New vista of fresh foreign investment flows with demutualisation of NSE
In her time as Director-General of The Nigerian Stock Exchange, the personality of Ndi Okereke-Onyiuke, who had joined the bourse upon her return to Nigeria from New York, United States of America in 1983, as manager and head of research and information services department, bestrode the Nigerian capital market and Corporate Nigeria like a colossus. There was some activism about the way she went about leading the bourse, almost as if she had an urgency, especially with this conscious desire to make The Nigerian Stock Exchange and the capital market come alive in most Nigerian homes. She travelled around the country and the world and you could tell she was a woman in a hurry to deliver an active bourse to investors. But it was a much more relaxed Ndi Okereke-Onyuike that business a.m.’s PHILLIP ISAKPA and STEVE OMANUFEME met when she welcomed us for this interview. You will find the following excerpts, illuminating. PHOTO CREDIT: JAYEOLA ISAAC
Let us start by asking; what is your take on the state of the Nigerian economy today?
As a Nigerian, I would say it is not so good; it ought to be better if the right people have been put in the right positions. A president can’t do everything himself. He is far from being an economist or money or capital markets person, he has absolutely no idea about the economy, even though he has been president before. He relies on people he chose to move the economy forward. In any country, if you don’t get the economy right, then you are still flexible, and as any Nigerian would agree, our economy has not been fixed as it ought to be. I think that he has a cabinet that is not quite appropriate for the Nigeria of today, because Nigeria has gotten complicated. We have a lot of people that have both intellectual and most importantly, technical know-how, and there are very few people in this cabinet that have the technical know-how, and I’m not going to call out names. If you don’t get the economy right, this is the result you get. The international community is scoring us zero on everything, Nigerians themselves have already scored the Nigerian economy zero. A lot of people have gotten into bad things because they believe there is no hope. And a lot of quality people have left Nigeria.
I have a consulting partnership in the US, but I decided to stay in Nigeria. I stayed in Nigeria to do the work and since I’m trusted to do the work, I don’t have to stay there, because I believe in Nigeria. I want to die for Nigeria, so concerning our economy, we can do better. We have people that have been ex- posed for e ective results.
You see that young man called Macron (Emmanuel, French President), he is not an intellectual wizard, but he was able to assembly quality people that know what to do with France, and he has a fair knowledge of everything and he has a strong leadership qualities. Why can’t people in their late 40s and 50s copy that and be like him, people in my generation and the younger generation, like people in their 30s and 40s, be in economic related systems in Nigeria. e young people should open their eyes, because there is a di erence between a 40 year-old and 60 year-old working. There is what we call factor of diminishing returns. The director-general of NSE that I was at 40-50, if you ask me to run The Stock Exchange, I won’t be the same person, the same e ect would not happen. I used to sleep three hours in a day, my ears were wide opened, I used to talk to 40 people in five minutes to sell Nigeria. There was no part of this globe that I didn’t go with my stockbrokers and bankers to sell Nigeria and it worked. Can a 75 year-old or 80 year-old man do the work? No. Most of the people there have been tested and didn’t excel. Take someone like Fashola (Babatunde, minister of power, works, and housing), that excelled in Lagos State, why is he not excelling now? It’s because the cabinet are not at the same pace, in the same realm as Fashola. I just used Fashola as an example, there are a few others. When I came into e Stock Exchange, for the first ve years, I made emphasis to train my sta and stockbro- kers, I took them all over the world, I didn’t spend e Stock Ex- change’s money. Foreign investors that I had worked with when I was in New York Stock Exchange financed our trips, most of the time; they were eager, they know Nigeria has potentials. We have to teach the young people how to think again, and say to them, the people ruling us have done it one million times over and it is not working and there has to be a dramatic change. I don’t criticize, what I do at any opportunity I have is to proper solutions.
We have played our own part, we are here to advise. Why would a 65 year-old or 70 year-old man want to be ruling, and then you ll your cabinet with people that have also expired? It is not easy to start a paper like this, business a.m., I would read it and recommend it to people.
In the UK, for instance, they say the cabinet office is the engine room of the government, why do you think this cabinet is not the engine room of this government and moving things forward?
