The Nation Newspaper

Tag: CIS

  • CIS pushes for broader market regulation

    The Chartered Institute of Stockbrokers (CIS) would work with other stakeholders in the capital market, the National Assembly and the Presidency to ensure the passage of a new bill that seeks to broaden the scope of certification of the CIS through the creation of the Chartered Institute of Securities and Investment (CISI).

    The CISI bill, which is being sponsored by former Chairman of the Senate Committee on Capital Market, Senator Ganiyu Solomon, intends to replace the law that set up CIS and bring other capital market operators under the supervision of CISI.

    Mr. Albert Okumagba, the new president of the CIS who was formally inaugurated on Monday, has made the CISI as a cardinal point of his administration.

    Okumagba said the CIS would engage the National Assembly and the Presidency to ensure that the CISI bill is passed before the end of this year.

    In a memorandum to the Senate Committee on Capital Markets on the CISI Bill, the Nigerian Stock Exchange (NSE) had stated that the CISI Bill would foster greater collaborative and proactive engagement with regulators, trade bodies, financial services firms, academic institutions and expert advisers and truly reflect the emerging nature of the Nigerian capital market beyond the restrictive definitions of buying and selling of stocks.

    According to the NSE, the CISI Bill is in line with the practice in other leading markets including United Kingdom (UK), South Africa and United States of America (USA).

    The NSE outlined that the objective of its memorandum was to enable the legislators to make an informed decision that would positively affect capital market stakeholders at a critical time in the recovery of the capital markets.

    The NSE noted that the CISI Bill would upgrade Nigeria’s CIS to similar bodies like the Chartered Institute for Securities and Investment (CISI) in the UK, the South African Institute of Security (SAIS) in South Africa and the Financial Industry Regulatory Authority (FINRA) in the USA, broadening the scope of participation and knowledge in the Nigerian capital market.

    The CISI Bill 2013 is based on the model of the CISI UK, the largest and most widely respected professional body for professionals in the securities and investment industry in the UK and in a growing number of financial centers globally. The SAIS was established in Johannesburg in 1978 and it is responsible for drawing up the original training standards for the securities industry. SAIS aims at promoting individual professional competence and to support the maintenance and enhancement of this competence by securities professionals. This model is also similar to the proposals in the CISI Bill. The FINRA, a successor to the National Association of Securities Dealers Inc. (NASD), is a private corporation that acts as a self-regulatory organization (SRO) FINRA is a non-governmental organization that performs financial regulation of member brokerage firms and exchange markets. FINRA also regulates the activities of professionals in the securities markets as well as administers the certification for participating in the US financial markets.

    According to the NSE, the proposed CISI Bill modernizes and broadens the scope of operations of the CIS to include securities and investments and its objectives include ensuring adequate knowledge and discipline in the market.

    “The CISI Bill seeks to adhere to international standards as illustrated in capital market activities in other jurisdictions. It will ensure that the Nigerian capital market meets up to the set benchmark and remains one of the leading financial centres in the African region in line with the transformation of the Nigerian capital market and wider economy,” the NSE stated.

    The Exchange noted that the passage of the CISI Bill will ensure a higher degree of professionalism in the financial services industry and encourage members to maintain and develop their knowledge and skills to promote higher standards of ethics and integrity in the securities and investment industry.

    According to the NSE, there is need for a broader version of the institute of stockbrokers as this will allow for broader participation of other players in the capital market as the Nigerian capital market has evolved beyond buying and selling of stocks and it now includes fixed income trading, Exchange Traded Funds and other securities.

    It pointed out that as part of the effort to deepen and develop the Nigerian capital market other financial instruments will be introduced to the market imminently which will require participation from other financial services professionals such as treasury bond dealers in the over-the-counter (OTC) market amongst other securities.

    “The current CIS structure has become redundant as it is restricted to only stockbrokers and does not accommodate other financial market professionals. The CISI Bill incorporates these professionals so they can also participate and contribute their quota to the development of the Nigerian capital market,” the NSE stated.

    The Exchange however called for broader consultation with all other major capital market stakeholders that will fall under the jurisdiction of the bill as well as a guarantee of the NSE position on the governing council of CISI as contained under the CIS 2004 Act.

    It also noted the need for the scope of the CISI bill to be adequately defined and articulated such that the regulatory functions and powers of the new institute would be clearly defined.

  • Fed Govt rakes in N2.2b monthly from CIS

    The nod by President Goodluck Jonathan for the transfer of Destination Inspection (DI) scheme from scanning service providers to the Nigeria Customs Service (NCS) has started yielding positive results as the Customs generates over N2.2billion monthly into Federal Government’s coffers as one per cent of the Comprehensive Import Supervision (CIS) scheme.

    The amount would have accrued to destination inspection service providers if they were still handling the scheme.

    Speaking at a training  for maritime journalists in Lagos, Customs Deputy Controller Olugboyega Peters said the N2.2 billion revenue was part of the many gains of Pre-Arrival Assessment Report (PAAR) introduced by Customs on January 1, this year.

    He, however, said contrary to speculations that the money would be kept in Customs’purse, this was not so.

    “We are yet to receive part of the money, but I am sure it will be given. Over N2.2 billion is being saved monthly by Customs as money that could have gone into the coffers of the service providers,” he said.

    He said the service is fully automated and that the initial hiccups it encountered in the transmission of PAAR from its ruling centre in Abuja to the customers’banks have all been surmounted and resolved.

    According to him, Customs clearing document is being managed by a network provider, Webfontain.

    Peters said genuine importers can obtain PAAR in six hours, adding that Customs has cleared the 99,000 backlog of PAARs it inherited from the former service providers.

    West Blue network provider, he said, handles Customs training schools and help in developing soft ware for its young officers.

  • Stockbrokers expel member over unprofessional conduct

    The Chartered Institute of Stockbrokers (CIS), the self-regulatory body that regulates the practice of stockbroking and serves as the umbrella body for all stockbrokers, has expelled one of its member; Mr. Akinwale Olagundoye.

    Olagundoye had been found guilty of unprofessional conduct by the CIS Disciplinary Tribunal on March 28, 2013. He however appealed against the judgement of the Tribunal to the Federal High Court, Lagos. The Federal High Court, Lagos on March 28, 2014 dismissed his appeal.

    Secretary to the CIS Disciplinary Tribunal, Mr. Babatunde  Odofin, said with the dismissal of the appeal, Olagundoye’s name was accordingly removed from membership of the institute with effect from March 28, 2014.

    “Olagundoye is therefore barred from operating or presenting himself as a chartered stockbroker or a member of the institute under any circumstance,” Odofin stated in a statement.

    On the other hand, Odofin said another stockbroker, Mr. Peter Temidayo Ola, who had been suspended last year, has been readmitted as a member of CIS. Ola  was found guilty  of infamous conduct contrary to and punishable under Regulations 5(vi), 5(vii) and 5 (xii) and section 11(1)(a) of the CIS Act of 1992.

    He was said to have collected the sum of N320, 000 from two persons under the false pretence that he had shares of Friesland Campina Wamco Nigeria when he knew in actual fact he had no such shares to sell. He did this between May and June 2009.

