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HomeExecutive BriefNIGERIAN MARKET DEVELOPMENT: Of SEC New Board, CBN Banking Sector Reform

NIGERIAN MARKET DEVELOPMENT: Of SEC New Board, CBN Banking Sector Reform

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New SEC board inaugurated and works ahead
Four years after the last board of the capital market regulator led by Peter Obi was dissolved by President Mohammadu Buhari, a new board was constituted for the Securities and Exchange Commission (SEC) this week.

Banks

The new board is headed by a commercial lawyer, Olufemi Lijadu and also comprise of the representatives of the Central Bank of Nigeria (CBN) and the finance ministry in accordance with the SEC enabling Act.
The inauguration of the new board came at a time when the regulator has been trying so hard to assert its position in the market and stamp its authority on the issue of governance in the capital market.
The board may have also inadvertently inherited a huge task of either scouting for a substantive Director General for the regulator or better still implementing the decision of the Federal Court, which ordered the restoration of the suspended DG.
Presently, the most senior commissioner in the commission is heading the regulator’s operations in an acting capacity. Mary Uduk, the acting director general of the commission has been proving her mettle since she ascended the position in the wake of the suspension of Munsur Gwazor by the then finance minister Kemi Adeosun.
The released of the report of the investigations into the operations of the energy firm Oando Plc by the Commission was received by the market as a pleasant surprise considering the political influence wielded by the chief executive of the oil company, Wale Tinubu.
The issues relating to the result of the investigations of SEC into the operations of the oil company and the subsequent sanction imposed on the Oando key principal officers may have to be essentially resolved by the judiciary.
However, the new board have critical role to play in the final resolution of the face-off between the commission and the oil company so as to help salvage the interest of investors in the embattled firm.
The manner the board chooses to resolve the issue will go a long way to either restore confidence in the market or undermine the integrity of the regulator.

CBN 5-Year road map for banking reform
The financial sector regulator, Central Bank of Nigeria (CBN) on Monday unveiled its five-year road map for the bank and the economy. In the presentation made by the governor of the CBN, Godwin Emefiele, he disclosed that he has a vision to position Nigerian banks in the league of 500 top banks in the world. To this end, he will be proposing a recapitalization programme for the industry to enhance their liquid assets and reduce the impact of any economic crisis on the financial system.
The recapitalization programme is one of the major policy thrust that have generated some discuss within the financial sector and investing public.
Many Nigerians may not be so enthusiastic about the new move in view of the state of the economy and the unpalatable experience of the past.
The last banking reform under Charles Soludo was significantly received by the investing public with huge expectations as many people even borrowed money to invest in the stocks of many of the banks.
However, 14 years down the line, many of those who embraced the share sales embarked upon by the banks in the course of the recapitalization exercise back then got their fingers burnt as a result of the subsequent development in the economy with grievous impact on the capital market.
The planned recapitalisation exercise this time around could face some resistance from the investing public who may require more than a mere campaign to get them to part with their money.
Besides, the imperatives of the expected new capital for banks are glaring in the face of massive devaluation/depreciation of the local currency since the last recapitalisation exercise.
At the time, when Soludo announced his banking reform and recapitalisation programme in 2004, the exchange rate of naira was at an average of 150 to the dollar. However, by the present exchange rate, the naira has depreciated to around 360 naira to the dollar on average at both the parallel market and Investors and exporters window.
The depreciation in the value of the naira has equally eroded the value of the capital base of the banking industry over the years.
Aside from the problem of Non-Performing Loans (NPLs), which has hindered many banks from extending credit to some key sectors of the economy, the issue of inadequate capital has continued to limit the ability of some banks to lend to big ticket businesses.
The exercise whenever it kicks off by the regulatory bank will definitely bring back to live the primary segment of the stock market.
However, the notice giving by the CBN for the recapitalisation of the banking industry is sufficient for the capital market regulators to fine-tune their processes to enable investors take advantage of the possible avalanche of new issues in the market when the time comes.
Investors may also have to look out for those banks that have been consistent in providing value for their investment and compensate them with subscription into their shares whenever they come to the market to raise funds.
The success of the planned recapitalisation would definitely depend on the discipline and commitment demonstrated by both the regulators and the financial institutions willing to raise funds in the market.

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