Honestly, I have not found out why, but I know it is not working, because, from my own perspective, everyone is working at crossroads. To the people of my own level, it doesn’t seem that there is serious coordination. You see, when you follow a one-man track, it doesn’t work; I’ve also been a leader and there is nothing I did at the Nigerian Stock Exchange that I didn’t involve my stockbrokers and bankers, insurance people and even the corporate world; it may be something nancial, but the people at John Holt, Dangote Industries and in oil sector, it affects them too. It is not only the brokers, in fact, they are the ones that generate what we work on in the nancial district, so when talk- ing about the economy it is encompassing, not just the nancial sector and government ministries that are associated with manufacturing, industry, it is everyone. The more you discuss with people that are not experts in your field, the better they would respond in the cabinet when you propose what to do, because they already understand it. But if they don’t understand, they wouldn’t and no man can be an island unto himself (so); there has to be cohesion, you have to explain the value whatever you are pushing to other cabinet members, and then it would trickle down. at is the problem with Nigeria, it doesn’t trickle down, decisions are taken, and they should come back and explain, up to the messenger.
They should hold state meetings, I used to do that, my messenger in the stock exchange can tell you what is happening in that market. He didn’t go to school and reach certain levels, but knows at least the periphery of what is right in the market and why certain decisions have been taken. at is what I mean by trickling down, because it is not every cabinet member that knows about every aspect of Nigeria, but that is what I’m saying, there is no cohesion, because if you are a minister of Nigeria, and you go to gathering where they are castigating the minister of finance, or agriculture, then you should be able to defend them, their actions and explain it to the people because you know it, you have asked questions and you know the rea- sons for the decisions, and how it would be implemented.
It is your duty to learn it, you are part and parcel of that cabinet. But I see there is no cohesion, everybody faces their own, and they are experts in them. When you choose a cabinet, you make sure they understand every aspect; they may not be experts but every decision you take and every project you take on, every member of the cabinet should be able to explain why they are taking a particular route. I came back to Nigeria in 1983 and have lived in Lagos since then. When Lagos was broke, I called the former governor, Bola Tinubu, and asked him what they were planning to do, we could not raise money on the capital market so I advised him to do Lagos bond. I said that there is no one that would not buy Lagos bond. He went to ask for the budget from his commissioner of nance, and they were in my house the next day and we did Lagos bond. It was so sweet that he came back the second time and the third time.
When Fashola came, I was making a delivery at Abuja and he came up to the podium and whispered in my ear, I then told him that he had my number and should come and see me at home. I left early because Lagos State was in trouble, and made a bond again. at is what I call a governor. He knows where to get the solution, he came and we did the first bond and he used the money wisely, because of stock exchange talks. You can’t just do a bond and say, bye, bye. He came back and did the second one.
He carried his cabinet along and that is exactly what our current governor, (Akinwunmi) Ambode is doing and that is why he is succeeding. So, we all have to rally around the people that are performing. is cabinet is not performing; we are talking generally, but I can single out three or four ministers that are performing. So the ministers have to look inward and the president and the team he consults have to look inwards and make changes. There are so many Nigerians that are highly qualified and do have the technical expertise in every sphere, and if I were him, I would not care whether the person is from his local government or whatever part of Nigeria he is from. The goal is to be able to say when I was the president, it worked. I can raise my head high and say while I was CEO of NSE, the capital market worked; yes, we made one or two mistakes, but the good work overshadows the untidy work. Will I say I did it all alone? Of course not. But I had the sense to assemble human beings that are Nigerians without looking at where they came from? I’m a detribalized person; you can see the quality of stockbrokers I gave license to. It is the performance that matters. Unless we do that, Nigeria will never move forward.
Let’s look at the financial district in which you played a major role and, perhaps, you still play a major role, as a consultant, like you said. What do you think the financial district should be doing to help this economy to make progress?
The stock market and the money market now are not working in cohesion the way it used to be. I see it and I ask about it from the appropriate people. Practically, all banks are listed on e Stock Exchange, at least 90 percent of Nigerian commercial banks are listed. From time to time, I used to call the CEOs for meetings, at the stock exchange, and I used to tell them that the wrong things they were doing would not be tolerated in the market. I then tell them the right ways to do it and show them the bene ts of doing the right things to the investors and commercial customers. And when your company is doing well in the stock market, you declare dividend and reward them for supporting you; so they can convince someone else to go to your bank that is quoted on the stock exchange. So they have to be carried along, they don’t see it as interfering in their work because their company is quoted on NSE, the same way I would do to John Holt or UAC, advice have to be given not because we know better but because we oversee all these companies, and we get their information and their reasoning for taking certain decisions. So we are able to apply the reasoning of one company to another.
How do we revive the market as someone who is locally and internationally steep in the knowledge of how these markets work?
See, the capital market is information driven.