    But Odofin said Ola brought an application last December for re-admission having re-purchased 1,000 units of shares of Friesland Campina Wamco Nigeria including   the outstanding dividends and bonuses for the two complainants.

    “The Tribunal considered the application which as not opposed by the prosecution. In this circumstance, the Tribunal hereby orders that the applicant be and is hereby relisted as a member of the Institute with effect from April 1, 2014. The Tribunal, however, would like to sound a note of warning that in the future, the applicant must in all circumstances comply with the rules and regulations of the institute. He is also under obligation to uphold the ethics of the profession to which he subscribed and swore as a stockbroker,” Odofin said.

    Meanwhile, the chief executive officer and registrar, Chartered Institute of Stockbrokers (CIS), Mr. Adedeji Ajadi, has stressed the importance of standardization of training and certifications across all functions in the capital market.

    According to him, there is the need for standardization of training and certification to ensure that only qualified and competent professionals operate in the market in order to ensure that market operators are subject to regulation and discipline, as appropriate.

    He noted that in order to improve investors’ confidence, all stakeholders need to continue to work together to foster transparency and good corporate governance structures in the market.

    “We need to put structures in place to ensure that investors’ funds are safeguarded. Charlatans and quacks should not be allowed to handle investors’ funds and transactions in the capital market. The CIS is playing a major role along this line. We also need to educate investors and prospective investors. Financial literacy will build investors confidence. It is heart-warming that the regulators; SEC, NSE, as well as CIS are currently putting in a lot of efforts along this line,” Ajadi said.

    He added that the CIS’s annual national workshop provides platform for national development as it brings together key players in both the public and private sectors of the Nigerian economy to engage, and generate ideas which will serve as useful input to the national budget and enhance the quality of the policy making process.

    “Our experience at the three national workshops held so far has proven that we are on the right track. Increasingly, we are getting the attention of the key drivers of the public and private sectors in the economy who are eager to contribute in all ways possible to making future workshop more successful. We are aware that the capital market is a major segment that drives national economy through mobilization of savings and creation of investment opportunities. On an on-going basis, we need to continually highlight the critical link between the capital market and other key sectors of the economy,” Ajadi said.

    According to him, there is need to keep mobilising all stakeholders to participate actively with everybody coming together once in a year to deliberate, brain storm and share ideas not only on critical issues affecting the capital market, but also the Nigerian economy as a whole.

  • Private trading floor will boost stockbroking practice, says CIS

    • -Lauds GTI’s pioneering floor

    The Chartered Institute of Stockbrokers (CIS) has described the emergence of the first private trading floor as a milestone that will deepen the practice of stockbroking and usher in a new era of private stockbroking profession.

    CIS, a self regulatory organisation chartered by Act 105 of 1992, is the regulatory body for the practice of stockbroking in Nigeria. The council of the CIS last week visited the 150-seat multi-purpose private trading floor built by GTI Securities in Marina, Lagos.

    President, Chartered Institute of Stockbrokers (CIS), Mr. Ariyo Olushekun led other council members including the 1st vice president, Mr. Emmanuel Ohanwusi; 2nd vice president, Mr. Oluwaseyi Abe and acting registrar and chief executive, Mr. Adedeji Ajadi and other officials of the institute on the facility visit.

    Olushekun said the coming of the first private trading floor will deepen the practice of stockbroking as it will allow stockbrokers to engage in private practice as qualified professionals in their own right as lawyers, medical doctors, accountants and other professionals as against the current situation where stockbrokers can only work under a stockbroking firm.

    According to him, the possibility of brokers and dealers being able to trade directly through private trading floor such as GTI’s will enhance the attractiveness of the institute certificate and create more opportunities for brokers and investors and the economy generally.

    He advised the management of GTI Securities to expand the trading horizon of the floor by adding other platforms such as the commodities exchange and the debt securities and bonds exchange.

    “What you have here is a mini stock exchange, some stock exchanges in West Africa and other parts of the world don’t have a floor as robust as this. This is very impressive; I will like to commend your effort. I urge other colleagues to find time to visit this floor and see what you have done and see how they also want to contribute to stockbroking and market development,” Olushekun, who is also the managing director of Capital Assets Limited, said.

    In his remarks, Ohanwusi described GTI as the biblical Moses that will lead stockbrokers to the promised land noting that such opportunity for private trading and practice is what the stockbroking community has been yearning for.

    He said GTI has bridged the timeline between aspiration and reality with the state-of-the-art trading floor pointing out that while private stockbroking was thought of as a future concept, it has now come closer as a possibility.

    Abe said GTI has made landmark contribution to bridging infrastructural deficiencies plaguing the country and particularly the stockbroking profession.

    According to him, the private trading floor is a great initiative that will bring the market closer to the investors.

    Managing director, GTI Securities Limited, Mr. Tunde Oyekunle, reiterated that the driving motives for the firm have always been the development of the Nigerian market and the ethics and ideals of stockbroking.

    Group managing director, GTI Capital, Mr. Abubakar Lawal, said GTI is committed to the realization of the capital market to its pride of place as the catalyst for the nation and one that should determine the socio-political, economic and financial direction of the nation.

     

  • ‘We can’t shy away from Islamic finance’

    ‘We can’t shy away from Islamic finance’

    Islamic finance is an alternative source of funding. But because of the country’s secularity, the issue is being looked at from the religion prism. Chartered Institute of Stockbrokers (CIS) President Ariyo Olushekun argues that religion should not be allowed to becloud the issue. Islamic finance, he tells Capital Market Editor TAOFIK SALAKO, in this interview, has “bright prospects”.

    What is your assessment of the capital market vis-à-vis the economy?

    The market is in good shape. The recovery of the market is stabilising, we can say that the market has recovered from what happened in 2008 and now it is stabilising. The resilience is showing, there has been a lot of profit-taking in the last few weeks, but the impact of this has not been as bad as you would have expected if the market is not strong. From about 40,000 index, we are somewhere around 38,000 points now, given the level of gain we had witnessed and the lack of confidence we have had in the past, that is not a huge drop.

    The signal we are getting is that the market could move back as more funds come in to the market. Particularly, we are seeing a lot of local investors. Right now; I think the ratio is 50:50, foreign to local and among the domestic investors, we are seeing more institutional investors. So, more and more investors are returning to the market and they are taking positions.

    In terms of capital issues, we are beginning to see more now. The companies are beginning to build more confidence that they will be able to raise whatever amount they want from the capital market. So, they are also returning. And the market is responding, it’s showing capability to provide funds for those companies which need funds. So, I think the market is in good stead, we have gone through the bad time, but we have been able to put reform in place; every stakeholder in the market has made significant efforts to bring the market back on the right track, what we are seeing now is the result of those efforts that have been made in the past.

    If the market is fast recovering, why have we not seen the primary market being active, where are the public offers?

    The primary market is building up day-by- day, don’t forget the cost of raising funds is relatively more and the process is long, so companies will have to be very sure that they have high level of confidence of success before they can commence the public offer process. But in recent times, you can see an increase in the number of capital issues generally. So, that aspect of the market is also recovering slowly.

    How do we ensure sustainable development of the market?

