11th February, 2013
Suleyman Abdu Ndanusa is the chairman of the recently inaugurated board of the Securities and Exchange Commission. In this interview with DIPO ALAJE, he spoke on various issues concerning the state of the Nigerian capital market, how the new board will help in tackling problems confronting SEC and other issues
It is nearly a decade since you left the Security and Exchange Commission, SEC, as the Director-General. Now, you are chairman of the SEC board. What changes would you say have taken place at the Commission between then and now?
I left SEC on 17 November 2004, over eight years ago. When I left SEC, we had been operating the Investment and Security Act 1999 for five years. When I joined in 1999, the Act had just been passed and of course, the law required that SEC moved from where it was under the old law, so we were able to introduce a number of fundamental and radical changes in the regulatory aspect of SEC. When I left in 2004, the debate on banking transformation in the Charles Soludo (former governor of the Central Bank of Nigeria) era was just beginning. The consolidation process required mergers and acquisition in the banking sector. Ultimately, the number of banks was reduced from 89 to 25. That meant most of the banks in Nigeria became public limited companies and were quoted on the stock exchange, which provided more impetus in terms of trading and market capitalisation.
After my exit from the Exchange, the market witnessed a surge induced by consolidation. However, during that time, from 2005 to 2008, there was laxity in regulation. When I was in SEC, we ensured rules were adhered to without fear or favour. We made sure operators complied with rules and regulations. But you know the circumstances that led to changes at SEC at that time meant that the regulated took over the job of the regulator. All we had done to ensure that the statutory regulator had the last say in terms of doing things in accordance with regulations were dismantled after 2004. SEC became weaker in the process. But there was a boom in the capital market which covered the effects of SEC’s weaknesses. The fact that enforcement was weak began to show much later when the market started cracking and crashing. It became obvious there was a failure of regulation and a lot of things began to happen.
But some analysts attributed the crash to the global economic recession. Don’t you agree?
Yes, there was global economic recession and the impact was felt in virtually the whole world, including Nigeria. But largely, a number of things that happened in our own market was because there was serious deviation from the enforcement of rules and regulations. In the last 10 years, the capital market has gone through interesting times. It has gone through growth that can be said to be largely artificial, a growth that was not backed with commensurate surveillance and enforcement of rules and regulations, and, therefore, was not sustainable. The growth was associated with ill-health and was bound to result in a crisis. When you were growing without obeying the rules of the game and the Police (which was SEC in this case) abdicated its full responsibility of enforcing rules and regulations, a crash should be expected, irrespective of other external factors.
Essentially I would say that within the last 10 years, there was growth and boom; some people made money, but within the same period people also lost a lot of money. I am hoping that we have learnt our lessons, especially from the events of 2009. So, when the current Director General took over, we saw the advent of a regulator who obviously was not appointed by the regulated, hence, she was able to see what the problems were and decided to start making certain changes that needed to be made. We just have to do a review of the ways the market is being regulated. The Central Bank is also playing a key role in re-awakening the tempo of regulation at SEC, because the banking sector represents about 60 per cent of market capitalisation. So if the banking sector is undergoing a reform, there must be a corresponding reform in the capital market, particularly in SEC, which is the regulatory body.
Considering the circumstances of your exit from SEC, how did you feel when you heard of your current appointment?
I feel triumphant, I feel vindicated. The pursuit of truth is very difficult, but with patience, one would live long enough to reap the results. Be truthful and honest in whatever service you are giving. Be selfless and ensure there is no personal agenda. I believe that between 1999 and 2005, I gave selfless service and I am confident this can be verified. Therefore, this appointment I was given can be described as the hand of God at work. For five years as SEC DG, I carried my team along trying to implement the Investment and Security Act in the best possible way. Of course, in a period of changes, you are forced to step on toes. But if you remain upright and focussed, whether you are there or not, you would feel satisfied that when you had the privilege of serving you did it selflessly.
