It was fun today at the House of Rep hearing on Capital Market. The erstwhile DG of the Nigerian Stock Exchange Ndi Okereke Onyiike was in attendance answering questions and giving her own views about what went wrong and what could be done to correct it. But before I take you through get very enlightening response, here is my take her appearance.
Ndi Okereke Onyuike showed a vast knowledge of the running of the stock exchange and succeeded in convincing those watching of her immense experience. She also displayed a high level knowledge for dealing with political matters affecting the exchange and showed an uncanny ability to get things done her own way. She however failed to accept some responsibility for the stock market crash blaming it solely on the CBN and margin loans. Under her leadership the stock market attracted IPO’s from companies that had questionable records, lack of corporate governance and lacking in transparency. Companies flouted rules and regulation as they hardly filed annual reports and accounts, failed to publish quarterly reports and committed all sorts of frauds such as insider training, arbitrage etc.
Even though they had no direct control in how prices are determined they could have done more to ensure price earning ratio rising way above reasonable levels are curbed. For example she could have barred countless companies which had not published earnings from trading on the exchange thereby safeguarding investors from buying shares in massively over priced companies.
Her knack for the limelight also gets in the way of focusing on the very demanding task of running the exchange.
So Here are highlights of her QA sessions.
On what can be done to deepen the stock market?
She Explained that the Federal Government should use moral suasion to ensure companies like Shell, MTN etc get listed on the stock exchange. She explained that the FG can do this by using tools like only restricting Government contracts and services to only public quoted companies. This will not only deepen the market, it will also ensure that part of the profits derived from Government businesses are also enjoyed by Nigerians.
On why the NSE sat back and allowed unsustainable share prices?
She explained that NSE was the only one warning the public of the unsustainable prices of shares quoted on the exchange. She explained that neither the CBN nor SEC performed their regulatory function of ensuring price fixing and insider dealings were eradicated.
On why the stock market crashed?
She explained that margin loans which the CBN and other regulators allowed to continue crashed the market. That the CBN had allowed banks to lend money to investors to buy shares without issuing proper guidelines.
On what happened to shares sold via private placement and never listed on the stock exchange?
She explained that the NSE had no oversight on shares not sold in the stock exchange. She opined that it was up to SEC to regulate sale of securities which are not listed on the exchange. She further mentioned that so many companies issued shares via private placement on the guise that the shares will be listed. She added that some even sent out “prospectus” rather than an “Info Memorandum” as part if their offer documents. Prospectus are only issued by Quoted Companies.
She claimed she became the Chairman of the board after much persuasion from the then President Obasanjo. She said Obasanjo Conceived the idea after he read a book written by founder of modern Singapore, Lee Kuan Yew. She also mentioned that she had refused to be the board Chairman due to issues of conflict of interest noting that her subsequent acceptance of the position was not against the law and received the full blessing of the members of the council.
She mentioned that the conception of demutualization of the stock exchange was one she had introduced during her time as the DG. Demutualization was simply a legal way of transforming the Stock Exchange from being a non-profit organizations to a company limited by shares. Meaning the Nigerian Stock Exchange can be a company and Nigerians can own shares in it
On Abuja Stock Exchange
She maintained that during her time as the NSE DG she had never been against the setting up of the Abuja Exchange. She said that the only grouse she had was setting up an exchange that will be funded by the Government which in her opinion was not right. She further mentioned that she had even suggested that they make the exchange a commodity exchange which was very much needed in a country like Nigeria. She was also insisted that she has been approached to run the Abuja stock exchange and that she will be willing to take up that role for free.
On Obama’s Campaign Donation
She told the committee that she had met Obama when he was just in his eight month as a Senator. She then decided to support for his campaign for Presidency. She then thought that the best contribution she could make was to create an awareness for Nigerians who were eligible to register to vote, through a dinner organised for that purpose. That by getting them to “register” people can then be able to vote for Obama who was “50%” African. She mentioned that she did not receive any contribution from anyone and that she was exonerated by the then boss of the EFCC after showing them the video I the dinner.
On the NASDAQ OMX Trading Platform?
She told the committee that the platform that the current NSE Management was using was not different from what they had before. She insisted that all that was required was an upgrade of the existing one rather than an outright acquisition of a new one. She mentioned that they Exchange under her management had embarked on replacing the equipment with a different type simply because the makers had decided to transfer maintenance of the equipment to their affiliate in Egypt. A situation which was unacceptable to them as she believed Nigerians had better knowledge and usage of the equipments than their Egyptian counter parts and so couldn’t then go back to them for maintenance.