    The reform will have to continue, we need to do everything we can to sustain and even build on the current level of investor confidence. We need to embark on capacity building on the part of all stakeholders- operators, regulators, investors, everybody that has a role to play in the market. We need to enhance their knowledge of the market. That is where the Institute has been doing a lot of work, trying to organise courses for its members so that their knowledge is enhanced.

    We keep organising training and retraining programmes. In addition, the institute has been organising workshops and annual conferences on the economy, dealing with recent issues. On the part of the Securities and Exchange Commission (SEC) itself, it recently inaugurated Master Plan Committees to develop a master plan for the different segments of the market- one, for the market in general; two, for the new product, non-interest product, so that we can be able to bring in that segment of the population that abhor usury and kind of fixed-returns. SEC also set up a capital market literacy master plan with the objective of developing a framework for educating all stakeholders of the market.

    On the part of the Nigerian Stock Exchange (NSE), it has started a new trading platform. it has been training its dealing members and has introduced many new products. All these will help credible price discovery and trading in the market. So, all the stakeholders need to play their roles for this to continue. However, I think the government will need to, as much as possible, bring down the interest rate.

    If interest rates are low, and they should be low otherwise they put so much pressure and impede the progress of the real sector. If interest rates are reasonably low, it makes it easy for people to come to the capital market for their investment activities. But if interest rates are unreasonably high, you will see people becoming risk-averse and they just place their funds in the money market to get fixed returns.

    Besides interest rate, are there other fiscal, or legislative incentives for long-term market growth?

    It is important for government to have incentives in place to encourage companies to access the market. Task incentives are very important to encourage participation. The government is on the right track by granting tax waivers on the contract stamp. But there is much more to be done; withholding tax will need to be removed from dividend. Companies that are quoted should also be made to pay less tax, you may reduce corporate tax from 30 per cent to 20 per cent for quoted companies, they should be more encouraged. We also want to see companies in major sectors of the economy being listed in the market. Now, we have different platforms on which they can be listed, we have the Nigerian Stock Exchange, we have NASD, we have the FMDQ, and the Abuja Securities and Commodities Exchange. So, the options are many, what government has to do in that area is that for the companies being privatised there should be a clause in the agreement that will compel them to get listed within a short period; two to three years. A minimum percentage of their issued shares should be in the hand of the public, 10 to 20 per cent, so that everybody has an opportunity to own shares and partake in the companies.

    For the telecommunications companies, their licenses will soon be due for renewal. This presents an opportunity for government to make sure they also get listed; they should also make available some 10 to 20 per cent of their shares available to the general public. They are making a lot of money from Nigerians; there is nothing wrong in Nigerians also being able to partake in such profit. The oil companies, which are the country’s mainstay, should be encouraged to get listed. That way you get more people and investments into the market.

    What is your view on the consolidation of the stockbroking industry?

    Consolidation is a business decision; you don’t force people to take such decision, it’s not natural; it’s something that should come up as a matter of course. Nigeria is a vast country; you have people in the hinterland, people in different levels, living in different parts of the country. If you are going to grow the number of investors, we need operators that will be able to reach out to these people. Right now, the number of investors is about five million; there five million include multiple accounts by some investors that, for instance, have three to five accounts. If you remove these multiple accounts, we may be having like four million investors or thereabout. Five million over a population of 170 million is one over 34; America has a population of 300 million and has over 100 million investors that are playing in her market, that is one-third; one over three as against one over 34 that we are currently on. So, if that is the case and we have a plan to move that to about 40 to 50 million from five million, which means we want at least a quarter of our population to participate in the market, it’s not something that you will leave for the mega firms. People must be allowed to operate at different levels. The big firms may not be interested in going to market somebody in Ode-Omu, Nguru and all that, they may not want to go to the hinterlands. We need brokers who must operate at that level, who will be able to go to all those places. What you can have is a tier structure; you have people operating at different level, carry different risks and then, they are able to play their part. Every N5,000, every N10,000 that Mr Owolabi has in Ikere-Ekiti; that Alhaji Adamu has in Gusau; that Mr Chukwuka has in Onitsha, we want every bit of this money to come into the market. If you want this to happen, then you leave people to operate at different levels. Going all out to say we must reduce number of operators is not the right thing to do. What we need to do is to delineate areas in which everybody can operate so that you have people operating at different levels and playing different roles; all of them working towards one goal-developing the market.

    What about the inkling on new capital base for operators?

    Well, we have been hearing that, we don’t know exactly what is going to happen. But it’s very important that share capital should not be a one-size-fits-all. Share capital should be a function of the risks that you are taking. It shouldn’t even be a matter of coming up with a figure, what needs to happen is to lay down certain things that need to be in place, then let those things translate into particular amount. As a result of this, then one will know the share capital one needs to operate the way one wants to operate.

    But if you have a figure now, then you are going to be chasing a moving target because by the time inflation comes in or foreign exchange rate goes up, the amount you are mentioning as share capital now, will become small in some years time and then you will need to raise share capital again. No! what you need to put in place are the things that need to be provided for as an operator to function at a certain level and then you derive your share capital from that; based on the risks you want to carry and the infrastructure you need to have. This will last forever unlike when you come up with a particular amount now and after some years, the amount becomes small.

    We must also note that most operators in the capital market, especially the stockbrokers, are intermediaries, they do not carry as much risks as banks and insurance companies carry. Banks carry risks because they have taken deposits from their customers and lent these deposits to other people, so if customers come for their money, they need to at least have a proportion of what they have lent in-house so that they are able to pay customers when they come for their money; that’s the way to maintain confidence. Insurance companies on the other hand have taken premium from people against promises that if something happened, just make your claim, we will indemnify you. So, they also need to have some money, they need to have adequate funds to be able to meet those claims as they are presented in order to also retain confidence.

    When people invest in the market, they only pass their money through brokers; if it is in the primary market, to the company raising the money, the money does not stay with the broker; if it is in the secondary market, they are passing the money from the buyer to the seller through brokers. So, the broker is not giving any promise like banks or insurance companies do. We should not be raising minimum share capital just because others within the sector have done that. No! We have to look at what risk everybody is carrying. Would you ask insurance brokers to raise their share capital just because insurance companies have raised their capital? Or would we have estate valuers or estate agents to raise capital? Even if you are buying a house worth N1 billion or more, you are only passing the money through the estate agent; he doesn’t require that kind of money to do that kind of business. The point is that as intermediaries-stockbrokers, issuing houses, they do not require so much financial capital.

    There are two types of capital that are required and very crucial- the integrity capital and the intellectual capital. Those are the things that will sell this market; those are the things we are selling. Really, it is dangerous for brokers to have excessive, huge share capital. If the brokers or issuing houses are excessively capitalised, the investors in those firms also want returns. Now, the stockbroking firm is not going to be placing its money with the bank, it is not going to be importing rice or stock fish, it is not going to invest in properties because even the market regulations do not encourage that, so, it will also have to invest its own money in the market. When these firms are investing heavily in the market, it means they are competing with investors, so the temptation to do their transactions at more favourable terms than transactions of their clients will become higher. So, really, it is good to be adequately capitalised, but it is not good to be excessively capitalised. And what is excessive capital? Capital that is beyond your need; capital that is beyond the risk you are carrying.

