What foreign investors hate about Nigerian companies

It is interesting how a good number of Nigerian companies complain of lack of capital to execute their expansion plans but do everything to ensure that they are not attractive to investors that could provide them with the capital they need.

Oscar Onyeama, DG, NSE 

As a financial journalist, I have the privilege of being in contact with several investors seeking to invest in Nigerian companies. However, most of them have similar complaints about Nigerian companies.

The common complaint is lack of information. It is not possible to make an investment without information. It is also not possible to monitor an investment without information.

Most Nigerian companies however see no need to provide information about their businesses. It is so bad that even listed companies do not consider it appropriate to provide information about their finances. In a modern world, the first place most investors go in search of information about a company is the company’s website.

I am not certain how many companies listed on the Nigerian Stock Exchange (NSE) have a website but they are few. Beside listed banks, most other companies do not deem it fit to have a website. Then, even for those that have websites, financial information is not adequately provided. Investors as much as possible want to see the company’s full current annual report. That is the minimum. Most companies will either provide basic financial information or none at all.

The Nigerian Stock Exchange (NSE) and the Securities and Exchange Commission (SEC) have also not helped in this direction. It would have been nice if both institutions would have considered it fit to have a link on their website for all listed companies to have their annual report uploaded. The world is too modern for this basic information about quoted companies not to be easily available.

The other thing that foreign investors hate about Nigerian companies is that they never pick their calls. “The CONTACT US” page on most Nigerian company websites is not functional. Put a call to the contact us number on the website, it is never picked up. The question is why provide a contact us number, if you do not intend to pick up your call. It is really frustrating.

Related to this also, is the contact e mail address provided on the website of most Nigerian companies. Send a mail to the number, and there is a 1 in 10 chance that you would never get a reply. The mails are never responded to. And no apologies are provided to even say we cannot respond to your mail.

Finally, foreign investors also hate the fact that you are never sure when dealing with a Nigerian company. An investor told me recently how he travelled all the way to Nigeria to discuss an investment deal with a company. It was only when the discussions had reached an advanced stage that he was  told by his supposed Nigerian business partner that the license they are talking about is not theirs but belonged to another company. He was only the middleman. The potential investor was so disappointed that he never bothered to continue with the discussions again.

There is also the issue of the governance structure of most Nigerian companies. This is usually dominated by the owner manager while most other directors on the board often tend to be beholden to the owner manager. The implication is that business decisions are always dominated by the owner manager. Most Nigerian companies that have sought listing outside the NSE have found themselves being forced to change their governance structure.

The above challenges are by no means restricted to Nigerian companies. In fact, Nigerian companies are quite ahead compared to most other companies in Sub Saharan Africa. But then, Nigeria is a very attractive market in Africa, and so naturally, there is a lot of interest in investing in the country and so it is expected that companies would subscribe to a higher standard of doing business to make them more attractive globally. 

How Nigeria can achieve an investment grade credit rating

Analysts at rating agencies have listed some initiatives that they will like to see in Nigeria that will help the country achieve an investment grade credit rating. They believe if these initiatives are put in place, Nigeria is one of the few African countries with the potential to attain an investment grade credit rating in the next 10 years.  

Sanusi Lamido Sanusi, Governor, Central Bank of Nigeria. 

Credit ratings usually reflect an opinion by a credit rating agency of an issuer’s capacity to meet its debt obligation when they fall due.

Fitch rating currently rates Nigeria BB- while Standard and Poor’s gives Nigeria a credit rating of B+/B which is three steps away from the minimum investment grade credit rating. A B+ rating is classified as a speculative grade by S&P which means that “is more vulnerable than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial and economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation”

A “B” rating is just grade above the C category of ratings which essentially means that a bond is junk and almost in default. For Nigeria, to move to the investment grade credit rating, it has to move a minimum of three steps upward in rating to an A credit rating which is the minimum credit rating on the S&P country credit rating scale.

