Strengthening Capital Market Regulation

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Goddy Egene writes on expectations from the new Director General of the Securities and Exchange Commission, Mr. Lamido Yuguda and three executive commissioners that assumed office on Monday

Generally capital markets enable a country to achieve economic growth as capital formation is promoted for government and corporate institutions to raise funds for economic growth.

The Nigerian capital market has over the years played this crucial role, providing funding to government to finance infrastructure and to corporate bodies to finance their operations.

The successful recapitalisation of the banking sector in 2005, when the Central Bank of Nigeria raised capital requirement to N25 billion was made possible through the capital market.
However, considering the country’s huge population and the low patronage of the capital market, it is very obvious that the potential are yet to be fully tapped.

It was therefore not surprising when the new Director General of the Securities and Exchange Commission (SEC), Mr. Lamido Yuguda, on Monday, said the market has a lot of potential for the growth and development of Nigeria post Covid-19 and beyond.
While the capital market has so much potential, one of the reasons that has not been fully tapped is low patronage.

Out of Nigeria’s 200 million population, only about five per cent invest in the market. Given the benefits the market offers, it is expected that more people would be attracted to invest. However, this has not been so due to fear of loss of investment as a result of weak regulation and lack of adequate protection.

But it is believed that if Yuguda walks his talk, the market will witness more patronage.
Speaking on assumption of office, the DG said: “We want to assure investors that this market is for them and we are ready to do everything to ensure that we increase investor enlightenment through education, robust regulation and fair dealing.

“For those that want to defraud investors, there would be no respite because we are ready to fight market manipulation to the last, anyone that flouts our rules will be made to face the consequences of their actions.”
He stressed that investor protection would be at the centre of the initiatives of the new management, warning that any operator that short-changes investors would not go scot-free.

The above are soothing words capable of encouraging investors to take advantage of current low prices of equities in the market. The DG has also assured that the new management will work to the best of their abilities to uphold things on ground and consciously seek ways to improve them to the benefit of all stakeholders.

“Together we must set our sights on achieving those milestones that are capable of making the capital market a powerful engine of growth for the Nigerian economy, with God’s help and our collective resolve and dedication, we shall succeed,” he added.
Yuguda said the capital market master plan launched in 2014, has the objective of positioning the capital market for an accelerated development of the national economy.

“Many of the plan’s initiatives have been successfully implemented while many others are work in progress in line with its objectives. Therefore, the continued implementation of the plan will be one of the major focus of the incoming management, while we also seek possible ways of strengthening it for enhanced impact. We would equally work towards improved market regulation, surveillance and general development,” he said.

Yuguda emphasised that in order to do this effectively, they would need to develop relevant capacities and foster collaboration in achieving their mandates.
Many operators have said while Ms. Mary Uduk, who acted as DG of SEC for over two years and her team strived to improve the regulation of the market , their efforts were hindered because they were in acting capacities.

However, stakeholders are confident that the coming in of Yuguda and the three executive commissioners, who are seasoned professionals, is good development capable of improving the fortunes of the market in particular and economy in general.
The new management team has been advised what to do in order to ensure successful running of the commission and efficient regulation of the market.

For instance, the Chairman, Association of Securities Dealing Houses of Nigeria (ASHON), Chief Onyenwechukwu Ezeagu said: “There is a compelling need for the SEC’s new DG and the management team to engage all stakeholders and build consensus. They should revisit and rejig the capital market master plan and be focused on the mandate to make the Nigerian capital market to be best in class, deep, resilient and capable of inspiring and sustaining confidence among all investors both locally and internationally.”

On his part, the President, Chartered Institute of Stockbrokers (CIS), Mr. Tunde Amolegbe, said Yuguda is clearly a consummate professional with outstanding pedigree and will be overseeing an industry that has been in transition, essentially, since the global financial crisis in 2008.

“It will be useful for him to engage with relevant stakeholders to come up with suggestions and plausible solutions that can see the industry play its expected critical role in the economic revival of the nation as had happened in other jurisdictions.
“And with Covid-19 pandemic re-defining the way business is done, the financial market should be more innovative in outlook. We at the CIS are looking forward to working with him and his team to achieve this and other laudable objectives,” Amolegbe said.
Also speaking, a Professor of Finance and Capital Market at the Nasarawa State University, Keffi, Uche Uwaleke, said Yuguda should ensure effective implementation of the master plan.

According to Uwaleke, the SEC DG should continue from where his predecessor stopped in the implementation of the master plan.
In the opinion of Mr. Ambrose Omordion of InvestData Limited, Yuguda and SEC board members should solidify plans already put in place to drive transparency and effective regulatory agenda aimed at deepening the market.
He said Yuguda should increase participation of Nigerians in the market to reduce dependency on foreign investors that made the market unstable and volatile.

He noted that the commission should decentralise its investment education programme to attract new entrants to the market and educate those scared to return to the market as a result of past bad experiences in the market.
An investor, Mr. Moses Igbrude of Independent Shareholders Association of Nigeria, said investor protection should be Yuguda’s priority.

According to Igbrude, he should be ready to work with all the stakeholders in the Nigerian capital market, by adopting a collaborative approach in handling investor-related matters.
“The SEC’s major role is to protect investors. That should be his focus, especially this period of the coronavirus pandemic.

Yuguda should make economic managers of the country to understand the importance of the capital market to the growth and development of the economy,” Igbrude explained, saying that proper understanding of the capital market would propel the federal government to formulate policies that would enhance the growth of the market.
“His strategies should be on how to assist companies to improve their performances. The capital market as of today is grossly undervalued.

“One of his objectives should be how to reverse this trend. The issue of unclaimed dividends in the capital market should be tackled vigorously by him and he should make sure the demutualisation of exchange is complete in a transparent way for the good of the market in particular and Nigerian economy in general,” Igbrude said.

Some operators said as countries begin to open up their economies, post lockdown, the new SEC boss and his team should clean up past messes and ensure that avoid victimisation of companies or players in the market.
Yuguda should make that SEC adopt structures that resolve issues amiably and privately, without eroding shareholder value and confidence.