- Lamido Yuguda, the Director General of Nigeria’s Securities and Exchange Commission, spoke to Nairametrics about the SEC’s approach to protecting investors in the country’s securities market.
- He said the Commission ensures all shareholders, minority or majority, are treated equally and fairly in cases of delisting.
- Lamido Yuguda also commented on the decline in foreign portfolio investment in the Nigerian Capital Market, explaining that the foreign exchange challenges facing the country are the main issue and cited developments in the Nigerian economy that will improve the situation.
Since his appointment by President Muhammadu Buhari to stir the ship of Nigeria’s Securities and Exchange Commission, Lamido Yuguda has worked to ensure that the present administration is closely aligned with the development of the Capital Market over the years.
In this interview with Nairametrics, the Director General of the SEC examines issues affecting the local bourse.
Nairametrics: What is SEC doing on the planned delisting by Oando and the crisis rocking Seplat currently?
Lamido Yuguda: The protection of investors is the central mandate of the commission, and when the commission protects investors, we do not discriminate between minority and majority shareholders. So, when there is a case of delisting, the application for delisting comes to the Commission and we go through it very carefully to ensure that the shares of the company being delivered are valuable because fair valuation is what protects all investors.
If there is any issue, we will take the application back to the issuing houses and get this sorted out so that nobody is treated unfairly.
That is how the Commission uses its regulatory power to ensure that both minority shareholders and majority shareholders are treated equally and fairly.
On the crisis in Seplat, we as a Commission have declared a public statement on the engagements that we have had with both Seplat as a company and NGX, the exchange on which it is quoted, and which is under our subsidiary purview. We have examined the issues surrounding the company and have concluded that these issues do not relate to the fundamental economic activities of Seplat as a corporate entity.
The production activities of Seplat have not been affected. Work at all Seplat facilities is continuing as it should, but there are issues surrounding some of the members of the board and some of the shareholders.
We have asked the board to pay attention to these issues, both the administrative issues that have been raised and the legal issues that have been raised. Now, I will say that we are satisfied that Seplat is working according to the agreements reached at that meeting to ensure that these issues are followed to a logical conclusion.
We will continue to receive updates from the board of Seplat about the current situation in the company and will continue to engage and support the company as it goes through these issues so that the interests of the shareholders are protected.
Nairametrics: The foreign portfolio has been dropping over time, and in recent times we have also seen that retail investors are reducing their participation in the market. What are the ways that the SEC is planning on bringing both sets of investors back into the market?
Lamido Yuguda: This is a very important question, and it’s a portion that demonstrates the attractiveness of both the capital market and Nigeria as an investment destination. The things that determine whether foreign investors come to a particular destination and whether domestic retail investors want to reinvest are similar, but they are also quite different. You know, when you have very good companies listed in the market like the Nigerian Capital Market.
Companies that have good fundamentals, companies that are selling products and that have a ready market . If you look at many of the companies in our market, they are doing very well, even compared to other countries. If you are a domestic investor, clearly you have very few reasons not to participate in a market that is quite vibrant. And right now, if you look at the equity market in Nigeria, it is doing very, very well relative to many other jurisdictions.
We closed 2022 very well and 2023 is also looking good, despite all the challenges that we know exist, in both the global economy and the domestic economy.
For a foreign investor, no matter how attractive the domestic economy or domestic capital market is, foreign investors will always factor in the ability to transfer their domestic earnings and foreign exchange to their countries.
We all know that we are having some challenges with the foreign exchange situation in Nigeria. There are also reports of some delays in assessing foreign exchange for the repatriation of foreign investors’ dividends to their country. This has curtailed international investors who have invested and are willing to invest in Nigeria.
So, because of this, we are seeing a reduced, proportion of foreign investors in the Nigerian Capital market relative to what this market has been used to. However, that is a situation that is not permanent. We expect the foreign exchange situation in this country to substantially improve.
Nairametrics: What will be done to improve the foreign exchange challenges?
Lamido Yuguda: There are a lot of economic developments in the country today that are laying the foundation for a much more vibrant foreign exchange market in the country. We do use a lot of foreign exchange to import refined petroleum products.
We know now that the Dangote refinery in Lekki once it comes on stream, will have a capacity of 650,000 barrels per day of refined petroleum products. That means that a lot of the importation that is happening now should be sourced in Nigeria and the amount of foreign exchange we are wasting on importing refined petroleum products should substantially go to other things that will make the country liquid when this huge refinery comes to play. The refinery is very close to completion.