“Debt issues that are rated as having higher credit quality are commonly referred to as investment-grade securities. Those that are assessed to have a relatively lower credit quality are often referred to as non-investment-grade, or sometimes speculative grade, securities. The term “investment grade” initially identified debt securities that bank regulators and market participants viewed as suitable investments for institutions such as banks, insurance companies, and savings and loan associations”  according to information on the website of Standard and Poor’s.

Basically, If Nigeria and other African countries can attain an investment grade credit rating; it would make the country’s debts eligible for investment from a wider range of investors. This has the potential of reducing the cost of borrowing in the international markets for both the country and companies operating in the country that may seek to borrow in the international capital markets.

Nigeria’s “B” rating put it in what analysts in the investment community call the “Trash ratio” category. Investors are usually restricted to just about 10% of their portfolio in any issue of countries in this category to reduce the risk of their exposure.

About 30 African countries are currently rated by Fitch ratings and S&P but none is rated as investment grade. So at this year’s 2^nd African Debt Capital Markets conference at the London Stock Exchange organised by the IC Group, publishers of African Banker and other pan African magazines, this blogger asked a key official of a rating agency what it would take for  Nigeria to attain an investment grade credit rating.

He suggests Nigeria will need to get inflation into single digits on a sustainable basis. Nigeria’s inflation figures in the last few years have hovered in the 10% to 20% range and in most cases trending upwards.

There is a need to see appropriate policy response to external reserve losses in periods of rapid fall in crude oil prices. An appropriate policy response that leads to a stronger reserve cushion will help to improve Nigeria credit rating. In this direction, he says, it is good news to hear that the State governments have agreed to the adoption of the Sovereign Wealth Fund (SWF)

He also sees as positive the reforms being pursued by Nigeria in the power sector. It would help the country credit rating if the Nigerian government get the reforms in the electricity sector right. He believes that getting the power sector reforms right could boost economic growth and improve Nigeria’s economic outlook.

It would also help if the federal government is able to tackle corruption. This will mean the government taking concrete and transparent steps to reduce significantly the incidence of corruption especially in the public sector.

For more information on credit rating click here

Does a falling crude oil price threaten Nigerian banks?

The Nigerian naira has come under heavy pressure in the last few weeks as crude oil prices head northwards. Brent Crude prices which closely mirror Nigeria’s Bonny Light dropped to a year low of $97 on Tuesday afternoon reflecting worries over the continuing economic uncertainty in the Eurozone. The fear, rightly expressed, is that if the Eurozone crisis is not resolved, global demand will weaken and consequently demand for crude oil.

Sanusi Lamido Sanusi, Governor, Central Bank of Nigeria

Reuters reported on Tuesday that a lack of U.S. buying interest led to the price of Nigeria’s Brent Crude falling to a six week low due to a significant overhang for July cargoes with three or four Qua Iboe cargoes unsold for July. "Demand is not great. There are probably only one or two cargoes that have traded this week," Reuters quotes a West African oil trader.

Fareed Zakaria on why crude oil prices will remain high

Nigeria, West Africa’s largest economy is already feeling the impact of the global panic. The Nigerian naira slipped to a 22 week low on Tuesday exchanging for N163.68 to the dollar at the Nigerian interbank market. Reuters report that dealers claim that the Central Bank could not meet the demand for dollars in the interbank market. The apex bank sale of $300 million in the market was not enough to meet the demand of foreign investors selling down the naira to get out of Nigerian held positions in securities.

Reuters quotes a dealer in Nigeria’s interbank market as saying that "The demand for the U.S. dollar is not being met at the central bank window. So we have all the oil importers as well as foreign investors exiting short term government securities exerting pressure (on the naira)"

Foreign investors’ hitting the panic button is understandable. Nigeria regularly auction dollars in the interbank market to stabilize the naira at a preferred rate. The dollars sold in the interbank market comes mainly from crude oil sales which brings more than 90% of Nigerian foreign exchange earnings. A steep drop in crude oil prices translates into less crude oil revenues and weakens the capacity of the CBN to defend the naira at its preferred rate. If the CBN cannot defend the naira, the naira will depreciate and depreciation of the naira mean whatever gains foreign investors have been made in currently held positions in government securities will be wiped out by the depreciation in the exchange rate.

