July 13, 2011 by IHEANYI NWACHUKWU
Arunma Oteh, SEC director general
•Sets up committee at next board meeting
The Securities and Exchange Commission (SEC) in Lagos Tuesday said, given the outcome of demutualisation around the globe, it believed demutualisation was critical for the growth of the Nigerian capital market. and to achieve this, is settting a committee to begin its implementaion.
Arunma Oteh, SEC director general, said this at the one-day national workshop on demutualization jointly organised by the Chartered Institute of Stockbrokers (CIS), the Association of Stockbroking Houses of Nigeria (ASHON) and the Association of Issuing Houses of Nigeria (AIHN).
“At SEC, we came out clearly last year and outlined the importance of building a world class capital market. We agreed with some stakeholders that if we have to achieve this dream, the necessary steps must be taken. The capital market is actually the barometer for measuring the performance of the whole economy,” Oteh told the audience at the workshop which had as its theme - “Demutualization: the way forward.”
Speaking further, she noted that as a regulatory body, the SEC has interacted with over 100 people across the globe and the outcome is not only that demutualisation allows markets to grow, it also addresses the issues of technology and governance, among others.
“We believe at the SEC that given the outcome around the world, demutualisation is very important for the growth of the Nigerian capital market,” Oteh noted, adding that at the Commission’s next board meeting, it would be putting together a working committee for the actualisation of the demutualisation. She said the workshop should be the beginning of the conversation on demutualisation and other aspects towards the attainment of a world class market.
Rasheed Yussuff, chairman ASHON, observed that demutualisation was a current topic that continues to dominate the news whenever capital market is discussed.
“Demutualisation is a very important and strategic process but regulators and operators must take a dispassionate view of it. Both really need to sit down together and look at the processes and agree on them. Whether mutual or demutualised, there is the possibility of conflict of interest between operators, regulators and other stakeholders,” Yussuff said.
Also at the workshop, Gamaliel Onosode, first president, CIS, said: “Demutualisation - whether good or bad - is not really the issue, but I think that appropriate time will be given in defining the optimum moment and process for which it will be introduced in Nigeria. In getting there, workshops like this are very vital. There has to be a mechanism to make sure that public interest is protected”.
In his presentation, Reben Lee, CEO, Oxford Finance Group, stressed the importance of recognising the whole series of the process when talking about demutualisation. “Where you are and where you want to be must be recognised.” He listed the five basic governance models that must be adopted in demutualisation to include: non-profit, mutual/corporate, for-profit, government owned/controlled and hybrid.
“The governance structure is one way of responding to a monopolistic Exchange. We need to look critically at the governance difficulties in the demutualisation process. “Demutualization will not solve all the problems in the Nigerian capital market, but it can solve some of the problems, as well as create a platform for which the problems can be solved,” Lee added.
Speaking further, Lee noted that many Exchanges around the world have self regulatory structures. “Moving from mutual structure to a demutualised structure will harm the self regulatory structure. As a self regulatory Exchange, there are different kinds of conflicts that can occur if an Exchange is moving from mutual to demutualised system.
If you are in a vertically integrated structure, the move from mutual to demutualised structure will be more problematic. There is the need to look at the cost benefit analysis of the movement. In mutual structure, the nature of self regulatory will affect optimal model,” Lee stated.
Rotimi Oyekanmi, CEO Renaissance Capital, who spoke as a stockbroker as well as an investor, noted that the whole issue of demutualisation was critical. “The level of confidence returning to the market is very important. Whatever we have to do, we have to consider the merits and demerits.” He said Renaissance Capital operates in many markets across Africa. “South Africa has demutualised; Kenya and Nairobi are in the process of demutualisation; Ghana and Zambia will likely do so.
“First, we need to clean up the past and start from a level that every one will key into. Then we consider the model to be taken. We need to be asking ourselves when we need to have the listing; if we consider it vital. Again, we need to ask ourselves: how does cash flow into this market increase (boast liquidity)? Because that is the way the market can grow,” Oyekanmi added.
Albert Okumagba, CEO BGL plc, advised the stakeholder group to be set up by the SEC to address the whole issue on capital market platforms, including the Abuja Commodities Exchange. “I think the respective platforms must agree on how they should be demutualised,” Okumagba said.