Jonathan On The Capital Market

When President Goodluck Jonathan visited the Nigerian Stock Exchange the other day, he struck all the right notes when he said that his administration would carry out a proper study of the capital market with a view to issuing guidelines and incentives for major companies in the oil and gas, telecommunications and power sectors to list on the NSE. He expressed the desire to grow the capital market to the size that is proportionate to Nigeria’s new-found ranking as the largest economy in Africa.
He explained that the listing of shares of the target companies on the stock exchange would enable interested Nigerians to become part-owners and benefit from their profits. Other advantages derivable from the planned listing exercise would be to make the operations of affected companies relatively transparent through observance of good corporate governance standards.

These views are in accord with the long expressed wishes of the Nigerian investing public, which had gone unheeded. It is a fact that most private companies in Nigeria particularly those that are foreign-owned do not furnish requisite disclosures of their activities as they are intent on unchecked exploitation of the country’s economy.

To that end, they associate with venal local elite who they have over the years corrupted thoroughly, made addicted to all forms of graft and turned to manipulable tools for collusive pillaging of the country. This is unacceptable because it is a replicated template of a banana republic defined as “a country operated as a commercial enterprise for private profit, affected by a collusion between the State and favoured monopolies…Such an imbalanced economy remains limited by the uneven economic development of town and country and tends to cause the national currency to become devalued paper-money… The national legislature is, in effect, for sale, influential government employees illegitimately exploit their posts for personal gain (by embezzlement, fraud, bribery, etc.), and the resulting budget deficit is repaid by the country’s working people who earn wages rather than making profits.

” Against that backdrop, all his sweet words notwithstanding, Jonathan’s track record and the absence of any time line for executing the listing programme raise questions about the genuineness of his conviction and sincerity of purpose.

Firstly, why did the Jonathan administration allow or condone the de-listing from the NSE of a profit-making large premier bottling company, against the wishes of its Nigerian small shareholders who thereby became dispossessed and excluded from benefiting from the company’s profits? Does it not smack of double standard to seek to have major companies in the oil and gas, telecommunications and power sectors to list on the NSE while other sectors are left out? For the sake of fairness, the proposed listing guidelines should apply to all sectors of the economy including the previously de-listed company as well.

Thirdly, despite being aware that the capital market reflects the performance of the economy, Jonathan said that a proper study required to issue the proposed guidelines and incentives had not been carried out. In any case, what is the nature of the “proper study” considering that the NSE has been in existence since 1960 and has some 200 listed companies? Could the pending proper study be a ploy to buy time and would it not induce the target companies to begin to lobby influential government functionaries? Surely, a directive requiring companies that meet specified conditions to get listed by a given deadline will serve the national interest well by stemming the huge revenue leakage and cause benefits to accrue to Nigerian shareholders and the economy at large.

It is, therefore, unclear why the Jonathan administration has instead chosen to grovel before Nigerian companies, which happen to be owned by foreigners in order for them to dictate the terms of the so-called guidelines and attractive incentives to encourage them to list on the NSE.

Government has hitherto over-indulged foreign investors at the expense of Nigerians and their own companies. In the planned or new order, only foreign direct investment (FDI) should be accommodated in the capital market. The World Bank defines FDI as inflows of investment to acquire a lasting management interest (10 per cent or more of voting stock) in an enterprise operating in an economy other than that of the investor.

So, short-term foreign portfolio investment (FPI) should be jettisoned from the capital market. The Nigerian experience shows that foreign portfolio investors merely come to earn and drain away within a short time much more forex than they bring in, no thanks to the inappropriate fiscal and monetary policies that are in place. They have precipitated the crash of the capital market on several occasions.

FPI adds no value to the economy except pain and, therefore, should not be allowed to participate in companies and bonds (both old and new) listed on the NSE. To pave the way for a flourishing capital market, Jonathan also pledged that his administration would disengage from “the management of business in order to provide the enabling environment for businesses to thrive.” To this end, Jonathan should ponder the expert diagnosis that faulty fiscal and monetary practices over the years have firmly anchored the persistent inclement business environment.

Ruefully, various administrations including Jonathan’s have spurned that expert advice and thereby merely wave dressed-up economic record while knowing the reality that the generality of the people is increasingly worse off economically. Jonathan should, therefore, proceed to faithfully implement correct fiscal and monetary measures. Pertinently, the capital market and stock exchange are impacted by the legislature.

But disappointingly, the federal legislature is truly on sale in a setting, which the National Assembly has co-sired. For an undisclosed price, international oil companies in joint venture with NNPC have succeeded in stalling the enactment of the Petroleum Industry Bill whose birth process began in 2001. As a result, NNPC successor companies that should have listed on the NSE a long time ago have remained undeveloped embryos.

It is so dis-honourable and shameful for legislators paid by Nigerian taxpayers to forsake the solemn oath that they individually swore to ‘perform my functions always in the interest of the sovereignty, integrity, solidarity, well-being and prosperity of the Federal Republic of Nigeria.’ All said, President Jonathan’s address to the NSE should not end up as an empty campaign promise.