2009 Outlook: Key Questions for the Director-General of the Nigeria Stock Exchange

If you had an opportunity to ask the Director General of the Nigerian Stock Exchange a question, what would you like to know from her?

Some investors, fund managers and equity analysts have sent in their concerns/questions; some of which were addressed by the DG, NSE at the Annual Review held at the Nigerian Stock Exchange on Monday, January 12, 2009.

However, the following questions, submitted by our board of analysts remain unanswered:

1) Bail-Out: Why has the Federal Government refused to provide a concrete bail out plan for the capital market, not just lip service? Do we think this will change with a change in the Federal Ministry of Finance given that other forward looking economies recognised the need to re-build confidence in its capital markets by taking actions that would bring about the much desired liquidity needed, albeit; with much more emphasis on regulatory control and accountability?

2) Alternative Market Strategies: The NSE (an SRO) along with other regulators has been talking about the introduction of simple options to the capital markets for over two years now. Why has this not been implemented?

At the moment, there are only two strategies investors can use in trading the NSE (that is, buy or sell) and in a free fall or in a downtrend as we have currently, there are usually no buyers for willing sellers.

Even with the introduction of market makers and ‘funding providers’, the makers will not be willing to buy shares that they know are fundamentally weak (given that the incidence of corporate governance and believability of financial reporting in the country is subject to risk discounting risk here relates to poor observance of standards and reporting requirements). If options are available or other strategies, investors can play the market even in a downtrend. The limited options/alternatives for traders at the NSE is keeping sophisticated ‘international’ investors from the NCM. The market appears too one directional.

3) Margin Accounts: With banks not providing margin loans to investors, it appears difficult for the Nigerian Stock Market to maintain any upward momentum or traction.

Has the Director General looked into other alternative source of financing for investors and brokerage firms?

Can the Federal Government provide brokerage firms guaranteed loans which can be loaned to investors based on strict guidelines as an alternative to an outright bail-out?

4) Demutualisation of the NSE: How does the NSE intend to conclude this key 2009 internal goals during a market cycle where most investors are not able to fully participate? The conversion of the NSE into a listed company appears desirable and precedents in Eqypt, J’borg and New York support the viability of such a proposition but to do so in a year where strategic management changes and movements have taken place, and will take place, as well as the governance and process capacity issues/challenges taking place will require a broad range of investor support.

We are interested in knowing more about the conversion of the not-for-profit organisation to a value and profit driven one in such a way as to allow each willing and able investor to participate.

5) New Products: The NSE recently launched five new indexes (including the NSE 30) working with reputable firms that have a history of creating such. We believe it is a welcome development that forward looking firms may create products around.

When will this be introduced in the market and does it not portend a dire signal for firms not included in the index or their sector not considered profitable enough to have a sectoral index?

Is it possible for the criteria or/and weighting of the index be made available for equity analysts?

6) Dealing with Current Challenges: in the last few weeks, there has been a spate of occurrences, not on such a large scale as to pronounce it a major crisis but it is a crisis itself, given that it is occurring in a market with confidence at its lowest ebb. Dud cheques have been issued to investors and fellow fund managers alike. What does the aggrieved receiver of such cheque have to do and what measures are in place to address these challenges given that it goes to the heart of the ‘confidence’ question?

7) Investor Enlightenment: The astounding reality of the market and indeed our larger economy was best summed up by the former president, Olusegun Obasanjo, who in a departure from the less than believable comments of the CBN Governor, declared that the current crisis will visit the poor and rich alike.

If you consider the yearning of the hard working employee, market trader, artisans, aspiring manager, church goer and widower, who in the heat of the capital market boom were plastered all over with offers and media blitz on the viability and security of investments in the NCM, and who now have to worry about the expected income due from the market to meet obligations but cannot access it; you will know that the current meltdown will affect people differently.

Hope is a casualty in this market, so also is the believability of the operators because of their silence. Investors have simply been told to wait and allow ‘nature to take its course’. The caveat emptor that should have been ringing out in the first place now becomes breaking news at this tail end of market downturn.

These are the first death throes. The question is what sort of market will remain?