    Is it really necessary to demutualise the Exchange?

    Demutualisation of the Exchange is not bad; it is going to bring about efficiency, it makes the Exchange to be more productive, more efficient. It provides opportunity for owners of the Exchange that is, dealing members, to be able to generate some incomes from their investments. We have invested for a long time. So, on its own, it is not bad, but it has to be done properly. It should be done in a fair and transparent way. Every stakeholder that is involved should feel comfortable with the way it is being done.

    What will amount to being fair in your own view?

    If you are going to demutualise the Exchange, some people own the Exchange, they must play major roles, they must be the deciders, it is not for some people or regulatory authorities to come and decide things for them. Everything that needs to be done, they must do it willingly. SEC as the overall regulatory authority in the market needs to set guidelines and those guidelines should not be related to a particular exchange, they should be guidelines that can serve for the particular exchange you want to demutualise now and they should be good for any future demutualisation. So, it shouldn’t be something you are just tailoring to serve an end. Then, the Exchange on its own must consult with its owner; it is not something for the council or management to decide on. They are in the process, however, we need to emphasise this consultation, we need to encourage them to do that to the fullest.

    In recent times, we have seen many companies opting for voluntary delisting, what could be responsible for this?

    We need to do things to encourage listed companies to remain listed because it doesn’t make sense if you are marketing to get more company to be listed and the listed ones are exiting the market. It should be attractive to those already there. If those who are in are leaving, it does not attract those who are outside. That is without prejudice to the right of the companies to delist, if they want to. I’m saying we shouldn’t make it attractive to them. We should find out why they are leaving. They are not many, but even if it is one, you need to find out why they are leaving so that we can see how to satisfy them. However, where I am not comfortable is in the area of companies not only delisting but also paying off Nigerian investors. You cannot say because you want to enhance the profitability of the company and Nigerians, from whom you are going to make the profit, should leave. No, it is not right, it is not fair. You rely on patronage of Nigerians to make the expansion plan work, to make the company more profitable and you are saying those people that are so critical to future profitability of the company should exit the company, it is not fair, it is an insult on this country and everything should be done to reject it. If you want to delist, there is a difference between delisting and asking Nigerians to exit. It is never done anywhere, in any country; that you now ask the indigenes of that country to leave the company just because you are about to invest more money and the company is likely to do better in future; that is even the more reason why they should stay.

    Against the background of recent efforts to develop alternative finance, what are the prospects of Islamic finance in the Nigerian market?

    The prospects are very bright because as we speak we have a very significant proportion of our population who strongly believe that because of the nature of the capital market and the dictates of their religion, they cannot invest in the market, so we need to develop products that will be attractive to them; that we can use to channel their funds into the market and it is not limited to any religion. The one that is popular is Islamic finance. Some Christians also do not like certain things, some do not like alcohol, some cannot put their money in companies producing arms and ammunitions some cannot put their money into companies that are gambling and all that. So, all these funds are outside the market, we need to bring them in, call them any name. If Sango worshippers need certain product, develop it, call it Sango worshippers’ product and use it to bring their money into the market. The same thing applies to everybody. I don’t think it is limited to any religion. What we want is to improve the depth of the market by introducing products and instruments that will channel funds, savings into this market so that those who have projects will be able to raise limitless amount of money.

    What is CIS doing to broaden human capital capacity in the area of this alternative finance?

    Well, we keep developing courses, we keep developing training programmes and we keep reviewing the syllabus for our examinations. We introduce new things into this syllabus and programme from time to time, this is not going to be different. It is a continuous thing for us, we have done courses in this area in the past, there are aspects of our syllabus that deal with this area. Our members are right now adequately equipped.

  • Unhidden treasure in stock marketing

    Unhidden treasure in stock marketing

    The unemployed and self-employed can make money, marketing securities and investment services and products in the capital market, writes Taofik Salako.

    The capital market is still largely unexplored. While its emerging market status comes with many challenges, its vast potential presents immense opportunities for the informed. Such huge opportunities exist in stock brokerage and marketing where millions of unemployed and self-employed Nigerians, as well as anyone desirous of having additional income can be gainfully engaged.

    With a growing population of 170 million, the country’s large size and vast geographical space have their advantages and disadvantages. Unemployment is a major problem of an underdeveloped economy, but the aggregation of small capital also can directly and indirectly solve the problem.

    President, Chartered Institute of Stockbrokers (CIS), Mr Ariyo Olushekun, describes the opportunities in the market. According to him, at theh moment, there are about five million investors in the capital market including those investors with multiple accounts. When multiple accounts are taken into consideration, the number of investors may be approximately about four million.

    “Five million over a population of 170 million is one over 34, America has a population of 300 million and has over 100 million investors that are playing in their market, that is one-third; one over three as against one over 34 that we are currently on. So, if we are going to grow to let’s say 40 to 50 million investors, which means we want a quarter of our population to participate in the market, it’s not something you leave for the mega firms,” Olushekun said. According to him, the market needs people who will be able to market securities and investment services to people in the hinterland.

    “Every N5,000, every N10,000 that Mr Owolabi has in Ikere Ekiti; that Alhaji Adamu has in Gusau; that Mr Chukwuka has in Onitsha, we want every bit of this money to come to the market,” Olushekun said.

    This is where the job opportunities come for self-driven persons who may want to act as sub-brokers. There are several intermediaries in the capital market. While the investors, stockbroker or dealer, merchant banker, regulators and issuers are the major operators, several other intermediaries play adjoin roles to ensure the market remain robust and resilient. These intermediaries help in the mobilisation of resources from investors to the needed avenues as well as help in broadening the depth and versatility of the market.

     

    Becoming a broker

    Primarily, brokers are regarded as the primary intermediaries in the capital market. The main function of the stockbroker is to deal on behalf of his clients-the investors, because investors cannot trade on the stock market. A broker must necessarily be a member of a stock exchange. The requirements to become a stockbroker or dealer at the Exchange are quite enormous. While the basic educational and personal requirements may be similar to other professions in the financial services industry and elsewhere, the professional and training requirements for a stockbroker are quite extensive.

    First, a stockbroker will have to study for and pass the examinations of the Chartered Institute of Stockbrokers (CIS), the statutory self-regulatory organisation (SRO) saddled with the practice of stockbroking. Relevant first degree and experience may exempt a candidate from some papers. It is upon successful completion of these examinations that one becomes an Associate of the CIS or Associate Chartered Stockbroker (ACS) and technically qualifies to practice as a stockbroker.

    Then comes the practical training, the ACS will have to enroll for training with a stockbroking firm, which will overtime recommend him for the institutional training at the Stock Exchange. The training-both theoretical and practical, at the Stock Exchange is the final stage to become a practicing stockbroker, duly licenced to trade on the Stock Exchange with designated code and details.

    The induction at the stock exchange, after the first induction as ACS, marks the transition to practical professional life. Given the fiduciary responsibilities and degree of trust as custodian of people’s monies, a stockbroker also needs to provide several indemnities including contribution to investors’ protection fund and provision of fidelity bond. The broker is under obligation to continuously observe the rules and regulations of the stock exchange and the institute of brokers as well as that of Securities and Exchange Commission, each of which can impose sanctions on the broker including withdrawal of the broker’s licence upon proven and serious infringements. Even with these, a broker’s life is that of continuing education as there are required mandatory annual continuing education scores that the broker must attained to retain his professional ranking.

