Imperatives of Handbook for Financial Market Operators and Practitioners

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Seye Adetunmbi
I started my working career in the capital market as Deputy Manager, Corporate Finance in 1990 after leaving MBA School in 1989, and my first assignment was the private placement of the divesture of the controlling holdings of Ondo-State Government in Araromi/Aiyesan Oil Palm Plc.

I was privileged to have two brilliant and experienced chartered accountant bosses as my Chairman/Managing Director and General Manager respectively. However, the financial intermediary service firm I worked for had not handled such a capital market issue before. In fact, there were very few investment banking mandates that had been consummated in the Nigerian capital market in the late 1980s and early 1990s.

This was coupled with the fact that some of the regulatory policies were just evolving and they changed at short notices. This meant that there was no precedent for me to follow with respect to procedure in-house to see my assignment through in a regulated capital market setting. The implication of this was that I took it upon myself to develop my knowledge on capital market issue process through papers presented at seminars and workshops. It was imperative for me to be on top of how best to go about the private placement procedure in line with the requirements of the Securities and Exchange Commission (SEC).

The private placement brief, I must admit challenged me a great deal from the beginning to the end. In the process of seeing through the brief, I developed passion for investment banking and lasting career in the capital market. There and then, I found the need for a standard pragmatic manual for capital market operators and corporate finance operatives.

Naturally by instinct, I started taking notes on financial market operations and practice within and outside Nigeria which culminated into a textbook. The initial manuscript was first concluded as far back as 1992 which I updated for this edition. I received inquiries from people who read my research work on Real Estate Investment Trust, Debt Securitisation and Asset Backed Securities which also prompted me to see this book through.

Contemporarily, the financial market sector of most developing economies in the recent past recorded a remarkable development and growth as a result of embarking on strategic economic liberalisation schemes. Structural Adjustment Programme (SAP) was one of such schemes. This is evident in the increasing numbers of operators in the financial intermediary services in the economy of these nations. In Africa for an example, there were more financial market operators in Ethiopia, Kenya, Nigeria, Zambia and Zimbabwe in their SAP era than it used to be in the pre-SAP days.

With the increase in the monetization of these developing economies, commerce and industry have been developing side-by-side with their financial system respectively. However, one area that is yet to come of age in spite of the imponderable potentials in the sector is the capital market of most these developing economies which still leaves so much to be explored. Financial market professionals may agree with me that the strength of the financial sector cannot be divorced from a developed, functional and vibrant capital market.

The essence of knowledge and information cannot be overemphasized because they are keys to any edge. It is an apparent fact that, lack of adequate business information on developing nations is one of the major barriers to their economic development and growth. It is also becoming very evident that economic reforms and liberalisation programs being adopted by some of these developing countries, are not yielding the desired results fully for diverse reasons.

Poor implementation is perhaps one of the key causes, and this is due to lack of credible and available information on contemporary environments with similar peculiarities. On the other hand, the sudden surge in the financial market activities in the world emerging markets did not match with the available expertise. The implication of this dearth in resource persons and relevant procedural information is trial and error approach to the professional needs of the financial market resulting to an inefficient market.

Nigeria is the case study in the book because activities in the money and capital market between 1980 and 2020 had been quite remarkable and should be documented, such that, it will serve as a guide for other emerging markets, government technocrats, intending practitioners, existing financial market operators and individuals who wish to know how the financial market operates and works. In January 1995 for instance, the federal government of Nigeria revoked the Exchange Control Act of 1962 and the Nigerian Enterprise Promotion Decree of 1989, as a bold move to integrate further, its economy into the global economic system.

I have read a number of publications on financial intermediation and its practice in developing economies which I found very informative on the activities in the sector. However, I deem it necessary to put a textbook together which will not only review the activities of the Nigerian financial market to date, but to serve as a practical guidebook for intending operators and participants who have been eager to be involved but have been constrained by lack of information and the technical knowhow.
The book should also clear misconceptions on the operational procedure in the financial market, particularly the mix-up of the identities and the respective functions of the various registered financial market operators and players.

