urged the government to deal with the issue of the forbearance package immediately in the interest of the market.

Ezenwa said that the market closed below operators’ expectation in May due to profit taking and lack of liquidity in the financial system.

The Managing Director of Trust Yield Securities Limited, Alhaji Rasheed Yussuf, however, described the forbearance pronouncement as a welcome development.

He said that the implementation would determine the direction of the market.

Yussuf said that the liquidity problem in the market would continue until the problem of brokers’ margin loans was settled.

Analysts have, however, urged investors to take advantage of the low prices of major equities in the capital market.

According to them, such investors would likely make profit when the market picks up later in the year.

President Jonathan’s earlier position
Last year, Jonathan had defended the government’s position against intervention in the capital market for whatever reason.

Declining any government intervention in the market during a media chart, he had blamed the near collapse of the stock market on recklessness on the part of operators and investors who turned the market into a casino station, that the government should replicate the banking industry bailout towards salvaging the over N3 trillion non-performing loans, to enabling the desired recovery of the capital market.

According to him, the serious crisis, which the stock market was plunged to, had since led to right pricing of stocks hitherto ambiguously over priced, as he said operators have also learnt the lesson of being moderate, while the market would find its depth at the right time.

He noted that corporate governance, which was absent in the ways listed companies conduct themselves in terms of disclosures, was being fully embraced, which would guide investors opinion on fundamentals of listed companies.

This position, however, was in sharp contrast with the position of stakeholders in the market, who said the only solution to the capital market’s present problem was intervention of the government, in the mode of what was done in the banking sector.