Ms Arunma Oteh, new director-general of the Securities and Exchange Commission (Sec) has decried the quality of the Nigerian capital market, saying, “We don’t need a casino, we need a functional capital market.”
Oteh noted in Lagos last week that the Nigerian Stock Exchange (NSE) suffered a serious decline last year, following a period of unprecedented growth and development, remarking that the market fell from being one of the fastest growing among the world’s developing and emerging economies to one of the worst performing, having declined by about 70 per cent from its peak in March 2008.
She said when the Nigerian capital market is measured against comparable markets, it still consistently fell short of the benchmark in several key market performance indicators such as market depth/breadth, market liquidity, sector concentration and transaction costs.
She said the market was also recently characterised by sharp practices which has led to the erosion of investor confidence.
She observed that while effective governance is key to well-functioning capital markets, the Nigerian capital market had in the last two years been characterised by governance weaknesses that had led to improper behaviours with sharp practices such as insider dealing and share price manipulation.
In effect, the Nigerian capital market had been more or less turned into a casino post recapitalisation and consolidation in the banking and insurance industries as banks and insurance companies had to invest their idle funds in the market in order to make short-term gains.
The market was then characterised by investors with short-term motive, with the hope of divesting after a short time, thereby turning the market largely into a casino.
The development came to a head when most discerning investors decided to divest at the same time, leading to a heavy glut and the attendant large-scale depreciation in the value of stocks.
Owing to the bullish trend in the market, the all-share index of the Nigerian Stock Exchange (NSE) which opened at 57,990.22 in December 2007, appreciated to 66,371.20 by March 5, 2008, its highest value before it dropped to its current position of 23,226.280 as at last week Friday.
“We must therefore implement the Sec zero tolerance policy in a decisive and far reaching manner,” Oteh said, adding that, “I am therefore determined to eliminate sharp practices, deter malpractice and change behaviours by ensuring that both the institutional and personal cost of any wrong doing is extremely high.”
She said they would ensure high standards in regulatory oversight and enforcement and would name and shame where necessary.
Oteh said the commission would strengthen inspection and investigation and any operator found wanting would be suspended, issued a warning, or fined depending on the gravity and nature of violation. She remarked that they hope the various enforcement actions against errant operators, including their suspension from participating in capital market activities, will deter other operators from breaching rules.
She said they would also continue to strengthen all the processes related to investigation, enforcement, prosecution and publicity of outcomes in line with international standards and ensuring that messages are well communicated to the market.
The director-general also said Sec would revitalise its enforcement programme to ensure focus on the cases that are of prime importance to investors, and that Sec would pursue its programmes speedily without compromising on fairness.