Director General, Securities and Exchange Commission (SEC), Munir Gwarzo, said the capital market, the institution he superintends, is in the forefront of getting the Nigerian economy out of recession. In this interview with ABDULWAHAB ISA, he also speaks on the unclaimed dividends saga and recent labour crisis that engulfed the agency, among other financial issues. Excerpts
As an integral member of immediate past management before you were elevated to the Director-General of SEC, what were the challenges then?
The responsibility before SEC and the market has grown bigger as well. It means that, the oversight responsibility of SEC has also grown. Like every organisation, SEC also has its own internal issues that it inherited from previous administration.
In the last two years, we’ve had a lot of engagements in terms of addressing those issues. It’s being a challenging time. It’s interesting to say that I have also enjoyed excellent support from the staffers.
No administration can achieve any progress unless you receive the support of staff. Nobody expect you to get 100 per cent support of the entire staff, but once I have 70 per cent supports, it’s enough for me to get the right momentum to move forward. However, that does not mean the 30 per cent will be laid back.
As far I’m concerned, my responsibility is for the entire 100 per cent. But once I’m able to have 70 per cent that shares my aspiration and vision and give the right support, it strengthens my resolve to continue what I have being doing.
So, it’s being quite challenging, it’s being quite difficult but, like I said, God has always been on our side. The market, government and staff have been quite supportive.
The capital market, just like the other sectors of the economy, has felt the effects of recession. What is SEC doing to address investors’ apathy?
After that crash, a lot of investors went out of the market, particularly retail investors. Some sold their houses to invest in capital market, some sold their vehicles, some sold their cows to invest in the capital market.
It has been a very bitter experience. But people need to understand that the capital market is a market where there will certainly be such developments – sometime it goes up, sometimes it goes down.
Even the most developed market in the world goes through that peak period and our market is not an exception. What we have being doing? We tried as much as possible to bring back domestic investors.
For institutional investors, we are happy that the National Pension Commission (PeCom) has been very supportive in terms of coming up with favourable guidelines for people to invest in the market.
Though, we have not being able to enjoy the kind of investments that the market expects from the Pension Funds Administrators (PFA). Money market rate gives between 17 and 18 per cent interests.
If you look at the treasury bills and the Federal Government’s bonds, it certainly discourages any institutional investor to invest in that equity market. That aspect significantly affects the propensity of institutional investors to patronise the market.
But we’ve been engaging them, especially now that the economy is recovering. We expect inflation to go down further. From last data, we saw it slightly dropped, which I think will favour the capital market.
From retail investor’s side, our approach since we came on board is completely different from what others have been doing. We try to look at what sort of issues retail investors complained about.
An investor will tell you that anytime he invests in the capital market, anytime dividend is being paid, he or she does not collect dividend. That is why we have being at the vanguard of propagating the e- dividend mandate.
We also get complain from retail investors who gave their shares to be sold and those shares had been sold but there are delays in the remittance of net proceeds. Sometime the complaint centres on total failure of remittance.
That is why we introduced Direct Cash Settlement, which allows the Central Security Clearing System that once those shares are sold, the net proceeds should now be credited directly to the client’s account.
We are making a lot of progress. This is the step we are taking in terms of bringing back domestic investors from the retail side and institutional side.
Poor enforcement of corporate governance code is responsible for half of fraud-related issues in the market. What is SEC doing to ensure strict adherence to code of corporate governance?
We’ve been doing quite well in that regard. We launched the code late 2015, precisely, in November 2015. Nigeria is the first regulator in Africa to come up with code of corporate governance scorecard where all quoted companies are expected to file in their scorecard and present their status of compliance with code of governance to the public.
In the last six months we have been running training programmes in conjunction with International Finance Corporation (IFC). They have been very supportive in terms of working with us to come up with the template for the scorecard and also training our staff.
We are almost through with quoted companies; we are also extending code of corporate governance to all the capital market operators. One of the things we have done in the last couple of years is to ensure that every capital market operator registered with SEC must have a compliance officer.
It wasn’t there in the past. Part of the responsibilities of the compliance officer is to check some of these corporate governance abuses so that he can now raise a flag.
If the management is not able to address it, the compliance officer has the cover of the SEC, given the provision in our law of whistle blowing, to extend it to the Economic and Financial Crimes Commission (EFCC) and other law enforcement agencies.
