. . . raked in N1.8bn in 7 months
The Securities and Exchange Commission has been relying on commissions on stock market transactions and other internally-generated revenues to beat a budget embargo slammed on it by the National Assembly, according to Daily Trust’s investigations.
Lawmakers froze SEC’s 2013 budgetary allocations and demanded that President Jonathan should fire its director-general Arunma Oteh as a condition for releasing the funds. But the president has refused to accede to this.
Capital market sources in Lagos and Abuja told Daily Trust that the regulator has been utilising the commissions earned from trading of securities on the Nigerian Stock Exchange as well as other regulatory charges in order to stay afloat.
The zero budget allocation to SEC was caused by a standoff between Oteh and the House of Representatives which started in 2012 when she accused then-chairman of the House Capital Market Committee Herman Hembe of collecting estacode from SEC for a foreign trip he never made. Hembe is at present standing trial over the allegation.
The House later passed a resolution declaring Oteh unqualified to run SEC and urged the president to sack her. When he failed to do that, the lawmakers froze SEC budget and made Oteh’s sack a condition for de-freezing the funds.
Investigation by Daily Trust shows that between January and July, SEC has made N1.788 billion from commissions on N596.133 billion securities traded at the stock exchange.
Some of the key revenue sources for SEC are commissions by broker/dealer on securities traded (payable by buyer), which is 0.3 per cent market value of securities; fees on government bonds and debentures of public limited companies; processing fee for schemes of merger/acquisition and takeover; as well as fines and penalties.
SEC is also entitled to application fee for registration of a collective investment scheme at flat rate of N35,000; filing fee for registration of securities at a flat rate of N10,000; registration fees of securities of public companies (including rights issue); special funds; and processing fees on offer for sale.
Since January this year, the stock market has seen significant improvement, following years of lull in activities.
The market has been rallying as capitalisation and key performance indicators reached levels that were last witnessed in 2008 before the downturn began.
In the first half of the year, the stock market recorded 43 per cent growth, with the All-Share Index at slightly above 40,000 points on June 11, 2013.
Market capitalisation beat the record set in 2008 to hit N12.85 trillion, up from N8.974 trillion at the beginning of the year.
The All-Share Index rose by 9,066.24 points or 32.29 per cent to close at 37,145.64 points last Friday from 28,078.81 at the start of the January.
The House of Representatives had early in the year warned the management of the SEC not to spend any internally-generated funds unless with approval from the National Assembly.
Analysts say the action of National Assembly affected the confidence of foreign investors in the market as local investors dominate trading activities since January.
Daily Trust gathered that the levels of foreign to domestic participation as at May showed that the ratio stood at 49 per cent to 51 per cent, as against 61 per cent to 39 per cent in 2012 in favour of foreign investors.
Chief Executive Officer, Lambeth Trust & Investment Company, Mr. Lambeth Adonri, said the zero allocation was impacting negatively on the effectiveness of SEC’s regulatory supervision of the capital market.
“Primary market remains inactive possibly because several issuers are encountering setbacks in processing of their applications,” he told Daily Trust.
He said if in pursuit of removal of the director general from office, the National Assembly takes a measure that is capable of crippling the capital market, the economy may suffer.
“Perhaps with appropriate funding, (SEC) could have proceeded on some cardinal development programs for the market,” he added.
But he said the upward trend recorded so far in the market will be sustained till the end of the year.
“With macroeconomic stability and consolidation of capital market reforms, it is expected that the stability of the equities market will be sustained for the remaining part of the year,” Adonri said.
Mr. Niyi Fatai, a stock broker, said it “is not easy to run an organisation without subvention. One should look the angle of training of staff, and also the maintenance of the office. Government should know that the National Assembly decision is affecting the market.”
A leader of shareholders, Dr Faruk Umar, said SEC has been doing well despite its financial predicament.
“They have performed very well in regulating the market and the new board should be commended. The Federal Government should try to resolve the misunderstanding between SEC and the National Assembly so that foreign investors can have confidence to invest in our market,” he said.
He said the zero allocation to SEC had not adversely affected the market so far, “but for how long this can continue, it’s difficult to say for now.”
When contacted, SEC spokesman Yakubu Olaleye declined comment.
daily trust
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