Monday, February 26, 2007


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Published: May 3, 2007
LAGOS, Nigeria — Measured one way, Nigeria’s democracy took a giant step backward in April. Its state and national elections displayed a disastrous mix of fraud and bungling, managing to be worse, by most accounts, than the seriously marred elections in 1999 and 2003.
Observers from the European Union said the elections were not credible; Nigerian observers demanded that they be canceled and held again.
The president-elect, Umaru Yar’Adua, faces an immediate “crisis of legitimacy,” according to the Senate president, Ken Nnamani, a member of Mr. Yar’Adua’s party. It is a feeling shared by many Nigerians and analysts, who worry that the country is teetering on the brink of catastrophe.
But judged another way, the test is only beginning: will Nigeria navigate the legal and political challenges to the election peacefully, in a way that cements rather than undermines its young democracy?
There are reasons to expect that it is better prepared to withstand the weeks ahead than analysts might think. “Elections do not a democracy make,” said Chris Fomunyoh, director of Africa programs for the National Democratic Institute, a Washington-based pro-democracy group that works in Nigeria, among other countries.
While voting is an essential part, Mr. Fomunyoh said, it is only the first and in some ways the smallest part. As recent successful elections in long-suffering, war-torn African nations like Liberia and Congo demonstrate, organizing a transparent and credible election is possible, producing feel-good moments that the world cheers.
But building a functioning democracy is a very different task. Congo and Liberia, for example, are shattered nations with few meaningful institutions. Only time will tell if they will become true democracies in which the will of the people can be carried out.
Nigeria is much further along that road. Eight years into civilian government after a long spell of military dominance, Nigeria’s institutions are blossoming despite the recent electoral chaos.
Last year the legislature rejected an attempt by the supporters of the incumbent president, Olusegun Obasanjo, to change the Constitution to allow him to run for a third term, despite considerable pressure from those in the political elite who felt the country was better off sticking with Mr. Obasanjo.
Many lawmakers had sectarian reasons for refusing. The unwritten rules, aimed at keeping the peace in a fractious, ethnically and religiously divided nation, dictate that the next president should be a Muslim from the north because Mr. Obasanjo is a Christian from the southwest. But whatever the legislature’s motives, it forcefully asserted its independence.
The courts have shown similar independence. Mr. Obasanjo’s bitter feud with his vice president, Atiku Abubakar, culminated in the president’s allies’ using corruption charges lodged by an administrative panel to bar Mr. Abubakar from running for president. But a last-minute Supreme Court ruling in his favor returned him to the ballot just before the election.
Nigeria’s robust civic and religious groups, driven underground by military rule, have blossomed into watchdogs, freely criticizing and even condemning the government’s handling of the election.
The country’s cacophonous news media deployed armies of correspondents across 36 states to bring back reports of stuffed ballot boxes, intimidated voters and phony results.
And a cellphone explosion allowed for text messages among poll observers, voters and political parties, making instances of rigging and intimidation in far-flung polling places almost impossible to hide.
“There are certain elements of the evolution of democracy that are moving forward” in Nigeria, said Madeleine K. Albright, the former secretary of state, who led a team of observers from the National Democratic Institute. “The electoral element is not.”
But others are, in ways that are unusually robust on a continent struggling for examples of peaceful multiparty rule, Ms. Albright said, and those developments cannot be easily undone in two terrible election days.
It has become apparent that the governing People’s Democratic Party simply seized the apparatus of democracy — ballots, boxes, ink and tally sheets — and rigged its way to victory in a number of places. But the sweeping victories will be challenged in the courts of law and the court of public opinion.
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Monday,February 26,2007. 4:16:45 PM
The World Bank has said that greater awareness and understanding of corporate governance and international best practice in corporate reporting is critical for all stakeholders in the Nigerian capital market, especially now that the country’s financial sector is undergoing reform.
Mr. Greg Nzekwu, a Senior Economist with the World Bank made this observation last weekend in Port Harcourt at a one-day workshop on Corporate Governance and Financial Reporting organized by the Securities and Exchange Commission (SEC) in collaboration with the Nigerian Accounting Standard Board (NASB).
A statement from SEC said the participants at the workshop called for immediate inclusion of corporate governance principle in the listing requirements of the Stock Exchange.
Speaking at the workshop Mr. Nzekwu who represented the bank explained that following the mergers that took place in the Nigerian financial sector (which according to him is adjudged to be one of the most comprehensive on the continent), the ensuing mergers in the insurance sub-sector, the spate of activities in the stock market due to expansive public offers and issues, the need for good corporate governance and financial has become very critical.
He said “the need for stakeholders to develop greater awareness and understanding of corporate governance and international best practices in corporate reporting becomes critical’
According to him, the workshop which was sponsored by the World Bank was aimed at sensitizing and raising awareness of key players and stakeholders in the capital market and the investing public on issues relating to corporate governance and financial reporting requirements.
In his address, the Director-General of Securities and Exchange Commission (SEC), Musa Al-Faki declared that Corporate Governance reform has become a global issue over the last decade. This according to him, is as a results of corporate failures (in Enron, WorldCom etc)
Consequently, Al-faki explained, the governments of countries around the world, through their regulators, in a bid to prevent sysremic corporate failures, have either formulated individual Corporate Governace Codes or adopted the provisions of the Sarbanes Oxley Act, by amending their legal systems and stock exchange listing requirements.
“The essence of this is to ensure that public interest entities are well managed and the interests of all stakeholders are adequately taken care of” Al-Faki explained.NEWS
World Bank harps on corporate governance in capital market
By Anas A. Galadima