    This applies to several other professions too. Given these requirements; the number of stockbrokers, the attractiveness of small trades vis-à-vis the time value of professional energy, the concentration of brokers-otherwise known as gentle men of the city, in the main economic centre and base for capital market and the size and demographics of national population dictate the need for additional service providers that can help the stockbrokers to effectively perform their functions.

    These are the reasons why sub-brokers have continued to thrive in several markets. This is also because the daily requirements for the mastery of the price discovery at the stock exchange-which sets out a super trading stockbroker from others, eat deep into the time and resources of a stockbroker and may not allow him to devote enough attention to small investors.

    Besides, the capital market recession, which swept away and inhibited the viability of several stockbroking firms and the generally high unemployment rate have also turned many chartered stockbrokers into sub-brokers since they do not have stockbroking firms to practice and trade under as stockbrokers.

     

    Requirements of a sub-broker

    A sub-broker functions under the broker primarily to market securities and solicit broking business. In most jurisdictions, they have very minimal professional and regulatory requirements. They are not required to be a member of a stock exchange. They are not required to be an associate of the institute of stockbrokers, although some levels of capital market-focused studies are required to perform effectively.

    Each stockbroker is expected to screen, train, record and account for sub-brokers under it. There is no limit to the number of sub-brokers that a stockbroking firm can engage to help as its agents-primarily to interface with investors. The sub-broker helps the broker to market securities, collect investor’s mandate and documents and foster the agent-principal relationship between the broker and investor by facilitating securities trading and rendering of returns to the investor.

     

    Incomes of a sub-broker

    The sub-broker makes his income from sharing in the stockbroking commission-the stockbroker’s fee, under a pre-arranged mutually exclusive contract between the broker and sub-broker. Besides the stockbroking commission, a sub-broker may share part of other incomes from other services relating to his clients including charges on share registration and management services such as dematerialisation and dividend collection and retrieval.

    A broker may have a standardised agreement and income-sharing documents for all its sub-broker, but each agreement with every sub-broker stands on its own. Because the income profile of the sub-broker, just like the broker and other trade-based professionals, depends on the quantum of transactions, most sub-brokers are usually aggressively persuasive and goal-driven.

    Knowing fully that an average City-based individual can easily walk into a stockbroking firm to conduct his transaction, sub-brokers cover wider areas in the hinterlands and the suburbs of the cities in search of clients in addition to competition with brokers for clients in the cities. To several investors, the ‘broker’ they know is the ‘sub-broker’.

    This was at play, and still on to some extent, during the capital market boom, when stock marketing became the driving force for multi-billion Naira public offers. Such new opportunities exist in the marketing of evolving products like derivatives, foreign collective investment schemes and infrastructure funds amongst others.

    Regulating the sub-brokers

    As sub-brokers become important intermediaries in the capital market process, the imperatives for the regulation of their operations have also increased. Besides being accountable to the broker-principal, SEC had prescribed minimum capital requirement for a corporate body seeking to act a sub-broker.

    SEC is reviewing the functions and minimum capital requirements for capital market operators, which will further define the scope and requirements for sub-brokers or broker’s agent in whatever capacity.

    Besides, the Nigerian Stock Exchange (NSE) is previewing a new rule, which precludes a broker from sharing his commission with anyone not under the regulation of the NSE. This will effectively bring other intermediaries such as sub-brokers directly under the purview of the rules and regulation of the stock exchange.

    The formalities and appellation of a sub-broker may change, but the function of securities marketing is ever expanding, especially as the market evolves with new products and services. Understanding the stock market processes and products can be a way to earn a living.

  • Unhidden treasure in stock marketing

    The unemployed and self-employed can make money, marketing securities and investment services and products in the capital market, writes Taofik Salako.

     

    The capital market is still largely unexplored. While its emerging market status comes with many challenges, its vast potential presents immense opportunities for the informed. Such huge opportunities exist in stock brokerage and marketing where millions of unemployed and self-employed Nigerians, as well as anyone desirous of having additional income can be gainfully engaged.

    With a growing population of 170 million, the country’s large size and vast geographical space have their advantages and disadvantages. Unemployment is a major problem of an underdeveloped economy, but the aggregation of small capital also can directly and indirectly solve the problem.

    President, Chartered Institute of Stockbrokers (CIS), Mr Ariyo Olushekun, describes the opportunities in the market. According to him, at theh moment, there are about five million investors in the capital market including those investors with multiple accounts. When multiple accounts are taken into consideration, the number of investors may be approximately about four million.

    “Five million over a population of 170 million is one over 34, America has a population of 300 million and has over 100 million investors that are playing in their market, that is one-third; one over three as against one over 34 that we are currently on. So, if we are going to grow to let’s say 40 to 50 million investors, which means we want a quarter of our population to participate in the market, it’s not something you leave for the mega firms,” Olushekun said. According to him, the market needs people who will be able to market securities and investment services to people in the hinterland.

    “Every N5,000, every N10,000 that Mr Owolabi has in Ikere Ekiti; that Alhaji Adamu has in Gusau; that Mr Chukwuka has in Onitsha, we want every bit of this money to come to the market,” Olushekun said.

    This is where the job opportunities come for self-driven persons who may want to act as sub-brokers. There are several intermediaries in the capital market. While the investors, stockbroker or dealer, merchant banker, regulators and issuers are the major operators, several other intermediaries play adjoin roles to ensure the market remain robust and resilient. These intermediaries help in the mobilisation of resources from investors to the needed avenues as well as help in broadening the depth and versatility of the market.

     

    Becoming a broker

    Primarily, brokers are regarded as the primary intermediaries in the capital market. The main function of the stockbroker is to deal on behalf of his clients-the investors, because investors cannot trade on the stock market. A broker must necessarily be a member of a stock exchange. The requirements to become a stockbroker or dealer at the Exchange are quite enormous. While the basic educational and personal requirements may be similar to other professions in the financial services industry and elsewhere, the professional and training requirements for a stockbroker are quite extensive.

    First, a stockbroker will have to study for and pass the examinations of the Chartered Institute of Stockbrokers (CIS), the statutory self-regulatory organisation (SRO) saddled with the practice of stockbroking. Relevant first degree and experience may exempt a candidate from some papers. It is upon successful completion of these examinations that one becomes an Associate of the CIS or Associate Chartered Stockbroker (ACS) and technically qualifies to practice as a stockbroker.

    Then comes the practical training, the ACS will have to enroll for training with a stockbroking firm, which will overtime recommend him for the institutional training at the Stock Exchange. The training-both theoretical and practical, at the Stock Exchange is the final stage to become a practicing stockbroker, duly licenced to trade on the Stock Exchange with designated code and details.