When my appointment was not renewed, I carried on without any regret. But some of the initiatives we put on ground have been germinating. When I see the progress being made in the pension sector, I feel very happy that it was during my time that SEC set up a market committee for the reform of the private pension sector in Nigeria. That committee was headed by Dr. Longe. The federal government itself then set up a committee to streamline public pension. It was my report and that of the public sector streamlining that were put together that led to the Fola Adeola Pension Committee of which I am a member
It was under my leadership in SEC that we set up a market committee funded by SEC under the chairmanship of Atedo Peterside to draw up a code of corporate governance. The committee came out with the first code of corporate governance for SEC. Even the code of corporate governance later issued by the Central Bank referred to the one we had earlier set up; it only improved on it. The reactivation of the bond market was also facilitated by a committee set up under my leadership. We had Tola Mobolurin as the chairman of that committee. I also set up a committee on unclaimed dividends, led by one of our commissioners, Dr. Owenoko. The Presidency accepted our recommendations on unclaimed dividends, but when it got to the National Assembly, the document was truncated. When I was in SEC, unclaimed dividends was worth about N8 billion. Today unclaimed dividends in Nigeria is over N56 billion. And there has not been a solution to the problem.
What do you see as the immediate challenges confronting this new board?
The immediate challenges are two pronged – the first one is looking at ourselves within SEC and re-establishing a bond, the togetherness and team spirit as an organisation. We need to start working together for the same goal and purpose. It is a challenge that we will pursue immediately. For you to regulate others, you must first put your house in order, you must work as a team with the same objectives and goal, because if you are weak on the inside, you will definitely be weak on the outside.
The second challenge is that we have to reconcile with some stakeholders. Of course, is known that we are having issues with the National Assembly; it is a challenge because they are very important stakeholders. No matter what it is, we are selling a product and services and the customers are always very right. Therefore, we have to look for ways of talking and carrying everybody along. You may disagree to agree. It is the duty and task of our board to work with the management to ensure reconciliation so that our job as regulators can be smooth again.
The current management of SEC seems to have lost confidence in the Director General. How do you intend to reconcile them and restore confidence between the parties?
The new board is coming in with an open mind. We want to look at the problems, diagnose the issues properly and subsequently proffer solutions to them. We are hoping that once the issues are addressed, confidence-building would start. Some of the issues have to do with motivation. If people are due for promotion and they don’t get it, they feel uncomfortable. There are also the issues of placement and recruitment. Are we doing them according to the rules and regulations of SEC? At the board’s inaugural meeting, I told the Minister that because we are regulators and we are insisting that companies we regulate must practise good corporate governance, charity must begin at home.
This board will ensure that before we go out to tell people to do the right thing we must show example. We want to ensure that we play by the rules. The board under my leadership will operate in accordance with the code of conduct, and we will do that without fear or favour. Where negotiation fails in ensuring that the right thing is done, the board will coerce. To me, nothing other than the right thing must be done or I would step down. If I cannot ensure that my board does what is right and fair, then, I don’t have any business there. In fact, my own standard should be higher because I have had the privilege of being a former Director General and peoples’ expectations from me are very high. Whatever little good name I have now should be improved upon. It is imperative of me to ensure that we do the right thing.
The National Assembly keeps insisting that that the Director General, Arumah Oteh must go. How would your board handle this?
Those are high-level decisions and we are a tiny institution under a Minister. In my inaugural speech, I said our board would be reconciliatory; we would work with our principals to see how these things are resolved. What we are doing now is to understand the Appropriation Bill passed by the National Assembly vis-à-vis the Act that established SEC and the constitutional provisions, because you don’t start a journey without proper preparation. We are making consultations at different levels, we are consulting our lawyers to advise us both in-house and outside, we are also consulting our principal lawyer, the Attorney-General, we will also consult our ministry and ultimately, our Minister. I am assuring you that we will work both quietly and openly with the aggrieved party in a very reconciliatory manner to resolve this matter.
What would you describe as the biggest problem confronting the Nigerian capital market?
The biggest problem we are facing is that of after-shock effect; when there is a volcanic eruption there is always an after-shock effect in the recovery period. We have had the boom and the burst period of the capital market. We also have a confidence issue, because the public has lost confidence in the market. So the capital market is in a recovery mood and it has not been grounded. There is also the issue of negative perception about the statutory regulator. We don’t need all these distractions currently being witnessed; what we need are policies that can accelerate a rebound in the market. We should be thinking of how we can be more creative in our efforts to modernise the market. I am surprised that things that we started during my time like dematerialisation is still far from completion, we need to pursue that. We should also be educating investors on the potentials of the capital market.
Basically, we are not getting the type of acceleration that is needed, but the new board will provide the momentum. Our major mandate as a regulator is to protect investors so they can invest their money in a system that cannot be manipulated. The current recovery being witnessed is coming through portfolio investment from outside the country, and that is capital flight, which can be withdrawn at anytime. Confidence should be restored through transparent regulation to encourage Nigerians to put their money there and not take it outside because this is their country.