The implication is that as long as crude oil prices continue to depreciate, the naira will come under pressure as foreign investors who are the dominant players in Nigeria’s equity and bond markets will want to get out of their positions as fast as possible to cut their losses or hold to their profits. Nigeria was in a similar position in 2008, when the sharp fall in crude oil prices from over $120 per barrel to about $40 per barrel led to a sharp fall in the value of the naira as foreign investors hit the exit button from Nigerian capital and money markets. This led to the eventual collapse of the Nigerian capital market, a rapid buildup of toxic assets on banking books and the eventual failure of some banks.

This time around, Nigerian banks are not heavily exposed to margin loans in the equity markets. However, most banks are heavily exposed to supposedly risk free government bonds on their books. The high yields on these bonds means most banks have exhibited a healthy appetite for federal government bonds. The Nigerian government is not expected to default on these bonds however banks may still incur losses if the prices of the bonds fall as demand for them drops. The liquidity of FGN bonds may also deteriorate if the revenue outlook for the government weakens. It is not however; very clear the extent of the negative impact a drop in liquidity and prices will harm Nigerian bank balance sheets. Nonetheless it is a risk worth watching.

The real risk may be in bank’s exposure to the oil and gas sector of the Nigerian economy. As at the close of 2010, an average of 20% of bank lending were to companies operating in the oil and gas sector of the Nigerian economy. Deterioration in the outlook for the sector is likely to have a significant impact on the balance sheets of most banks depending on the exposure of each bank to the sector.  Though, many Nigerian banks have capital adequacy ratios in the 10% to 20% range, there will always be a challenge if there is a simultaneous deterioration in risks in the sector which impacts on liquidity of held positions.  

Another point of transmission risk for Nigerian banks will for banks exposed through their Eurobond issues. A rapid depreciation in the dollar could mean rise in the naira value and servicing cost of these debts. It is not clear how well most Nigerian banks have been able to hedge this foreign exchange risk in their Eurobond debts.  

Nigeria banks risk to the global crisis will however largely depend on how low crude oil price fall. The lower it falls, the higher the risk. Unlike 2008 however, the sanctions against Iran and the crisis in Syria and even Boko Haram activities in Nigeria may mean that crude oil prices may not fall to 2008 low levels. 

Analyst speak on the impact of Euro crisis on Nigeria 

Barrels for guns and dollars

-an inside look at the stolen crude oil trade in Nigeria’s Niger Delta

In the creeks of Nigeria’s Niger Delta, home to the world’s third largest wetland, more than two million barrels of crude oil are pumped and exported daily, but an estimated 30,000 to 300,000 barrels are also stolen. The Niger Delta is home to about 31 million people, belonging to 40 different ethnic groups, bound by fishing, farming and hunting.

Since 1958 however, the people of the Niger Delta have also been bound by the misery of crude oil exploration.  Farmlands have been destroyed and water ways overtaken by thick slicks of crude oil. Amnesty International estimates that nine million barrels of crude oil has been spilled in the region since the first oil well was dug.

An oil bunkering scene in the creeks of the Niger Delta. 

The degradation of the Niger Delta environment was revealed in a 2011 study by the United Nation Environmental Programme (UNEP).

“In some areas of the Niger Delta, there was heavy contamination present, 40 years after an oil spill occurred”

Surface water throughout the Niger Delta creeks contain hydrocarbons with floating layers of crude oil varying from thick black oil to thin sheets, according to the UNEP study. It cites community actually drinking water from a well that is contaminated with benzene, “a known carcinogen, at levels 900 times above the World Health Organisation (WHO) guidelines.

Life in the Niger Delta is no longer the same.