Monday, Feb. 26, 2007/Safar 09 , 1428 A. H

Flooding the Unusual Market

Influx of investors into the Nigerian stock market defies class categorisation and causes a progressional surge in trading of stocks


Onyuike-Okereke,Stock Exchange boss
As a trained civil engineer, Bayo Oribamise was contented with eking out a living from his profession until he attended a seminar on the capital market and its operations. It made an indelible impact on him. Today, he has become a keen investor in most of the blue-chip companies and a guru of some sort in analysing the movement of stock to the point that even the best from ivy league business schools would go green with envy. To give expression to his new pastime and, perhaps, tell others about the benefits inherent in the capital market, Oribamise has established a company where he offers services to willing and would-be investors in the capital market. His explanation is more telling: “I became more interested in it when I discovered that returns on deposit in the bank were becoming unattractive, coupled with the distress in the banking industry, which led to some customers’ money being trapped. Higher returns are easily made on investment in the capital market than in the money market”.
Like Oribamise, the story of Odeyemi Oluwole is just as captivating. Oluwole, who is affectionately called ‘Investor’ by his friends and associates, was a staff of United Bank for Africa until he lost his job. “I thought about what to do. I tried my hands on contracts and all that. It wasn’t easy. Then I realised that there is more to be made from buying and selling shares if you understand the procedure and the dynamics of the market”. Today, Oluwole is neck deep in buying and selling shares from which he is making a fortune.
If working in a stockbroking firm was what spurred Leke Ojabowale, a chartered accountant, into stock business, the story of Mary Uduehi, a petty trader who sells fruits at Ketu market, is intriguing. Uduehi was counselled by a stockbroker on the need for her to invest her monthly collection, esusu, on stock. Though she was initially reluctant, she later gave it a try and, today, she has not only become a shrewd investor but has also led many of her friends and relatives into the business. This quartet is just a few of the many Nigerians who have embraced the business of buying and selling stock as a way of making more money.
The truth really is that more Nigerians, male and female, young and old, literate or uneducated, have become more interested in the activities of the capital market. This, no doubt, has led to the growth in the volume of businesses of the Nigerian Stock Exchange, NSE. But what has brought about this development? One of those who should know is Oladipo Aina, president, Chartered Institute of Stockbrokers. He attributes it to the introduction of the Central Securities Clearing System, CSCS. The CSCS, a subsidiary of the NSE, has made transactions in the market a lot easier than before. With the CSCS, the limited liability companies operate a computerised depository, clearing, settlement and delivery system for transactions in shares listed on the NSE. “If you buy shares today (Monday), you can sell on Friday of the same week, unlike what we used to experience in the past when transactions took weeks”, Aina said.
Again, Aina said the CSCS e-certificate has enhanced the express delivery of share certificates to investors unlike in the past when it took a longer time for investors, to get their share certificates which sometimes got missing in transit. According to him, the awareness that has been created by the NSE, the Securities and Exchange Commission, SEC, and the issuers, that is, companies selling the public offer, have been pivotal in attracting people to the stock business.
This view tallies with that of Oribamise who became a keen investor during the consolidation in the banking industry. With banks given a specific period to meet the N25 billion minimum capital base, most banks approached NSE to raise the money through initial public offer, IPO. At the heat of the consolidation, Zenith Bank and Guaranty Trust Bank, which were the first set of banks to offer their shares for sale, engaged in intensive advertising campaigns that aroused the interest of those who ordinarily had no interest in the goings-on in the stock market. The banks practically took advertising to the next level by placing wrap-around in newspapers and magazines. There was also massive publicity through billboards, radio jingles, television commercials and other below-the-line advertising — posters, flyers and SMS messages to reach potential subscribers. The competition was so stiff that other banks which followed suit tried to outdo one another in their efforts to raise the stipulated N25 billion. Even players in other sectors such as May and Baker, Dangote Sugar Refinery and Transcorp also followed suit. Transcorp expanded the frontiers by engaging in road shows in Lagos, Ibadan and many other big cities while using popular music star, Daddy Showkey, a symbol of grass-to-grace prosperity, in its advertising campaigns.
Apart from this, NSE, led by its director-general, Ndidi Okereke-Onyiuke, has also been involved in road shows in Europe and United States to draw attention to the activities of the capital market in Nigeria. Shola Oni, spokesman for NSE, says it has greatly encouraged foreigners as well as Nigerians in diaspora, to invest in the capital market. “Nigerians in diaspora and foreign investors are now more aware of the high returns in Nigeria’s capital market,” he said.