Yet, one heard not one expression of real remorse or accountability from any of them. They had nothing to offer except the time-worn counsel of confidence men: trust me. Instead of protecting our market or at least preparing the investors and players alike for the possible challenges, we did what we have always done best as a nation…deploy self denial as a shield from the truth.

Maybe not everyone was playing the ostrich game, at least not brazenly. While the CBN Governor embarked on a self effacing trip on being nominated to attend the world deliberations on the crisis, the Ministry of Finance was silent, shooting down everything pushed forward to ameliorate the situation without providing an alternative. The Director General of the NSE, to her credit, continued to show empathy, and spoke consistently about her heavy burden and desire to see that the ordinary citizen/investor is assisted to overcome the current challenge.

The question she has to provide now is: how do we hope to achieve this? What should the investor do from tomorrow?

Source: Proshare Nigeria

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Investor Beware! A Preview of the Nigerian Capital Market in 2009

Capital market drivers. The prosperity of the capital market depends on the prosperity of the economy. Thus the capacity of the market to successfully provide long-term funds and a good platform to trade in the accompanying securities will depend on the strength of macroeconomic productivity. A productive economy is invariably one in which economic agents create value and earn correspondingly meaningful income. Because economic agents generally subscribe to primary offers of either debt or equity or purchase stocks at the secondary market if they have income it is only consistent to argue that vibrant markets are ones where the economies create positive economic value added.

There are, however, other reasons investments can be made. These other factors are usually considered if the budget constraint has been satisfied. Thus no matter how appealing the market prospects of a security is, in the absence of income there will be no transaction overtures from the demand side. The reverse cannot be the case because even badly performing securities can be deliberately purchased once there are the funds depending on the kind of strategy that is being pursued by the investor largely because these strategies ultimately aim at making profits or returns.

So when an investor consciously transacts on the securities of an obviously dead company, such decisions though in the short-run, can be with a long-term focus of acquiring, restructuring and turning around the stock’s underlying business operations for better performance. A good example is the acquisition game between bank PHB and some Springbank investors.

Similarly some old persons, for instance, may forgo the fat capital gains of stocks of companies which are still at the early stages in industry life cycle and consistently go for the moderate returns of stocks of companies at matured stages in the industry growth cycle. Although in this case, returns are fundamental, risk perceptions are considered. This risk consideration is not strictly of the stocks but on the perceptions of the impact of the business environment on such firm’s prosperity.

Overall, three important considerations for flourishing capital market existence are the income levels of the investors; investor evaluation of current and potential performance of company as well as the risk perceptions of the investor. These forces cover the supply and demand sides of the market but not of the market umpires. What of the umpires: those who ensure that the rules of the game are complied with? The importance or unpopularity of market umpires have become more critical because from recent experiences their unwarranted interference with the market process created more problems than solutions. So a fourth factor can as well be added as the role of market umpires and regulators.

Behaviour of market drivers in 2009 In order to predict the performance of the capital market in 2009, we have to examine how these four forces are likely to fare during the year. While it is possible to make some informed guesses about the likely behaviours of the first three, it is difficult to predict how the regulators are likely to behave during same period. So for the umpires, we can at best advise on what they should or should not do in order to ensure that the market performs better.

We start with individual incomes. The incomes of individuals are tied to the prosperity of firms who in turn pay them wages in return for the services offered. Possible exceptions here are the government employees may continue to earn their wages irrespective of whether government’s finances are doing well or not.

Although it is equally possible for government to respond to macroeconomic conditions and reduce the number of persons in its payroll, oftentimes such decisions are mired in serious political considerations and are oftentimes wrongly targeted so that those who lose their jobs may not necessarily be the people who should. Historical experience in this country also has not supported wage cuts in the public sector. So we concentrate on the private firms who are more flexible in responding to changes in the environment of business.

The factors which therefore determine the profitable performance of firms in Nigeria are: infrastructure adequacy, monetary stability, fiscal equilibrium, efficient justice system and ease of taxes.

The presence of these factors ensure that firms face minimal macroeconomic uncertainty and also much more able to compete more efficiently. How are these determinants likely to fare in 2009? Infrastructure inadequacy has been unresolved and cannot be resolved in 12 calendar months. On average, partially substantial resolution of Nigeria’s infrastructure problems given its current state – should last longer than 18 months. Power supply has remained the most problematic of the entire infrastructure nightmare which was seemingly, but in futility, addressed over the eight year reign of the past administration.