Forced out of their traditional way of life, the people of the Niger Delta have found a new way to survive. Under the cover of darkness, in the midst of the forests, a trade is booming. Wooden Canoes once used for fishing have become transport vehicles for barrels of stolen crude oil. 

Crisscrossing the wetlands of the Niger Delta are long pipelines carrying millions of barrels of crude oil. These pipelines tap into a fraction of the 34 billion in proven crude oil reserves in the Niger Delta. The region also holds another 186 trillion cubic feet of gas reserves, the eight largest in the world.

The exposed pipelines are the source of stolen crude oil. A  copy of a  report  obtained by this reporter, describes how crude oil is stolen from the exposed pipelines. Hacksaws are used to damage to pipelines. This forces the Oil company to shut down oil flow on the affected pipeline to reduce the impact of any oil spill on the environment. As soon as this is done, the oil thieves install bunkering points on the hacked portion of the exposed pipes and attach hoses and suction instruments to the pipes. As soon as oil starts flowing on the pipelines again,  they siphon the flowing crude to waiting locally made barges; said to be able to store up to 40,000 barrels of crude oil at a time and large canoes called “Cotonu boats”. 

The oil thieves have two markets for their stolen oil, the local refineries in the creeks and offshore large tankers waiting patiently for such cargoes.  The obtained report confirms that the portion that is sold to the local refineries in the creeks is refined into diesel, transferred to a storage depot and then sold in the local Nigerian market.

A local journalist familiar with the Niger Delta says the stolen and locally refined diesel is sold at about N150 (59 pence) per litre compared to the official price of N190 (75 pence) per litre for the imported none locally refined diesel.

“In this region, if you want to be a small-time bunkering baron, you raise N10m (£39,000) and pay to a syndicate, then you get supplies as your share. Many people in the big dark jeeps you see here are in it. People introduce themselves as being in 'oil' business. That is it. It is no big deal here.”

Corrupt security agents are behind the trade, he says, explaining how large barges of stolen crude oil are able to move around the creeks unchallenged.

“If you go to Bonny Island, some soldiers lodge N3m (£12,000) daily in their accounts. My bank source tells me that some top brigade commanders get N25m (£98,000) lodgements at a time. There is piecemeal payment to security operatives and also one time pay-offs.  Has government agencies questioned the source of money?”

The exact number of barrels of crude oil stolen is not certain. But various reports put it between 30,000 to 300,000 barrels of crude oil every day. Ian Craig, Shell’s director for Sub Saharan Africa told an oil and gas conference in Abuja in December 2011 that Nigeria could be losing as much as 150,000 barrels of crude oil a day to the oil thieves.

Tony Attah, Vice President at Shell in Nigeria in an emailed response to this reporter’s enquiry disclosed that the “theft of equipment or leaks caused by crude oil thieves drilling into pipelines or opening up wellheads to steal oil, accounted for 74% of all oil spill incidents and 73% of all oil volume spilled from our facilities in the delta between 2007 and 2011.”

He puts the estimated cost of oil theft at “around $4.5bn a year to the Nigerian state and operators in lost revenue”

A special report by the United States Institute of Peace (USIP) titled “Blood Oil in the Niger Delta” estimates that the loss to the Nigerian economy from stolen crude oil between 2003 to 2008 could be as high as $100 billion.

Despite the significant loss of revenue to the Nigerian state, the government seem reluctant to deal with the massive theft of crude oil taking place in the creeks. The government is not only  scarred but may have been  compromised. 

Andrew Walker explains the reason for the Nigerian government reluctance, in a report in 2009 for the BBC titled “Blood Oil dripping from Nigeria” quoting a source close to the Nigeria’s former president Olusegun Obasanjo as saying that “This is an industry that makes £30m ($60m) a day, they'd kill you, me, anyone, in order to protect it”

"If the president goes after them, they could destabilise the country, cause a coup, a civil war. They are that powerful, they could bring the state down."