In terms of the other aspect, the Nigerian economy has a good potential to generate foreign exchange from a block of non-oil sources. So once this is realized, you will see a much higher generation of foreign exchange in Nigeria.
If we have a higher generation of foreign exchange from non-oil sources, it will give us a much better situation. It is not a situation that has no solution. The solutions are there, but right now they are in various stages of development. By the time they all reach full development, you will see that this situation should improve considerably.
Nairametrics: Do you expect President Muhammadu Buhari to sign the Investment and Securities Bill (ISB) before the end of his tenure?
Lamido Yuguda: We expect the ISB to be presented to Mr. President for his assent. The Capital Market and its development are very close to the heart of this administration.
If you look at the Capital Market Master Plan, it started exactly in 2015, when Mr. President came to office for the first time. And a lot of the developments that we have seen today in the Capital Market, I mean e-dividend, direct cash settlement, and all the other huge efforts that you are seeing in the Capital Market were a direct result of those efforts from 2015.
So, the tenure of this administration is closely aligned with the most important development that has happened in the Capital Market over the last eight years. And it is only fitting that this Investment and Securities Bill is in the works.
Remember, we had an attempt to reform, but we couldn’t get it through the National Assembly. I think it was the eighth assembly or even earlier. It’s almost 15 years, and a lot of developments have taken place within Capital Markets globally and of course, within the Nigerian Capital Market.
From 2015 to date, this has now been captured with the smooth passage of the ISB by the Nigerian National Assembly. I’m very confident that Mr. President will sign this bill into law before his term of office finishes on May 29, 2023.
I’m very optimistic about this, and I’m very happy and very grateful to Mr. President for his support of the commission and the market. Over all these years, there has never been a single request that we made to the government that was not granted. And I think this is very, very good. We have seen development in the commodities trading ecosystem.
Today, the revised ISB 2023 has a section of provisions on the regulation of the commodities trading ecosystem. And I think this is something that is a big achievement.
And it’s a game changer because, if you look at the strength of this country in commodities, if we start trading these commodities and organize them well, the impact on the economic development of Nigeria and the non-oil exports is going to be massive.
I think there are lots of things that the ISB has that would appeal to the heart of the government to sign it.
Nairametrics: What is the Commission doing to curtail the increasing rate of Ponzi schemes?
Lamido Yuguda: The SEC has been fighting a serious war against Ponzi schemes, we have been alerting people, we have said that investors should only deal with registered operators that have the registration of the Commission, we have their list on the SEC website and we have always said that if you go to an operator or when an operator approaches you, you must confirm that he is a licensed operator with the SEC.
We have our numbers on how to reach our offices in the zones, and we have done a lot of sensitization in terms of seminars, and webinars, all to discourage people from going to Ponzi schemes.
Unfortunately, a lot of people continue to patronize these Ponzi schemes. We have had cases that have been reported to us, and our enforcement department and the police unit have been on many of these cases, trying to resolve the cases that have been reported to us.
I will like to use this opportunity to say that it is not very difficult to recognize a Ponzi scheme, and the people that go into Ponzi schemes are probably aware of the type of risk that they are taking. When somebody tells you that I will pay you 10% per month on your investments, that means if you invest a million naira, every month you get 10% of that, which is N100,000.
If you see something like this, it is probably too good to be true. Because when you compound the annual rate of return, you find out that it is way higher than any decent investment can give you.
Some people think they can be among the first people to go in and probably go out before it collapses, but you may be taking a huge risk because you do not know if you are the first, maybe the 1000th, and it could be that it is your own money that gets trapped.
It is important for our investors to understand the telltale signs of a Ponzi scheme and to alert the commission if they need some clarity, We have contact numbers; you do not have to come to us; you can send a WhatsApp, email or walk to any of our offices that are close to you.
Nairametrics: What is the state of unclaimed dividends?
Lamido Yuguda: This is a dynamic figure that is evolving. So now, I will not give you a very specific figure, but I will let you know that there are arrangements that have been developed for managing the unclaimed dividend administration.
You know that there is the Unclaimed Funds Trust Fund that has been established by the government, and unclaimed dividends are part of the unclaimed funds that will be taken into this Unclaimed Funds Trust Fund, others are unclaimed deposits in banks, among others.
There are efforts that are currently being made to ensure that this fund starts working, but the thing is that this fund is not taking over unclaimed dividends from people.
If at any time anybody comes up with a claim for unclaimed dividends, the fund has been designed to pay that claim. But as you are allowing this fund to remain idle, this unclaimed trust fund is supposed to help in developing the country economically, so this will benefit both people who have this unclaimed dividend as well as other people who do not own them.
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