Growing Suspicion Ndi Okereke-Onyiuke Is Planning To Transmute From DG To CEO

DG, NSE

DG, NSE

Not a few capital market watchers hailed the announcement of the demutualization of the Nigerian Stock Exchange. Literarily, demutualization is the equivalent of the stock exchange transforming from a quasi public sector self regulating organisation (SRO) to a publicly quoted company, accountable to its shareholders and governed by the laws and regulations that other publicly quoted companies are answerable to in the market.

Most stakeholders had commended the prospect of the demutualization in the expectation of the fresh breathe of life that would predominate in the capital market under a new leadership and operating environment. Some operators were particularly excited over the expectation that the current Director-General of the NSE, Prof. Ndi Okereke-Onyiuke, will not be qualified to continue in the office of the CEO of a demutualised stock exchange.

Recent indications emanating from the stock exchange, according to observers, are telling signs the DG is clearing the field to make her continued stay in the high office of the stock exchange secured even beyond the year 2010 proposed year for the demutualisation of the exchange.

Reports of recent administrative activities at the exchange indicate that Okereke-Onyiuke has been restructuring, personnel are being moved and new appointments being made. Of major concern to stakeholders is that some of the recent appointments at the exchange are somewhat connected to the DG. For this reason, the concerned stakeholders argued that the DG’s maneuvers suggest that she is positioning her people to pave the way for her come back to the head of the stock exchange after its demutualization.

FORENSIC ACCOUNTANT CASTIGATES FEDERAL INLAND REVENUE SERVICES FOR PROTECTING OIL COMPANIES

Issues in appropriate auditing process and accountability have, over the years become a constant source of worries and had, often led to cases of finger pointing by Federal Government agencies responsible for regulating the oil and gas sector and the mostly multinational oil producing companies in the country.

The contentious issue had always revolved around the huge discrepancies between amount that up stream oil companies say they paid and what the government says it actually received.

Financial experts and officials of the Nigeria Extractive Industry Transparency Initiative had, since 2004 continued to dismiss the measure of transparency and accounting standards as generally poor.

But a United States of America based Nigerian forensic accountant has accused the Federal Inland Revenue Services of shielding the influential multinational oil companies from the investigative probing of forensic accounting. The Federal Inland Revenue Services is the primary government agency responsible for assessing tax and other revenue due to the government from oil and gas exploration and production activities of shielding.

Mr. Nat Cole, the Forensic Accountant observed that he had been aware of a flourishing practice of under reporting of revenue due to the Federal Government from the multinational oil companies in Nigeria and had approached the Chair person of the FIRS to approve for him, at no cost to the government, the responsibility of auditing the oil companies on the auditing model of forensic accounting’. Cole said.

“The Federal Government and other stakeholders in the oil and gas sector have always been suspicious of figures declared by multinational companies in the now vexed joint venture arrangement with the government in oil exploration and production. In fact, the Nigeria Extractive Industry Transparency Initiative had, in an audit covering the period 1999 to 2004, uncovered huge discrepancies in the figures returned to the government by the oil companies and the figures that are, actually, due to the government.

“As a veteran forensic accountant with more than 28 years auditing the oil and gas sector in the United States and other countries in Europe, I had volunteered my services to the FIRS to audit the books of the oil companies without charges to the Federal Government. I told the Chairman of the FIRS, Mrs. Omoigui Ifueko-Okauru of the limitations of the conventional auditing style to get the actual status of revenue accruable to Nigerians through payment to the government by the oil companies.

“The fact is that by deploying the forensic model of auditing one would be avoiding the what you see is what you get model of auditing. The fact is that with the auditing, you can only work within and by the figures the companies present to you. You won’t be able to ask questions beyond the figures presented. But with forensic accounting and auditing procedure you apply investigative techniques and that will uncover more facts that can be authenticated.

“But the FIRS seems not be to be bothered about what I all of us believe are the wrong things the oil companies are doing as they deliberately act to short change us. I offered my service and I think it is the responsibility of the FIRS management, if they are really serious about getting the right picture of what is happening in the oil and gas sector, to approve the forensic auditing of the companies in the sector.

“But I fear that the FIRS may not be willing to do this because it might be protecting the oil companies from what I can’t really understand. Well, the truth is that the oil giants have become so influential in government that they seem to do things at will and get away with these inappropriate things. It won’t be until we muster enough courage to confront them that the nation would be able to get what is rightfully its, from the oil giants.” Nat explained.

