With Omoh Gabriel

The handling of the Nigeria banking crisis portrays every investor in Nigerian economy as a common criminal who should not be trusted and must be dealt with. Going by the current CBN governor’s understanding of his role in the economy, his responsibility starts and ends with protecting depositors only.

For all he cares, investors in the banking sector can go to hell. Right from the time he took over as the Governor, he made it clear to all who cared to listen that he is out to protect depositors and all shareholders in the rescued banks have lost their investment. With that attitude, what happens in the capital market does not matter to him.

If CBN has responsibility to protect depositors in the banks, the Securities and Exchange Commission and the Nigerian Stock Exchange have the primary responsibility to protect investors’ interest in the capital market.

As it is, these two bodies have been swallowed by the all-powerful CBN. Yet, the economy needs investment to grow and create jobs for the teeming unemployed youths in the country.

The CBN was quick to argue during the global financial crisis that the stock market collapsed when foreign investors pulled out their investment in the market.

Any economist would have thought that the focus of policymakers would have centred on how to rebuild confidence in the market and get the foreign investors who left the economy to return.

But in the past two years, all monetary policies have been geared towards driving investors away. Each passing day, the utterances and actions of the market regulators further damage the confidence. As it is today, no sane local or foreign investor will approach the Nigerian capital market for investment.

The evidence of this is what happened on Wednesday when the management of the Nigerian Stock Exchange openly begged investors to stop dumping their shares. There is total loss of confidence in the market.

The take-over of three out of the eight rescued banks has resulted in panic dumping of bank shares at the secondary market of Nigerian capital market. In the last two years, no new shares have been issued.

Last Monday alone, investors lost a total of N138.932 billion at the Sock Exchange as the market value of all the shares listed, which opened the day’s trading at N7.484 trillion, dipped by 1.86 per cent to close at N7.345 trillion. The All-share index, another key performance indicator, also dropped by 1.86 per cent or 434.33 basis points to close at 22,963.11 points from 23,397.44 points at which it opened. Banks’ stocks were the worst hit, as 11 banks recorded significant decline in their share prices. As a result, the NSE Banking index, representing major banking stocks, dipped by 3.66 per cent to close at 317.33 points from 329.38 points.

Investors had a week before lost N137.4 billion as the total market value of shares dropped by 1.80 per cent to N7.484 trillion from N7.621 trillion at which it opened the week. On Tuesday, investors again lost N141.96 billion as the total value of all the shares listed at the Exchange dipped by 1.93 per cent to close at N7.203 trillion from N7.345 trillion at which it commenced the day’s trading.

The All-share index dropped by 1.93 per cent or 443.79 basis points to close at 22,519.32 points from 22,963.11 points. The NSE Banking index further declined by 4.22 per cent to close at 303.93 points from 317.33 points.

This was brought about by massive decline in the share price of majority of the banks, as 13 banks recorded significant losses in their share prices. A turnover of 401.08 million shares valued at N2.96 billion was recorded in 5,196 deals.

What is more disturbing is that several multi-national companies that are listed on the exchange having seen the lack of focus and discipline in the financial markets have applied to be de-listed from the exchange.

This gives cause for worry as to the future of the Nigerian Stock market. As it is, it will take a long time before the market recovers.

The delisting by executive fiat of BankPHB, Spring Bank and Afribank from the Stock Exchange without following procedures has given foreign investors reasons to believe that Nigeria has no respect for sanctity of investment contract.

To de-list a company from trading at the exchange, the management of the Stock Exchange will have to take a memo to the council of the exchange for consent and shareholders are adequately briefed of the intention and appropriate fees paid before such a company can be de-listed.

The CBN had given September 30 as deadline for the eight rescued banks to re-capitalise but the investing public woke up two Fridays ago to hear that the three banks have been acquired.

Worse still, the following Monday, management, board and a new name were announced for the banks. Investors in the three banks woke up to find that the share certificates in their hands were worthless.

They can neither trade nor sell off those shares because the banks under which they bought those shares have been taken over by NDIC on the order of the CBN.

Where were SEC and NSE when these decisions were being taken? Did they not realise the implication this would have on those they were employed to protect? What moral ground will they have to urge Nigerians to patronise the capital market in the future? What will Sanusi, Arunma Oteh and Obi, be telling foreign investors when wooing them to come and invest in Nigeria? When will Nigerian public officials learn to obey the rule of law and put public interest above personal agenda? The action of the authorities has further damaged the shaking confidence that was building in the market.

The CBN had in August 2009 injected the sum of N620 billion into the eight banks it bailed out and the three nationalised banks were among them. Last Friday, AMCON injected another N679 billion of public funds into the three, bringing the total fund injected into the rescued banks to a whooping N 1.299 trillion though the three banks said they have paid off CBN.

But before the CBN intervention, the Expanded Discount Window the CBN opened for the banks to support them was N270 billion facility from which they could borrow. That window was closed by Sanusi thus leaving the troubled banks naked.

Would it not have been better for the CBN to use the Expanded Discount Window to manage the troubled banks than the total mess the economy has been put through now?

SEC and NSE have failed in protecting investors, the NSE may be deemed complicit in the series of events beginning from the consolidation share offers and subsequent abuses that led to the banks’ problems and nationalisation.

Unfortunately, the current leadership of NSE/SEC may correctly claim that these issues pre-dated their tenures, and that they are taking corrective action. Ordinary investors are the ultimate losers in this crisis. The bankers have become rich; depositors are protected; while CBN/NDIC/AMCON among others, flex muscles with the bank owners.

The major concern of both local and foreign investors is the re-entry of the Federal Government into the banking sector and the market-distorting effect this is likely to have on the growth and development of the sector.

This was the same option the CBN told the world it considered not feasible at the start of the current reforms. It appears that what is happening is a deliberate act to destabilise the whole financial markets and threaten the whole economy.

The advice that institutional investors and financial analysts will be giving to investors now is to steer clear of Nigeria’s financial markets and start looking for alternative markets and economies in the sub-region.

From the look of things, investors’ protection is not on the agenda of SEC and NSE as the actions of the regulators especially in the last two years, have heightened the political and investment risks of the country, which means we have finally lost the confidence of foreign and local investors in our capital markets. No investor will invest in a situation like this.