What of monetary stability? It is going to be a scarce commodity in 2009. The scale of the budget deficit and the pressure on the naira exchange rate following the depressed earnings from crude oil are good pointers to what should be expected in these regards. Such huge deficits will be financed with equally huge expansions in money supply. At present, some of the areas that the budget had specified as its financing sources are being contested by some other stakeholders in the federation account particularly state governments.

With such sustained pressure, the Federal Government and the Central Bank, will come up with more ingenious ways of creating money out of nothing. This has started with the deliberate allowance of the naira exchange rate to fall from N116.00/US$1.00 to N138.00/US$1.00 in less than 60 days which enabled the transfer of naira earnings from actively struggling and value-creating economic agents to the government and its monetary authorities.

More straightforwardly, by deciding not to defend the naira as it statutorily claims with the community fund (foreign exchange reserves) and allowing the naira to fall at such scale with such speed,

(a) the CBN has saved and will continue to save as long as the naira value falls that portion of the foreign exchange reserves that will have been used for such interventions. These savings can be monetized for direct use by the government (depending on the understanding and arrangement) and; (b) all government’s proposed dollar earnings in 2009 would have become higher in naira terms which in a way may plug the holes to be created

(1) should the Federal Government lose the contested revenue sources and

(2) should it have to re-do the clearly unrealistic assumptions that underscored the revenue side of the budget proposal.

Government’s expenditure plans far outweigh its earnings prospects. In the past, the deleterious consequences of this historically traditional policy indiscretion have been cushioned by good oil prices. Government is not an investor and in a highly corrupt environment such as ours and particularly now that it appears that the fight against public sector economic and financial crimes are seriously waning, most of these proposed deficit spending will definitely find their ways straight into the pockets of some powerful predators.

So having lost the opportunity to successfully execute the projects for which the funds are meant, we shall in turn suffer the inflationary and other economic-price consequences of these actions. Who feels the brunt? The firms continue to suffer lack of competiveness in the face of the inclement operating environment where basic infrastructure remains inadequate, firms will equally not able to effectively plan over a longer time horizon because of the heavy degrees of uncertainty injected by policy-induced inflation, distortion of relative prices and inevitably rising interest rates. Firms will equally suffer demand losses because of the reduction in the real worth of incomes in the hands of households (private consumers).

Take for instance, the issue of naira devaluation. Who benefits? Who suffers? More than 70 per cent of all intermediate input into industrial production that take place in this country are imported: raw materials, machinery even technical expertise, etc. With massive naira devaluation, how competitive can these entrepreneurs be? Yet the Central Bank has pitched the reason for naira devaluation on mercantilist premise: to promote exports? Which exports? Unfortunately the export industry in this country has as well been destroyed by exactly the same reasons which we have provided above.

What has happened in the devaluation game in effect therefore is the deliberate sacrifice of the economic well-being of majority of Nigerians and Nigerian businesses in order to meet a pre-determined motivation of government’s short-term financial objectives: a consequence of many years of deliberately neglecting to put in place policies and processes that will make the economy prosper along a natural path with minimal fruitful interventions.

What of the other factors that equally contribute to the prosperity of the economy such as efficient justice system and ease of taxes. We are definitely far from these. This administration which started off with a great promise on the pursuit of the rule of law appears to be pursuing a contrary objective. In recent times we were witnesses to the executive threats meted out in the name of justice to clearly guilty government thieves. Some received N3.5 million as fine for practically wrecking their states.

Some of the accused’s files are already joining the archives of the forgotten documents without even being called up after baton change at the EFCC. For genuine vanguards of the campaign to rid the country of this mess, his reward is bouts of inglorious dishonour culminating in an ultimate sack from the service.

On the area of taxes, my suspicion is that mid-way into 2009, the government will likely invoke the dropped raise in the value-added tax rate. It is my sincere wish that this does not happen. But what can possibly prevent its occurrence is the rebound of good oil prices. The Federal Government has already recognized the massive effects that taxes from non-oil sources can play in its finances in 2009. Thus if oil prices do not stabilize at more than US$45 per barrel, the government are most likely to raise the rate of VAT as it earlier intended.

