The Director-General, Securities and Exchange Commission (SEC), Ms Arunma Oteh recently presented a review of SEC’s journey to world-class as a capital market community, covering where the Commission was in 2010 when the SEC started its reform program to where it is today and where it should be in 2025, Aminu Imam reports.
The Securities and Exchange Commission (SEC) Nigeria was established in 1979 as the apex regulator of the Nigerian capital market. It is a Federal Government statutory body supervised by the Federal Ministry of Finance.
Its activities are currently governed by the Investments and Securities Act (ISA) 2007. The SEC has the overarching mandate of investor protection, ensuring orderly and equitable dealings in securities, developing the market and shielding it from all forms of abuses.
In regulating the market, the Commission undertakes many activities meant to protect investors, market operators and ensure market integrity, which include: Registration of securities and market intermediaries to ensure that only fit and proper persons/institutions are allowed to operate in the market; Surveillance over exchanges / capital trade points / trading systems to forestall breaches of market rules as well as deter and detect unfair manipulations and practices which may cause market disruption among others.
The popular saying that ‘good deeds shall not go unrewarded’ could best describe the SEC Director-General, Ms Arunma Oteh, who recently presented a review of the Commission’s journey to world-class as a capital market community, during an Infrastructure Conference in Abuja, during the launching of a detailed Master Plan for the Commission at the weekend.
According to Oteh, the Nigerian economy will require N655.2 trillion ($3.9trillion) to fix the deficit infrastructure in the next 30 years as SEC Nigeria launches a 10-year Capital Market Master Plan.
Ms Oteh, while speaking during the launching of the Master Plan, at the just concluded 4th Capital Market Committee retreat in Abuja, stated that if the policy actions in the master plan were vigorously pursued, the Nigerian capital market would be in the position to generate the $3.9 trillion needed to meet the infrastructure deficit in the next 30 years.
“We want a bond market that will enable us to meet the infrastructure deficit estimated at USD3.9 trillion over the next 30 years. We want a market that does more for housing finance, enabling Nigeria close down the 17 million housing unit deficit while supporting entrepreneurship by doing more for SMEs and start ups. We want a capital market that combines all the elements needed to support Nigeria to actualize its aspirations of peace and prosperity for all citizens,” she said.
Before assuming office, the SEC boss disclosed that the stock market in 2003 had total capitalization of only N1.4 trillion, which grew 7 fold to N10.2 trillion by 2007 and peaked at N12.65 trillion by March 2008.
However, she said this was a highly concentrated market where 15 of the 20 most capitalized companies were banks, together accounting for almost 60 per cent of market capitalization.
“There was subsequently a painful unprecedented market correction, in which the market lost about 70 per cent of its value. This experience decimated investors’ confidence and contributed to systemic banking crisis on the heels of the global financial crisis,” she stated.
On her assumption in office, Ms Oteh said her first task was to ensure that investor confidence is restored, adopting a posture of zero tolerance to wrongdoing while strengthening SEC enforcement machinery through partnerships with the Office of the Attorney-General of the Federation and the Nigeria Police.
According to her, “We instituted legal proceedings against over 260 individuals and entities for various forms of market infractions seeking to disgorge all illegally gotten wealth and restitute investors. We have revamped our investor protection and dispute resolution mechanism by strengthening the SEC’s quasi-judicial Administrative Proceedings Committee (APC), developing a robust complaint management framework, setting up the National Investor Protection Fund and strengthening Anti-Money Laundering and Counter Terrorism Financing (AML/CFT) framework.”
She added that “we have invigorated our rulemaking, ensured adherence to the principles of securities regulation as espoused by members of the International Organization of Securities Commission (IOSCO) in which we are a leading member. We have also enhanced market transparency through implementation of global best practice in corporate governance and financial reporting, issuing a new Code of Corporate Governance and supporting the adoption of the International Financial Reporting.”
The SEC DG said, “Beyond serving as a source of long-term finance, I believe capital markets play more profound roles in our society. They are enablers of socioeconomic development because they hasten the rate of capital formation, foster a meritocracy and promote good corporate governance, innovation and entrepreneurship.
“In addition, capital markets broaden access to economic prosperity by allowing ordinary citizens participate in the successes of businesses, they help accelerate wealth creation and wealth distribution by facilitating access to capital for small and medium scale enterprises (SMEs). Capital markets can equally catalyze housing finance which does not only provide shelter but also creates jobs and collateral for businesses.
“Prior to 2010, when the SEC-led reform agenda started Nigeria had a budding capital market even well before independence. The stock market in 2003 had total capitalization of only N1.4 trillion which grew 7 fold to N10.2 trillion by 2007 and peaked at N12.65 trillion by March 2008. This was a highly concentrated market where 15 of the 20 most capitalized companies were banks, together accounting for almost 60 percent of market capitalization. There was subsequently a painful unprecedented market correction in which the market lost about 70 percent of its value. This experience decimated investor confidence and contributed to systemic banking crisis on the heels of the global financial crisis.
The DG further said, “When I joined the SEC in January, 2010, we felt that we had no choice but to commence a far reaching reform programme that would address these challenges. It was a period of general malaise, investor apathy and high uncertainty.
“There were regulatory lapses, many cases of wrongdoing leading up to the crisis and most worrisome; a market that was way below its potential in terms of breadth, depth, liquidity, sophistication and governance. Where others saw gloom, we saw an opportunity to build a world class capital market made up of world class institutions operating in a conducive environment.
“Our reform agenda was largely based on the report of an Industry Committee established by the SEC in 2008, titled: “Making World-Class Potential a Reality”.
Oteh expressed its SEC’s appreciation to President Goodluck Jonathan, whose administration, she said, has been very supportive of the capital market. She also said the Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala has been SEC’s key advocate in this administration pushing for the elimination of stamp duties and value added tax (VAT) on market transactions while being instrumental to the much-needed forbearance for stockbrokers.
“These important initiatives by Mr. President’s administration have enabled our own reforms in the market”, she emphasized.