    The induction at the stock exchange, after the first induction as ACS, marks the transition to practical professional life. Given the fiduciary responsibilities and degree of trust as custodian of people’s monies, a stockbroker also needs to provide several indemnities including contribution to investors’ protection fund and provision of fidelity bond. The broker is under obligation to continuously observe the rules and regulations of the stock exchange and the institute of brokers as well as that of Securities and Exchange Commission, each of which can impose sanctions on the broker including withdrawal of the broker’s licence upon proven and serious infringements. Even with these, a broker’s life is that of continuing education as there are required mandatory annual continuing education scores that the broker must attained to retain his professional ranking.

    This applies to several other professions too. Given these requirements; the number of stockbrokers, the attractiveness of small trades vis-à-vis the time value of professional energy, the concentration of brokers-otherwise known as gentle men of the city, in the main economic centre and base for capital market and the size and demographics of national population dictate the need for additional service providers that can help the stockbrokers to effectively perform their functions.

    These are the reasons why sub-brokers have continued to thrive in several markets. This is also because the daily requirements for the mastery of the price discovery at the stock exchange-which sets out a super trading stockbroker from others, eat deep into the time and resources of a stockbroker and may not allow him to devote enough attention to small investors.

    Besides, the capital market recession, which swept away and inhibited the viability of several stockbroking firms and the generally high unemployment rate have also turned many chartered stockbrokers into sub-brokers since they do not have stockbroking firms to practice and trade under as stockbrokers.

     

    Requirements of a sub-broker

    A sub-broker functions under the broker primarily to market securities and solicit broking business. In most jurisdictions, they have very minimal professional and regulatory requirements. They are not required to be a member of a stock exchange. They are not required to be an associate of the institute of stockbrokers, although some levels of capital market-focused studies are required to perform effectively.

    Each stockbroker is expected to screen, train, record and account for sub-brokers under it. There is no limit to the number of sub-brokers that a stockbroking firm can engage to help as its agents-primarily to interface with investors. The sub-broker helps the broker to market securities, collect investor’s mandate and documents and foster the agent-principal relationship between the broker and investor by facilitating securities trading and rendering of returns to the investor.

     

    Incomes of a sub-broker

    The sub-broker makes his income from sharing in the stockbroking commission-the stockbroker’s fee, under a pre-arranged mutually exclusive contract between the broker and sub-broker. Besides the stockbroking commission, a sub-broker may share part of other incomes from other services relating to his clients including charges on share registration and management services such as dematerialisation and dividend collection and retrieval.

    A broker may have a standardised agreement and income-sharing documents for all its sub-broker, but each agreement with every sub-broker stands on its own. Because the income profile of the sub-broker, just like the broker and other trade-based professionals, depends on the quantum of transactions, most sub-brokers are usually aggressively persuasive and goal-driven.

    Knowing fully that an average City-based individual can easily walk into a stockbroking firm to conduct his transaction, sub-brokers cover wider areas in the hinterlands and the suburbs of the cities in search of clients in addition to competition with brokers for clients in the cities. To several investors, the ‘broker’ they know is the ‘sub-broker’.

    This was at play, and still on to some extent, during the capital market boom, when stock marketing became the driving force for multi-billion Naira public offers. Such new opportunities exist in the marketing of evolving products like derivatives, foreign collective investment schemes and infrastructure funds amongst others.

     

    Regulating the sub-brokers

    As sub-brokers become important intermediaries in the capital market process, the imperatives for the regulation of their operations have also increased. Besides being accountable to the broker-principal, SEC had prescribed minimum capital requirement for a corporate body seeking to act a sub-broker.

    SEC is reviewing the functions and minimum capital requirements for capital market operators, which will further define the scope and requirements for sub-brokers or broker’s agent in whatever capacity.

    Besides, the Nigerian Stock Exchange (NSE) is previewing a new rule, which precludes a broker from sharing his commission with anyone not under the regulation of the NSE. This will effectively bring other intermediaries such as sub-brokers directly under the purview of the rules and regulation of the stock exchange.

    The formalities and appellation of a sub-broker may change, but the function of securities marketing is ever expanding, especially as the market evolves with new products and services. Understanding the stock market processes and products can be a way to earn a living.

  • ‘Quoted companies should pay less taxes’

    Mr. Ariyo Olushekun, President and Chairman of Governing Council, Chartered Institute of Stockbrokers (CIS) is a well-rounded financial expert of nearly three decades. A fellow of the CIS and Institute of Chartered Accountants of Nigeria (ICAN), Olushekun is also the Managing Director of Capital Assets Limited, a leading investment banking firm he founded in 1998. He is currently on the board of NASD Plc, the newly inaugurated Over-the-Counter (OTC) trading Platform for unlisted securities as well as several committees of the Securities & Exchange Commission (SEC), Nigerian Stock Exchange (NSE) and ICAN. He had served on the national council of the NSE and was a member of the Business Support Group of the Nigerian Vision 20: 2020 as well as the Capital Market Resuscitation Committee set up by the Federal Government. An Authorised Dealing Clerk of the NSE and registered by the SEC, Olushekun is an alumnus of the University of Lagos, Yaba College of Technology and the Advance Management Programme (AMP) of IESE Business School, Barcelona, Spain. In this interview with Capital Market Editor, Taofik Salako, Olushekun speaks on the Nigerian economy and budding issues in the Nigerian financial services industry.

    What is your general overview of the Nigerian economy, how do you see the economy performing?

    I think the economy is not doing badly. I think it has prospects, if we are able to get the power sector right, it will rub off very well on all parts of the economy-more employment, improve productivity, more foreign exchange incomes and financial stability. Things will be generally okay. But the banks need to be more courageous, they need to be less risk averse. The way it is now, the banks are not taking risks at all, that is an area that requires a change. But in terms of the economy, we may not be moving as fast as we should but I think we are moving in the right direction.

    What about the market vis-à-vis the economy?

    The market is in good shape. The recovery of the market is stabilizing, we can say that the market has recovered from what happened in 2008 and now it is stabilizing. The resilience is showing, there has being a lot of profit-taking in the last few weeks, but the impact of this has not been as bad as you should have expected if the market is not strong. From about 40, 000 index, we are somewhere about 38,000 points now, given the level of gain we had witnessed and the lack of confidence we have had in the past, that is not a huge drop. The signal we are getting is that the market could move back as more funds come in to the market. Particularly, we are seeing a lot of local investors. Right now; I think the ratio is 50: 50, foreign to local and among the domestic investors we are seeing more institutional investors. So, more and more investors are returning to the market and they are taking positions.

    In terms of capital issues, we are beginning to see more now. The companies are beginning to build more confidence that they will be able to raise whatever amount they want from capital market. So, they are also returning. And the market is responding, it’s showing capability to provide funds for those companies which need funds. So, I think the market is in good stead, we have gone through the bad time but we have been able to put reform in place; every stakeholder in the market has made significant efforts to bring the market back on the right track, what we are seeing now is the result of those efforts that have been made in the past.

    If the market is fast recovering, why have we not seen the primary market being active, where are the public offers?

    The primary market is building up day by day, don’t forget the cost of raising funds is relatively more and the process is long, so companies will have to be very sure that they have high level of confidence of success before they can commence the public offer process. But in recent times, you can see an increase in the number of capital issues generally. So, that aspect of the market is also recovering slowly.

    How do we ensure sustainable development of the market?