The current desperation which resulted in the sudden devaluation of the naira justifies this position. Unfortunately, VAT if well implemented and at a higher rate has even more devastating consequences on businesses. Whereas corporate profit taxes are imposed on businesses that have already made profit, there is no such discrimination with VAT and thus firms are forced to internalize in part or full – the additional costs imposed by VAT rather than allowing its transfer to the customer in order to remain competitive in a tough operating environment. In effect many firms may have to give way in 2009 and many more will proceed to the fringe of extinction.

In all these, government still intends to use the capital market to finance some of its deficits. Because the returns on government bonds are much more certain than those that can be expected from firms in a highly uncertain environment of business – as the one we expect in 2009, – entrepreneurial activities will be massively crowded out.

With many foreign investors already gone; with many investors badly hurt in 2008; with prospects for laundering of government funds in the capital market very bleak etc, the level of participation in the capital market will obviously decline. With declines in participation, the hitherto demand pressure that have led to rapid price appreciations will be absent. The crowding out effects of governments’ capital market bond participation will not only limit the capacity of businesses to access fresh funds but will equally raise bank interest rates. Can market makers change the prospects here?

Let us start with the primary market. Market makers cannot fundamentally alter the current trend in the primary market. There is a seeming cessation and poor outing in new issues segment primarily because of the overall lull in the capital market owing to

(a) recent previous massive losses,

(b) heightened market and macroeconomic uncertainty,

(c) massive investor withdrawals particularly foreign investors and short-term speculators.

Market makers, by restoring short-term demands for securities in the market place can trigger equally short-term speculations in the market. Barring any major shock in the market place, market makers can enable the market to coast albeit at a low level over a reasonably long period of time. In the absence of good company fundamentals and income which drive long term investment (following harsh macroeconomic environment of business), market making may have very limited impact on the market. If however, the market regulators over-use market making process and thus create herd reactions, the system will be temporarily ballooned and leave more participants much more hurt.

In summary, the outlook for the year 2009 is that of low productivity (and of course low income) and high macroeconomic uncertainty. These are not consistent with the forces that enable the market flourish which we enunciated at the beginning of this work.

Since the Nigerian economy is umbilically tied to crude oil, reduced earnings from it relative to governments spending plans equally means reduced spending of the Nigerian masses and businesses; majority of whose incomes are tied to such public consumption levels. The peculiarity of this year’s proposed spending is that the present administration must show strong and determined commitment to its promise on infrastructure for it to regain its fast crumbling reputation as non-performer.

If that is the case therefore, unless there is a deliberate policy to use Nigerian firms for the provision of these infrastructure with attendant high performance risks a good percentage of these expenditures will flow into the accounts of expatriate engineering firms. To quickly correct an impression, the high performance risk alluded to here does not refer to any perceived technical inferiority of Nigerians but the high levels of possible compromise due to corruption.

Let me quickly add that the Siemens case equally proves that such compromise is not limited to Nigerians alone. Our conclusion however is that; reduced government spending will affect private consumption levels with consequences for the demand for goods and services supplied by firms.

Similarly, there shall as already stated high uncertainty with implications for high inflation, interest rates and low naira value.

What should stakeholders brace up to? In rough seas, sailors can take a variety of options: abandon the ship altogether and escape on lowered boats, struggle to salvage the ship or do nothing. The present condition of the market approximates a rough sea situation and participants have variety of options which may approximate sailors’ actions in rough sea depending on their specific contexts. For instance, many investors have already abandoned the equities market following the relative shock levels that they experienced in 2008. On the other hand, many market operators together with the regulators are bent on salvaging the market. The question is: which options should various stakeholders take in approaching the capital market in 2009?

Investors as we know are in purposeful pursuit of profit. How much profit that satisfies an investor is subjective and depends on each individual investor. Consequently how much more risk an investor is prepared to take for more returns is equally subjective and depends on investor risk preferences. Thus investors with high return; high risk profiles who have a longer time operational dimension may find the capital market in 2009 worth it. But that is given the scenario that alternative opportunities/markets such as the markets for properties, currencies, solid minerals and other commodities do not offer better returns.