Evidently, this awareness has led to the over-subscription of some initial offers by some of the companies. For instance, Dangote Sugar Refinery’s IPO was oversubscribed by over 300 per cent. Aliko Dangote, chairman of Dangote Group of Companies, said: “There is clear and ample evidence that confidence in Nigeria is rising”. May and Baker, a player in the health sector, and Intercontinental Bank were also oversubscribed.
No doubt, the growth in the capital market in the last couple of years has been overwhelming. According to the NSE annual reports and accounts, in 2004, the market capitalisation was N2.1 trillion. In 2005 it was N2.9 trillion but rose to N5.12 trillion in 2006, representing a growth of 76.5 per cent. For the value of shares traded, 225.8 billion shares were bought and sold in 2004, while in 2005, it was 262.9 billion. But the figure rose to 470.25 billion, representing 78.8 per cent growth in 2006. In terms of new issues approved, 235.53 billion shares were approved as new issues in 2004, 730.54 billion in 2005, and 1.41 trillion in 2006, which represent 93 per cent growth. For the volume of shares traded, it was 19.2 billion in 2004, 26.7 billion in 2005 while 36.76 billion volumes of shares were traded in 2006, a growth rate of 37.8 per cent. The daily average number of shares traded has also increased. In 2004, it was 75 million units; it rose to 107.6 million units in 2005 but jumped to 159.9 million units in 2006, an increase of 40.2 per cent. The number of listed securities has also increased from 276 in 2004 to 285 in 2005, and 288 in 2006.
But despite this, Ojabowale says Nigerians have not taken full advantage of the capital market. According to him, except in purchase of equity, most other products such as bond and derivatives have not been embraced by Nigerians. “Activities at the stock exchange are still low. The market needs to be made more vibrant. You cannot compare NSE with the stock exchange in South Africa. We still have a lot to learn from these countries,” he said. He is optimistic that with the federal government reforms which have led more private companies to be listed on the stock exchange, the future of the capital market in Nigeria remains very bright. “We are looking at a time when the capital market will have the depth and breadth of securities that are tradable, a time when Nigerians will not look at the capital market for trading in shares alone but for other products such as bonds and derivatives.”
For those who are still sceptical about investing in shares, Oribamise urged them to give it a try. “You can only suffer some temporary setback but you cannot lose completely,” he said. Truly, there are times when quoted companies and their shareholders suffer losses. But some companies in this category do rebound and the investors regain their confidence. At other times, the authorities rise in defence of the shareholder when the investment is threatened by crisis at the company.
That was what happened recently with the announcement that subscribers to the aborted shares of Aviation Development Company, ADC, which was cancelled following the withdrawal of the airline’s operating licence, would get the refund of their money. ADC had offered for sale 1.2 billion ordinary shares of 50 kobo each at N1.00 per share and 1.2 billion floating rate convertible preference shares of 50 kobo each at N1.00 per share. But with the crash of one of its aircraft which resulted in the death of 96 persons and the revocation of its licence by the federal government, subscribers were worried over the fate of their investments. But the issuing house, Capital Bancorp, allayed investors’ fears. “Some of the investors wrote the SEC, asking for a refund and as a result of this, we met with ADC and SEC before we agreed that it is better we refund the money because we realised their feelings are natural,” said Tola Mobolurin, managing director of Capital Bancorp .
But as more Nigerians embrace the capital market, Akintunde Asalu, president, Nigeria Shareholders Solidarity Association, NSSA, says investors should be cautious in their choice of stockbrokers. “They have caused a lot of investors not only nagging headaches but also gnashing of teeth. You ask them to buy something for you. Whether deliberately or otherwise, you could wait until it is convenient for them, not knowing that time is of essence when you want to buy stock”. He added, “If you don’t buy at the right time, you lose and when you place an order, it’s because the time is right. But I believe that many stockbrokers don’t know the implications of this”. Asalu, founder of NSSA, started buying shares in 1963 with 10 units of Daily Times. From then on, he has been hooked to stock until he invested in more than half of the companies quoted on the stock exchange. All he does now is monitor the growth of his investment and earn dividend. But when asked how much he is worth, Asalu went arithmetic: “I calculate what I’m worth in shares. I use the prices of quoted stocks at the last trading day of the year as the basis of multiplying how much in each company and total it up.” Surely, with the current trend, more Nigerians are set to join Asalu in quantifying their worth by the value of shares they have.
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