    The reform will have to continue, we need to do everything we can to sustain and even build on the current level of investors’ confidence. We need to embark on capacity building on the part of all stakeholders- operators, regulators, investors, everybody that has a role to play in the market. We need to enhance their knowledge of the market. That is where the Institute has been doing a lot of work trying to organize courses for its members so that their knowledge is enhanced. We keep organizing training and retraining programmes. In addition, the institute has been organizing workshop and annual conference on the economy, dealing with recent issues. On the part of Securities and Exchange Commission (SEC) itself, it recently inaugurated master plan committees to develop a master plan for the different segments of the market- one, for the market in general; two, for the new product, non-interest product, so that we can be able to bring in the part of Nigerian population who abhor usury and kinds of fixed-returns. SEC also set up a capital market literacy master plan with the objective of developing a framework for educating all stakeholders of the market.

    On the part of the Nigerian Stock Exchange (NSE), it has started a new trading platform, it has been training its dealing members and has introduced many new products. All these will help credible price discovery and trading in the market. So, all the stakeholders need to play their roles for this to continue. However, I think the government will need to as much as possible bring down the interest rate. If interest rates are low, and they should be low otherwise they put so much pressure and impede the progress of the real sector. If interest rates are reasonably low, it makes it easy for people to come to the capital market for their investment activities. But if interest rates are unreasonably high, you will see people becoming risk-averse and they just place their funds in the money market to get fixed returns.

    Besides the issue of interest rate, are there other fiscal or legislative incentives for long-term market growth?

    It is important for government to have incentives in place to encourage companies to access the market. Task incentives are very important to encourage participation. The government is already on the right track by granting tax waivers on the contract stamp. But there is much more to be done; withholding tax will need to be removed from dividend. Companies that are quoted should also be made to pay less tax, you may reduce corporate tax from 30 per cent to 20 per cent for quoted companies, they should be more encouraged. We also want to see companies in major sectors of the economy being listed in the market. Now, we have different platforms on which they can be listed, we have the Nigerian Stock Exchange, we have NASD, we have the FMDQ, and the Abuja Securities and Commodities Exchange. So, the options are many, what government has to do in that area is that for the companies being privatized there should be a clause in the agreement that will compel them to get listed within a short period; two to three years. A minimum percentage of their issued shares should be in the hand of the general public, 10 to 20 per cent, so that everybody has an opportunity to own shares and partake in the companies.

    For the telecommunication companies, their licenses will soon be due for renewal. This presents an opportunity for government to make sure they also get listed; they should also make available some 10 to 20 percent of their shares available to the general public. They are making a lot of money from Nigerians; there is nothing wrong in Nigerians also being able to partake in such profit. The oil companies, which are the country’s mainstay, should be encouraged to get listed. That way you get more people and investments into the market.

    What is your view on the consolidation of the stockbroking industry?

    Consolidation is a business decision; you don’t force people to take such decision, it’s not natural; it’s something that should come up as a matter of course. Nigeria is a vast country; you have people in the hinterland, people in different levels, living in different parts of the country. If you are going to grow the number of investors, we need operators that will be able to reach out to these people. Right now, the number of investors is about five million and that five million already include multiple accounts by some investors that, for instance, have three to five accounts. If you remove these multiple accounts, we may be having like four million investors or thereabout. Five million over a population of 170 million is one over 34; America has a population of 300 million and has over 100 million investors that are playing in her market, that is one-third; one over three as against one over 34 that we are currently on. So, if that is the case and we have a plan to move that to about 40 to 50 million from five million, which means we want at least a quarter of our population to participate in the market, it’s not something that you will leave for the mega firms. People must be allowed to operate at different levels. The big firms may not be interested in going to market somebody in Ode-Omu, Nguru and all that, they may not want to go to the hinterlands. We need brokers who must operate at that level, who will be able to go to all those places. What you can have is a tier structure; you have people operating at different level, carry different risks and then, they are able to play their part. Every N5,000, every N10,000 that Mr Owolabi has in Ikere-Ekiti; that Alhaji Adamu has in Gusau; that Mr Chukwuka has in Onitsha, we want every bit of this money to come into the market. If you want this to happen, then you leave people to operate at different levels. Going all out to say we must reduce number of operators is not the right thing to do. What we need to do is to delineate areas in which everybody can operate so that you have people operating at different levels and playing different roles; all of them working towards one goal-developing the market.

    What about the inkling on new capital base for operators?

    Well, we have been hearing that, we don’t know exactly what is going to happen. But it’s very important that share capital should not be a one-size-fits-all. Share capital should be a function of the risks that you are taking. It shouldn’t even be a matter of coming up with a figure, what needs to happen is to lay down certain things that need to be in place, then let those things translate into particular amount. As a result of this, then one will know the share capital one needs to operate the way one wants to operate. But if you have a figure now, then you are going to be chasing a moving target because by the time inflation comes in or foreign exchange rate goes up the amount you are mentioning as share capital now will become small in some years time and then you will need to raise share capital again. No! what you need to put in place are the things that need to be provided for as an operator to function at a certain level and then you derive your share capital from that; based on the risks you want to carry and the infrastructure you need to have. This will last forever unlike when you come up with a particular amount now and after some years, the amount becomes small.

    We must also note that most operators in the capital market, especially the stockbrokers, are intermediaries, they do not carry as much risks as banks and insurance companies carry. Banks carry risks because they have taken deposits from their customers and lent these deposits to other people, so if customers come for their money, they need to at least have a proportion of what they have lent in-house so that they are able to pay customers when they come for their money; that’s the way to maintain confidence. Insurance companies on the other hand have taken premium from people against promises that if something happened, just make your claim, we will indemnify you. So, they also need to have some money, they need to have adequate funds to be able to meet those claims as they are presented in order to also retain confidence.

    When people invest in the market, they only pass their money through brokers; if it is in the primary market, to the company raising the money, the money does not stay with the broker; if it is in the secondary market, they are passing the money from the buyer to the seller through brokers. So, the broker is not giving any promise like banks or insurance companies do. We should not be raising minimum share capital just because others within the sector have done that. No! We have to look at what risk everybody is carrying. Would you ask insurance brokers to raise their share capital just because insurance companies have raised their capital? Or would we have estate valuers or estate agents to raise capital? Even if you are buying a house worth N1 billion or more, you are only passing the money through the estate agent; he doesn’t require that kind of money to do that kind of business. The point is that as intermediaries-stockbrokers, issuing houses, they do not require so much financial capital.

    There are two types of capital that are required and very crucial- the integrity capital and the intellectual capital. Those are the things that will sell this market; those are the things we are selling. Really, it is dangerous for brokers to have excessive, huge share capital. If the brokers or issuing houses are excessively capitalised, the investors in those firms also want returns. Now, the stockbroking firm is not going to be placing its money with the bank, it is not going to be importing rice or stock fish, it is not going to invest in properties because even the market regulations do not encourage that, so, it will also have to invest its own money in the market. When these firms are investing heavily in the market, it means they are competing with investors, so the temptation to do their transactions at more favourable terms than transactions of their clients will become higher. So, really, it is good to be adequately capitalized, but it is not good to be excessively capitalized. And what is excessive capital? Capital that is beyond your need; capital that is beyond the risk you are carrying.

