Capital market: We will address problem of new issuance in 2012 Oteh The Director-General of the Securities and Exchange

e Commission (SEC), Ms Arunma Oteh in an interview with capital market correspondents discusses the challenges facing the Nigerian capital market, steps being taken to revive the market and the expectation for 2012. Excerpts: What is the Commission doing in terms of attracting new issues? One of the things we must address is new issuance, whether it is fixed income or equities. This is because we have had a decline in new issuance. In fact, this year we have had no new issuance except for rights issues by a number of companies. So we have agreed with operators that there has to be concerted effort to bring new issuance to the market. One piece of it is that we must make sure that the market is attractive enough for them to come to list. But the other aspect is that we must make sure that the Exchange is a reflection of the economy. And also we followed the discussion around the importance of having telecoms companies, upstream oil and gas, agro businesses to list on the Exchange and ensure that the privatisation agenda of the government, particularly with reference to the power sector, allows us to have the privatised companies listed on the Exchange. It is something that we agreed to work on as early as possible in 2012 so that we can develop a road map for us to have new listings. How would your commission and operators assess the capital market in 2011? We feel that 2011 was a year that was challenging primarily because of what was happening globally and because of the keen interest our market has continued to enjoy from foreign investors. And therefore for the first time in a very long period, America had a downgrade because of their debt ceiling issues with the sovereign debt crisis in Europe and the issues with the banking sector in Europe, all impacting on our market. So, some of the things we have to do is how to ensure that both local investor base and retail investor base are as active as they can be in our market. What we will do early next year is to map out more clearly plans to ensure that local investor base is able to take up the opportunity that the decline in the market has provided because we dont want a situation where it is the international investors who are picking up the equities at reasonable prices and both our local institutional and local retail investors are not able to. So, we have mapped out some very specific plans which we will further develop. How is SEC partnering Akwa Ibom State in investor education? One of the things that we agreed with Akwa Ibom State Governor, Godswill Akpabio is that the e-library that they are going to establish by the end of January, we will have an investment learning centre. This is something that the SEC, Nigerian Stock Exchange (NSE) and Chartered Institute of Stockbrokers (CIS) have committed to working with the government of Akwa Ibom to have that centre set up immediately because we recognise that the electronic platform is such an important platform given our youthful population and what is happening in the world. So, we are very pleased that the Governor responded immediately to this request that we have

an investment learning centre that is basically on an e-platform which will be incorporated in this e-library which they said is the biggest library in Africa. What is the commission doing in terms of improving market infrastructure? In fact, to us infrastructure is very important, in the sense that we want to make it more efficient for foreign investors to invest in our market. So, we are committed to addressing all of those things that will ensure efficiency. One of those things is to ensure that our dematerialisation plan is really firmed up. Dematerialisation started a few years ago. In fact, the CMC put together a committee led by Mr. Emeka Madubuike, the Chairman of ASHON, and they have presented every report to SEC on how we can make sure we firm up the issues of dematerialisation. We believe that that is important to making this market more efficient. We believe there are other issues that support that; that we need to make sure that we leverage technology better, that we at SEC need to accelerate our effort in technology. The NSE is doing the same; they are working on a bigger robust platform for trading. The CSCS needs to do the same; and that we need to move to leveraging technology better at our market. And market operators need to do the same. And this is why there is a subcommittee on market infrastructure and technology. In terms of capacity-building, what is your commission doing? Another important issue to us is capacity-building. We have continued to highlight the issue of capacity in the market. We feel that the capital market is one that is evolving all the time. That the issue of capacity is so critical and therefore for the regulator, we need to keep making the effort to enhance capacity for the capital market operators and for the investors. In terms of the maiden Capital Market Committee (CMC) retreat held recently in Uyo, what was the objective of the Commission? In terms of the objective of our maiden retreat, the objective was to give us an opportunity as a community to assess what the issues that we had to deal with in 2011 were. What are the successes, what are the challenges we faced? And then map out the way forward to ensure we benefit from the experiences of 2011 for 2012. In my estimation, and I know I speak for all my colleagues; here we exceeded our expectations in terms of what we wanted to achieve for the capital market retreat. We had each of the sub-committees of the capital market. We are revamping the CMC to reflect a modern capital market committee. So, we have seven sub-committees including Investor Confidence Restoration Committee, Rules and Compliance Committee, Fixed Income Committee, Investment Management Committee, Market Infrastructure, Product Development and Business Development, Commodities Exchanges Committee. What we decided as Capital Market Community during our third quarter meeting was that we needed to review and revamp the CMC. And one of the things we did during this retreat was to try to agree on what the terms of reference should be for each of these subcommittees so that they reflect the issues that our capital market is facing today. We also discussed what should be the plan of action for each of these committees for 2012, what are their deliverables? What we came up with exceeded our expectations in terms of

the things that we wanted to achieve. It shows that the capital market community is just a group of fine professionals who at any point you called them are ready to put in their best. What we agreed on is that every issue that was raised was very important. And what we then need to have is what I consider the CMC roadmap for how we can make sure that the successes we have recorded is sustained and then the challenges we had, we try to see how to address them.

