The Director General of the Securities and Exchange Commission, Lamido Yuguda, speaks on the factors that drove unclaimed dividends to N190bn and the ongoing reforms in the capital market, during an interactive session with journalists. Our reporter, Oluwakemi Abimbola was there
With the economy undergoing reforms, what are the reforms being considered by the commission?
There are a number of reforms that have been taking place. There is the Tech Board from the NGX. We have reforms in custody in the Collective Investment Scheme space. We have reforms in derivatives trading; reforms are taking place in the commodities exchange.
A number of reforms are taking place in-house in the regulator to make the regulator more efficient, more IT-friendly so that the capital market can embrace technology as we move forward.
We have a number of new initiatives on crowdfunding, Robo advisors; these are all areas where significant activities are taking place to position the capital market so that they can really fund the nation’s quest for development.
We still have issues of unclaimed dividends in substantial amounts, including in a company like MTN Nigeria, whose listing was driven by digital offering with a lot of documentation done when the offer was going on. Why are we still having the issue of unclaimed dividends not in one or two companies but in many?
Unclaimed dividends have become a very serious problem in our country because we have issues with identity management. Within the capital market, we have issues with multiple subscriptions, where people are using different names to subscribe to share offerings and we had a situation where not much information was captured on each individual subscriber.
We also have a lot of companies that have changed their names from the time we were using paper dividend warrants. We have legacy issues that have really aggravated the issue of unclaimed dividends.
However, these are issues that we have been trying to resolve with the introduction of the electronic dividend payment. The electronic dividend portal has actually been under some kind of reforms under the committee of the electronic dividend mandate to get the portal to perform much better and be user friendly, so we can substantially increase the investor experience in terms of uploading their details and get the issue of unclaimed dividend significantly reduced.
I note your reference to MTN (Nigeria), which is a newer stock than others and should not have had a lot of unclaimed dividends on it. We also looked at that and are now tightening our KYC requirements. By the time you buy shares in the capital market, all the information that should be captured from you will be captured so that these unclaimed dividends will be a thing of the past in our market.
What is the SEC’s stance on dollar-denominated bonds listed on the NGX?
I don’t see any problems with dollar-denominated bonds. Any bond should be an obligation that is backed by the obligor to repay the bond. So, while that bond has that character, it does not matter the denomination of that bond.
Of course, that bond could be a corporate bond, a sovereign bond or an agency bond, but what matters is that the person or the entity, who has borrowed the money through the bond, is able to meet the repayment requirements, both of the interest and principal as they fall due. So, once they are there, it is a good investment for those who wish to participate in those kinds of bonds.
What have been the achievements of the revised capital market master plan and the challenges in terms of meeting targets in 2023?
It is important to remind us that the capital market master plan is actually a 10-year plan from 2015 to 2025. What we did last year was to do a midterm review of the plan so that we can align the plan with revised capital market expectations, with newer economic developments so that as we move towards the end of the planned period, the plan is very consistent with the reality on the ground.
The capital market master plan has achieved a lot and in 2023, we continue to see these achievements. We have mentioned the issue of dividends and the issue of commodities exchanges. We have mentioned the issue of strengthening the entire capacity of the regulator to discharge its mandate and we have the non-interest capital market as an important area for development that we have not exploited very well and now, you can see concerted efforts in the capital market and in the rest of the financial sector to explore that area. We have mentioned Pension XI. We have seen a lot of Sukuk issuances by the government, all issues oversubscribed.
We have also looked at the developments in the CIS sector, that is the Collective Investment Scheme sector, where we have strengthened custody requirements and our regulations so that capital market operators in this sector will continue to offer products that are suitable to investors and we can substantially reduce the impact of non-regulated or Ponzi schemes.
Overall, I will say that our achievements have been really good. Can we have achieved better? Yes, of course. That is what we are doing with the revised capital market master plan.
The challenges are quite many. One is the issue of technology. One of the things we have done since we came on board as management is to ensure that the technology environment within the commission is actually strengthened. We have a robust technology project. It is underway in the commission and we hope to see it launched by the beginning of 2024.
