Former Governor of Central Bank of Nigeria, Professor Chukwuma Soludo, yesterday, painted a gloomy picture of the Nigerian Capital Market as he told the House of Representatives Ad-Hoc committee investigating the near collapse of the Capital Market that no amount of regulation can stop the crash of the market as crashes are normal in the stock market.
His testimony came on a day the Minister of State for Finance, Dr Yerima Ngama, berated the Director General of The Securities and Exchange Commission, Ms Orunma Oteh for not doing enough to safeguard the capital market as her performance "should have been better, far far better than it is."
Soludo who appeared before the committee also defended his position on the global economic recession, saying he did not say it would not affect Nigeria but that the economy would not go into recession.
According to the former CBN governor, "stock market crashes will always happen: no amount of 'reforms' or 'regulation' will stop future ones. The jury is still out on what constitutes 'appropriate' regulation or 'reforms' of the market: debate raging in US now, over vs under-regulation."
Reflection of general economic situation
He said what was obtainable in the stock market was a reflection of the general economic and political situation in the country, adding that the committee should "think about Nigeria's 'Newspaper Headline Index' - how many positive per week versus negative! Political economy of change in Nigeria is one step forward, three backwards! The Stock Exchange cannot be better than the systemic competitiveness of the economy. Investors are not stupid (when the Market was booming, Nigeria was not rated No.14 failed State in the world- think about this!) -- see all the reversals of privatisations, etc. Stock Market is simply a barometer.
"How are we sure that the market is not just reflecting the fundamentals of the economy? What kind of market do we want-a market that leads the economy or that follows the economy? Let us define our target/destination and how far we are from it before we know the appropriate vehicle to reach there.
Former CBN Governor, Prof. Chukwuma Soludo, Speaking at the Public Hearing by the House of Representatives Ad-hoc Committee investigating the near collapse of Nigerian Capital Market in Abuja on Tuesday (15/5/12).NAN Photo
"How come that in three years and with monthly oil price averaging $100 per barrel and over 2mbd, and with all the 'reforms' in money and capital markets (supposedly there is no more lax regulation/supervision) and despite Dangote's over N2 trillion listing which lifted the market cap over N8 trillion, the market cap is basically today at the level I left it three years ago?"
Talking about his achievement in office, the former CBN governor said he came into "office with a unique background and experience with a vision and ambition to create a new financial system that would make the economy realise its potentials as Africa's largest economy; an International Financial Centre, and Africa's financial hub," adding that he "created a new banking system through Consolidation and 13-point agenda, which engineered a new Stock Market as one of its by-products."
Ngama rates Oteh
In his testimony, the Minister of State for Finance, Dr. Ngama, when asked whether the competence of the Director General of the Securities and Exchange Commission played any role in the state of the capital market, said the lack of good working relationship between the Director General of the Commission and other Commissioners contributed to the comatose state of the capital market.
He said: "You can have all the certificates, you can go to school but you can decide to be incompetent. The performance (of the Director General of the Securities and Exchange Commission) should be better, far, far better than it is. It is not a mistake that the SEC Act says there should be a director general and three commissioners.
"From what I have watched, the body (SEC) is not one. The leg is apart from the hand. Since you (committee) have observed what is happening there, whatever your report says, as an employer, whatever you recommend, we will implement."