    Is it really necessary to demutualise the Exchange?

    Demutualisation of the Exchange is not bad; it is going to bring about efficiency, it makes the exchange to be more productive, more efficient. It provides opportunity for owners of the Exchange that is, dealing members, to be able to generate some incomes from their investments. We have invested for a long time. So, on its own, it is not bad, but it has to be done properly. It should be done in a fair and transparent way. Every stakeholder that is involved should feel comfortable with the way it is being done.

    What will amount to being fair in your own view?

    If you are going to demutualise a company-the Exchange, some people own the Exchange, they must play major roles, they must be the deciders, it is not for some people or regulatory authorities to come and decide things for them. Everything that needs to be done, they must do it willingly. SEC as the overall regulatory authority in the market needs to set guidelines and those guidelines should not be related to a particular exchange, they should be guidelines that can serve for the particular exchange you want to demutualise now and they should be good for any future demutualization. So, it shouldn’t be something you are just tailoring to serve an end. Then, the Exchange on its own must consult with its owner; it is not something for the council or management should decide on. They are in the process, however, we need to emphasis this consultation, we need to encourage them to do that to the fullest.

    In recent times, we have seen many companies opting for voluntary delisting, what could be responsible for this?

    We need to do things to encourage listed companies to remain listed because it doesn’t make sense if you are marketing to get more company to be listed and the listed ones are exiting the market. It should be attractive to those already there. If those who are in are leaving, it does not attract those who are outside. That is without prejudice to the right of the companies to delist, if they want to. I’m saying we shouldn’t make it attractive to them. We should find out why they are leaving. They are not many, but even it is one, you need to find out why they are leaving so that we can see how to satisfy them. However, where I am not comfortable is in the area of companies not only delisting but also paying off Nigerian investors. You cannot say because you want to enhance the profitability of the company and Nigerians, from whom you are going to make the profit, should leave. No, it is not right, it is not fair. You rely on patronage of Nigerians to make the expansion plan work, to make the company more profitable and you are saying those people that are so critical to future profitability of the company should exit the company, it is not fair, it is an insult on this country and everything should be done to reject it. If you want to delist, there is a difference between delisting and asking Nigerians to exit. It is never done anywhere, in any country; that you now ask the indigenes of that country to leave the company just because you are about to invest more money and the company is likely to do better in future; that is even the more reason why they should stay.

    Against the background of recent efforts to develop alternative finance, what is the prospects of Islamic finance in the Nigerian market?

    The prospects is very bright because as we speak we have a very significant proportion of our population who strongly believe that because of the nature of the capital market and the dictates of their religion, they cannot invest in the market, so we need to develop products that will be attractive to them; that we can use to channel their funds into the market and it is not limited to any religion. The one that is popular is Islamic finance. Some Christians also do not like certain things, some do not like alcohol, some cannot put their money in companies producing arms and ammunitions, some cannot put their money into companies that are gambling and all that. So, all these funds are outside the market, we need to bring them in, call them any name. If Sango worshippers need certain product, develop it, call it Sango worshipers’ product and use it to bring their money into the market. The same thing applies to everybody. I don’t think it is limited to any religion. What we want is to improve the depth of the market by introducing products and instruments that will channel funds, savings into this market so that those who have projects will be able to raise limitless amount of money.

    What is CIS doing to broaden human capital capacity in the area of this alternative finance?

    Well, we keep developing courses, we keep developing training programmes and we keep reviewing the syllabus for our examinations. We introduce new things into this syllabus and programme from time to time, this is not going to be different. It is a continuous thing for us, we have done courses in this area in the past, there are aspects of our syllabus that deal with this area. Our members are right now adequately equipped.

  • BPE promises improved power by Sept.

    BPE promises improved power by Sept.

    The Bureau of Public Enterprises (BPE) has assured “drastic improvement” in power supply by September this year.

    It also said that power would be stable by the first and second quarter of next year.

    These disclosures by the BPE DG, Benjamin Dikki in Abuja at the Second annual national workshop of the Chartered Institute of StockBrokers (CIS), came hours after the Minister of Power, Prof. Chinedu Nebo said that a plethora of investments would be required to achieve the 40,000 megawatts target mentioned in the Vision 2020.

    The BPE boss said the improvement and stability of power would be possible after the final takeover of the PHCN successor firms by private investors in the power sector.

    He however, assured investors in the sector of the safety of their investments and increased rate of returns on their investments.

    Speaking on the workforce that would be engaged by the investors in the power sector, the minister said the federal government would not lay off the Power Holding Company of Nigeria (PHCN) workers but instead disengage them from public service employment so that they can migrate to the private sector.

    Nebo explained that the current PHCN workers would be retrained and would be part of the new energy market or be engaged in other critical sectors of the economy.

    On the pending severance benefits of the PHCN workers, the Minister stated that outstanding benefits to the workers would be paid to them by the end of July, as ”all bottlenecks to the current privatisation exercise were being resolved.”.

  • Stakeholders seek support for capital market practitioners’ bill

    Stakeholders seek support for capital market practitioners’ bill

    The Chartered Institute of Stockbrokers (CIS) and other stakeholders in the capital market have launched a broad consultation framework to drum up support for a new bill that seeks to broaden the scope of certification of the CIS through the creation of the Chartered Institute of Securities and Investment (CISI).

    The CISI bill, which is being sponsored by former Chairman of the Senate Committee on Capital Market, Senator Ganiyu Solomon, intends to replace the law that set up CIS and bring other capital market operators under the supervision of CISI.

    Sources familiar with this development said leading capital operators have been engaging in intense consultation and harmonisation of divergent views with the intent of achieving a common market position that will facilitate quick passage of the bill.

    While most operators, especially professional brokers, investment managers and other currently certified operators, saw the need to have a new regulatory framework that subjects all operators to certification by a market-focused institute, there were fears from some stakeholders that CISI may unduly favour stockbrokers, who are currently the most organised group in the market.

    The source said efforts were being made to persuade all stakeholders to look at the overall benefit of CISI to sustainable the growth and development of the capital market.

    “We are very optimistic the bill will sail through, it’s in the best interest of the market. You can’t have a market where anyone can stand up one morning and start doing a function, this is one of the reasons for the previous rot in the system, it’s not safe for the market and the economy to have uncertified people parading themselves as capital market operators or to have people creating all sorts of certification standards, without bordering whether they meet global competitive standards,” the source said.

    The source said after initial consultations, several stakeholders have seen reasons for the CISI bill but the consultation would continue until stakeholders have achieved what could be termed as general market position that is strong enough to ensure hitch-free passage of the bill.

    The source noted that while the CISI bill could pass the scrutiny of law-making on its merits and strong global argument in support of its necessity, major stakeholders adopted dialogue and consultation on the grey areas of the CISI bill in order to allay fears as well as preserve the cordiality of the market.

    Some custodians and financial analysts had faulted the CISI bill on the ground that they were not consulted in the preparation of the bill.

    They had expressed concerns that the new institute may be dominated by stockbrokers and it may not adequately cater for intricacies and challenges faced by the other trade groups.