I think we’ve being doing quite well; we also came up with very robust capitalisation requirement where we expect companies to comply. We are also coming up with certain manual, like risk-based supervision, which, apart from looking at the financial standing of those companies, the template will also look at the level of their governance.
With that, I think in the next one or two years, we expect to see high level of compliance in terms of corporate governance from the capital market operators.
Is there a role capital market could play in aiding the recovery of the Nigerian economy?
I think the capital market has a pivotal role to play. When you are in a recession, you need a lot of investments. It’s the investment that will create the necessary growth. It’s when you have that growth that employment generation and citizens will now earn income.
The more citizens earn income, the more they will have more purchasing power, which will now encourage companies to produce more and the economy will continue to grow. There will be stability in terms of economic growth.
The best way to do it is on medium to long term. Capital market provides that window. For Instance, if you want to invest in infrastructure, this will require buying of materials, employment of people and the best platform to issue those instruments is actually the Nigeria capital market.
We’ve been engaging the Federal Government and working so hard to come up with favourable rules and regulations that will assist some of those investments.
We also have a role to play in terms of small and medium enterprises (SMEs). On infrastructure side, we are talking with Guaranco and Infracredit so that they can provide the necessary guarantee.
Investment in infrastructure is one of the riskiest areas of investment. For anybody to be comfortable to invest in those areas, the areas needed to be de-risked so that the level of risk investors will put in is less. Part of ways and means of de-risking an area is by providing a guarantee.
We are discussing with Guaranco and Infracredit to come to the country and provide some of the guarantees that will create a lot of activities in infrastructure.
We are talking with them to see ways and means they can extend such guarantee to SMEs because everywhere in the world, SMEs are the largest employers of labour. We need to extend the growth and development of our SMEs.
Most of them are not in the best of conditions. By the time the Guaranco and Infracredit are able to see the need to extend such credit to SMEs, it would help a lot. We are also discussing with private and equity funds and venture capital so that they can identify some of these SMEs that require funding.
They can enter those companies and provide them assistance they need so that those companies can be restructured and put in to operational level. We believe that the recovery programme of government will easily be achieved.
We are also looking at agriculture side, which is also in line with government policy. We believe that the best way to address agriculture is to have a thriving commodity exchange.
With a commodity exchange, a farmer will be able to get a better price for his goods and ensure price recovery. We are happy that the Nigerian Sovereign Investment Authority (NSIA) has agreed to invest in the Nigeria Commodity Exchange (NCX).
The intention is, once they invest and restructure the company, it will be easy for any investor to come in. We also encourage the establishment of AFEX, which is a private commodity exchange. We believe the role we’ve been playing in commodity exchange will certainly complement government’s effort in reviving the economy.
What is the state of unclaimed dividends and progress made in respect of National Investors’ Trust Fund?
From records we received from the Registrars as of end of last February, the total unclaimed dividends is about N117 billion. Currently, our staffers are with Registrars to actually verify this claim. We are also pushing for the establishment of National Investors’ Trust Fund to address some of the complaints of unclaimed dividend.
The reason for establishing it is, first, we don’t think the provision in Company and Allied Matters Act (CAMA) that states that any dividend that is more than 12 years become status bar.
It only states status bar, it didn’t state where those monies would be reverted. Secondly; there is no country in the world that has a law saying after 12 years you cannot claim your dividend.
We believe that after 13/14 years once someone can come with genuine documents to proof that he/she is the genuine owner of that document or is a beneficiary of that dividend, we believe that person should be able to own and claim those dividends. So, the whole thrust about unclaimed dividend trust fund, is first to ensure there is transparency.
You can clearly see how much of dividend declared has been moved into the trust fund. Secondly, is for market to also enjoy the liquidity. As it is now, based on the provisions of the law, once any dividend has been declared and has not been claimed after 15 months, the law says it should be reverted to the company.
The law also went on to say that the company should now invest the dividend outside its business and when it is 15, 12 years, it becomes status bar. Like I said, the law didn’t say where that dividend should be reverted.
With the trust fund, the moment it is 15 months of payment, it should go to that trust fund. Let me clarify that the trust fund is not going to be managed by SEC. It’s not a SEC trust fund, but strictly a market wide trust fund and that is why we had presentation from SEC, Ministry of Finance, from shareholders associations and from other stakeholders’ groups.
It’s a market-wide trust fund and it is going to have fund managers whose responsibilities are to manage the fund; it will have trustees and is going to have a secretariat that will administer the fund. However, the fund will register with SEC.
SEC recently swooped on some firms and sealed them, what were their offences?
