NSE crisis, an indication of troubles ahead for stock market , Shyllon

By Akoma Chinweoke
The Nigerian Stock Exchange, NSE, is still reeling from the crisis that drew its intervention, on Wednesday, of the Securities and Exchange Commission (SEC). The SEC removed the NSE Director General, Prof. Ndi Okereke-Onyeuke and appointed Emmanuel Ikazoboh to act as D-G.

Shyllon

In this interview, Prince Yemisi  Adedoyin Shyllon , a chartered engineer, chartered stockbroker, business administrator and former clerk of the Stock Exchange reviews the crisis and what it portends for the economy.

How do you see the the crisis in the Stock Exchange especially the allegation by Alhaji Aliko Dangote that the NSC is broke to a point that  it might not be able to honour its obligation to investors?

Well as a stakeholder in the stock exchange market, I must say that I was shocked to learn of that news from the president of the Nigerian Stock Exchange. My initial reaction was who else would know better than the director general of the Nigerian Stock Exchange and the president of the Council of NSE.

If the president of the NSE in line with his fiduciary duty to the council and the NSE comes out to say that the stock exchange cannot honour its obligation, that it is owing the Central Security Clearing System, CSCS up to about 900million, that it is also owing the Accenture Consulting firm up to about 115 million and based on that it appears that the NSE cannot fulfil its obligation in terms of its current liabilities, then one becomes very worried that it appears that the global economic meltdown must have also affected the Nigerian Stock Exchange. One is worried because it appears from the explanations of the officers of the NSE that the money was owed to the CSCS which is a subsidiary of the NSE.

They also claimed that Accenture is owing up to 46 million. Be that as it may, it appears there is a problem in the council of the NSE as they are not speaking in one voice.

As an organization I would expect that the council as led by the person that blew the whistle should be better informed and must have drawn the attention of the management of the NSE to the problem and has failed to get the NSE management to correct the anomaly .That is why the president had to cry out so that he would not be deemed in law to have failed in his fiduciary duty as the president of NSE. It is worrisome and tells a lot of problems ahead for the stock market itself.

The banking sector which is very critical to the growth of the economy is also in a dilemma as it has lived below expectation . Where do we go from here?

If you mean that  there is some element of depreciation in the banking system in Nigeria, it appears you are not far from the truth because as it is obvious, it had to take the intervention of the Central Bank governor, Sanusi Lamido, to again blow the whistle and take effective action to cure the problems that had bedeviled the banking sector which the past CBN governor did not address . I

t was a very good development because if this had dragged on for sometime, many of us who rely on the banks in terms of not only collecting our dividends but also keeping our little savings in the banks and again borrowing some of the deposits with the banks to run organizations, we would have been in serious problem and that could have had a big impact on the country’s economy and its future. Having said that, I am worried that the way which our banks are going now is also not good for our development because Nigeria is not a credit driven economy like you have in Europe and America whose economies are highly credit driven.

They virtually do not carry cash as they have to buy everything on credit cards which has become part of the nature of their economy. So, their economy does not really encourage savings but Nigeria is not credit driven while  the banks are not encouraging savings and I begin to wonder what is going happen to this country in some years time if we do not really decide on what policy direction the banking system and the economy should really be focused on .

We need to do something quickly because savings form the basis of a non- credit driven economy like Nigeria as it form the basis of development because if people find that they are under simple economic arbitrage, that is if they find that the savings rate in any economy is good enough, then the money market of such an economy  would attract funds from different parts of the world.

Since the NSE is having a problem, so people are wary about putting their money in the capital market. The bond market itself people are also wary because many of the states that are offering bonds have some intrinsic problems. So,  if the oil prices should go down today, some of these bonds would be very risky bonds.

If you have that kind of situation in place apart from the federal government bond which again, I am  worried given the fact that the chairman of the Revenue and Mobilization Committee shouted out some months ago to the effect that Nigeria has used up all its funds under the excess crude oil account, then you begin to worry that we have a problem.

What then are your expectations from new bank chief executives who have taken over from their predecessors whose tenures has expired?

I am not really interested in the individual. I am interested in the system. If you put a dog to manage a well systemized organization it will take a long time for the problem of that dog to affect the survival of such an organization especially when there is a term attached to the management of such a dog.

Our system was such that it allowed a lot of abuse in the past and now that Sanusi is there, he has put in place a lot of policy that encourages risk management analysis of every credit that is granted by banks, He has also put in place Asset Management Corporation of Nigeria (AMCON) that will buy the toxic asset of the banks and release funds to them and ensure that those toxic assets are bought at a discounted values to allow the banks room for investment in the real sector of the country’s economy, So,  I am not interested in the individual that have left or those that are left behind but I am interested in what systems we are putting in place to ensure that the abuses of the past are minimized because we cannot eliminate it and to also ensure that the interest of all stakeholders in the economy is protected.

Now that the AMCON bill has been signed into law. How would you react to the fears expressed by many that the corporation being a government owned entity might turn out ineffective as it is not likely to be run along professional lines?

Well, it is too early to critic because first we don’t know the template at which it is going to operate. The only thing that we are aware of now is that the law has been signed establishing AMCON and also the various functions that will be carried out by it .  However, we are yet to know those who are going to run the corporation but I only hope that those in authority will choose people who have real experience and knowledge that will take us out of this mess where the banks have found themselves in terms of granting non-performing loans and hiding non-performing loans in their books.

With the way we are going, do you see the stock market bouncing back soon?
No,  I don’t see any recovery by the end of the year, because there are a lot of toxic assets and many of them are shares held by banks over margin trading that have failed to perform and as soon as the stock exchange is recovering, some of these shares are going to be offloaded and most times we are going to have excess supply over demand for some time. Until when some of these shares had been fully offloaded can the stock exchange begin to recover because there is a lot of stock out there under margin trading that are being warehoused in anticipation of AMCON and recovery of the market.

So, once these shares which are not held by the banks but by some private individuals who would offload their shares once they see that the market picking up in excess supply over the demand . So, we are going to have up down movement and until when some of these toxic shares have been sold will the market recover. I don’t see the market recovering early until mid next year.