WILL THE STOCK MARKET EVER RECOVER?

Many investors have sat and watched in bewilderment as the value of their stocks plummeted, a reason I have been asked over and over if the stock market will ever recover from the losses that have been accumulated over the past eight months. To be specific, investors have lost nothing less that three trillion naira in terms of paper losses alone. I said paper losses because the losses you see in your portfolio are not real until you give a sell order to your stock-broker, stocks are volatile assets whose value can change within a few trading days.

REASONS FOR THE PERSISITENT DECLINE

 1.   LOW INVESTOR CONFIDENCE: The bearish market which started in March has eroded the confidence of many investors, especially, those who entered into the stock market within the past two years. The peculiar thing about these new investors is the fact that a lot of them see the stock market as quick money making venture, and as you know, some of them have never witnessed such a long bearish period as we have witnessed within the past few months. It is also noteworthy that several investors had just begun to recover from the losses they sustained from wonder banks like Nospetco, Sefteg, etc; in 2007. I remember that such investors were condemned for being too greedy by stock analysts and they were admonished to limit their investment to stock market alone. So, at the beginning of 2008, we experienced a massive exodus of investors from the wonder banks to the stock market, but alas, the stock market has been crashing which have made such investors to resign from the investment world. This is no good news for all stakeholders in the market because all over the world, the confidence that investors have in a market determines how successful that market is since they are the ones who move the imaginary hand of demand and supply at all times.

 2.   POOR IMPLEMENTATION OF POLICIES: Our regulatory agencies should take one or two punches for the current situation of things because they have been slacked in their approach to recent developments in the market. A stakeholders meeting was finally called on the 26th August to find solutions to the current situation after six months of a bearish market. Since then some of the policies that were identified have either not been implemented or simply relegated to the background. The most important of this is the creation of a stabilization fund to stem the bearish trend whenever necessary, I don’t know how you look at it, but from my point of view, I think this issue should have taken priority over other policies because without funds that are needed to buy stocks, the stock market can simply not move, it’s as simple as that.

Dear friends, gone are those days that fundamentals count and investors are motivated to buy shares because of good quarterly and audited results published by companies. Investors are not moved by results again and if you want to contradict this argument, check what has happened to the likes of Fidelity Bank, Oceanic Bank, etc; since they declared their fantastic results. The truth is, things are not normal and desperate situations require desperate actions. In addition to this, the authorities have not addressed the investing public since August 26. I have reasons to respect the American spirit better within these past few weeks that the Americans have been hit by an unprecedented financial crisis. Within two weeks, the president of the USA, the Senate president, speaker and federal reserve chairman have addressed the American public four good times trying all they can to update Americans on the situations of things and the way forward but it’s not like that here, investors are always left guessing.

Another controversial policy is the introduction of a minimum one per cent drop in prices while allowing stocks to gain a maximum five per cent in a day; this has caused what some investors call a slow motion in the stock market, a situation that has made the sale of stocks even more difficult than in the past, this was supposed to be a temporary measure but I think it’s here to stay. The list of the number of inefficiencies from our regulatory agencies cannot be exhausted in one piece of article, it is better left as it is.

3.   GLOBAL FINANCIAL CRISIS: the Nigerian crisis actually preceded the ongoing global financial crisis which started in the USA with the collapse of big banks like the Lehman Brothers, Merrill lynch and WAMU. Stock markets all over the world are currently taking the beating of their lives. As a matter of fact, the Russians had to shut down their stock exchange for two trading days in September in order to arrest excessive decline in stocks. Last Thursday afternoon, I saw some investors protesting in the legislative house in Hong Kong because of the losses they have made on their portfolio. Don’t mind the CIBN and CBN which recently came out to say that we are immune to the global financial crisis; the truth is that we are not immune and I will state my reasons.

First, recall that we had touted the entry of foreign institutional investors who were planning to come into the Nigerian market as one of the factors that will lead to a bullish market in 2008, but at present, the JP Morgan, Merryl Lynch, or Barclays of these world won’t come into the Nigerian market for now because they have serious problems to contend with back at home. In fact, Charles Soludo, Governor of Central Bank of Nigeria recently shifted the blame for the recent market drop to some of these foreign investors who have pulled their funds out of the Nigerian stock market.

Despite all these challenges, it is not all gloomy for the Nigerian market because there is always light at the end of the tunnel, this market will definitely recover soon and the road to recovery will form the central theme of my article in the next edition. Watch out for it.