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Capital Market Regulation: Not yet 50 Years


By Adewale Ishmael / October 28, 2011 / The Nation & Thisday


Reports to download:    

Programme Activity Schedule for SEC’s Project 50  

 The History of Capital Market Regulation in Nigeria


According to newspaper advertisements, come October 31, 2011, an investment forum will hold in Abuja to commemorate “50 years of capital markets regulation” in Nigeria. Speakers at the exclusive event will include the Finance Minister, Dr. Ngozi Okonjo-Iweala, Trade Investment Minister Olusegun Aganga, Mallam Sanusi Lamido Sanusi,  The Central Bank of Nigeria (CBN) Governor Chairman of Securities and Exchange Commission (SEC), Senator Udoma U. Udoma, and the DG of SEC, Miss Arunma Oteh. President Goodluck Jonathan and his wife, Dame Patience Goodluck Jonathan, are billed as special guests of honour.


In one version of the newspaper advertisements, it was stated that “Nigeria is in its fifth decade of capital markets regulation”, consequent upon which the investment forum would “draw attention to government’s interventions for engendering market integrity and posturing for a truly robust and well-regulated market.”


It is a matter of conjecture as to who placed the advertisement. But it would have been good to inquire from the advertiser what is meant by “market posturing”. Another Nigerian predilection to use big words that contradict the meaning they intend to communicate? Or, perhaps, this is simply a Freudian slip that unintentionally, but perfectly, captures the modus operandi in the regulation of the entire financial markets under the extant regime?


It would also help to know what is intended to be achieved by the advertised thrust of the “commemorative” investment forum, coming at a time that the Nigerian capital market is reeling in the aftermath of the last official intervention in the market; such that while the rest of the world have recovered from the meltdown of 2008, the Nigerian market is still deep in depression.


SEC’s intervention in the market in August 2010, rather than facilitate recovery as was the case in other jurisdictions, has compounded the growth and development problems of our emerging capital market. Investor confidence has remained weak, contrary to the promise of SEC as it moved against the leadership of The Nigerian Stock Exchange in 2010. Capital flight from the market is still the order of the day; issuers of securities are not forthcoming with new issues, instead there have been cases of voluntary delisting that are linked with issuers’ loss of confidence in the market as currently regulated and operated; The Nigerian Stock Exchange All-Share Index has fallen so badly from 27,000 points pre-intervention, to now hover precariously around 20, 000 points. Since August 2010, the market capitalisation of the exchange has also fallen steeply to stand at about N6.4 trillion as opposed to 13trillion naira in 2010.


Evidently, government’s intrusion into capital market under the guise of regulation has not augured well for the market and should not be celebrated, especially in view of the current sorry state of the market. At best, government’s recent intervention in the market has demonstrated all the elements of revisionism, and has been largely out of synch with known strategy for capital markets development around the world. Only last week The Guardian led with a story entitled “Investors lament weak capital market, seek reforms”. According to the report, even though SEC and the stock exchange had embarked on reforms to reposition the market, operators said the changes were inadequate.



For the avoidance of doubts, there are good reasons for government regulation of capital markets. One is political self-interest, where government knows that investors are also voters and tax payers; the other is public interest, which operates on the need to promote economic development and confidence, and thereby “encourage inward investment.” Sadly, neither of these motives seems to inform SEC’s approach to the regulation of the Nigerian Capital Market.


From the line-up of speakers at the proposed investment forum, the focus of all the discussions will be undoubtedly on the recent intervention in the capital market and the banking system. However, for a conference that purports to commemorate 50 years of the regulation of the Nigerian capital market, this is a rather narrow composition of faculty, unless where self-glorification is the sole objective. None of the speakers has a history of the market beyond the last 5 - 10 years as to speak outside of this time frame, except as an academic exercise. The point is that it would have been interesting and more productive, from a public policy point of view, to see a Chief Joseph Sanusi,  former Governor of CBN and first executive secretary of the forerunner of SEC, or a Prince M. A. Odedina, former executive director of The Nigerian Stock Exchange, comparing notes with today’s capital market regulators


But the fact is that apart from the concerns already raised, we cannot in 2011 be talking about 50 years of capital market regulation in Nigeria if the idea is not to provide an escape for bored public officers seeking media lime light while providing the perfect licence to fritter away public funds. How old is the Nigerian capital market? Did regulation start at the onset of the market?  Absolutely not.


In reviewing the history of capital market regulation in Nigeria, casual reference could at best be made to the activities of the Capital Issues Committee (CIC), an ad hoc committee of the Central Bank of Nigeria (CBN), which operated between 1962 and 1973. As explained by Alile and Anao in The Nigerian Stock Market In Operation (1986), “the committee was not set up by law and it had no statutory powers. It was purely consultative ....”


In the circumstance, formal regulation of the capital market in Nigeria could not have preceded 1973 when the capital issues decree of the same year was promulgated. That decree established the Capital Issues Commission, which was subsequently succeeded by SEC Decree of 1979. Thus, it would be misleading to now talk of 50 years of capital market regulation in Nigeria, unless the idea is to rewrite the history of the Nigerian capital market in keeping with the observed revisionist tendencies in the market at this point in time. Incidentally, only last month the newspapers published a photograph of the Director General of SEC ringing the closing bell at the New York Stock Exchange on September 26. If the caption of the photograph ended at this, there would not be a problem with the publication only that it went on to claim rather indecently that “in Nigeria’s history, only President Olusegun Obasanjo was accorded this exclusive privilege.” (Daily Sun, September 29, page 48). This claim was made when only a fortnight earlier, BusinessDay (September 14, page 16) had published the photograph of the former Director General of The Nigerian Stock Exchange, Professor Ndi Okereke-Onyiuke, OON, ringing the closing bell at the New York Stock Exchange, with a displayed date on the podium reading  September 21, 2008.   Nigerians should try not to re-write history and mislead the future generation.


Finally, as the train of the contrived commemorative investment forum on 50 years of capital markets regulation in Nigeria leaves the station, it needs to be stressed that this is not how to make judicious use of public money; certainly, government’s resources could be better utilised than expended on artificial celebrations that only work to further insult and impoverish the public, and the President of Nigeria should not be used for such frivolities. The capital market is bleeding.  Government regulators should sit down and do the work for which they are employed.


Source: The Nation / Thisday


About The Author: Mr. Ishmael is a securities market analyst


Reports to download:  

Programme Activity Schedule for SEC’s Project 50     

The History of Capital Market Regulation in Nigeria 

*         * Timeline of Regulatory Intervention in Nigeria 

*      *Relevant Excerpts from the Denniss Odife Panel Report on the Review of the Nigerian Capital Market (1996)  

*         *  The History of Capital Market Regulation from the SEC Website


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