The way I used to give information to the public appears not to be done as much now because if you are asking the public to invest in the market they don’t know much about, then the sta of CSCS and stockbrokers should disseminate information, they should explain what is happening in the market. It is a collective intellectual work, you can’t know everything, and the journalists I invite when I was NSE director-general have a feel of the people, those people that are buying and selling the shares, you see them more, and in the gallery; there is also a section for investors to come and watch the market, what is happening on the poor, it is an open market. e journalists don’t have much access now, so how would they disseminate information? e public don’t have the gallery to hear and see what is going on. Why does the New York Stock Exchange, the most computerized stock market in the world, have a trading poor? It’s because they want the people to see and hear what is going on, to see a stockbroker. We had a stock exchange shop, it is not for money-making; people get up and come to the hall I created, people can buy pens and others, so they can have a souvenir from the stock exchange. Little things like that make a difference, it is part of getting people’s interests piqued to buy shares. So the stock market is information driven.
I went to every corner of Nigeria, and met with market women, traditional rulers, governors and their sta and I went with my brokers so that they can buy the shares, that is why stock market doesn’t need branches. But I opened branches in every state, working branches and connected them with Lagos in real time so that no one in Kano or Port Harcourt can say they bought shares of any company at N2 while the person in Lagos bought at N1.50, there is no such thing. So, those branches don’t make money, it is not a money making venture, it was when we started talking about demutualization, demutualization will still be that stock exchange will still make some money, but not money that you can say is real money. Now, it is not profit making but demutualization will make it pro t making, earning minute pro ts to be able to catch up with innovations.
Talking about demutualization, it is taking so long, what do you think is causing the delay?
Honestly, I don’t know. I have spoken to the new managers of the NSE, the CEO and certain council members came and we talked at length, and I have offered my services free of charge, because like I said, when they called me at the National Assem- bly, when there was an unusual problem created by a woman, in SEC, not understanding that the Stock Exchange is not under government and came and scattered stock exchange with police.
For me, the Stock Exchange is like my baby. You can’t call me and say that I should castigate the Stock Exchange, created by me, with my sweat. I can’t destroy the market by telling what is wrong. I can only tell you what will make it better now that I have left. I’m in touch with them, I have spoken to people who took over from me, but I can’t force them. I’m doing big time con- sulting abroad for the people that know the value, unfortunately, we don’t understand and value consulting work in Nigeria.
What about the fact that the National Assembly appears to be involved in it?
Demutualization will help the market a lot because the first leg of it I completed, that is throwing the market open, foreign investors to come and invest, foreign investors to buy, and for that I went for a collaboration with the Central Bank of Nigeria under the Emir of Kano Sanusi, his number two man in charge of banking supervision, with the young man that wants to come out as president, Kingsley Moghalu; I enlightened them, educate them, about the workings of the market, because we used to have what we called nancial services regulation coordinating committee. I don’t know whether they are still holding it now. It comprised the CBN, Stock Exchange, the insurance regulator (NAICOM), the SEC, Securities and Exchange Commission, all the regulators of the nancial market were members; their chief executives were all members. Because everything we do are interrelated, the money market within the bank cannot be run- ning a parallel market against the stock market, the stock market cannot be making decisions that will affect the pension market and so on. That was why we formed that fsrcc (financial services regulation coordinating committee) and I hope and pray that it is still working now.
I was completely fabbergasted when I saw the Stock Exchange on television at the National Assembly. If they had consulted me, I would have told them: “You don’t need permission. What you should do is enlightenment; just say your decision will be done on a particular date, maybe a month to the time or two weeks to the time you write National Assembly saying you are planning to do this in the market. Your board has decided to do this; your market will be stockbrokers’ because the stock alone will not lead to what the stockbrokers would implement it. The stock exchange and its dealing members have decided to demutualise. We have done it in the past house and senate, the president was asked the meaning g of demutualisation, what will be the effect on our market? It’s positive and there is no negative. And it will bring more foreign investors; it took us a long time to get foreign investors to invest in this economy, not only in the stock market and also in the money market, because there was a time that I went to foreign investors and I take some bankers with me. When I went to London Stock Exchange, New York Stock Exchange, anywhere, we took bankers everywhere we went. We take bankers so that they will understand so, we have done all the consulting, and we have gone to all branches of stock- brokers. We have talked to market women; everybody and now we are come to you to explain what is de –mutualisation and why it is good for the Nigeria economy and good for the stock market. When the market is de–mutualised, foreign companies can list on the stock exchange of this country and our own companies that are very buoyant and good can also list on London, New York or South Africa stock exchanges. We have announced to the World Federation of Stock Exchanges meeting; we have also announced it to Africa Stock Exchanges Association, of which I was the chairman, and explained it to other African stock exchanges and encouraged them that we are ready to help them, most of them will set them up free of charge, we brought them here to Nigeria to also see what we have, how we do it.
