SEC of Nigeria, Brokerage Scandal, Access Bank and more...

Dear Africa interested professionals:
                                                     Find below the verbatim text from the SEC about the Brokerage Scandal in Nigeria.  This is classic example of the grandiose speeches I mentioned in my last article that are more focused on self than transparency.  The SEC's response is largely defense and pacifying rather than providing clarity and answering questions.  Why did the media have to break a story more than four months after SEC knew about it?  Now, the SEC wants to respond and feel it is being proactive and transparent.  This issue will be buried before you can dig six feet.  It is Nigeria; nothing of this nature is new. People are talking as I write and the hook is gradually being removed from the mouth of the fish.  Victor Ogiemwonyi will not be sentenced to jail for any financial crime.  He has enough people that sit at the top of regulatory bodies to get him off the hook.  

This is why I continue to repeat; nobody involved in financial market and banking deals should sit at the top of any regulatory body anywhere in the world.  Decisions will be taken or avoided (behind the scenes) to ensure their interests  and those of their cronies and surrogates are protected.  

The current and last President of the Council of the Nigerian Stock Exchange (Aigboje Aig-Imoukhuede and Aliko Dangote respectively) own two (2) and four (4) listed companies on the same Exchange they oversee from the top.  The current and last Central Bank Governor (Godwin Emefiele and Sanusi Lamido Sanusi) were executive directors at listed commercial banks just before taking up their new appointments at the helm of the Central Bank of Nigeria.  The banking industry is in another round of crisis and the capital market is on life support as all bond yields are less than Nigeria's inflation and the stock market is in negative territory once again at -6% despite two new listings over the past two weeks.  Is their appointment the direct cause of this malaise? No! The signal to the marketplace from their appointment is bad and this is what the Nigerian capital market is suffering from!  How can someone be allowed to buy a bank (Intercontinental) that a company he owns (United Securities) borrowed N16B ($133m at the time)from and defaulted on the loan?  These are the kind of intangibles that make a market full of potential almost comatose and reluctance by investors to take the market as serious as they should.  

As long as people continue to use the system to serve their interest, instead of protecting the system from interests that undermine it, the Nigerian capital markets and banking industry will continue to flatter to deceive.  Everybody continues to keep quiet as long as they get their own piece of the dollar rain.  Those that have the power and influence to effect change for the GOOD OF ALL, better get to work; posterity will not be kind to them otherwise.       

Do you know which Nigerian bank holds the unpalatable record of achieving the most net income in the fourth quarter relative to the previous three quarters?  The answer is Intercontinental Bank that achieved 92% of its cumulative nine-month net income in the fourth quarter of its FY 2008 alone.  Do you know which bank is second?  Access Bank achieved 88% of net income for the previous nine months in the fourth quarter of its FY 2007 alone.  Which bank bought Intercontinental Bank? You guessed right; Access Bank bought Intercontinental in October of 2011.  No other Nigerian Bank has achieved this "phenomenal" feat that obviously defies logic.  Talk about weird coincidences...   

The former CEO of Intercontinental Bank: Erastus Akingbola is still pursuing the sale of Intercontinental to Access Bank through the Nigerian court system.  The Court of Appeal on November 8, 2016 reserved judgment and is still reserving judgment as I type.  Justice delayed may very well be justice denied especially in the current set up where the system is subject to certain people instead of everybody being subject to the system.  

S & P rates Nigeria B+ and Egypt B-.  Nigeria just issued a $1B Eurobond with a yield of 7.875% for 15 years.  Egypt just issued three weeks earlier, a $1B Eurobond with a yield of 7.5% for 10 years and $1.25B Eurobond with a yield of 8.5% for 30 years (thirty years.)  The 8.5% yield was Nigeria's market target rate for its 15-year Eurobond.  Intangibles have clearly made Egypt's debt more appealing than Nigeria's debt.     

The SEC letter as mentioned earlier...

"The attention of the Securities and Exchange Commission (“the Commission”) has been drawn to various publications in the National dailies alleging that investors in the Nigerian capital market have recently been defrauded by a licensed member of the Nigerian Stock Exchange (NSE).
In response to these publications, the Commission states as follows;
  1. As the apex regulatory authority of the Nigerian capital market, the Commission would do everything within the confines of the Investments and Securities Act (ISA) 2007 and the Rules and Regulations made pursuant to the Act, to ensure the protection of investors and their investments in the market.
  1. The Commission has established a robust framework for investigating complaints received from investors. The Commission also has an excellent enforcement mechanism and continues to maintain zero tolerance to any form of infraction in the market. Furthermore, the Commission adopts a risk-based monitoring and supervision of operators and institutions in the market to forestall potential systemic collapses.
  1. The Commission imposes stiff sanctions on erring operators to serve as a deterrent within the limits permitted by law, while infractions with elements of criminality are referred to the Law enforcement agencies for prosecution as provided under Section 304 of the ISA 2007. In furtherance of this, the Commission has developed a thriving partnership with the Nigerian Police Force (NPF) and the Economic and Financial Crimes Commission (EFCC) to prosecute these matters.
  1. Trading Platforms and other Self-regulatory Organizations in the Nigerian capital market have viable Rules/risk management strategies and have also adopted corporate governance standards that conform to global best practice. The Commission continues to collaborate with these platforms to ensure the eradication of all forms of market manipulations.
  1. In line with its commitment to implement the Nigerian Capital Market Master Plan (CMMP 2015-2025), the Commission has in recent times launched several notable initiatives which would galvanize the market, safeguard investors’ portfolio and contribute to the overall transformation of the economy. These include the E-dividend, Direct Cash Settlement, Full Dematerialization, Recapitalization exercise, Corporate Governance Scorecard and the establishment of the National Investors’ Protection Fund.
  1. With respect to the activities of Partnership Investment Company Limited (PICL) and Partnership Securities Limited (PSL) in the Nigerian Capital Market, the Commission wish to state that it has had All Parties meeting with some of the parties concerned and further investigations are ongoing. The matter is also currently before the Economic and Financial Crimes Commission (EFCC).
The Commission assures all investors and stakeholders of its commitment to ensuring the continued development and stability of the capital market, while no stone is being left unturned to recover for investors monies illegally converted by market operators."

Signed,
MANAGEMENT
9th February, 2017

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