Akoma Chinweoke
30 August 2008
interview
The persistent downward movement of stocks being traded at the Nigerian Stock Exchange at least, has confirmed that all is not well with the market.
Little wonder the government, regulators and operators recently waded into the situation to stem the tide of sliding fortunes of stocks and bring back the nation's capital market to the right track.
Part of such proposed remedy by the Federal Government was the yet to be actualized creation of capital market stabilization fund as an intervention instrument while the Central Bank of Nigeria was to take appropriate measures to ensure adequate liquidity within the system to oil operations in the market among others.
In this interview, Chief Aderemi Oyepeju, chairman Ibadan zone of Shareholders' Association which comprises Ekiti, Kwara, Ogun, Ondo, Osun and Oyo States takes a critical look at the current state of the market and steps taken so by the authorities to check the worrisome trend and insists that problem requires not a fire brigade approach but permanent solution to restore investors confidence. Excerpts.
TO stem the tide of sliding for tunes of stocks in the country, the CBN and operators of capital market appear now to be talking about synergy, How would you react to that?
Well, as a shareholder ad more importantly speaking from a practical end, there are some companies whose shares do not worth the price that it is. Also there some companies whose prices is above the price it is now. Take for example, the price of First Bank shares, everybody knows the solidity of the bank, the price of UBA and Union Bank.
These banks were not pushed. But a company that reconstituted its board a year or six months ago jumped from one naira to nearly thirty naira because the share was very scarce in the market. So, the bulk of this blame has to be laid at the door step of the Nigerian Stock Exchange. Because stock brokers usually move share prices when the share is not available.
But for somebody who wants to play an economic gimmicks might have come, mobilised the shares because the person knew that the shares would continue to appreciate, they would now dump such shares. So, when those who buy for capital gains now dump their shares then the problem started. So, the novice who knew nothing about price movement will now run to it thinking the company is doing excellently well. Price movement is not an indication that a company is good.
What is your view on the government proposed establishment of market stabilization fund as an intervention instrument to checkmate bearish trading in the market?
Anybody that need his/her money at anytime would definitely get it back. Most of these fall in price is are not due to actions of the general shareholders at the grassroots. Let the richmen search themselves. For example somebody who bought 1000, 5,000 or 1000 units of shares cannot impose any form of danger to the stock market. But when somebody knew that the share of N10 has become N20 and he has about 50 million worth of shares what will he do?
He would sell the shares and when he now gives the shares to the market, and the cash in the market is not enough to take it, then the shares would begin to drop and drop. These are the areas the government needs to look at critically. I hope they would involve real shareholders who know all the companies involved in this exercise, because they don't make and enforce law here in Nigeria without the involvement of lawyers, police and others that are related. So, any law on capital market must involve shareholders because they are the ones that are directly affected and not even the Nigerian stock exchange. It is very important.
Are you saying that measures taken so far by the government would not make the market to bounce back?
Well, to some extent, the government intervention might revive the market. For example, if the government is saying that it is going to establish a stablization fund, when the government needs back that money, what do we do? It is not firebrigade approach that we give to issues. The problem that we are experiencing now at the market requires a permanent approach. Let the government look inwards particularly those companies that are bearish whose prices are going down.
If it is a director that is a member of the board who now wants to sell his N500 million shares, what do you do to that? When you buy, you have to sell. So, the habit the Nigerian society should cultivate is the that of long term investment. But people see the NSE or capital market as a place where they can become rich overnight where as it is now difficult to siphon money. So, may be, they have billions which must have been stolen, they sunk it into the capital market and when they know one billion has become three or four billion, they take it back. So, it is the big investors that the government has to appeal to and not small investors.
Do you buy the idea that commercial banks should re-structure its existing facilities and operations to licensed stockbrokers, institutions and individual investors on long repayment basis?
I totally agreed with that. The reason is that if a customer should ask for a loan to buy one million shares of a bank shares of which the banks total shares value is N15 million and the bank pays N50k per share as dividends. If you should calculate that, to buy one million shares would require N15 million.
Would any bank that the investor loaned money from go along repayment as per dividends? You know that is not possible. Even when they gave 1-10 bonus. It is not enough for the investor to pay your bank loan. But if it is ten years, that is as the bonus they gave is growing, so would the investor's chances of repaying the banks be enhanced. Then, within that period, the investor may have other sources through which he/she can pay the money back. That would surely give the investor a big leverage to repay the money to the bank. So long term facilities by banks would be a welcome development.
How best do you think SEC, NSE and capital market operators can cushion the effect of crash in shares to reduce the huge losses being incurred by some shareholders?
Well, those who are real investors, I mean the real shareholders do not buy shares on speculative information. I have been with a stockbroker who said somebody wants to sell a four million shares of a company and that share was quoted 78k or something like that and before I opened my eyes in the third week, the share has already risen to N4.00 and this is a company that even does not have any address. So, what do you do to that? So, who is moving that price up? Who is paying it? NSE, or SEC? Such issue has to be investigated. These are the areas the NSE and SEC has to beam their searchlights.
How would you react to the renewed call to NSE to review its current trading rules and regulations?
Yes, I agreed that trading rules and regulations need to be reviewed and that is part of the clarion call that I am making now that before you appreciate any company, all stock brokers or their representatives must ensure that the company is alive. Again they must ensure that such company has a sound management and a proactive board of directors. It is then that you can say the company is alive.
But how many shareholders are courageous enough to alert Nigerians of such exercise and even when you are doing that, they would say somebody has given you money to go and do it and they can't pretend as if they don't know. So, I would want the NSE to look at all the indices that can move a price forward and then take appropriate action. Instead of somebody just bring a share and began to use it to adjust the price.
The issue of e-allotment and e-dividends is another issue which you have always kicked against, why are you not very comfortable with the innovation?
Well, my stand was that the exercise needs more time and that for the director general of NSE to have given a deadline was wrong. It is a bad policy and has to be reviewed. Many Nigerians are not educated about even what is the responsibility of the NSE to shareholders, about who a stockbroker is or stock broking firms and the duties of the security and exchange commission. So, I am now making a clarion call to SEC, CAC and NSE that they should educate shareholders both at the grassroots on enlightenment and business education on the capital market activities.
They should find a way to talk to the shareholders, go to local governments, every nooks and crannies of the society.
What do you think are the prospects of stocks trading in Nigeria judging from what the market is experiencing at the moment?
Well, nobody can talk about the future of Nigeria without referring to the quality of our leadership because they are the ones that give direction or policy that shapes the country's economy. So, our leaders should wake-up from their slumber and create the enabling environment for the capital market to thrive. There are no clear policy on banking, agriculture and other sectors of the economy, whereas in the past you know the direction the Nigerian stock exchange is going. So, also is the SEC and so on and so forth.
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