Toyin Akinosho,  publisher of “Nigeria Oil and Gas” confirmed the fears expressed by the BBC source in a phone chat with this reporter.

“It is not unusual to hear militants in the Niger Delta boasts that they will make the government uncomfortable if they are prevented from stealing crude oil. They always threaten that they will blow up the pipelines.”

Nigeria earns 90% of its revenues from crude oil exports. So blowing up the pipelines could collapse the government.

But the inability of the government to deal with the situation could also be traced to top level political involvement in the oil theft trade.

Top level involvement in the stolen crude oil business may explain how in 2004 a detained Russian Ship carrying an estimated $2.6 million in stolen crude oil vanished. The Nigerian Navy detained the ship and claimed they handed it over to the Nigerian police. The Nigerian police claimed that they never received any ship from the Navy. The Nigerian legislature launched an investigation into the missing the ship. The report of the investigation was never made public.

Since then, several more ship detainments have been reported in the media. In 2011, security agencies are said to have arrested 145 people and seized among others 18 tankers, 22 vehicles, 16 barges, and 35 locally made boats. Sources familiar with the stolen crude oil trade however say these arrests target just the foot soldiers fronting for local and international financiers.  

There is evidence of well-established international syndicates facilitating the stolen crude oil trade in Nigeria. The route to the international markets for Nigeria’s stolen crude oil is a collaborative effort between the foot soldiers in the creeks, the communities hosting the oil wells and pipelines, the Nigerian Navy and security agencies, and an international syndicate of oil thieves that finance the whole process.

The international syndicate involves well established players in markets for stolen Nigeria crude oil in West African countries like Sao Tome, Liberia, Senegal, Cote d’Ivoir, Gambia supported by Moroccan, Venezuelan, Lebanese, French and Dutch Financiers.

The stolen oil is usually exchanged for cash, illegal drugs and weapons from the ships lurking out at seas waiting for the stolen oil to be delivered. The large tankers that buy the stolen crude oil take them directly to spot markets like Rotterdam or directly to refineries in places like Cote d’Ivoire a neighbouring West African country.

“There are large international syndicates involved in this operation, which also handle the money laundry for the international players” according to the USIP report mentioned earlier.

The report notes that the players in the creeks are just the front end of a complex international trade in stolen crude oil.

“While the Niger Delta youth may handle the local tapping and loading, international players from Eastern Europe, Russia, Australia, Lebanon, The Netherlands and France all play roles in financing, transporting, and laundering the money associated with blood oil. One money trail followed a path from Senegal and Cote d’Ivoir, through French banks and French credit agencies to Syria and Lebanon.” The USIP report revealed.

The report reveals deep involvement in the stolen oil trade of Nigerian Lebanese (those of Lebanese descent, born or naturalized in Nigeria) “especially those with good political connections”

Attah, Shell’s Vice President says only international collaboration can stop the booming trade in stolen crude oil from Nigeria.

“Nigeria needs the cooperation of the international community to checkmate the organised crime syndicates engaged in crude theft.  Buyers can demand assurance that the oil they buy comes from a legitimate source.”

The Nigerian state may be too compromised to stop the massive oil theft taking place, unless as Attah suggests, the international community intervenes. 

The Nigerian Stock Exchange and its new website

I just noticed today that the Nigerian Stock Exchange  (NSE) new website is up. The Exchange deserves some commendation  for putting up this new website. I am one of those who felt the old website was not good enough for an Exchange that seeks to be a leading market in Africa for trading securities and raising capital.

The Nigerian Stock Exchange building 

I had a feel around this new website this evening. My first impressions are mixed. Design wise it looks dull and still looks slow to download but that may be due to my own browser. My major problem with the last website of the NSE was the fact that it was not always available when you needed to access it for information. For an Exchange, that could be killing. However, I am accessing this new website for the first time today and I hope it is not usually this slow. The Exchange needs to sort this out if it is.