A proxy measure for the returns in the capital market is the expected yields on government bonds which many smart operators will aggressively leverage on to play on in the market place given the possible poor outing of the equities market. This area will be a tough battle ground in which only well funded and technically aware operators can achieve meaningful success. Few operators in the Nigerian capital market meet this desiderata.

Recall that government will be a major player in the 2009 market with the issuance of bonds to finance its huge deficits. If that is therefore the benchmark return expectation, it is my considered opinion that in the short-to-medium term speculating in many other alternative markets will offer better returns than the equities (or capital market) market which will make it clearly not very attractive for the short-term high risk-taking investors.

Another way to look at it is that those who were most hurt in the market last year were the high risk-taking cum short-term inclined investor groups. This is where most of us (over 90% of the investor-side participants in the stock market in the last two years) belong to. At the time it became obvious to many Nigerians that the equities market had become an ATM of some sort where you simply slot your card and draw money, millions threw caution to the wind concerning the associated market risks and ‘went for the money!’. Many more persons borrowed their lives and used it in the gamble. Consequently, when this supposed ATM machine got bad, they were the most badly hurt.

Now this category of short-term inclined and high-risk-taking groups are not going to gleefully run back to the equities market without serious meditation and sophisticated professional guidance. The reasons are many:

(a) their fingers have been burnt and they are yet to recover from it. The nasty experience is enough discouraging factor;

(b) they have lost their own past savings and are using their current incomes to pay the interest due on the margin facilities used to build the now decimated portfolios;

(c) even though they are high-risk taking, the global uncertainty and domestic macroeconomic outlook are very indicative of the need for serious caution;

(d) the outlook for the market is not consistent with the typical risk-return calculation. Thus the expected return by the end of the day, may not justify the attendant risk if they decide to take a chance once more. Perhaps, because this group constitutes the largest proportion of the investor-universe in Nigeria, their indisposition to the market is in fact the ‘market sentiments’.

Naturally, the short-term focused but risk averse investor groups have naturally retreated further into their shells.

The high pro-risk investors with long term focus may want to stay on and wait for a longer period of time to see if the market will rebound. Unfortunately this category of investors with strong waiting power constitutes not more than 2% of the entire investor-universe in Nigeria . Another side of that coin too is that if this category dominates the market, they scarcely engage in aggressive short-term price speculations – which create market ebullience. On the contrary they speculate with a focus on the long-term which equally implies that less of the tradeable instruments are brought to the market.

On the other hand, if many of the investors in the Nigerian market who are largely short-term inclined decide to move into alternative markets, the likely obstructions include poor development of these markets as well as limited technical expertise to profitably speculate in them. For instance the commodities and solid mineral markets may provide very good alternatives but these markets are not yet well developed in Nigeria and there are limited technical know-how as regards how to successfully operate such markets.

This therefore provides some kind of opportunity for the professionals and regulators of the capital market. The immediate development of the Nigerian commodities market has become indispensable as this can provide credible alternatives in situations such as this. The situation equally calls for increased attention to the bonds market. Since this has more guaranteed returns as well as generously involves government with high capacity to honour debt securities issued, many more investors that are relatively risk averse and many more high risk investors who want to diversify their portfolio holdings will find that outlet more reassuring.

It is evident from the market gloom that many operators in the Nigerian capital market will die within the next few months. At present, many of these firms are finding it difficult to pay the salaries of their members. This therefore calls for many likely initiatives. One of such is mergers and acquisitions as well as organizational refocusing and repositioning. For the former, the question is: what is there to acquire in many of these firms? Some of these firms are set up just to deliver dealing activities. And thus their expanse of skill availability ends with stock trading. Regrettably too, in most (up to 80% of all) instances, these firms are equally poorly capitalized.

Now with the recent calamity already wrought on proprietary portfolio of capital market operators such as in the described firm who are forced to repay margin facilities taken at about 33% while the portfolio value for which the facility is taken in the first instance is worth less than 40% of their cumulative purchase value because of rapidly dwindling prices, what strategic impact will the merger of firms in this category have? Very limited too! It could be a merger of liabilities! The funds are not there. The technical expertise that could enable the strategic navigation of these companies into alternative opportunities is equally lacking.

