Uduk: Despite Downturn, Stock Market Fundamentals Still Strong

Acting Director General of SEC, Ms. Mary Uduk d

 The acting Director General, Securities and Exchange Commission, Ms. Mary Uduk, who was a participant at the just concluded annual meetings of the World Bank/International Monetary Fund, in Bali, Indonesia, in this interview expressed optimism that the downturn in the capital market is temporary, adding that once the political activities are sorted out the market will rebound. Obinna Chima presents the excerpts:






In the past few months, the Nigerian stock market have recorded significant decline. As the regulator, what do you think is responsible for this trend?

I would want to say if you look at the global market report that was released here in Bali, Indonesia and what we already know like increase in interest rates in advanced countries especially the United States, many of the times foreign investors find such increase in interest rate very attractive particularly in advanced countries where their economies are stable. It is normal for a lot of them to want to move their investments in both emerging and frontier markets, which Nigeria is, part of out, to take advantage of increase in rates in those advanced countries. We want to believe that it is one of the things causing the downward trend in the market this period. Another probable reason could be the upcoming general elections. As an investor, a lot of them would want to reduce their exposure or totally move it out. Some may also adopt a wait and see attitude on what will be the outcome of the elections to keep their investments safe. They are waiting to see what will happen and after the election, they can then decide to return full throttle. Such things happen at times like this so i do not really see any problem in that direction. Our stock market is very strong and the fundamentals are very strong. So, it’s just a temporary thing and we believe that after the elections the market will pick up.

Market development is one of the initiatives in the master plan. What efforts has SEC made so far to attract retail investors?



We do not take for granted the presence of foreign investors in our market because they bring with them transparency and liquidity that comes with it. We are also very particular about our domestic investors as they are the foundation of the market. When these foreign investors leave, they are the ones that are here and still make us have a market. There are certain initiatives that we have come up with to build confidence and encourage their participation. One of them is zero tolerance on market infraction. We have also put in place Complaint Management Framework, we have in place other initiatives like risk-based supervision as well as the ongoing e-dividend mandate and the direct cash settlement. E-dividend is one of the game changers in this market and a lot of people are embracing it. As we already know, the forms are on the SEC website for prospective investors to download and get registered. We have carried out many enlightenment programmes in different locations in Nigeria to sensitise investors in respect of this initiatives. We are also planning to deepen the market by coming out with new products like derivatives, non-interest capital market products as well as trying to build the commodities ecosystem. Our rules on derivatives are ready and have been exposed to the market. We are also building in-house capacity to ensure that we are able to implement these initiatives.

We are working to automate processes in the commission so that we will work well with the market. Most of the operators are already automated and for those that are not yet automated, we encourage them to do so and put in place processes that will help the market.

We have a standing committee on the commodities ecosystem to speed up the pace of work in that area. We also have a standing committee on financial technology (fintech), which is an important theme of this conference in Bali and to that extent we have a dedicated Division on fintech at the SEC and we have also come up with a Standing Committee by the Capital Market Committee (CMC) to chart a roadmap for fintech for the capital market. We also encourage the Fintech Association of Nigeria, those of them working on capital market related issues and projects to collaborate with SEC so that we can work together to build a capital market that is technology savvy.

What is the update on the e-dividend enrolment?

As at the last CMC meeting in August, a total of 2.55 million investors had registered. We will get an update on that figure during the next CMC in November.

Any reason for the slow pace of enrolment?

None for now that we know of. We have not received any complaint from investors on why the process is not as fast as it should. What I want to believe is that those that have not yet come may probably not have heard about it and that is why we are pushing on with the enlightenment programmes in respect of that. We are working to improve the awareness and i am expecting that more people will be enrolled on the platform.

What is the update on the planned listing by MTN Nigeria?


We are still expecting that MTN will come to the market, what we cannot say is when they will come. We also have a New Listing Committee of the CMC whose responsibility includes fashioning out ways for these multi-nationals and other companies already not listed to list. The committee is meeting with some of these companies and we hope that very soon they will have breakthrough.


What is the take away for the SEC from this annual meetings of the World Bank and the International Monetary Fund?

We have gained a lot of knowledge from this meeting, but a major take away has been technology related discussions. The world is moving towards digital technology and as regulator, we have to be ready to step up our regulations. A lot of those are what the Fintech Association of Nigeria is already working on in Nigeria. We are willing to collaborate with them so that the SEC is not left behind. Last month or two months ago, we invited them to the Commission’s headquarters for a presentation to staff on what it is all about particularly the areas that affect the Commission like RegTech, Block chain, Initial Coin Offerings which are things we are already working on. This goes to re-emphasise that technology is the future and we have to move with the trend as regulators. It will also help our work and make the market better

Two other issues were discussed here and they include global risk and sub-saharan Africa’s debt

In terms of global risk, there are quite a number of risks. The major ones are the increase in interest rate in advanced countries especially in the United States, the rise in global oil price and equity valuation in the United States. The trade war between US and China as well as Brexit were also discussed.

In terms of interest rate, we understand that if interest rate is increased in a developed country like US, it’s a signal to foreign investors to exit from emerging and frontier markets or at least reduce their exposures to such markets. Secondly, for such economies with foreign debts, it also indicates increase in the cost of their debt service. At the same time, the monetary authorities in such markets will find it difficult to unilaterally adjust downward their interest rate. So it’s like their hands are tied.

Equally the high equity valuation in the US also makes participants to prefer such markets although one hopes that it does not suffer a major correction which in turn will likely affect the global financial stability. Trade war between US and China May likely have some unintended consequences on emerging and frontier markets. A big question will be how all this affects us as a country especially given that we are a commodity dependent economy with developments in the global oil prices dictating the performance of our economy in terms of output growth, foreign exchange and government revenue.

Currently also, we can see the impact of increase in interest rates of advanced economy leading to capital outflows and reduced performance of our stock market. It is also one of the factors that is making it relatively difficult for our central bank to lower interest rate which has implications for private sector borrowing and growth. Increase in borrowing by sub-Saharan African countries was another issue. Debt generally is not a bad thing if it is properly used especially on a well costed projects. However, it can get to a point where debt is very high especially when the cost of servicing it becomes burdensome.

 You don’t want to find yourself in a debt trap. If interest rate is getting higher in advanced countries, it means that the rate of repayment is higher.

Especially in economy that is commodity dependent, it can bring instability and export prices can change anytime.