By Osaigbovo Iguobaro, Benin
Nigeria’s economy with its driver and indicator, the Capital market, believed to be at its zenith prior to 2008, came crashing with the global financial meltdown in the never to be forgotten year 2008.
It played further in 2009 and with it, trillions of investments were lost, prices decreased in such a fast rate that it called for grave concern. There was panic and lack of investors’ confidence. All these are what may have set Nigeria’s economy on its first steep into recession ever before the 2015 recession alarm bells.At the policy front, Governments had to do battle with unemployment, redundancies, falling wages, foreign and domestic debt traps, illiquidity in the stock market and absolute rock bottom Capital market prices.While many attributed the shock waves in the Capital market to policy failure, weak Corporate Governance, weak
regulatory framework and ignorance of investors, Professor Patience Amechi Isenmila was not so confused.
In a study that first spanned 15 years – 1972 to 1986 and using time series data covering the period 1985 to 2010, she could clearly identify the ailments of Nigeria’s economy and particularly the Capital market.The outcome of that research was the thrust of her inaugural lecture of the University of Benin, which focused on – “The Nigerian Securities Market: the twists and Turns Towards Engendering Growth”.Professor, Patience Isenmila, a Professor of Accounting and Finance went through history to situate Nigeria’s Capital Market which dates back to 1946. It commenced by floating £300,000.00 registered local loan stock1956/61 by the British Colonial Administration bearing an interest rate yield of three and a quarter percentage. Thus, Nigerian Securities Market has always leaned towards medium and long term assets since the first financing of development project under a ten year plan.
Turning her attention towards the sales and purchase of Securities which inevitably reduces risk of liquidity and promotes growth of the Securities market, Professor Isenmila, 26 years ago, undertook a study of three variables she considered had effect of Capital Market Development – namely, openness, political stability, and foreign direct investment.Another equation in the mix, is sustainable growth over a long term.
She therefore undertook yet another research involving fiscal policies to see whether the Central Bank of Nigeria (CBN) guidelines could produce the desired effects.
But to her chagrin, this first female Professor of the Department of Accounting in the Faculty of Management Sciences, discovered that in 1995, “Banks were not complying with the CBN guidelines and that the penalty for non-compliance and for violating CBN regulations were so insignificant that Banks would rather pay the penalties than comply”.
Of interest to note, Professor Isenmila went on to observe that in the time of General Sani Abacha, as Head of state, barriers to foreign investments in the Securities Market were removed and from then on, the market experienced a deregulation which improved further foreign investment in the Nigerian Capital Market.
According to her, “the deregulation of the Nigerian Securities Market has been profitable in that it has improved the competitiveness of the Market as well as making it more investor friendly.The theme of the Lecture also touched on the recapitalisation of Banks and Insurance Companies, since that agenda that occurred under the them CBN Governor, Professor Charles Chukwuma Soludo, between 2004 and 2007 affected Bank Securities and the Capital Market consequently.
The exercise which was aimed at “recapitalisation, consolidating and strengthening Banking and Insurance Institutions in Nigeria caused Shareholders funds to move beyond loss impairment from N2 billion to N25 billion per Bank and total Banking Capitalisation rose from N2.1 trillion in 2004 to N13.1 trillion in 2007.
This development, according to Professor Isenmila Patience Isenmila, was merely in the context of the evolution of recapitalisation of the Banking sector in Nigeria, which had commenced prior to 1992 and had led to the recapitalisation and merger of 89 Commercial Banks to 25. This recapitalization further jerked up the Capital base of banks from N400 billion to approximately N1.120 billion.In the wake of the recapitalisation of Banks, an unfortunate outcome Professor Isenmila observed was that “most investors with little or no knowledge about the Capital Market, prospected for shares indiscriminately. This caused banks to keep approaching the market to raise funds without accounting Properly for funds raised earlier. All these led to unprecedented stock price rises and an eventual collapse and in 2008.A keen student of the Securities Market, the Accounting Professor, observed as well significant historical events and impacts on the market. The 2011 general election which had adverse effects occasioned by uncertainty at home and the climate of fear from the global economic meltdown as well as the fact that despite the Securities Market regulations around the first and second indigenisation policy of the Federal Government; “The Nigerian Securities Market is still largely dominated by foreigners” who she remarked “dictate what happens in the market despite indigenous participation in principle, and who are more interested in what they will get, despite running their business in Nigeria”. And with a touch of humour, she quipped in, “So when the worst happens, or when anything goes wrong, they (foreigners) carry their things and leave” -an obvious sign that all is not well with the nation’s Capital market.To this end therefore, the University Don recommends that the Federal Government should intensify its supervisory role in the Securities Market, address illiquidity issues and deepen the market in order to boost investors’ confidence. On her part, she would recommend a business model which would help boost market liquidity and stimulate economic growth in response to global economic competitiveness and technological advancement.One last major issue Professor Isenmila addressed was impending Demutualisation of the Nigerian Securities Bill which is now before the National Assembly and hopefully the Stock Exchange would be demutualised by the first quarter of 2018. She is all for it as it would transform the Stock Exchange from being a self regulatory organisation, with no shareholders, to a public company that is share owner based and profit seeking.The 196th Inaugural lecture ended on a note of caution for would be investors, who according to the lecturer, know little about the destination of the market, lack the knowledge which can be gleaned from the pages of most national dailies and the electronic Media. The lurking danger of losses can be averted through a tighter investment and Securities Exchange Commission (SEC) control to ward off insincerity and abuse on the part of operators in the security market which has been a long standing concern of many persons.In his goodwill message, the Vice-chancellor of the University of Benin, Professor Faraday Orumwense whose address was delivered by the Deputy Vice-chancellor Academic, Professor Pius Iribhogbe, described Professor Patience Isenmila as a true breed of the Academia who has shown that sharing knowledge is vital component of growing society.Professor Isenmila has through her thoughts in the Nigerian Securities Market: The Twists and Turns Towards Engendering Growth”, paid her dues and gratitude to the University of Benin and helped to fill a void that the regulators can distill from and which policy makers can utilise to act upon should they ever need to deepen Nigeria’s Capital Market in the direction it should go.