By Peter Egwuatu
Shareholders ofÂ quoted companies have criticised the proposed plan by the Securities and Exchange Commission (SEC) to revisit the recapitalisation of capital market operations which hitherto generated a lot of controversies among operators.
The shareholders under the aegis of Independent Shareholders of Association of Nigeria (ISAN) told Vanguard yesterday that it was improper at this period of economic recessionÂ for the Commission to talk of recapitalisation issue in the capital market.
The Acting Director General of the Commission, Ms Daisy Ekineh had earlier disclosed that the SEC will revisit the recapitalisation issue of the capital market operations.
According to her â€œ Recapitalization is to be backed by risk based capital adequacy standards and risk based supervision which the Commission is migrating to. The objective is to create stronger institutions which would effectively and efficiently intermediate n the capital market. The World Bank is assisting the Commission in the move to risk based supervision/capital standards. Rules on the use of a custodian for the safe keep the assets of collective investment schemes are being formulated while the possibility of same for clients of stocks brokers is being examined. Indeed a market committee is currently looking at this.â€
Speaking, National Coordinator, ISAN, Sir Sunny Nwosu said, â€œ SEC should forget about recapitalisation of capital market operations and begin to think of things that will create business for the operators. Recapitalisation is not relevant at this period. When it was initiated the first time the operators were divided and many of them explained that it was not necessary especially for the stockbrokers that do cash and carry business. Even the Issuing Houses does not need to recapitalise at this moment since the Commission has removed compulsory underwriting and reduced underwriting of issues to 50 per cent from 80 per cent. The issue of recapitalisation should be left as a historical perspective and let look for things that will move the market forwardâ€.
The ISAN Coordinator said that the intervention of the Central Bank of Nigeria (CBN) in the banking sector negatively affected the capital market.
According to him, â€œ Before the intervention of the Lamido Sanusi, stock market has started recovering and confidence was gradually returning which made the market capitalisation to rise from N4 trillion during the meltdown to about N7 trillion.
But when Sanusi came with the reform in the banking sector, the market was a ffected due to heavy exposure to stockbrokers, investors, oil and gas operators and other debtors. So it was his first pronunciation to probeÂ the oil and gas and other debtors and the radical approach to issues that ledÂ to loss of confidence in market as investors started dumping their shares at the same time to pay off their loans from the bank.
In that process of dumping the shares the price of most stocks fell beyond the minimum. We thought that Sanusi would have brought fresh ideas that would have enhanced confidence. He was not guided by his words.â€
Continuing, he said, â€œ When the global meltdown started affecting our market, government was not ready to bail the market until confidence was completely eroded in the market. The way forward is that our regulators in the financial system should be coordinated in their policies. There should be harmony of policies so that one regulator is not found doing one thing and another regulator antagonising it.â€
While reviewing the 2009 operation of the stock market, he said, â€œ The stock market did not grow as expected. This was as a result of the global meltdown and various policies introduced in the financial system. The enforcement of the provisioning for bad debts and recovering exercise of debts owed to banks , among other things affected performance of most banks. Banks were no longer giving credit even to manufacturers. So most of the companies could not recommend dividend for shareholders.â€
On the outlook for 2010, Nwosu who spoke the minds of shareholders at the media parley Wednesday, said, â€œ We expect there will be growth which will surpass the previous year. But the market cannot grow to the extent we experienced during the pick in 2007. It will take more than three years for our market to get to that kind of growth. On the average, the growth in 2010 will be better than 2009 and 2008.
To that extent, I would advise my fellow shareholders to take advantage of the lower price of equities in the market by investing more to reduce the losses we made in the past two years. As we can see the year 2010 has started on bullish note unlike the previous years that always start on bearish trend. This is a sign of recovery and also an indication that the market will grow more than we saw in 2009.
On the issue of market makers being introduced to the market, he said , â€œ Market making is quite expensive and now that the banks are no longer giving credit it will be difficult for any capital market operator to meet the financial requirement required to act as market maker.â€