Oscar Onyeama-DG NSE

Also I noticed that the scrolling prices at the top of the home page have no links to the companies. I would have expected that the prices have links to the price history  of the companies so that investors can easily track share price trends for a period, say three months, six months, one year and more with a click.

Talking of historical price trends, I was able to register and access the data portal of the exchange, but I was not able to get historical data. Instead, I got a brief note asking me to specifically request for historical data at a fee. This demand is surprising for an Exchange that wants to attract investors and increase liquidity. One, this puts an additional transaction cost on investors. The implication is that retail investors who need historical price data on a company will have to pay for it. This is not investor friendly. Two, it limits who is able to access price information on the exchange. All Exchanges thrive on free flow of information. It is not investor friendly that they will have to request for this information and wait until whatever time to get that information.

What happens if two investors put in a request for similar historical price information at the same time, and one of the investors gets it ahead of the other? Would the Exchange not have given an unnecessary advantage to the investor that got the information first? In this age when historical price information and other basic company data on other Exchanges can be gotten with a click on websites like Yahoo Finance, I personally do not think it is a good idea that investors will have to wait for days to get similar information from the Nigerian Stock Exchange. Ease of critical information and cost of transaction are two key drivers of the competitiveness of modern stock exchanges. The NSE should not put itself at a disadvantage here. 

 If the NSE is going to be investor friendly, price information and basic company data should be easily accessible and all unnecessary transaction costs should be eliminated. That is the only way to enhance liquidity, which is vital for any exchange that wants to be considered a good place for companies to be listed.  I would expect that the management of the Exchange will visit leading Exchange websites like that of the London Stock Exchange  and model that of the NSE website after it as closely as possible. No need reinventing the wheel.

And still on the front page, I noticed that some links returned blank pages when you click on them. For example, under the Financial News  pages, the company links return blanks.  I hope that this is corrected. Returning blanks on a website can be quite frustrating mostly when you are looking for time sensitive information which is what most investors are always searching for.  

However, one commendable initiative I noticed was that under the NSE Highlights corner of the home page, there was a link to “Early Fliers” which provided a list of companies that had beaten the NSE deadline on submission of full year annual reports within three months of the end of their financial year. I think this is a good initiative from the Exchange and will serve as positive reinforcement for these companies who have done the right thing. The Exchange needs to adopt more of these positive reinforcement methods to encourage voluntary compliance and disclosure among its listed companies.

It is also commendable that the Exchange has taken the initiative to improve its website. We hope it continues to work at it until the site compares favourably with the best in the world.  Most importantly, the Exchange should realize that the primary purpose of its website should be to provide the highest standards of transparency through full and timely disclosure of all information pertaining to listed securities and not to make money. 

10 tips for doing business in West Africa

1.       Be ready to deal with some government officials who do not understand or really care about the business you are setting up and how it benefits or create jobs for the people. All they are really interested in is how your business idea benefits them or their relatives immediately.  

 Kadre Desire Ouedraogo-President  Ecowas Commission 

2.       The infrastructure challenge is real across most West African countries. So, be ready to put up some form of infrastructure for your firm or for the community or for both. A simple borehole can sometimes make a great difference in the community you operate in, especially if your business is located in the rural area, where access to clean water is usually a challenge.

3.       Be ready to occasionally accommodate the village chief, the local leader, the local parliamentarian or just the local big man who will approach you to employ his or her son, daughter, niece or relative who may not be exactly qualified for the job. Not accommodating him or her could negatively affect your long term business prospects in the community or country.

4.       Give allowance that your signed contract with the current government may not be respected by the next government. Make a provision for negotiating with a new government whenever there is a change of government while your business is still on going

5.       Be ready to accommodate different taxes that may not be clearly spelt out in law or clearly defined by the government. Some of these taxes may not be officially receipted.

6.       Going across borders in West Africa is not a drive through experience. Be prepared to deal with real and fake border officials and even thugs with official endorsement. Dealing with all the official and unofficial border agents means that your goods may not always arrive on schedule at their destination.