Examining capital market prospects in 2012 The challenges in the global economy have raised issues concerning the sustainability of emerging capital markets, especially the Nigerian market. In this piece, UDEME EKWERE Xrays the prospects of the market and how to boost patronage. With the ongoing Greek crises resulting in decisions tending towards the development of austerity measures, fears are being expressed over the stability of the Nigerian capital market in year 2012. This is especially true when the fact that foreign investors account for over 70 per cent of investments in the Nigerian equities market is considered. Across the globe, the year 2011 was a dull year for equity markets as uncertainty underlay key economies for the most part of the year and as the worsening Eurozone debt crisis and the lack of definite direction on solutions to the problem triggered further flight by investors to safety. For instance, United States stock index futures fell on Friday, indicating that the Standard & Poors 500 Index would snap three days of gains, as one of the three party leaders supporting Greeces government said he could not vote for the current austerity package. Bank of America Corporation fell by 1.6 per cent and JPMorgan Chase & Company lost 1.2 per cent in early New York trading. Futures (SPH2) on the S&P 500 expiring in March fell by 0.9 per cent to 1,336.5 in New York, while the Dow Jones Industrial Average futures dropped by 0.7 per cent, to 12,758. The Head of Investments at Robeco Gestions in Paris, Mr. Yves Maillot, said, For many days and weeks, we have been hearing that negotiations will soon be over. Things are getting stuck a bit on every front. The big European countries must dig into their budgets to help Greece. Analysts have said that this was amplified by underlying risks in currency devaluation and inflation in emerging and frontier markets, especially in Africa. In a recent survey conducted by PricewaterhouseCoopers, Chief Executive Officers of major companies around the world expressed fears over a bullish year for capital markets in 2012. The CEOs, who predicted this in a survey, were pessimistic over profitable activities in global capital markets by the end of the year.

The survey showed that 64 per cent of global CEOs said there would be relative instability in the market this year. The CEOs explained that their prediction was based on the fact that the global economy has been fraught with so many challenges in recent months. According to them, the effect of these global challenges, which affected most markets in 2011, was likely to spill over to this year. The Nigerian market has recorded some instability since the beginning of this year, with the market capitalisation of the listed equities dropping by N77bn or 1.2 per cent from N6.579tn at the beginning of February to N6.502tn on Thursday. Similarly, the Nigerian Stock Exchanges All-Share Index has recorded a decline by 244.45 basis points or 1.2 per cent in the similar period. The Chief Executive Officer of the NSE, Mr. Oscar Onyema, said recently that despite the Eurozone and Greek crisis, there was still opportunity for growth in the Nigerian market. He noted that as against the 17 per cent loss recorded in equity trading activities in 2011, activities were likely to close positively this year. He made this projection based on some initiatives undertaken by the Exchange from the end of last year, which according to him, is expected to boost activities in the market. He noted that some of the initiatives undertaken by the Exchange to move the market and attract more investments especially from the foreign investors included the market segmentation as well as the introduction of the Exchange traded Funds. He said, We know that the global challenges experienced by some top economies in the world would open up some new opportunities for the Nigerian market, and we intend to put things in place to ensure that we take advantage of the opportunity that it will present to the market. This year, we are going to be involved in various activities and reform aimed at improving the market and attracting more investments, and there will be focused goals towards deepening the already existing products in the market. We believe that we should concentrate on building our bond market to ensure more participation and so, we would revitalise the secondary bond market, provide investors with a wide range of choices regarding investment options and help stockbrokers tap into the opportunities inherent in trading in bonds. The CEO Proshare Nigeria, Mr. Olufemi Awoyemi, said that with the efforts by the capital market regulators to reshape the market and realign it with standards of more developed markets, it was possible that activities would be boosted this year. According to him, the market, especially foreign investors, might react positively to the equities market. He said, The developments and new initiatives in the market undertaken last year were perceived as the right steps in the right direction. The new market segments have aligned

