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Tug of War Over A Name (Posted 30th Apr, 2001) Tell your friends about this page! Email it to them.

Story of the Securities & Exchange Commission and the Nigerian Stock Exchange

What is in a name? No big deal some would say. But if the current ruckus between the Securities and Exchange Commission, SEC and Nigerian Stock Exchange, NSE is anything to go by, there must be more to a name indeed. SEC which regulates the capital market, where NSE is the major player wants the latter to drop its name and revert to its pre-1977 name, Lagos Stock Exchange, LSE. But, so far, the NSE has demurred.

About a fortnight ago, after the NSEpurportedly failed to respond positively to several entreaties and directives from SEC to change its name, the commission announced the suspension from office of the chairman of NSE Ganiyu Abdul-Rasak, a senior advocate of Nigeria, and the director-general, of NSE, Ndi Okereke-Onyuike. But in a swift reaction the next day the NSE described SEC’s action as “Illegal, contemptuous of court and of no effect.”

Explaining the NSE’s position, Sola Oni, its corporate affairs manager said that the Federal High Court had early in the year “stopped SEC from taking any steps against the NSE on the grounds of its failure to change its name “pending the outcome of the court action instituted by the NSE over the issue.

Therefore, according to Oni, SEC’s action was also “subjudice”. Last week, Abdul-Rasak and Okereke–Onyuike held a meting with stockbrokers at the NSE building in Lagos where the NSE president assured his audience that there was nothing to worry about. He restated the NSE earlier position that SEC’s action was illegal, adding that the director-general and himself were still very much in office and performing their duties.

The Root of the Face-Off
But what is really at the root of the unusual face off between the two giants of the capital market? From all indications, the cause is the newly opened Abuja Stock Exchange, ASE. The baby of the infamous General Abacha Junta, the exchange was completed in 1996 but was only opened last November 2000 by the Obasanjo administration. Even so, and perhaps scandalously, the exchange opened without a single issue being listed on the exchange. It is widely held that the then Abacha junta enmeshed in an intractable political crisis embarked on the Abuja Stock Exchange project as part of his strategy to downgrade the position of Lagos as the Country’s commercial and business capital. The larger script was to isolate and contain the political crisis within the so-called southwest area of which Lagos is a part, by shifting certain vital economic or business activities elsewhere. Thus, the ASE built and equipped with the latest technology was expected to rival the NSE based in Lagos. The only problem was that there was no major commercial activity in the new Federal Capital and there was a surfeit of stockbrokers to give life to the glittering but inert façade of the ASE.
Dual Listing and Multiple Trading
In November, few weeks after the ASE building in Abuja was commissioned SEC had issued new guidelines on the listing of securities in the country. Among the new rules were those allowing dual listing, and multiple trading on the country’s exchanges. Under the new rules, public companies or issuers could have their shares (that is, offer for sale) on more than one exchange.

It also allows brokers to belong or be registered with more than one exchange. Further more, the SEC rules states that: “an exchange shall permit trading in securities not listed on it.” For the NSE which had watched with trepidation and suspicion the birth of the ASE, the SEC’s new rules was proof positive that fire was being put to the timber of its dominant position as the only stock exchange in the country. Particularly odious to the NSE was the idea that an issue not listed on an exchange could be traded on it. A NSE statement described this rule as “absurd” and perhaps unheard of in the traditions of the capital market. Its director-general, Onyuike condemned SEC for issuing such guidelines without carrying other stakeholders in the market along, and called for the suspension of the new rules. Indeed, the NSE smelt more than a rat in the rule allowing an issue to be traded on an exchange where it is not listed. Some industry watchers close to the situation believe that the Obasanjo administration may be planning to give the ASE a lifeline by listing the shares of the big parastatals, the national Telecommunications Co. NITEL, and National Electric Power Authority, NEPA - slated for privatization soon - on the ASE. With the above provision, stockbrokers in Lagos can still trade the shares. The net effect is that the NSE hall in Lagos would be turned into a mere trading ground or agent to the younger exchange in Abuja, which would pocket the big listing fees accruing there from.

Undue Advantage to the Abuja Exchange?
Apprehensive of such an outcome, Hayford Alile, the NSE’s former director general who retired in 1999, had called on the authorities not to give undue advantage or patronage to the Abuja exchange. Alile in November 1999 had said “government should allow a level playing field in order to ensure healthy competition” between the two exchange. Alile added that: “I don’t think there is anything against multiple exchanges, if it is to guarantee more business out Lagos.” But he noted that elsewhere in Europe and USA other nations were merging their stock exchanges. To be sure, several studies commissioned by government to look into the country’s capital market had recommended the setting up of more exchanges. These were the Adewole Adeosun panel in the late 70s, the (late) Pius Okigbo panel in the 1980s and lately the Dennis Odife panel, which submitted its report in 1996. This may have informed the setting up of additional trading floors of the NSE in Port Harcourt, Ibadan, and Kano, which are all the NSE’s subsidiaries

Another question is whether the Obasanjo administration should have gone ahead with the ASE, which from all intents and purposes, is a government parastatal at a time government was privatising its age-long parastatals and companies. The stock exchange in Lagos evolved from a private sector from pre-independence era to 1976 when it was yet known as the Lagos Stock Exchange, and flourished, nourished by the commercial and business hubris in Lagos. This would not be so in the case of the ASE. It is yet unclear what will become of the NSE’s suit against SEC. Although in 1999 the Abubakar administration had strengthened SEC’s hands through the Investments and Securities Decree (of 1999), which gave SEC wide ranging powers including revocation of the certificate of registration of an erring stock exchange.

It also allows SEC in section 25 subsection {4} to remove an executive officer of any exchange or capital trade point who had “willfully contravened” existing securities laws and regulations. But the big question is whether the government or SEC can legislate patronage for ASE? That is the real question, not what name either exchange bears or will bear.

Editor's Note: NEPA is now called Power Holding Company of Nigeria, PHCN from 2005

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See also: Securities & Exchange Commission - History, roles & functions

               The Nigerian (Lagos) Stock Exchange - History, roles & functions

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