Regulators seek to restore confidence in battered Nigerian capital market

Regulators and players in the Nigerian capital markets hope recent actions against five banks will restore confidence in the market, but it looks as if the storm is not yet over. The Securities and Exchange Commission (SEC) has indicated that investigations continue into securities trading firms, after the Central Bank of Nigeria (CBN) sacked the chief executives and executive directors of five banks and briefly suspended trading in their shares in a bid to avoid a banking crisis.

As the CBN Governor Sanusi Lamido Sanusi and five appointed replacement bank directors visited the Nigerian Stock Exchange (NSE) on 16 September, the overall index stood at around 21,090 and market capitalization was N4,843 billion (US$31.5 billion), down 18.5% from 25,865 (index) and N5,887 billion (market capitalization) at the start of August.  Market capitalization was reportedly N12 trillion ($78 billion) last year. Liquidity was also down as the banking sector is a key part of market activity.

According to the Daily Trust newspaper, acting SEC Director General Daisy Ekineh told journalists last weekend that current reforms in the banking sector will help strengthen confidence in the market:: “I am confident that the market will recover ultimately. What the market actually wants is confidence and once this is assured it will ultimately return back. What is happening in the banks will ultimately strengthen confidence in the market.”

On 9 September, Farida Waziri, chair of the Economic and Financial Crimes Commission (EFCC), represented by Bala Sanga, her principal staff assistant, was reported by This Day newspaper to have said in a presentation – titled “Barbarians within the Gates: The EFCC, Criminal Loans And Tax Evasion” – that the crash in share prices on the NSE was not linked to the global financial meltdown but by the high level of insider trading and other malpractices perpetrated by some stockbrokers, a few boardroom criminals and other collaborators.

The clean up was a joint effort of an investigating team comprising the SEC, the EFCC, the CBN and Nigeria Deposit Insurance Corporation (NDIC). Ekineh was reported to say the SEC had been instrumental in probing capital market transactions linked to the investigations are were still busy with on-site target inspection of registered market entities in different parts of the country “to ascertain the state of health of firms operating in the capital market”, following up returns that firms normally submit to the Commission.

On 14 August the CBN fired the management and later suspended trading in the shares of Union Bank, Intercontinental Bank, Finbank, Afribank, and Oceanic Bank. Ndi Okereke-Onyiuke, NSE Director General, said the suspension was to protect investors and prevent an unprecedented dumping of the shares of the five banks. The suspension was lifted on September 2, 2009 but led to more sellers than buyers of the banks’ shares. The CBN also injected a massive N420 bn into the banks, although the Vanguard newspaper reported that only N100 bn was used.

The SEC also investigated Okereke-Onyiuke, according to news reports, but cleared her. SEC’s Ekineh is reported as stating: “All the issues we raised have been addressed by her and we are satisfied by her response.. and she responded in good time.”

However, Ekineh warned that recovery in confidence and share prices may take some time.


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