Nov 17, 2010 5:44 PM
Lagos, Nigeria (MBC News) - Emmanuel Ikhazoboh, the Interim Head of the Nigerian Stock Exchange today told Business Morning in an Exclusive interview that a new Director General of the NSE is expected to emerge later in December but will formally take office in January 2011. Speaking on the award-winning daily financial news programming, a production of MBC News Corp on Channels Television, Mr Ikhazoboh said his first 100 days in office has been challenging. Mr Ikhazoboh was joined on the show by Olufemi Awoyemi, the CEO, Proshare Nigeria.
Below are excerpts of the Emmanuel Ikhazoboh’s interview.
Q: Your First 100 days in the office
A: It has been very challenging and has revealed to me a lot of things that l never knew about the capital market. But I must admit also that I have gotten a lot of commendations. The issue with capital market is that people always have wrong perception that it should always move in the positive direction but it is not so. There is meant to be volatility in the trading of stocks otherwise something is wrong. But as l speak now, most banks have achieved the ratio expected of them and the market is becoming a bit stable, companies are also coming back to list at the NSE. The issue of share dumping happened early in August but things changed in September. But because the banks and other earnings are now better, the market ratios are now heading better.
Q: What has changed in terms of the internal processes at the Stock Exchange?
A. The back office was not properly structured when we came in and financials were not also properly handled and regulated. The NSE never had any internal auditor or audit department. What we had was just a shade of what an internal audit should be, but we have been able to set up one (internal audit unit) now. We had to take care of the back office and if we do so, the front office will naturally take care of itself.
Q: (Awoyemi) The uniqueness of the Stock Exchange and impact on what you have been doing
A: The Stock Exchange control is unique, but when it comes to financial management, it wasn’t really there but we have also fixed it now so it’s unique. The internal processes were very weak.
Q: How do you manage to ensure internal restructuring of the workforce?
A: We have had retreats for the top management officials of the NSE when l stepped in, and to the best of my knowledge, they are cooperating. We have written a code of good corporate governance for the Exchange as well as code of conduct for staff and all of them have to sign that in as members of the staff.
Q: (Awoyemi) What culture did you meet on ground at the NSE?
A: The culture of no control of cash management was what we met which was not the fault of the staff because most of them know nothing about management. Lack of corporate governance which we have also worked on right now, all the staff signs once they report to the office, we have also put up a code of conduct which the staff are following.
Q: What were your expectations when you came in?
A: I had no expectations because I wasn’t prepared for it. My job was just to go and fix the financial mismanagement and that’s why my first address to the staff was that we have to organize the front office, but the back office is where we are concentrating on now.
Q: On the trading platform?
A: The platform have been on before we came, even on the 5th of August, there was a technical problem which was corrected later even though it was embarrassing because I learnt there was no coupling between the Stock Exchange and the CSCS (Clearing house). But that has since been put in place. From my review of all the documentations, we needed to fix the trading platform because by December 2011, NASDAQ will no longer service the existing platform. The system has been on but we are working to get the Council to approve the final decision on the new platform to use. Because of new technology, a replacement of the NASDAQ technology is necessary.
Q: Have you lived up to your statement to the press during your first briefing on August 17?
A: To a great extent, I have but the only thing remaining is to get bonds traded on our platform. We are having discussions with the Debt Management Office and other government agencies. Trading bonds on the NSE will bring transparency to the market.
Q: How did you find yourself on the Stock Exchange on the 5th of August?
A. I didn’t feel strange on that day because I was responsible for financial management in Deloitte and I also did Capital Market in my MBA. The only thing that was strange was the nitty-gritty of stock trading on the NSE. I have also handled issues relating to capital market so it was not so strange to me.
Q: How did you feel that day?
A: I was not really prepared so for the first two days, I needed to know what was going on and what the issue were and, that was why I took the first decision of internal cleansing and right sizing the staff. I moved to tackle the issues at the back office of the Exchange as quickly as possible to bring credibility to the whole process and the market. I never felt strange because being the CEO of any organisation does not mean you need to know everything but the capacity to handle the processes with a strong team. I was able to bring myself to understand the intricacies of the market, had meetings with the management and the stockbrokers so I understood all the issue and hit the ground running.
Q: The role of a regulator as a key market operator?
A: I will leave that for you to make the judgement whether things have improve and if we have met the expectations of the market.
Q: Are you acting out the SEC script or the mandate of someone else?