Inevitably therefore, many firms will be sold at much lower value to stay afloat while many lay-offs should be anticipated. Over the years the research and strategy capabilities of the firms in the market never exceeded the writing of reports and were not very much encouraged by the management. Today this works against many of the companies as they have to pay more dearly with non-existent funds in order to refocus and reposition.

Operators in the market who are well capitalized should begin a refocusing and broadening of their business areas outside of core capital market activities. Massive retraining of staff in what it takes to successfully operate in alternative markets is imperative. With a devalued naira for instance, the commodities export market will be a good option.

In Conclusion. The regulators have a critical role in the entire process as they can either aggravate or ameliorate the current crisis in the market. In an uncertain environment, the quality of monitoring and fine-tuning of the market rules and procedures shall go a long way in minimizing the risk exposure of majority of the participants.

I personally do not believe that market decisions based on the sole discretion of one man can produce such high quality. For instance, for quite a long time, the Nigerian equities market has been run at the discretion and whims of one person. Although there may be semblances of collective deliberation and output, closer examination of the decision making process reveals very much the contrary. Such monopoly needs to be broken.

Perhaps the establishment of more Exchanges may be an answer as it will engender necessary diversification and competition. It is equally very important that the market regulators cooperate among themselves so as to always minimize prejudiced decisions that usually fallout from their personality wrangling and disagreements. Whereas such disagreements are inevitable, it should at best be to further the cause of market development.

The regulators also need to generously seek as well as process the informed views and ideas of many stakeholders before arriving at their ultimate decisions. Patriotism should be the watchword here. For instance, decisions taken by the regulators should always be at the interest of the larger number of market participants and not to protect the sectional interest of few, which for instance may have rightly or otherwise been behind the initial decision of the NSE to put a wedge restricting downward movement of share prices by 1%.

To end this piece, what if things do not fall out as predicted? What if oil prices get back to about US$60 per barrel? That obviously is my prayer. Welcome to year 2009.

Martin Oluba, Ph.D., DBA, is the President/CEO of ValueFronteira Limited and an advisor to Proshare. He can be reached at martin@valuefronteira.com

CHARLES UGWU BLOCKADES PROSHARE NIGERIA WEBSITE

Charles Ugwuh, son of the immediate past Minister of Commerce and Industry, Eng. Charles Ugwuh, is at the centre of a controversy over the illegal blockade of Proshare Nigeria website, a popular investment focused website. According to owners of the website, Ugwuh shut down the site so as to blackmail Proshare.

In a release made available to FORTUNE&CLASS, Proshareng explains that on Friday, November 7th 2008, Charles Ugwuh of ContentOmni made good his threat to shut down the website of the company in an attempt to blackmail it to pay for spurious bills.

Ugwuh manages the Information Technology arm of Proshare through his ContentOmni IT company. He had informed the management of Proshareng that the site would be hosted on a dedicated server for which payment was made to January 2009. This, according to Proshareng management, was backed up with a full year maintenance agreement, equally paid for.

The revelation that Ugwuh had, in fact, breached the specific order to host the site on a dedicated server was made when, according to the Proshareng statement, it discovered, sometime in the first quarter of 2008 that Google had flagged the blog website as ‘possibly harmful’ to users.

“This was brought to his attention with nothing done. We realized the need to take better care and full control of issues related to the site as we were responsible for the site and requested that a 3rd party investigate the cause. We discovered that the problem resides on ContentOmni server for which we had no control over. This led to the discovery that we were indeed not operating on a dedicated server as contracted; and was sharing the platform with his other clients.” Proshareng explains.

Highlighting the reason for the need to have a dedicated server, Proshareng said:

“The agreement states that we shall be able to deliver 50,000 newsletters per 60 minutes amongst other service qualities desired by us. This unfortunately was never the case because of the deceit and non-conformity with the contractual obligation as agreed with us. To deliver this service, the company has had to operate shifts in a 24 hour cycle to meet newsletter demands.

Commenting on the challenging relationship Prosahreng had had to contend with Ugwuh because he held the sensitive information and access to its site, Proshare observed:

“The ContentOmni office in Ikeja was shut down early this year, barely two months after we had commissioned the firm and we have had serious challenges locating him or reaching him on phone when we had service issues which was a daily affair, for which our maintenance agreement covered.

