Uduk: Massive Investment Opportunities abound in Down Market

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The Acting Director General of the Securities and Exchange Commission, Ms. Mary Uduk, in this interview with Obinna Chima, on the sidelines of the recently held Annual Meetings of the World Bank and the International Monetary Fund, held in Washington DC, highlighted various initiatives introduced by the regulator to strengthen the capital market. Excerpts:  

What is your assessment of the performance of the capital market so far in 2019?

The capital market can be assessed in three areas: Our efforts at policies and regulation, the development in the primary segment of the market as well as secondary market performance. In terms of policies and regulations, we have continued to implement nitiatives as contained in the Capital Market Master Plan. These include e-dividend, direct cash settlement, financial literacy, commodities ecosystem, among others. I will like to tell you that these, and many more, are shaping the landscape of the Nigerian capital market. In terms of the primary market, we have some new equities issues comprising rights, bonuses and global offer of securities. Some corporates have also issued bonds and some have taken advantage of our new rules on Green bonds to issue this innovative product. In addition, we have equally expanded the number and value of our registered Collective Investment Scheme. Now for the secondary market, if you look at the equities market, especially on the NSE, the market has lost about 16 per cent so far this year, on the back of relatively weak economic fundamentals and investors’ sentiments. Meanwhile, the trading statistics in the fixed income segment of the market appears relatively higher. However, in this last quarter of the year, we hope to see some improvement in the equities segment, especially as investors see opportunities to pick low-priced stocks. As you know, even in a down market, there are still opportunities, since what is down has higher probability of rising. So, generally, during the period under review, the market witnessed some relative activities in both the primary and Secondary segment of the market. Also, in the primary market, there was a new trend in the last one year with the listing of the telecomm companies (MTN Nigeria) and also the recent IPO and dual listing of Airtel. The dual listing of Airtel signified the interest of the foreign issuers into the Nigerian capital market. Consequent to the Airtel IPO, some off shore companies are in discussion with the Commission for an IPO that would be dually listed in Nigeria and the United Kingdom. 

But what are the reforms SEC is working on to enhance growth and confidence in the market?

Yes, investors’ confidence is central to our job as the regulator of the capital market. People must have confidence to invest, not just in the performance of the market, but that stakeholders will play by the set rules and standard and that the market is efficient. If you look at many of our initiatives, they are designed to achieve these. For instance, the e-Dividend system enables shareholders’ dividend to be paid directly into their bank accounts without the stress of dealing with physical dividend warrants and to reduce unclaimed dividend. Also, the Direct Cash Settlement protects investors from funds mismanagement by ensuring that the proceeds of their shares sales are credited directly into their own account. Similarly, non-interest finance is to boost the confidence of those that may not want to invest in the conventional capital market products. We have also continued to discourage people from investing in Ponzi schemes. Our enforcement action against Dantata Success and Profitable Company and others are necessary to make investors distinguish between regulated and illegal investment schemes. We have also signed a memorandum of understanding (MoU) with the Nigerian Financial Intelligence Unit (NFIU) to curb and combat fraud in the capital market. In the area of financial literacy, you know knowledge is power and it can bring confidence. We have employed various means to bring financial literacy to students, academics, military, and the general public, among others. In the area of multiple accounts regularisation, we have assisted in regularising accounts of investors that used different names during IPOs. This was to enhance market liquidity and reduce unclaimed dividend. So, these and many more we are doing to improve the confidence of existing and potential investors in the Nigerian capital market.

I also need to mention that in order to encourage financial inclusion and with the aim of catching them young, we have developed the curriculum on capital market studies and we are now training the teachers. That is the stage where we are now. With fintechs, we are trying to encourage innovation through the use of technology. At the last Capital Market Committee, we resolved that the capital market is not going to sit on the fence and that is why we set up an implantation Committee on the Fintech Roadmap. This road map will be launched later this month, which shows how important fintech is to us. In addition, we are still in continuous engagement with PenCom to encourage more Pension Fund Administrators’ participation in the market. Many of them have large sums of money under management that they can deploy in our markets. We are also planning to re-constitute the Administrative Proceedings Committee (APC)

How do you think the market has fared in the area of corporate governance and what are your expectations?

As you are aware, companies must have good governance structure and be run properly for them to be profitable and sustainable. This is even more relevant for public companies, given that ownership is separated from control. Thus, shareholders and investors must have comfort that their companies are well governed under the appointed managers. With the scorecard which now allows the commission to assess compliance, investors are now better off. The companies are complying and that is boosting investor confidence. The companies now disclose their level of compliance to corporate governance practices which enhances transparency. Now that we have a national code, we expect to see high level of compliance because we have a national code now in addition to the sector code. With these two layers of code, and reporting structure where they need to report the level of their compliance, it will more confidence to foreign investors to invest in our country. This helps to attract foreign investors. But when there are violations to these codes, we sanction them. As securities regulator, we must push for this, otherwise, investors’ rights and confidence will be eroded and they will not be interested in participating in our market. You can imagine the impact of that on the country’s level of investment and growth. Therefore, we monitor companies’ compliance with our Code of Corporate Governance and when they are in violation, we sanction them appropriately. You are probably aware of some of the recent cases where we are taking action against the management of some companies. There are other cases we are looking into that will become public in due time. We encourage whistle-blowers to use our policies in this respect and bring to our notice any of corporate governance violation case that we may not observe. We are also working towards re-introducing the APC that is more strengthened.

How will you feel if you are able to bring the Nigerian National Petroleum Corporation to list on the exchange?

I will feel great. As you rightly said, the listing of MTN and Airtel was a very positive outcome and they substantial raised the capitalisation of the equities market. It also meant we now have the telecoms sector of the economy represented on the stock market. Therefore, it will be great to also have the petroleum sector well represented on our market and having NNPC will make it greater. Recall that one of the provisions of the Petroleum Industry Governance Bill (PIGB), if approved, is to list 10 per cent and an additional 30 per cent of NNPC companies between five and 10 years. If this is done, it will significantly improve the size and performance of our market. Meanwhile, it will also be important for the NNPC companies to be well commercialised such that they can return positive profits to their shareholders. But, I believe that with the country’s potential in the oil and gas sector as well as with appropriate governance and commercialisation policy, investors, the market and the entire economy will benefit from such listing. And it will be a great achievement indeed.