A: Never. As soon as we took over on the 5th of August, we had a Council in place and had our first Council meeting a week after, and they all unanimously agreed and concurred with the intervention. There was no way were going to work without an independent Council in place. I personally will not work in an environment where there is no corporate governance and that was why a Council was put in place. No actions taken today in the NSE without the Council approval but no SEC interference. B ut in some cases, you know there are issues that SEC needs to approve before we move on so we will always report to them. As in the ISA, some issues need SEC approval but the Council goes through it first. We must be seen to practice good corporate governance. The Council takes all policy decision and all operations decisions I have to take and sometimes I need to clear with the Council President and members before I move forward.
Q: Have you had to run head-to-head with the Finance Minister or SEC DG?
A: The good thing is that these are people who do not want to interfere. They just want to get things done. l have not even spoken with the Finance Minister for once, they are not interfering in any way. And SEC does not interfere in the operations of the Exchange except on a monthly basis with our report and if there are clarifications we clear them. But when it comes to the executive selection process, we need to carry them along. We need to get their approval on some of the steps we are taking.
Q: Concerns on key market requirements of financial reporting?
A: One of the first things l insists on was market information because that is what drives the market. And it was really a shock to me that many of the listed companies hadn’t sent in their financials for four or five years. So we have to give a directive on 30 days notice to send it those financials. Most of them had. Where we are having challenges now is in the area of quarterly reports. The companies that have not fulfilled their reporting for 2009, the delisting process will soon begin but the processes we have used was first on technical suspension and later full suspension and delisting after 30 days. About eleven companies, however, will have delisting process commence on them in few days.
Q: (Awoyemi) Companies earnings and forecasts that analysts need and some doesn’t seem to be in order?
A: It is a source of concern to us as well and we are checking the Law on the forecasts. I want to say that we need to address that area in our ISA because companies can’t come and say because of some circumstances beyond them the forecasts can’t me met. That’s not true. When they said listing at the NSE means dancing naked in the street, it’s because you have nothing to cover anymore. We are going to be strict now on the quarterly returns. We are also moving towards a situation where companies will begin to give us their earnings calendar of day and time so that analysts and operators can track these figures and do their valuations. We are going to be strict also on the forecasts. We need to do more. Maybe I have a bit lenient on the companies, but I think we should do more. There is zero tolerance now in the production of the financials. I am sending notice out that all those that had outstanding September reports should turn them in and we are giving deadline to that.
Q: Do you see the NSE reforms as a mission possible?
A: Yes, it’s very possible but in the process of doing that, there will be a lot of training for the staff and everyone. It is possible though difficult.
Q: On NSE demutualization, will you do it, will the next DG do it?
A: Demutualization is very crucial but I wouldn’t know who will do it yet. It will be good for the NSE and will solve a lot of issues. Looking at the World Federation of Exchanges, most of the members are all demutualised. Therefore one of the issues am presenting to the Council was that we should fastrack the process of demutualisation of the Exchange and solve other issues.
Q: Should we do it now during the transition or later?
A: You should always know that I had a mandate when l came in and the mandate was ‘go and bring in credibility back to the Exchange, clean out the back office, do the audit and get a report out and complete the executive selection process.’ Demutualization was not included in my mandate. But in carrying out my mandate I have seen that it is an area the regulator needs to pay attention to and it’s an issue I will present to the Council
Q: (Awoyemi) What about multiple Exchanges?
A: I agree that competition breeds efficiency on the hand other markets are integrating their Exchanges. So we must have a balancing as to have the one Exchange properly operating.
Q: When is the new DG coming?
A. We are working towards ensuring having a new one in by the end of December but should be in place by the first quarter of next year.
Q: Would that be a DG or a CEO?
A: I don’t know. But if you have a CEO then you should have a Board of Directors but what we have now is a Council so it should be a DG.
Q: What about the Memorandum and Articles of Association of the NSE?
A: The legal team is working on that. We have to tinker with some of the provision of the MEMAT in order to have a demutualised stock exchange. Whether what we will have is for a demutualised stock exchange. But I don’t see us having a MEMAT that will bring in demutualisation.
Q: What will you tell the Senate and the House next week?
A: I will tell them what we have done so far and what we still hope to do. We will be giving the final report of our operations then the capital market committee will appreciate the reasons for the intervention.
Q: (Awoyemi) What are you leaving behind as Ikhazoboh legacy?
A: My legacy is to leave behind a transparent Exchange, a strong Exchange, and a better one in terms of corporate governance for that matter. What drives me is the ambition to make the Stock Exchange one of the best. Close