By Chinenye Anuforo
The Nigerian stock market has experienced substantial volatility in recent months as foreign investors seem to have adopted a wait and see posture following the May 29, 2015 change of government in the country to know the direction of the administration’s investment and fiscal policies before embracing the market again.
This is evident with the over 30 per cent drop recorded in June in foreign portfolio investment at the capital market.
In this piece, the Director General of the Securities and Exchange Commission (SEC), Mr. Mounir Gwarzo, explained that the decline in the basic indicators of the Nigerian Stock Exchange (NSE), even when the fundamentals remain robust, offers opportunities for discerning investors to take position now. Even then, he believes only a more robust domestic participation would resolve the high volatility in the market.
We are not happy about our market performance at the moment, but we have to bear in mind that that is how the stock market operates. In China, few days ago, the market dropped by about 13 per cent. So, stock market sometimes goes up and sometimes comes down. But the beauty of it is that if you look at the fundamentals of some of these companies, they are good. It is a trend that the market is familiar with. Sometimes it does well and at other times it does not. But our focus at SEC and the NSE and other stakeholders is to continually engage and bring the domestic investors back to the market as we think they are very critical in lifting the market. That is why we are going into public enlightenment programme and other initiatives. We think those initiatives will be able to bring back the domestic investors.
The market is well regulated and operators are following a strong regulation regime and we are putting in strong processes to make sure the operators are fit, strong and proper. Markets go up and down, what is more important is the fundamentals in the market.
We have been asking for this the past 20 years. SEC has issued several directives mandating companies to pay into clients’ account. For certain reasons, that has not been done. For the first time in this market, we have an excellent arrangement with Central Bank of Nigeria (CBN) and Nigeria Inter-Bank Settlement System (NIBSS) as they provided for us their platform to ensure that this becomes possible. The era of, you have a dividend of N200, you have to travel from Gwarzo to Kano City to pay your dividend warrant, and it will cost you N300 to make the trip, that period is over. You begin to wonder why you have to spend N300 to pay in a dividend warrant of N200.
The issue of dividend being stale, and we all know the history of the huge unclaimed dividend we have in the market, which ranges between N75 billion and some people say N80 billion. It is all because people do not have the opportunity to claim their dividends. With this platform, the issue of unclaimed dividend will be a thing of the past. Let me commend the excellent collaboration between the CBN and NIBSS. Without them, we will not be where we are.
There are tremendous benefits in e-dividend; it removes the problem of dividends becoming stale, among others. Even if people change address, they will still get their dividends. We are determined to see the full implementation of this innovation. After today, the committee will also run a training programme for all the bank officers so that when an investor reaches a particular bank, that officer knows how to put the investor through. We are also going to do a massive public enlightenment. Already, we are doing public enlightenment on other issues, but we are also going to run public enlightenment specifically on how investors will utilise the e-dividend portal.
From the provisions of Companies and Allied Matters Act (CAMA) and our engagements with the National Assembly, we know that few years ago, SEC was of the opinion that making the unclaimed dividends statue barred after 12 years is not good for investors in the market. An unclaimed dividend should be such that even in the next 15 years, somebody should be entitled to claim his dividends if he comes around with evidence that he owns the shares. But the provision of CAMA says we cannot do that. At that time, SEC was leveraging on the provisions of our law, Investment Securities Act (ISA), that says where there is a conflict between the two laws, and as long as the subject is the capital market, the provision of ISA supersedes. And we leveraged on that and did another advocacy with the National Assembly. But we did not get the support of major stakeholders in the market and along the line, it did not go through. Our intention at the time was to have an unclaimed dividend trust fund. Some people that were against it said we want to have another Nigeria Social Insurance Trust Fund (NSITF) and as such, that money would be kept there and people would not be able to access it. But we said there would be a very robust system where there would be authentications by the market, such that any time an investor comes with all the necessary evidence, we should be able to pay his or her dividends. But unfortunately, we have not been able to do that. It is something we need to look at as we move forward.
This market has been yearning for dematerialisation and it is part of the initiatives of the Capital Market Master Plan. We need to have in this market a period where certificates are no longer being issued based on the consent of the investor. We have, as SEC, started that process. We have been interfacing with the registrars and the Central Securities Clearing System (CSCS). We also had a presentation in respect to Bank Verification Number (BVN) system, which is part of what we want to do.
Our focus will be to faithfully implement the Capital Market Master Plan. We respect and recognise the tremendous efforts being put in place by all the capital market operators and participants in coming up with that report. And we say we are not going to prepare any report because our focus under the current leadership is to implement that report and one of the recommendations is to set up an advisory council, where, if there is a need to change certain provisions of the law, we will have a vanguard that will interface with the National Assembly. If we want government to change certain policies, we will have the team that will interface with government.
We have been able to come up with a list of the advisory council because of the confidence the market has in us. They have given us (SEC) the mandate to come up with the members of between 10 and 12 people. In the next couple of weeks, we will share with you who we think should be members of the council and their role will be purely advisory, interface with the judiciary, the parliament and the executive. We also came up with the technical team that would interface with the various groups or committees that are supposed to interface with the various groups.
What we did in the Master Plan was that we looked at the sort of things we have to do. We came up with seven initiatives and we have a committee that is implementing that. But we now have a monitoring team within the SEC led by a Deputy Director. Those people will be interfacing with those committees that are working with initiatives to make sure that we achieve what we want. Our commitment is to ensure that those seven initiatives are completed before the end of this year.
Source : SunOnline