BY MICHAEL EBOH
The Nigerian Stock Exchange has been called upon to explain its roles and the circumstances surrounding the nationalisation of Afribank Plc, BankPHB Plc and Spring Bank Plc by the Central Bank of Nigeria and the Nigerian Deposit Insurance Corporation, NDIC, especially as the non-inclusion of the NSE in the consultation and processes leading to the action is likely to lead to an erosion of confidence in the capital market.
Analysts at Proshare Nigeria, led by its Chief Executive Officer, Mr. Femi Awoyemi, in a report made available to Vanguard, titled: ‘The Nationalised Banks and the NSE: Beyond the Case to Nationalise – What about NSE Processes?’ said that “The NSE needs to shed more light on the ‘grey areas’ that appear apparent with regards to how public companies become private companies without delisting processes initiated before such is made public.”
According to him, It could well be that this is in the nature of how business gets done with governmental interventions; but with the market, it should be expected that clear and unambiguous rules should be in place to guide such actions to establish a level playing field and help both local and international investors have a clear idea of risks and rewards in investing in banking stocks in Nigeria.
He expressed concern that the actions of the CBN and the NDIC portend negative consequences for the future of the Nigerian capital market, especially for both retail and institutional investors.
Awoyemi said that investors would have benefited from a well-planned exit programme, noting that the full suspension on these banks translates to a total loss of investment for investors.
“How does this sit with the investors’ protection argument made by the SEC and NSE, when it did not take any step to educate investors?” he said.
Awoyemi said that the consequence of this action will be reflected in the market and could well plunge the market further into negative territory.
According to him, the sustained cloudy atmosphere coupled with unstable trend in the banking sector would not help the state of affairs in the coming periods as the sector remained the volume driver in the market while the likely trend reversal is built around the thriving outcome of recapitalisation and mergers & acquisitions in the sector.
He said further, “In the main, and if we are to accept the logic of AMCON, these are substantial losses to tax payers for which it remains liable – as it had full control of the management of the banks (CBN appointed the current management for the last two years at a minimum though in the case of Spring bank it was for more than four years).
“The announcement of the Full suspension did not come from the NSE but the SEC and leave one to wonder who is directly in charge at the NSE in the absence (as it would seem) of a functioning council or quasi board of directors.
“The claim by the NDIC appear to be an ‘anticipatory bankruptcy’ claim for which the market had no information about and had traded on the stocks on the very day the announcement was made suggesting imperfect information to the market who had relied on the statements from the CBN and assurances given by the AMCON CEO.
“The take over by NDIC would indicate the action taken against a failed bank for which no information or signal was available to the market to act on – thus suggesting culpability on the part of the market managers of a cover-up on the financial condition of the banks listed on its bourse.
“The role of the Corporate Affairs Commission (CAC) in the matter is obviously nonexistent. It is understood that a listed company cannot transmute to a private company without necessary papers filed with the CAC and disclosure made to the market.
“The process for the orderly liquidation of banks (as against other non-banking quoted companies) has not been legislated open leaving room for such concerns as is the case in other climes.”