our market with International Standard and global best practice which will make it more accessible and easy to evaluate not in isolation anymore but along with its counterpart. The recent moves by the NSE on the new market segmentation is likely to usher in more companies on the bourse particularly in the power sector of the economy as the utility sector is yet to be active while the introduction and listing of first ETF on the bourse is commendable as one of the initiatives in the pipeline to deepen the market and attract more foreign participation. He added that another factor that could boost activities was that the banking sub-sector closed with lesser number of banks as a result of successful merger and acquisition that took place in the sector within the year. The market closed with 15 stronger and healthy banks as against 21 banks that started last year, while their books have been cleared of non-performing loans by the Asset Management Corporation of Nigeria, and in this regard, we expect improved lending in the economy in the coming periods as the banks are healthy to recommence active lending on a clean slate, Awoyemi noted. Also, analysts from Afrinvest, in their 2012 Nigerian Market Outlook, noted that the reforms undertaken in the market within the last one year would help to boost investor confidence this year. They added that the reforms, which were targeted at enhancing a fair and transparent market place, enhanced investor confidence, and improving market depth, was on course for boosting investors confidence this year. The need to capture a significant portion of emerging market portfolio inflows necessitates a quantum leap in regulatory and administrative oversight, including high corporate governance standards, on the Nigerian bourse in line with acceptable global standards, they stated. The analysts revealed that having initiated varied reforms, which are targeted at enhancing fair and transparent market place, enhanced investor confidence, and improving market depth, the bourse is on course for boosting investors confidence. According to the analysts, policies such as the introduction of market making, securities lending, short selling and introduction of ETFs need to be accompanied with effective regulatory oversight, while their general acceptance and participation by the investing public will largely depend on improved investor education going forward.

Kesimpulan: Negara-negara di kawasan Afrika, termasuk Nigeria saat ini sedang menjadi fokus negaranegara dari benua lain khususnya Asia dalam hal pengembangan bisnis dan investasi. Tak bisa dipungkiri bahwa Cina adalah pionir Asia dalam merambah kerja sama ekonomi ke Nigeria. Total perdagangan antara Indonesia dan Nigeria sendiri, pada tahun 2011 mencapai 2,09 milyar. Untuk masuk ke pasar Afrika khususnya Nigeria, diperlukan strategi melalui promosi dan penetrasi yang lebih intensif, baik melalui pameran, misi dagang maupun penjualan secara langsung. Pasar saham Nigeria turun 16,3 persen pada 2011, meskipun sejumlah langkah oleh regulator untuk mengembalikan kepercayaan investor. Dengan krisis Yunani yang sedang berlangsung sehingga keputusan cenderung menuju pengembangan langkah-langkah penghematan, ketakutan yang diekspresikan lebih stabilitas pasar modal Nigeria pada tahun 2012. Kekhawatiran tentang dampak krisis utang zona euro pada sistem keuangan dunia semakin dalam setelah Moody's memperingatkan kemungkinan downgrade beberapa bank terbesar di dunia, termasuk HSBC, Goldman Sachs dan Bank of America. Dalam perkembangan dunia bisnis belakangan ini terjadi adanya suatu dinamika jatuh bangunnya perusahaan publik dalam sektor ekonomi nasional bahkan dunia. Dalam perkembangan tersebut, tidak hanya berimbas pada sektor ekonomi saja akan tetapi hal tersebut berimbas pula pada sistem pengelolaan perusahaan publik dan kebijakan pemegang saham terutama dalam hal menilai return yang mereka harapkan dari suatu perusahaan publik sehingga tingkat kualitas pengelolaan perusahaan pun idealnya harus memenuhi standar kebutuhan informasi para pemegang saham dalam membuat kebijakannya. Dan jelas terlihat fundamental ekonomi dihantam dengan isu politik dan terus menerus mengarahkan pasar pada kesimpang siuran, tetapi apabila kita dapat memilah dengan seksama ada suatu penjelasan yang realistis dari keadaan di eropa tersebut, dimana para pelaku pasar dan para pihak otoritas mencoba mengsinkronkan fundamental ekonomi dan fundamental politik yang mempondasikan kebijakan jangka panjang untuk memperbaiki dan mengakselerasikan hasil sinkronisasi tersebut dan dituangkan dalam pembentukan sentimen pasar terhadap ekspektasi pertumbuhan ekonomi zona euro tersebut.