As the former DG of the NSE, what is your relationship with the current management and council of e Nigerian Stock Exchange, in view of the fact that there should be collaboration between past and present administrations?
It is very cordial, as I told you, I have no problem, my man- agement has no problem with the NSE, the NSE never sued me and I never sued the NSE, there was no quarrel, and I gave my letter of resignation on July 18 because I had worked all my life; as a student, I started working and haven’t stopped since then so I needed to retire at 60. roughout my trips as DG, I lived in ho- tels, and didn’t see places in all the countries I travelled to except U.S when I was working there. So I decided that between 60-70 when I still have the strength to walk on the stairs of a plane to do consulting work, travel and sightsee.
The Stock Exchange didn’t do anything to me and I didn’t do anything to the Stock Exchange; just because I started this demutualization, a group of people, whom I would name later on, but people in the market know them, wanted to seek the opportunity of the demutualization to hijack the market. And I said not while I am here, and so they took the opportunity to say that I was voluntarily retiring, because I was to retire in July, but my Council said I should wait till December because the stockbrokers said that they would not be ready to pull me out and do a ceremony for pulling me out and e Stock Exchange wanted me to work through the succession plan I had put in place, they wanted to see those people do the work without me, I could be here but hands off . So, they said I should wait till December instead of July 18. ey approved it, but said I stay till Decem- ber then they would announce the next person in the succession plan which I had given them and they approved it. So the people that heard that I said that nobody can buy the controlling shares of e Stock Exchange, because nobody should control the stock exchange; no stock exchange in the world would allow a group of individuals to control the stock exchange. It is the dealing members, because they’re the members, it is the stock broking arms, they have the stake in the stock exchange; if the stock exchange goes down, they lose before any other person, before shareholders, or quoted companies, because they are the members they own the stock exchange, so they must be the core group in determining who is chairman of the board, who is CEO of NSE and which rules would apply in the NSE. These members are the owners of stock broking rms who are also trad- ing. Because you can’t be CEO of a stock broking rm without being a stock broker. I then made the chart, which my council approved, that it’s the dealing members rms, not the stock- brokers but the owners of the stockbroking rms, who are also stockbrokers, that will be the ones to own the controlling shares of the demutualized stock exchange, which is 30 percent. Once you own 30 percent, you are in control. So we then put the chart out, 30 percent for the dealing members rms collectively, then any dealing stockbrokers just like me or you would buy shares that are for the public, both Nigerians and foreigners 40 percent, quoted companies are part of the companies too, so they can buy from the 40 percent. Then the issuing houses which are the banks will own only ve percent because the banks can buy up the whole shares, and be controlling the market, and their shares are quoted on the market, that is insider dealing, we can’t do insider dealing. en the Nigerian registrars and issuing houses will own 5 percent, and then corporate entities will be 5 percent. So the controlling member will be the stock broking rms because they own the market. So we called a meeting and my board agreed, the stock broking rms also agreed and we went around Nigeria, explaining and opening branches, telling them they don’t have to come to Lagos. We went to all branches of the NSE and explained what we were doing and what demutualization is.
Let’s look at the market and talk about instruments. What is your take in terms of what you see now, how deep is the market, how vast are the instruments that are on the market and how better?
The Stock Exchange today and the stock market, has reached its peak, the only way we can move forward is to complete the demutualization process. The reason is because we have gone round every state in Nigeria, and we have talked to business men and women, market women, and they are buying shares, it takes a lot, to get them to list their companies, and stock exchange is still trying to get them to come and list their companies and we are taking a long time to get the buying for this demutualization, approval is only from our board, and noti cation to SEC, public and different institutions. en we went abroad to notify and ask for encouragement, collaboration, with London and New York and Johannesburg stock exchanges and so on and they are happy and waiting for us. We were able to get the Francophone stock exchanges and we did a simultaneous translation whereby someone in Abidjan or any French speaking countries put in their bids in French, the Nigerian stockbroker will see it in English and the Nigerian stockbroker will reply in English and they would see it in French, we have gone far, it is just to demutualize.
How would that deepen the market?
