Ex-DG of NSE blames regulators for past crisis


The woman under whose watch the collapse of Nigeria’s Stock Exchange happened four years ago, Ndidi Okereke-Onyuike, has blamed the crisis on the regulatory Securities and Exchange Commission (SEC) and some commercial banks.

Okereke-Onyuike who was the director-general of the exchange spoke today in Abuja at the public hearing of the House of Representatives ad hoc committee investigating the operations of the capital market. According to her, commercial banks which accounted for 60 per cent of listed securities in the market granted indiscriminate margin loans to all manners of investors and market operators without helping them to manage such loans.

“However, in the case of Nigeria, the banks gave out these loans indiscriminately, and in most cases insisted that such margin loans were used to purchase their own shares.Some banks were deeply involved in granting margin loans that were not properly structured and this created excess cash in the market, and the share prices got bloated.

“The regulators of government which is CBN and SEC did nothing at that time to warn the public.But the NSE on several occasions engaged in newspaper advertisement to advise and warn innocent shareholders that there was no guidelines for margin loans in Nigeria.’’

Another factor which she said militated against the Nigerian stock market’s rebound was the problem of unlisted private placement issues on the market.

The former NSE boss stressed that the SEC gave approval for the participation of private business outfit not listed on the NSE without guiding them on the workings of the market. She said that the 0. 3 per cent of the money SEC collected from every company that bought shares on the floor of the market was based on administrative arrangement.

Okereke-Onyuike said that the money was not covered by the Investment and Securities Act (ISA) or Company and Allied Matters Act (CAMA).

She said that the last straw that led to the crash of the market was regulatory pronouncement and actions which had a negative effect on the market.

The former director-general said that there was a need for injection of funds into the market to bring it back to its feet as no amount of workshops could avail the situation. She, however, said that government should induce them by introducing tax holidays and other incentives such as government contracts to make listing attractive to them.

“The truth is that all these companies are listed in their home countries; why are they refusing to list them in Nigeria? In addition, more indigenous quotable companies should be encouraged to seek listing, by giving them incentives like tax holidays, tax rebate and other incentives.”

She said that she couldn’t present any document to the committee in respect of the allegation made by the SEC Director-General, Ms Arunma Oteh on May 7. She said that this was because her office was raided and vital documents carted away by security men at the instruction of Oteh.

“There may be some documents you may ask from me which I don’t have, but if you ask the Chief Executive of the NSE, Mr Oscar Onyema, can bring them to you.

Oteh, had on May 7, accused the former Director-General of financial mismanagement during her tenure as the head of the NSE.

She regaled the hearing with reports of gross mismanagement of the Exchange, under Okereke-Onyuike, saying that the exchange was at the heart of a web of fraudulent accounting that saw share-price manipulation, insider trading and millions of dollars misspent on a yacht and Rolex watches, the regulator said.

In a report filed to a parliamentary hearing on the capital markets on Monday, Securities and Exchange Commission (SEC) Director General Arunma Oteh said abuses leading to a financial crisis in 2008/09 were still scaring off local investors.

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Oteh’s presentation concerned a decade when Ndi Okereke-Onyiuke was its director general. Replacing her was one of the first things Oteh did when she was appointed SEC head in 2010 in an effort to clean up Nigeria’s capital markets.

Okereke-Onyiuke herself was not accused of any specific wrongdoing in the regulator’s report.

“The extent and nature of the market abuses carried out between 2006 and 2008 are primary reasons for the continuation of the investor apathy that we see today,” Oteh said in the presentation to the parliamentary committee, a copy of which was obtained by Reuters on Tuesday.

The financial crisis saw shares lose 60 percent from market peak at the end of March 2008 to the same month a year later.

The central bank had to bail out nine banks at a cost of $4 billion.

Oteh told the hearing the SEC investigated alleged fraud behind the crisis, but it had been unable to publish findings because of a court injunction brought by Okereke-Onyiuke.

“There were incidences of financial skimming, misappropriation, false accounting, misrepresentation, and questionable transactions,” Oteh told the hearing.

The stock exchange bought a yacht for 37 million naira ($235,300) that was meant to be presented as a gift during a 2008 award ceremony, yet there are no records of the receiver.

It also spent 186 million naira on 165 Rolex wrist watches as prizes, but only 73 were actually presented.

“The outstanding 92 Rolex watches valued at 99.5 million naira remain unaccounted for,” Oteh said.

Alhaji Aliko Dangote and Femi Otedola who were expected to present their position on the capital market were absent at the hearing.

Ibrahim El-Sudi (PDP-Taraba), the Chairman of the committee, said the committee would communicate to them in writing when the duo would appear before it.

The hearing continues on Thursday.

.With Reports from News Agency of Nigeria and Reuters