Oteh Vs Hembe: Eye-ball To Eye-ball
Harman Hembe, until last Tuesday, chairman of the House of Representatives Committee on Capital Market and Other Institutions, did not know he would be stepping on the tail of a cobra when his committee decided to probe the continued crash in the nation’s capital market. Although Hembe might have an inkling of what might transpire at the public hearing when Oscar Onyema, director-general of the Nigeria Stock Exchange, NSE, sometime last year, told the committee that it lacked the power to carry oversight function on the exchange, Hembe did not know that the joke would be taken too far by Ms Arunma Oteh, the director-general of the Securities and Exchange Commission, SEC, a regulatory agency of the capital market. Onyema, however, apologised to the committee on the first day of the hearing and withdrew the letter he earlier sent to it.
The first day of the public hearing was practically a victory for the committee as the heat was turned on Oteh. She was accused of running the commission aground, spending a whopping N30 million on hotel accommodation alone within eight months, while the sum of N850, 000 was spent by the DG on just meals daily. The committee was also not happy that Oteh engaged the services of two staff of Access Bank on secondment to the commission. This, in the opinion of the committee members, has made the commission to compromise in its duty as an impartial regulator.
But that was much point the committee could score. The DG came the second day well prepared. She probably decided not to go down without a fight. She told the committee of her lack confidence because she was not being given a fair hearing and described it as “Kangaroo court …worse than what Idi Amin had in Uganda.” Oteh did not stop at that as she added: “You had implied that as a regulator, having people on secondment from the private sector could undermine the capacity of the regulatory functions of the commission. You think that Honourable (Emeka) Ihedioha, the deputy speaker of this House, being the nephew to Professor Ndi Okereke-Onyiuke and having his wife work in the Abuja office of the Nigerian Stock Exchange, will be compromising his capacity carrying out his duties? In asking SEC to contribute N39 million for this public hearing, you think that you are not undermining your capacity to carry out your duties?”
These allegations were enough to unsettle the committee and its chairman. This is not the first time the House of Representatives or any of its committees was facing allegations of corruption. In fact, this has become part of the House history. Ndude Elumelu, who was chairman of the House Cmmittee that conducted public hearing on the nation’s power sector and his committee members were accused of receiving financial inducement to write the report. Elumelu is still facing corruption charges in court.
Both Oteh and Hembe have been fighting dirty since last week. Hembe, while announcing his decision to step down as chairman of the committee on the floor of the House last Tuesday, fired back at Oteh. He alleged that a memo from the SEC proposed an overture to the committee ahead of the probe, which was turned down. “I want it to be on record that I demanded no bribes and took no bribes, rather I fought hard and rebuffed efforts to be inappropriately influenced. I have documentary evidence to support my assertion and I believe that at the appropriate time and venue, this will be disclosed,” he told his colleagues.
In the document he tendered before the House, purportedly written by SEC, the commission proposed the sum of N30 million to assist the committee to conduct the public hearing. The memo allegedly signed by one Hassan Mamman to the DG believes that co-sponsoring the probe “will be of immense benefit to the nation`s capital market by further creating more conducive atmosphere to finding lasting solutions to the challenges facing the Nigerian Capital Market.” Mamman proposed the sum of N30, 418, 800 for the committee and gave the breakdown as follow: Live Coverage – N26, 203, 800 and Secretariat Needs – N4, 215,000.
SEC board at its 63rd meeting held on March 12 approved the sum of N30 million for the committee. This was confirmed by E.K Aigbekaen, secretary of the board, which he called a “donation by the commission to the House of Representatives Committee on Capital Market and Other Institutions to enable it undertake public hearing to identify the manifest causes of the near collapse of the capital market with a view to finding lasting solution.”
But Oteh maintained that SEC received a document in respect of the public hearing with a list of items with cost implications totaling N39, 844,490. The breakdown of the committee’s budget estimate, which was forwarded to the commission on February included the sum of N5, 605,240, which was to be spent on advertising the public hearing in five newspapers and N2, 245,450 for electronic media adverts. The sum of N26, 203,803 was to be paid to the three electronic stations for live coverage of the public hearing; the sum of N4, 215,000 was for refreshment, while the sum of N1, 575,000 was secretariat needs.