The prevailing inflationary trend in most of the developing economies made money market funds expensive for the financial engineering of the formal sectors of the economy until recently in Nigeria. This apparently makes it necessary for most of the Nigerian manufacturing companies to explore the capital market window. Activities in this sector are inclined to grow continuously and it is against this background that I have been inspired to put the guidebook together with special reference to the capital market operations.

In my working career, I have been directly involved in securing registration as a capital market operator for four different companies. I was also actively involved in taking public liability companies to the capital market under the auspices of the Securities and Exchange Commission. I also had integrated exposure in stockbroking operations and corporate finance. I have at one time or the other coordinated various capital market workshops and seminars on multifaceted financial market issues while I have presented several papers in Nigeria, Zambia and USA on financial market operations, specialized products and services. I participated in the second conference of the African Stock Exchanges Association (ASEA) in Johannesburg, South Africa in 1994 and the 10th Conference at Sandton City, South Africa in 2006; some of these experiences were reflected in the guidebook. Most of my specialized seminar papers constitute the section five of the textbook.

Therefore, in view of the practical approach of this book, most of the materials in this maiden edition other than the statutory information are informed by my functional involvement in the financial market operations. In addition, I carried out a detailed research into a select literature, workshop and seminar papers on the capital market operations of some active markets. Necessary clearance of facts was done at the appropriate quarters on the relevant areas of this textbook. Hence, most of the procedural information in the book might not be found in theoretical finance textbooks.

On August 15th 2008, the inspiration to convene Capital Market Roundtable in Nigeria resulted to an interactive e-Forum. The roundtable parades the best of professionals in the Nigerian financial market. It is an online platform where past and present operators, tested practitioners and regulators converged to cross-fertilize ideas for the good of the market and the national economy. The last section of the book brought out some of the best moments in the forum. The various relevant issues discussed and debated were highlighted for ease of reference and application as the need arises. I am a follower of the school of thoughts of Warren Buffet, the oracle of value investing; the pages separating each section of the book contains some of his timeless quotes which readers may find refreshingly instructive.

Representative symbol of Capital Market Roundtable in Nigeria
The book is not an end in itself. However, the 20 chapters should be able to inform the financial engineers, formal sector players and practitioners, proprietors, entrepreneurs, investors and company executives on the opportunities that abound for them in the financial market as well as the challenges too, and how to benefit from this sector in a developing economic environment. Section one provides an incisive intro to the world of financial intermediary services. The book also articulates functions of the professional parties that are relevant to typical market issues in an emerging or a developing market. Thus, solicitors, management consultants and accountants who are often faced with professional callings in the financial market would also find section two of this guidebook useful.

The technocrats in government that are confronted with the problems of how to fund capital projects would also find the book relevant. Section two and section four would enable them to understand the step-by-step of long-term capital raising alternatives available to productive government capital projects in an organised stock market by exploring various financial market instruments and integrated capital market product derivatives. Likewise, the owners and managers of private sector companies with growth potentials would find the book useful.

Practitioners pursuing careers in the capital market should also find the book functional, while those individuals aspiring to be stockbrokers, companies seeking quotation on the Nigerian Stock Exchange or prospecting registration as capital market operators should benefit from reading the guidebook. Furthermore, the book should enhance or facilitate the induction programme for new employees of the financial market operators. Students of accounting, banking, business management, economics, finance and law should find this book very relevant because of its practical approach to financial intermediation and practice in Nigeria, particularly in the capital and money markets. The glossary of financial market terms was well researched, quite educative and should be beneficial to all and sundry.

In spite of my efforts, I still feel that some information which some readers may wish to find in the textbook may have been left out. Nevertheless, I consider this book as an insightful compendium on financial market activities in Nigeria. It is also important to note that the guidelines articulated in this book were valid as at the time of publication. In subsequent editions changes in operational procedure and the directory of operators shall be effected accordingly. This is why this publication is a continuous exercise which should be reviewed periodically. Financial intermediary service has a broad spectrum, this textbook is therefore limited to the areas which I have competence professionally, adequate knowledge and modest exposure. This I deem fit to share with my professional colleagues, article clerks in the capital market and all inquiring minds.
Adetunmbi is an author