We want to ensure that any service you are going to produce in this market, you must do it within the confines of the law. So, if its capital market activities you are doing, you must register with SEC, if it is banking related activities, you must have approval from the Central Bank of Nigeria (CBN); if it is insurance, go get registration with the National Insurance Commission (NAICOM).
The hallmark of our regulation is to ensure things are done properly. Those guys were basically doing funds management business because; they were collecting money from investors and investing the money. If you are doing fund management business, the law mandates you to receive the approval of SEC.
What is compliance level to e-dividend registration?
We are happy that people are getting their accrued dividends once they have registered. On the average, we have between 7.5 to eight million investors in Nigeria. As of today, only about 1.7 million have registered for the e-dividend.
A lot, almost six million are yet to register. Recently, we uploaded on our website, list of people that have not provided their account numbers and we are calling people to visit our website and check if their names have appeared so that they can approach their Registrars to register for the e-dividend.
The e-dividend is a major game changer in this market. The era of warrant being posted to your postal box is no longer fashionable. A lot of people hardly collect their dividend and these huge accumulated dividends are the problem of unclaimed dividend.
It’s a function of people not picking up their dividend warrant either because they have changed their address or the amount of transport they are going to pay to collect the dividend is far above the amount contained in the dividend.
If it is going to cost you N2,000 to collect dividend warrant and another N2,000 go to bank and pay, that is N 4,000 and you will return home, it will cost you another N4,000 making N8000. You only have dividend of N3000 to collect.
It does not make sense using N8,000 to collect dividend of N3,000. So, we want to address that. That is why we are calling Nigerians to register with e-dividend.
There appears a frosty relationship between the SEC management and leadership of its in-house union. What was respon- As of today, only about 1.7 million have registered for the e- dividend. Almost six million are yet to register sible for this?
SEC has never had union in its history. I think the Commission started having union in 2012, almost five years ago. They joined an umbrella called Amalgamated Union of Public Corporations, Civil Service Technical and Employees Recreational Services (AUPCTRE), an umbrella meant to provide membership for clerks, cleaners and drivers.
They had a running battle with my predecessor, the former DG. When we came on board as commissioners for two years, we knew there had been a lot of issues. For instance, when we came on board, there were backlog of promotions that had not been done. Within three months, we conducted two promotions, which has never happened in the history of the Commission.
Given our limited resources, we did the promotion. Secondly, we even paid arrears for those promotions and those are optional things. There is nowhere it’s made compulsory you must pay arrears when you’re promoted, but we paid arrears. Three, we met a system where by medical services – check-ups were limited only to senior managers cadre and above.
But when we came on board, we say sickness has no level. Sickness is not only limited to DG, senior managers, principal managers and other top officers. So we extended it to every staff. .
Also, we looked at some items such as lunch, education allowance, which increased by 100 per cent even though the institution was going through difficult times financially, but we feel we need to motivate staff, we increased it.
We looked at contribution to the pension fund. We believed that when you are working in an organisation and you retire, you should be able to enjoy some level of comfort.
There is a provision in pension Act that says if a staff is willing and ready to increase his/her contributions up to 20 per cent, the organisation should also be able to do that. And we sent memo to say we are ready to increase it up to 20 per cent for anybody that wants to do that.
The increase to 20 per cent is a cost to the organisation. Most organisations stopped at 15 per cent, but we said anybody that is ready to go to maximum bar of 20 per cent, we are ready to support it and we extended it.
We didn’t stop at that. We set up a clinic within the Commission for the first time in the history of SEC. And we have a medical doctor that comes in every Wednesday to attend to staff.
We have a consultant, family physician that comes once in two weeks and we have a permanent nurse that comes in Monday to Friday. We had one or two staff that went through difficult times, they were dismissed, people made appeal and we looked at the appeal; they tendered an undertaken and we brought them back.
All staff-related issues we have addressed. I challenge anybody to fault these provisions I listed. But the argument is, because you are a union person you think you can do something and go scot-free, we say no.
You are first and foremost, a staff of the organisation and you are bound with staff manual of that organisation. You are actually a member of union of the organisation by virtue of being a staff of the organisation.
If you were not a staff you can’t be a member of the union. My argument has been, if you are a union official your conduct should be more than ordinary staff member because you are holding that position in trust on behalf of every staff.
So, your activities should be exemplary, your conduct should be above board. You cannot arrogate certain powers to yourself, thinking that whatever management wants to do they need to consult you.