The situation of things at the nation’s stock market is not a cheering one. The crisis in the market started in the heat of the economic meltdown in 2009, when the market capitalisation fell from N13.5 trillion (about $USD 1 billion) in March 2008 to less than N4.6 trillion by January 2009. Within seven months, the market lost over N3 trillion. As at December 2008, the market has lost over N6 trillion; investigations revealed that the bearish trend might persist for some time.
An investor, Leonard Karshima Shilgba, a former lecturer at the Ahmadu Bello University, said the shares of Transcorp Company, which he bought in 2007 at a unit price of N7.50 now stands at about 50 kobo, while the unit price of the United Bank for Africa, UBA (which was then Standard Trust Banks), which he bought for N4 now values for less than N3. Shilgba said he had neither received a company report nor a letter of invitation to a shareholders’ meeting from the Transcorp since he bought the shares. Ayodeji Salami told this magazine that the stocks would be the last thing he would ever thought of investing in again. Salami disclosed that all his life savings, which he invested in the market, had gone down the drain. He said a friend of his who bought 5,000 units of shares in one of the now acquired banks was left with only 150 units in the new bank.
Sir Joe Wenegieme, director-general, Abuja Chamber of Commerce Industry Mines and Agriculture, ABUCCIMA, who lost virtually all that he had worked for in his over two decades in the banking sector, said many investors were “shying away from investing their money in the sector as it is often say, once bitten, twice shy.” Wenegieme was worried that the regulatory authorities were not doing much to restore investors’ confidence in the market. “If there is any meaningful growth in the economic situation of the country, I think it would have a ripple effect on the capital market also.” He said.
Although the causes of the decline in the Nigerian capital markets were unrelated to the financial crisis that originated in the United States and spread through other economies of the developed world, the consequences nonetheless, had far reaching effects on the Nigerian markets. The branch manager of Lion Stockbrokers Limited, member of the Nigerian Stock Exchange, NSE, Victor Aibe identified government policy as the cause of the crisis in the Nigerian Capital Market. He supported the ongoing probe of the sector.
The House has empanelled another committee headed by Ibrahim El-Sudi from Taraba State to continue with the probe and report back within 21 days. It has also referred the allegations against members of committee on capital market to the House Ethics and Privileges Committee to investigate. The Economic and Financial Crimes Commission, EFCC, has since swung into action to dig to the root of the matter.
The crash of the Nigerian market has eerie historical parallels. The same thing occurred in 1929, when there was world economic depression. The shrink in the foreign economies orchestrated capital flight from the Nigerian capital market as most foreign investors sought to make up for the deficits in their home countries. The Nigerian stock market failed to respond to the various regulatory and other intervention measures taken to stem the declining trend.
A stockbroker, Edet Nyong-Edet said there was nothing new in what is happening now as even countries with sound economic base had experienced such during economic meltdown. He was of the view that the development in the capital market could not be isolated from the dull in the nation’s economy. “People are no longer buying or selling shares. Coca-Cola was selling in Nigeria for N130 but in Ghana Stock Exchange, Coca-Cola shares goes for equivalent of N150. N100, 000 investment in First Bank would yield triple the sum but now it has nose-dived; First Bank shares have dropped to N30 from between N120 and N140 per share. That is why there is lull in the market. People keep on asking us when this thing would pick up. It is all economic meltdown. Zenith Bank one time went up to N160; I advised my clients then to sell but now it has come down to as low as N12.
“It takes the grace of God to survive now as a stockbroker; you cannot close shops, we keep on encouraging the clients hoping that it would pick up again.” He said.
For Aibe too, business has not remained the same since 2008 when shares crashed. He said only very few people now patronise the market. He advised people to take advantage of the lull in capital market now and buy shares. “A wise investor should take advantage of the market now; after all it is buying for a long run gain. I can guarantee them on return on investment.”
The stock expert advised that Nigerians should concentrate on investing on food and beverages industry now, not looking down on the banking sector because of the reform recently introduced by the governor of the Central Bank of Nigeria, CBN, Malam Sanusi Lamido Sanusi.