7.       Be friendly with customs officials especially those in charge of the borders if you do any business that requires you moving goods across the border. Having an officer friend at the top could make a lot of difference on how fast your goods move across the borders

8.       Being able to speak both English and French can make a lot of difference for doing business in West Africa

9.       Flying across West Africa will not always be smooth. Be prepared for a bumpy flight once in a while. Also do not expect to be able to fly to all parts of West Africa anytime you need to. There are still many places where flights do not go. Also, note flights may not always be on schedule.

10.   Do not panic over the occasional crisis especially around and during election periods when everything look like they are going to fall apart. They will not. Ignore CNN, BBC and most media networks. Even your embassy’s travel advisory always gets it wrong. Remain calm; the noise will blow over soon for you to continue with your business with the same old faces or with some new faces that have similar interest, lining up their pockets first and national interest second.  

Do you do business in West Africa? What is your experience like? Share it by commenting below 

One Scandal too many for the Nigerian capital market

As the Director-General of Nigeria’s Securities and Exchange Commission (SEC) sat down that early Tuesday morning in the (un?)hallowed chambers of Nigeria’s National House of Assembly, little did she know that she was in for the biggest embarrassment of her life.

Director-General of Nigeria's Securities and Exchange Commission (SEC)

As she was preparing for the hearing on Monday, putting together her papers to present to the committee on the capital market that Tuesday morning, some rebels in her office were also busy leaking what should have been confidential internal memos to the committee. While she was thinking that this was going to be an inquest into how the Nigerian capital market lost its verve in the last three years, little did she know that this was also going to be payback time for those that have lost out in her bid to restore some credibility to a market bruised to the point of death.

So when the attacks came flying, she was hardly prepared. A N30 million bill on an eight month binge in a luxurious hotel, a N850, 000 bill and an unholy alliance to a bank she should be keeping at an arm’s length were the arrows of accusations that came flying in her direction. The hallowed chambers of the house of assembly must have suddenly looked like a magistrate’s court. Suddenly, from a prosecution witness, which she thought she was going to be at the trial of the capital market miscreants, she was the one in the dock. She had little time to respond to the change of situation before the curtain fell.

Recall, about a year ago, it was the turn of Ndi Okereke-Onyuike. She was the  Director General of the Nigerian Stock Exchange (NSE). She was the woman who you offend at your own peril. But the gods were about removing the veil of invincibility from her face in a very horrible way. The hammer the gods were about to use achieve their devious mission was called Arumah Oteh, a woman of impeccable character and education, a Harvard graduate with distinguished career in Africa’s most prestigious financial institution.

Ndi Okereke-Onyuike Former DG NSE 

Among the accusation against Onyuike-Okereke was the mismanagement and stealing of billions of naira from the NSE, the alleged falsification of her credentials and other sins. Despite her protestation of innocence, she was removed promptly and a new DG of the NSE appointed. With her removal, it was expected that the storm of scandals that has enveloped the market is over. Now the market was ready to fly on a pedestal of transparency and credibility until the latest bombshell.

Oteh’s fight back was a classic case of a woman scorned. On the Thursday, when the house returned to sit for the second session of the probe, the committee chairman thought he had it made. He has stamped his authority on the probe in the last session and made the woman of integrity look like an ordinary crook worse than the crooks she sent out of the capital market.

However, he was in for a shock. Only if he knew what awaited him from the SEC DGs microphone, he would have gladly postponed the day’s sitting. When the accusations started flying from the SEC DG, the palpable discomfort of the committee members and its chairman were obvious. They had asked for N39 million for this sitting and have also asked for N5 million in cash. Interestingly, the chairman had once collected money from SEC for a foreign trip which he never attended. 

As the counter accusations started flying, the committee members realized that they had interesting games on their expensive smart phones. They all suddenly fell in love with the games and started playing with it. The chairman of the committee also suddenly realized he had a long tongue and dry lips as his tongue kept flying over his dry lips.

