Nigeria’s Securities and Exchange Commission (SEC) has not published its annual reports and accounts for eight consecutive years, raising questions about the regulator’s financial transparency and prudence.
In May 2020, Lamido Yuguda was appointed the Director General, SEC. Three years after, the management has not made public the apex capital market’s annual reports and accounts since 2015.
The last time the Securities and Exchange Commission published its annual report and account was in 2014 when Suleyman. A. Ndanusa was the chairman of the Board, while Arunma Oteh was the Director General.
In addition to the executive and non-executive members of the SEC Board, the Central Bank of Nigeria (CBN), and Federal Ministry of Finance (FMF) also have their representatives on the SEC Board.
An annual report is a comprehensive report on a company or institution’s activities throughout a preceding year. They are intended to give stakeholders and the public information about the institution’s activities and financial performance.
Interestingly, two informed market sources accepted to speak on this only on conditions of anonymity, saying they wouldn’t want to be conflicted.
“It’s an absolute outrage that a foremost financial services regulator is operating beneath the standards it ought to be holding operators accountable for. It speaks to a degree of opacity in the financial management of the SEC which became entrenched during the ill – fated dispensation of Munir Gwarzo whose tenure was characterised and aborted by serial acts of financial impropriety, bordering on larceny,” the first source said.
According to the first source, “The interregnum presided over by Mary Uduk didn’t quite rise to the bar of financial transparency either. The Yuguda regime, emplaced in 2020 at the SEC has had three years to return the apex regulator of the capital markets to the path of rectitude and propriety in the conduct of its financial matters but has failed to do so. It is no wonder that observers are persuaded that the days of financial and other resource haemorrhage are yet to abate at the SEC. This raises the need for an urgent intervention to straighten out affairs in this vital market regulator”.
Another source who spoke on same condition said, “In an elaborate prescription by the International Monetary Fund (IMF), financial markets authorities and by extension, leadership of financial services agencies must demonstrate good practice on transparency and accountability.”
“Within this construct of accountability and assurances of integrity by agencies overseeing the financial services there are about three critical elements. First, the officials of money and capital markets must be able to report on their conduct as regards financial policies, explain the policy objectives and to measure performance as well as exchange views on the state of the financial system. This should not be limited to generic communication to the market and public, but also in reporting to legislative or executive arms of government on the appropriateness of their policy pursuit,” our second source noted.
Explaining further, our source said, “Second, financial agencies such as the Securities and Exchange Commission should show leadership on corporate governance and accountability by publishing and publicly disclosing their audited financial reports, in good time, as this is essential in demonstrating good practice and transparency to the financial market.
“After all, he who comes to equity must come with clean hands and you cannot give what you don’t have. It is a moral burden on the SEC to penalise companies for late submission of annual reports and accounts while it cannot publish its own accounts for several years and has continuously struggled to give stewardship of its operations even to legislators which have oversight function on its operations,”.
According to our source, “As the IMF and other credible international bodies prescribed; “financial statements should be audited by an independent auditor. Information on accounting policies and any qualification to the statements should be an integral part of the publicly disclosed financial statements. It is crucial that the SEC demonstrates that its internal governance procedures necessary to ensure the integrity of operations, including internal audit arrangements are of best practice and this should be publicly disclosed for the market to emulate. In the least, the SEE should publicly disclose information on its operating expenses and revenues at least annually, as a show of transparency and accountability,”.
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“Third, institutions overseeing financial markets such as the SEC should not only roll out rules to protect minority investors but also demonstrate that it upholds global best standards for the conduct of its officials as regards conflicts of interest, and perhaps going above board in setting rules to prevent officials from abusing their status and general fiduciary obligation in the market. Disclosing this to the market can go a longer way in shaping conduct and behaviours of market participants, who indeed would see rationale for SEC’s strict position on issues of governance and integrity of the financial market.
“Disclosing and practicing these principles would go a long way in refining the conduct of market stakeholders, including issuers and intermediaries such as brokerage firms and financial advisers, and by extension such conduct would uphold the integrity of the market and by extension enhance the performance of the Nigerian Capital Market. This can be a major reform in deepening the capital market and ensuring the confidence of all market participants, especially investors,” our second source stated.
Bagudu Waziri Mohammed, head, external relations, SEC did not get back to us on this development as he earlier promised to do within an hour when contacted on phone, thereafter follow up calls to him weren’t taken as at time of filling this report. He rather sent a terse message saying, “Please text me”.
“If we go through the Medium-Term Expenditure Framework which we started last year, if we look at 2022 and 2023, you will see that we have worked on our expenditure and have done a lot of financial management to turn around the fortunes of the Commission.
“We therefore need the support of all to engineer the kind of transition we are thinking of at the SEC,” Yuguda had last year told the Senate Committee on Finance at the 2023-2025 Medium Term Expenditure Framework/Fiscal Strategy Paper (MTEF/FSP) interactive session.
He had noted that the Commission is a 100percent self-funded agency of government “that pays dues to the Consolidated Revenue Fund of the Federal government under the Finance Act 2020 that has amended the Fiscal Responsibility Act of 2007.”
“Right now, we are contributing 25percent to the federal government which is deducted at source and we are also asked to pay another 15percent at the end of the financial year when we submit our annual accounts. That is making 40percent in total”.
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