By Dele Sobowale

“One of the lessons of history is that people [especially Africans and Nigerians in particular] never learn from history.”

The current travails of investors in the Nigeria Stock Exchange, NSE, has once again convinced me that Nigerians, including those we regard as the “brightest and the best”, never learn from history. Back in November last year, writing under the title, ANOTHER CAPITAL MARKET CRISIS COMING UP, I warned my Fellow Countrymen about the crisis they now face in the NSE. Once again, I was ignored.

Now millions of shareholders will shed trillions of naira as well as tears, and possibly life, for being so negligent. The Securities and Exchange Commission, SEC, and the NSE have driven us into a hole once again.   Only a fool will henceforth invest in the NSE and believe in the SEC until the foul nest is overhauled. Read on.

ANOTHER CAPITAL MARKET CRISIS IS ROUND THE CORNER

“A total of 92 companies fell short of the Nigerian Stock Exchange’s minimum listing standards between December 2012 and September 2013″. PUNCH, October 14, 2013.

Three days after that report, PUNCH in its editorial of October 17, 2013, titled “PREVENTING ANOTHER CAPITAL MARKET CRASH” warned the Securities and Exchange Commission, SEC, and the Nigerian Stock Exchange, NSE, not to stop at indictment of erring companies but to take pre-emptive steps to avert another crash – just as the nation seems to be digging itself out of the hole into which former managers of the capital market plunged the nation. PUNCH gave good advice but it might be coming a little bit too late to save the situation completely.

In my nearly twenty years of writing on these pages, I had predicted four crashes – two banking and two capital market crashes. The first was in reference to the banking crisis of the 1997/98 financial years. Writing under the titled FUNNY MONEY, I had predicted that Nigerian banks, which at the time were enjoying rave reviews in the media in general, were as a matter of fact deceiving all of us. The high profits and dividends being declared were out of tune with the underlying economy which was in a recession.

My query then, as now, was “What sort of investments were banks making to earn the returns they were declaring?” I went further to list seventeen (17) banks which were sure to go under. The list included Alpha Merchant Bank, the darling of ignorant investors, and Commerce Bank headed by two former heads of the Chartered Institute of Bankers of Nigeria, CIBN. Few people believed me until the banks went belly up and bankers changed designer suits for prison uniforms.

My prediction about the unhappy fate of the capital market was taken as a huge joke by traders at the time. They found it so hilarious they actually pasted the article on their notice board as share prices at first climbed up – thanks to millions of unwary investors. Well, I had the last laugh when share prices turned down and did not stop until the market had shed about 30 per cent or more. Suddenly, my article disappeared from the notice board.

Back in 2007, I was busy warning Nigerians that the banks were not as healthy as Professor Soludo would have us believe; we were experiencing FUNNY MONEY II, but few listened. Then in 2008, I warned the former NSE DG, Dr Ndidi Oyuike, to pack and go before the market crashed on her head – if she wanted to have a decent send off party. But, they never listen. The market crashed; she was removed without a send off and the following year, 2009, the banks came tumbling down after the capital market.

The present predicament has all the earmarks of crises we have experienced in the past. Then as now, the malfeasance starts with companies that are relatively large in the capital market. To begin with, how many companies are there anyway that 92 will, at once be guilty of violating listing standards? Then you look at some of the names mentioned and it is easy to see that some of the same companies or individuals who had been involved in malpractices in the past are again featuring in these.

One particular company has again raised the issue of conflict of interests. How can we allow a major investor in the capital market to be involved in the regulation of the market? No other modern market would allow it. But, impunity and immunity have become part of the defining characteristics of Nigeria since 2010. As long as you are loyal to the man at the top, you can get away with murder.

Well, if you are a small investor, not wanting to be murdered, this is the time to start re-appraising your investment portfolio before the roof caves in again. You are probably asking: why should it? Then, let me disclose a closely guarded secret known to the business moguls when things like this happen.

All business reports can generally be summarized into three: good, fair and bad. It is good news when the company’s operating results are better than budget estimates; profits are higher, returns on investment are above estimates and good dividend will be forthcoming. Such reports get out very quickly to the capital market and other stakeholders. Fair reports mean that there is a mixture of good and bad news. Gross revenue might be up but profits might be down – or vice versa. Dividends might be reduced or not paid at all and the Board would have to meet to decide how to present the good and the bad in a way that would not upset the shareholders. The reports then get delayed a little bit while spin doctors and creative accountants are called in to dress up the results.

The real elephant in the television store is the bad news. That is when the revenue is lower than expected; the profit is tending towards an outright loss; dividends are definitely out of the question and the management and board face a stormy Annual General Meeting, not to talk of massive sell-offs at the capital market. That is when like the school boy who failed the exams, woefully, there are long delays in releasing the figures.”

Now, the NSE had lost 20.40% of its market value in just five weeks and the end is not in sight. In any other country, investors, anxious to avert disaster would have been burning down my telephone number with calls wanting to know how I could have been so accurate in my predictions and seeking advice on which securities to off-load. But, not My Fellow Nigerians. They willingly go down with the sinking ships they hold as shares – many of which are not worth much anymore. Banks again are in the lead – for reasons I will not now want to disclose.

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