“Most importantly, we needed ContentOmni to complete outstanding work from Proshare 2.0 which remained outstanding till date. A culture of service failures, non-observance of delivery timelines; desperation for money and disregard for client preferences, all well documented in formal correspondences showed no sign of abating.

“As the market entered the bearish state in May/June we feared for our ability to respond to the anticipated need for ‘another type’ of market information during the increasingly obvious market downturn, and requested that the website be handed over for us to take full responsibility for.

“Several entreaties from him for understanding of pressing challenges were made. On one of such visits, we made available additional funds to assist.

“Again, nothing happened and when ten (10) months after, sometime in September 2008 we asked again that he simply hands over the site and refund our money when able, he pleaded with us that we would have the site ready in October 2008.

“During the period of waiting, we requested for but did not receive information on the look and feel, functionality changes, logic for uploading and information on what customers should do and know about the new site. We still do not have that information.

“He rather sprung on us the need to move us to a ‘better’ dedicated server on a day when we were due to load a clients advert and while the website was acting up. It was literally a ‘gun to the head’ moment. We then realized that given the ‘catch 22’ situation we found ourselves, the only reasonable thing to do was to go ahead with it but insist that payment will be made by us directly to the web host, especially given our most recent experiences with him on matters relating to integrity.

“We recall that we have a subsisting contract till January 2009 and reckon that we could validate all works completed by the firm to achieve a smooth handover.

“ContentOmni migrated the platform to a test version of Proshare 3.0 in October 2008. The transition was anything but smooth or professional. Clients, advertisers, subscribers and staff members found it challenging to buy into the site and we thus demanded for a meeting/presentation from the firm. This he said he could not create time to do as ‘anyone should be able to apply themselves to the information there if serious’.

“Ugwuh’s disparaging remarks about users’ level of IT literacy would be considered by some as unusual but his formal response to our request to provide FULL DISCLOSURE of all third parties to which he had allegedly contracted on our behalf was anything, but sincere or professional.

“ContentOmni, he said, cannot and considers it unprofessional to disclose the identity of the third parties with whom he had contracted on our behalf nor can they disclose the source codes relating to our site (though initiated and paid for by us) if we want to take over the site and move it from them.

“We responded by demanding for a meeting as we became convinced of ContentOmni’s resolves to use any means available to them to keep us from being independent of them. When we insisted that we wanted a complete control of third party obligations and direct relationship with service providers supporting our operations as part of the transition, he threatened to shut us down unless full payment was received in a matter of days for spurious bills which included previous work done and paid for, and cost of transferring the website from one server to another.

Knowing our desire and passion to always serve the people, especially at this critical time of financial turbulence; Charles Ugwuh went ahead to block the website by placing a suspended service notice with the view to embarrassing the company and bring the brand into disrepute for no just cause. The notice was placed by ContentOmni and not the web host as anyone with knowledge of such services would know that no credible business will behave in such a reckless manner over disputed bills.

He had hoped that our zeal for service would compel us to succumb to such lawless act of intimidation and blackmail. WE REFUSE! If he is not responsible for the shut down, can he allow us pay direct to those who are, so we can hold them to a higher standard of decorum and service regard.

“This singular action of Ugwuh was subsequent to a commissioned project to deliver on the ideas put forward by us on the anticipated market requirements for investors in the Nigerian Capital Market; known as Proshare 3.0 – a customer centric platform which would remain free for all users. The completed site was due for launch in January 2008, having paid for same in November 2007.” Proshare recounts

“Charles Ugwuh, a son of a former minister, touts and believes that he is privileged enough to ignore the consequences of the shutdown by taking the law into his own hands. Sadly, this will be another chapter in the list of incidents we have had to grapple with this year in what many believe is a deliberate attempt by certain faceless persons/institutions to stifle the service and muzzle our voice in the market. It is not lost on us that the last incident we had to issue a disclaimer on related to the possible hijacking of our mails to which we used the website to immediately quell. More tragic is the fact that ContentOmni, referred to in the said broadcast as looking into the remote causes of such has allowed itself to be a willing tool to shut down our capabilities to defend ourselves.”

“This makes it such a compelling reason, not to allow such a blackmail to stand.” Proshareng affirms.