We also have a very challenging macroeconomic environment; no capital market can prosper without the right macroeconomic environment. We have high inflation, unstable exchange rates and we are beginning to see the kind of reforms that are conducive to capital market prosperity and you can see that the capital market has responded fairly well to the reforms as they are introduced.
I think the future is really great for our country. I think we need to harness the capital market to fund critical infrastructure. These are the investments that will actually stand the test of time. These are the investments that will prepare Nigeria for the kind of population explosion that every reasonable forecaster is projecting for Nigeria.
Today, we have a population of 200 million plus. We are likely to have a higher population in the next 30 years. We are already seeing a demography that is increasingly young people, who don’t have the right kind of jobs. Most of them don’t even have the right type of education.
I think if we make the right investments today in infrastructure, we will see a Nigeria that is much prepared to confront this demographic challenge. We will see our youths taking advantage of education, skills and jobs to make a good life out of their stay in this country.
How do you intend to get the country out of the Financial Action Task Force grey list?
The grey listing of Nigeria is actually a thing of concern to the capital market but as you know the Financial Action Task Force does not look only at the capital market. It looks at the entire economy before it makes its assessments. The financial sector is one but they look at a lot of things.
What we have done in the capital market is to work with all relevant agencies involved in this and the National Assembly and the judiciary, the regulatory agencies, the Central Bank of Nigeria and the Corporate Affairs Commission. Basically, everyone involved in how this country works, the way the economy of this country moves is involved in this discussion.
In the capital market, we have our own part to play and that role is to ensure that operators in the capital market carry out their operations with a very clear risk-aware approach. That they know the kind of people that they open accounts for- KYC. Ensure that no transaction is done without carrying out (checks) in terms of money laundering, counter terrorism financing and proliferation of small arms.
We do not allow transactions to be done with entities under UN sanctions. We have sent a new set of circulars and requirements to the financial sector in the capital market.
We have organised training for capital market operators on what they should do to get Nigeria off this list. Capital market has been on the forefront of efforts to get Nigeria delisted off the list. We have been working with the relevant agencies. We have been attending all relevant review meetings. We are happy with what we are seeing in the capital market. We are not relenting; we are charging the operators to do more so that we can have a very clean slate at the next review.
There was a recent tussle for control at FBN Holding. What should we be expecting to see from the SEC to ensure this does not spill over to other listed companies?
The commission has been looking at this. It is currently being investigated. So, I will not be able to share anything more at this point. The commission is concerned with a view to resolving the dispute.
There are concerns that the DG and his management staff are not doing enough to ensure passage of the Investment and Securities Bill?
There were some issues that needed to be corrected. That was sometime in early May. Before it could be resolved, the last administration had expired.
The bill was then passed back to the National Assembly. It had already passed the second reading and is before the House of Reps committee, which is looking at it.
All that needed to be corrected and amended has been done. You know, legislation is a very sensitive activity.
Even within the commission, we realised that there were typographical errors that if they had been passed would have necessitated us going back to the National Assembly to seek an amendment. We had issues from our own side; a few government agencies had issues from their end. The bill is actually very ready. If it was not in a good state, it would not have passed the first and second reading in the 10th assembly now.
So, I will tell you that the commission is pursuing the ISB. The bill is reflective of the modern capital market, reflective of the kinds of activities we are trying to do. It has a lot of robust provisions for commodities exchange which were not in the 2007 Act.
Once we have this new legislation, the capital market will basically have newer impetus because of the novel provisions and the strengthening of the provisions in this particular bill.
Is the SEC self-sustaining?
The answer is yes. We are able to pay our bills. You know SEC is a government agency that relies on its own Internally Generated Revenue for 100 per cent of its revenue and expenditures.
We raise our revenue for the market. Also, we spend according to our revenue earnings. That is actually a tough task, meaning you have to run this organisation on a very fair financial principles basis. If you overspend, you cannot have any other source of getting any support. We have to be very cost-efficient and cost-effective. Over the years, we have been self-sustaining.