The damage had however been done. A picture of a capital market enveloped in a dark cloud of corruption was complete. The Nigerian capital market has been painted like a vultures party with everyone feeding on the carcass of investors. A good reason why the market is yet to recover from a loss that has seen mostly retail investors lose more than IUS$ 60 billion in three years. This is more than a quarter of Nigeria’s GDP.

Efforts to revive the capital have been largely futile. There are many reasons why the market remains comatose. Some of the blame rest on the doors of regulators why other reason have to do with the peculiar circumstances of Nigeria as a country.

First, let us look at Nigeria as a country. How many investors will be comfortable investing in a country when bombs are exploding by the minute? Two, with unending threats of break-up of Nigeria, most investors are getting sceptical investing long term considering that capital market investments are long term. Three, with the way three banks were nationalized, with little say from shareholders, how many investors will be willing to invest in shares again not knowing if they will wake up and see their investments nationalized. Most investors still find it difficult to understand why their investment in Bank PHB or Spring Bank or Afribank is no longer worth the paper it is written on again while investments in other banks are now worth one tenth their values. For such investors, the capital market has become a no go zone for generations.

For long, the current regulators in the Nigerian capital market, encouraged by the Central Bank of Nigeria (CBN), have adopted the attitude that retail investors got what they deserved in the massive loss that the market suffered. Yet, as regulators, they stood by and watched the infractions and market manipulations that eventually killed the market. None of the auditors which approved fraudulent annual reports have been charged today for their actions and these auditors still audit the same banks that they audited to death in previous years. Yet, regulators expect investors to trust these same auditors again that once audited the banks to death.

 Nigerian regulators are also yet to show that they have better control of the market? There is no doubt that there has been significant improvement in enforcement of the rules and regulation of the exchange in the last one year. Companies are releasing their results more regularly and the forecasts are also done more consistently. Also capital market operators are also being forced to adhere more closely to the rules of both the Exchange and the SEC.

However, there is much to be done. The quarterly reports of most companies remain unreliably. It is very difficult to understand why a company will issue a third quarter result showing that it has made profit, issue a forecast that it is going to make profit at the end of the year, and a few days to when it is going to release its final results, it hits you with a profit warning and eventually announces a significant loss in its final results. No investor will ever have faith in such a market or company again.

Company quarterly results are still basic. Most companies release very few details in their quarterly results that hardly help investors to make an informed decision about the company. Forecasts are always not backed with assumptions. Investor relations departments are missing from most quoted companies and most of them do not have reliable websites. Getting the published annual report of most quoted companies in Nigeria is like a camel going through the eye of a needle.  Very few companies (mainly banks) bother with analysts presentations and conference calls on their results. 

Finally, regulators seem to think that foreign investors can be relied on to revive the Nigerian capital market. It is usual for them to tout the amount of foreign investors investing in the Nigeria Capital market. However, the truth is that foreign investors are usually short term. It is only local investors that give the market the liquidity it needs to be a viable market.

The depth local investors can bring to the market was shown in the 2006 to 2008 market boom. Retail investors were mainly the drivers of the boom. It can happen again. But local retail investors must first of  be given the respect they deserve once more. It is talking down on them and making them look stupid for putting money in the Nigerian capital market that has partly gotten us to where we are today.

And that reminds me, this was the reason the House Committee on Capital market was supposed to be calling for a public hearing on the Nigerian capital market. To find out why the market is in a bad state. Unfortunately, it became a probe into how SEC is run. Not that how SEC is run is not an issue, it is key, but it should not have been the main purpose of the probe. Putting it first, buried the more important issue of why the market collapsed and has remained in coma.

The capital market committee should have concentrated on the bigger issue of why the market collapsed and let how SEC is managed come in as part of their probe not as the main focus of their probe.  I hope the adhoc committee on the capital market will take a cue.  The Nigerian capital market must be made buoyant again.