Nigeria’s bourgeoning labour market is set to witness new entrants as over 5,000 employees of capital market operators will be shown the way out of the system as the Securities and Exchange Commission (SEC) insists on their recapitalisation, BusinessDay can disclose.
According to the new minimum capital structure, a broker/dealer is required to have N300 million compared to N70 million in the past.
Rising from the third quarter (Q3) capital market committee (CMC) meeting held in Lagos, SEC insisted that it will enforce new capital requirements for capital market operators by end of December 2013.
Analysts said if it comes to pass, the implication is that President Goodluck Jonathan’s recent move to create three million jobs in the next 12 months will receive a major setback.
Having weighed the likely effects of SEC’s decision on the entire economy, market operators suggested that SEC embarks on its decision through a risk-based approach. This is coming on the heels of the market which its crash six years ago wiped-off over N6 trillion of investors’ money.
Currently, driving the suggestions are trade unions/professional bodies within the market. The Association of Stockbroking Houses of Nigeria (ASHON), Chartered Institute of Stockbrokers (CIS), and Association of Issuing Houses of Nigeria (AIHN) have noted the implication of ignoring a seamless approach to the recapitalisation.
“Discussions around the imperative for both recapitalisation as well as migration to a new capital regime for operators in the Nigerian capital markets industry have been on for well over a decade. In fact, a new capital regime was proposed for the industry as far back as in 2007. The recently announced minimum capital for operators is far lower than the 2007 figures,” Obi Adindu, communications advisor to the SEC DG told BusinessDay over the weekend.
Though, industry sources told BusinessDay that since the SEC announced the deadline for operators’ recapitalisation, “it took us 6 months to get the regulator engaged and discuss the implication on the entire Nigerian economy.”
Last month, during his investiture as the president of CIS, Albert Okumagba vowed that the institute would protect the interest of stockbrokers in the recapitalisation of capital market operators. His words: “I would like to assure that the Institute will continue to play a leading role in advocacy to protect our members and their businesses and to ensure that we operate our market with globally acceptable standards. In the front burner at this time is the issue of recapitalisation of operations of operators and demutualisation of the NSE.
Currently, there are about 226 active stockbroking firms at the Nigerian Stock Exchange. On average, each of them has about 30 employees. Sources at the market confirmed to BusinessDay that if SEC ignores risk-based approach to the recapitalisation, only 27% (about 61 firms out of 226) of the operators might not be affected because “we are nine months down the year and the uncertainty is high for the remaining operators to raise this money in the remaining three months.”
Victor Ogiemwonyi, chairman, Association of Issuing Houses of Nigeria, said, “Regulators should look at recapitalisation from mergers and acquisition (M&A) perspective. They should look at the negative impact of throwing out market operators. That is why we have chosen ‘mergers & acquisition as an option for recapitalising the stockbroking industry’ as the theme of our annual workshop which comes up this Thursday. Arunma Oteh, DG, SEC, is the guest of honour, Oscar Onyema, CEO, NSE, will speak on benefits of consolidated stockbroking industry. Kayode Falowo, MD, Greenwich Trust Limited, Bolaji Balogun, MD, Chapel Hill Denhan Group, will all make presentations while Atedo Peterside will be the chairman of the workshop session.”