It would deepen the market because Nigerians are very skeptical when it comes to investments but the day the same foreign investors, with a newspaper like business a.m. notifying them that they are buying, foreign companies are buying shares on this market, and Nigerians will now wake up and start rushing, so it would deepen the market further. We want our market to compete at least if not New York and London, come into the mid stage like Israel and some of the other mid- sized stock exchanges and even Canada. So that we leave the emerging market and become a mature market, because the foreign investors have tasted our economy, they are partici- pating in our money market, they are also participating in our capital markets but on the portfolio level, so when the market is open and demutualized, they know they can stay in London or Australia and call a stock broker and tell him to sell or buy. ere would be no di erence between our market and London or New York. It would now be the instruments not the institution or currency, it would only be is it available, is it good, and because it is fully demutualized, the stock ex- change is bound to sell its reputation across the world, be- cause the person that bought shares in Toronto doesn’t need to come here, or have a friend here or call a bank here to give him information, it would be online real time, anywhere in the world, they would see your trading, and would be able to participate. So that is the value of demutualization.
Are they creating enough instruments today as it were before?
Once you have the full interests of the foreign people, it is automatic, the instruments would create themselves. It happened with the banks, once the banks got quoted, and we put in a lot of work in the nancial regulators meeting, and even before the government accepted, we had to keep explaining, Charles Soludo and I. Now, we are enjoying it but it would ow more because foreigners buy more of shares and invest in the money market, they are there in the money market but they can make more money in the capital market, so if our market is open, they would see it on their computer. ey can also put their bid directly and all they need is their stockbrokers code, just like they are doing now, but they are not doing it right because we are not demutualized. So the market will open up, more money will come into the system, no more reselling of oil, they can borrow from the capital market. ere is no di erence between money that you get in New York and money that you get in Lagos be- cause the market will be open so it is a good thing for Nigeria, it has been approved, and I left the implementation document there, I don’t even have a copy.
I’ve noticed voluntary delistings from the market for the past one or two years, what could be the cause, are the requirements too di cult and how can listing become simpler?
It is actually simple, it is just the apathy of our Nigerian businessmen, and when they come, they see that it is not really difficult. But our businessmen are used to saying if they make N100 million, they tell you they made N60 million, and no one knows that they did with the other N40 million. ey have apathy about opening up to the public, and I keep saying, as a publicly traded company, if your company makes N100 million, nobody is say- ing you can’t spend the N100 million, but the public will want to know what you spent it on. If in your company, you make your budget and allocate 30 percent of pro t is for the chairman and board to do whatever with and you announce it at your annual general meeting, nobody is going to tell no, do whatever you like in your board , with that 30%, it is your company.
You have met the listing requirement of stock exchange, this is how much you made, and this is how much you want to pay out to shareholders; this is how much you want to put in re- serves. So I don’t understand the apathy because it is informa- tion driven, give the information, it is your company, nobody is going to tell you no, you can’t do it. e market is already demu- tualized, so if the majority shareholders decide how much is for dividend so why is it di cult for them to such the money to do whatever else they need, if they said they are going to buy so and so equipment, I won’t go and inspect the equipment.
We have seen portfolio investors come in and look for op- portunities but Nigeria needs FDI. What do you make of the climate for investments in Nigeria today?
You see the FDI will come if the stock market is strong. In most parts of the world, it is the stock market that determines where the economy goes, not the money market, because money market is frivolous. You can put your money in the bank today and remove it tomorrow, but when you buy stocks, you wait until the company makes money and pays you dividend or you wait for a little while for the share prices to appreciate so that you can sell it for a good return. If you have an emergency, you can sell at any price, and take your money, so it will happen. And the only way it would happen is demutualization, because those FDI that was coming in was when we opened the stock market to the world, that foreign investors started having faith in our banking system. We demutualized the banks by getting them to quote on the stock exchange, so their annual report became public informa- tion, a lot of things they were doing became public information, they got more correspondent banks, it helps and that is the only way the economy can grow. Now, if we do the same thing, and if it had taken place in 2010 like I wanted it to, we were planning to do in November and I leave in December, my council said that if the brokers said they would be ready by November and I go, they may not do it again because they think that I’m like a moth- er to the stockbrokers, and they think they love to please me and they think I’m correct. So they didn’t want to be shocked, for me to go and the stockbrokers start to make some trouble for the new people that would take over. So I stayed and then some wise people who thought that they could hijack it and scatter the stock exchange. at is one thing I keep telling Nigerians, that if you remove me, the people I have trained, they don’t need me to actualize it; if they removed only me and didn’t touch my man- agement team, that demutualization would have gone through. e way I ran the exchange, there was nothing I was doing that my immediate sta can’t do or don’t know. So, they could easily do it but, because they disorganize the entire system, that is why it is limping.