BY PETER EGWUATU
The Securities and Exchange Commission, SEC, has reacted to the call by some market operators to suspend the recent minimum capital base for all capital market operators on the premise that it was ill-timed, stressing that it consulted widely with stakeholders before taking the decision to increase the capital base.

The commission stated that the new capital regime is the outcome of a process which commenced in 2010 with the setting up of a technical committee chaired by a former Executive Commissioner, Operations at the SEC.

According to a statement signed by Mr. Obi Adindu, Communications Adviser to the Director General, SEC, “The committee featured representatives of the capital market industry trade groups such as the Association of Stock – broking Houses of Nigeria, ASHON and the Chartered Institute of Stock , CIS ,The new minimum capital regime which was recently announced on the basis of a September 2013 SEC Board decision was a finalization of the work of that industry – wide committee.”

The commission stated that an enhanced capital base for operators in the Nigerian capital markets  was long overdue,  stressing that it is an inevitable logical step in the industry reform effort being led by the SEC and which has the buy – in of all industry stakeholders.

According to Adindu, “The reform has led to unprecedented market recovery with market capitalization and the All Share Index (ASI) attaining and exceeding the pre 2008 peak global financial meltdown figure, thereby positioning Nigeria within the top 10 bracket of the world’s best performing capital markets for the third year running.”

Continuing, he said “The new capital requirement is inspired by current international best practice which requires that operators hold capital which is commensurate with the size of risk which they bear in the market place. Indeed the new capital regime, when depreciation in the value of the naira is factored in, merely takes the Nigerian capital market back to the 2004 baseline capital situation. The significant erosion of capital which reduced many  Capital Market Operators ,CMOs to hollow shell entities was a vital factor in the flight of investor confidence from the Nigerian market which, in turn, frustrated the market’s recovery for a long time.”

Adindu explained further that the stark realities in the market underscore the need to migrate to an enhanced capital regime, adding “There are presently 281 registered market operators out of which 250 are active. 20% of this active group controls 80% of total transactions in the market by volume and value. The relationship between transaction volume and value on one hand, and number of operators on the other, makes the Nigerian market a most parlous picture relative to other peer and non peer markets as many more operators chase after fewer businesses (in the Nigerian market).”