President Muhammadu Buhari recently identified three major poles on which the future of a nation lies – namely, creativity, technology and character – and said the most crucial of all is character, which combines resilience, humility and commitment. A careful look at the president’s team reveals a deliberate attempt to select the best hands to help him run the affairs of this country. And the team leaders will have to adjust to the fact that his intolerance for indolence is legendary.
One sector that is poised to help Mr. President realize his goal of turning around Nigeria’s economy and building a sustainable industrial and vibrant economic base is the capital market. Already, the innovative policies being churned out by Mounir Gwarzo, the director-general of the Securities and Exchange Commission (SEC), the regulatory body of the capital market in Nigeria, reflect the interplay of the three poles identified by Mr. President – creativity, technology and character.
No doubt, the hope of Nigeria’s rapid economic growth lies in capital market development as obtains in all successful modern economies. The positive impact of capital activities on the economies of nations worldwide cannot be over-emphasised. In Nigeria, the capital market continues to drive economic growth, especially in the banking and industrial sectors. It will not be much of an exaggeration to posit that no nation will attain its goals of economic development without recourse to the services of its capital market.
The history of capital market in Nigeria is a long one. It can be traced to 1946 with the floating of N600,000 (more than £300,000) worth of government stocks. But a secondary market trading in issued stocks was lacking then. However, in 1959, following the establishment of the Central Bank of Nigeria (CBN) a year earlier, a N4-million (£2 million) Federal Government of Nigeria development loan stock was issued in line with its role of fostering economic and financial development. The introduction of the Structural Adjustment Programme (SAP) in the mid-1980s in Nigeria, courtesy of International Monetary Fund (IMF), resulted in significant growth in the financial sector. The related privatization exercise exposed investors and companies to the significance of the stock market. The Nigeria stock exchange was to play a key role during the offer for sale of the shares of the affected state run enterprises.
This kind of role was to be repeated again in 2005 when the capital market became instrumental to the initial 25 banks that were able to meet the minimum capital requirement of N25 billion during the banking sector consolidation exercise of the CBN.
The role and impact of the capital market, under the supervision of Securities and Exchange Commission (SEC), on the economic growth of the nation’s economy cannot be overemphasised.
Since the introduction of the stock market in Nigeria, the institution has helped governments and corporate entities raise long-term capital for financing new projects and expanding and modernizing industrial/commercial concerns. What is required is for SEC to initiate policies that would encourage more companies to access markets and also be more proactive in their surveillance role in order to check sharp practices which undermine market integrity and erode investor confidence.
Gwarzo, 52, is a dyed-in-the-wool investment adviser all through his rich career—from his early days at the Nigerian Stock Exchange in 1989 to the days of his first arrival at the SEC as special assistant to the director-general in 2000.
In-between those years and even afterwards, he garnered vast experiences providing fund management services to institutional and individual clients as a private investment consultant to investment companies, such as MTL Global Services, Empire Ventures and Visa Investment Limited, and to well-established institutions, such as the Federal Mortgage Bank and erstwhile Century Merchant Bank. These were experiences that prepared the investment banker for the enviable position he occupies today.
At the SEC, Gwarzo is an insider. He knows the SEC like his palm top. His second coming is full of the zest of a visionary reformer – full of ideas, hope and zeal to change the course of history.
In the short period that he has been on the saddle, he has taken bold steps to change the SEC for better, with many more ideas still under his sleeves. The steps have included strengthening the SEC Administrative Proceedings Committee (APC) while maintaining a posture of zero tolerance for market infractions. In the process, he has sent a clear signal to the market as to the imperative of discipline. Mounir also recognizes the importance of working hand-in-hand with his critical stakeholders in the capital market community. Nothing demonstrates this more than his resolve to implement the capital market community-articulated comprehensive 10-year (2015-2025) master plan for the strategic growth and development of the capital market.
Among the components of the master plan that have been implemented is dematerialization in which, for the first time in Nigeria, about 90 percent of share certificates have been dematerialized. The commission is also coordinating between registrars and the CSCS to achieve 100 percent dematerialization. Other priority areas are e-dividends; the establishment of the National Investor Protection Fund (NIPF); addressing the issue of unclaimed dividends by issuing a directive mandating registrars to transfer such monies in their possession that are 15 months or older back to the companies, which has stopped the growth in quantum of unclaimed dividends.
The effectiveness of the use of technology to strengthen the operations of the capital market can been seen in the collaboration the SEC is having with the CBN and NIBSS to leverage the BVN (Bank Verification Number) database for dematerialization, e-dividends and direct cash settlement. The DG has also strengthened the collaboration between SEC and PenCom for greater asset allocation to the capital market. The N3 trillion pension fund is a huge asset that capital markets should leverage. Other on-going areas of collaboration include that with the Debt Management Office (DMO), which seeks to deepen the domestic bond and sukuk market; with National Insurance Commission (NAICOM) for greater financial inclusion; and with CBN for a unified licensing framework.
On the need to encourage good corporate governance, which will check infractions, the SEC has completed all the necessary work towards launching of the Corporate Governance Scorecard for public listed companies in Nigeria. The scorecard is a tool for the assessment of corporate governance practices. It is designed to measure the observance of Corporate Governance Codes and encourages better governance practices. It is also a quantitative tool to measure the level of observance of a code and/or a standard of corporate governance. It compares governance practices to a benchmark.
It could be recalled that, back in 2011, the SEC issued the Code of Corporate Governance for public companies in Nigeria. Since the adoption of that code, public companies have been required to file returns on corporate governance issues on a half-yearly basis through the use of SEC Form 01. However, monitoring and assessing actual compliance with the code has been a challenge. This proactive posture of the DG tells us something about his character. A deeper look will tell us more.
It is often said societies are judged by the kind of books they read. We can learn something about the character of Mounir Gwarzo, who loves reading leadership and management books and biographies. Through these, he is able to imbibe leadership styles necessary to cope with myriad challenges. From biographies, he will acquire sharper visions and avoid the mistakes of others. Like all reformers in history, Gwarzo is destined to change the course of history at the SEC.
Bashir Ibrahim Hassan
Bashir Ibrahim Hassan, a financial analyst, contributed this piece from Abuja.
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