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Nigeria does not need quack shareholders’ associations – Nwosu

By on August 24, 2014

Sunny Nwosu is the National Coordinator, Independent Shareholders Association of Nigeria. In this interview with SIMON EJEMBI, he talks about the fate of shareholders’ associations in the capital market and changes he would like to see, among other issues

The capital market is believed to be better regulated and more transparent that before. What has that meant for shareholders?

Well, it depends on your mindset about the whole thing. There are certain things we are seeing now that were not there in the last regime of the capital market. Some of these have to do with very obnoxious penalties. Of course, I am not saying people should not follow the rules of the market, but when you are imposing penalties that will have no meaning to shareholders, the end result is that it is the shareholders who will suffer the effect of such penalties. Even when we ask questions at the annual general meetings about the penalties paid, they (the companies) would tell us that the penalties were imposed on them by the Nigerian Stock Exchange.

What we want to see is a situation where the Exchange would be very beneficial to the shareholders. It is not penalties that make them beneficial to shareholders. The problem is not peculiar to one regulator; it is about all the regulators coming up with obnoxious rules that have no legal backing.

Despite the efforts of regulators to protect investors, your association expressed concern last year that retail were being marginalised. To what extent has the situation changed?

We have not seen any major change or changes that will make us to have a rethink about our position because every day, the capital market continues to be more elitist.

The patience of the retail shareholders itself is what sustains the capital market. The capital market in this country was established around 1960 and 1961 and people started investing there for the future, but towards the last 10 – 15 years, we have had people that come into the market to make money and get out.

In the Nigerian capital market today, we have those who are investing for the rainy day and those who come up, trade on the shares, jerk up the price, take their money and get out. I am not saying it is not practicable, but there should be more respect for those who are very patient to maintain the capital market because they are the ones that sustain the market.

We are seeing a very clear elitist nature in the present crop of capital market managers, but I think they can do more by taking care of the patient investors and giving them the hope with the way they are going, the market will not collapse.

There are several shareholders’ associations in the country today with some being accused of constituting a nuisance at AGMs. Does the market really need all of them?

Your question is as good as asking me why we have so many political associations in this country. You saw what happened when at a stage we had more than 50 political parties in this country. When the chips were down, some of them were de-registered and all that. The reality is that it is the Corporate Affairs Commission and the Securities and Exchange Commission that have caused the multiplication of shareholder associations because they have not done what they are supposed to do in checking some of these groups. We are aware some of them do not even have secretaries; they are made of just an individual. But it is not the duty of Sunny Nwosu or ISAN to go and scrutinise other shareholder associations; it is a duty of CAC, which is a regulator to registration and incorporation.

However, I do not believe that the country needs any quack shareholder association.

The law is very clear; every shareholder association must have up to 50 followers. However, anybody can bring 50 names and say these are my followers. The question is, did CAC do a diligent follow-up exercise to know whether these shareholder associations are existing or not? Does SEC take the pains of visiting the offices of these shareholder associations? If there is a loophole in this country, so many people will take advantage of it.

What makes you a member of company is the issuance of its certificate to you as a shareholder or the Central Securities Clearing Systems’ report that shows you are a shareholder. If you don’t fall under these two categories, whether you are the biggest shareholder association, you cannot enter into an AGM.

Unfortunately, SEC is encouraging this by inviting some of these associations to their functions. At the beginning, the associations were inviting SEC to say that they had been approved so they can go to AGMs, and they were embarrassing company secretaries. Some of them send text messages to company secretaries threatening them. I will never support such a thing because shareholder associations are there as non-governmental organisations to help improve the standard of shareholding in this country.

Only a small percentage of Nigerians participate in the capital market, according to reports. Based on your experience, what do you think is holding people back from the market?

I think part of the problem has to do with religion; some people say that their religion does not allow them to play in the field of capitalism. And some people are totally ignorant about the effectiveness and beauty of capitalism, while some dropped out after being caught between the lines during the meltdown. To address that, I think we need put on some educational road shows to inform Nigerians about the beauty of capitalism. Nigeria is a capitalist country and, therefore, both government and agencies should do as much as possible to educate Nigerians. By the time we are able to persuade the big corporations to be listed on the Exchange, I believe that those who are sitting back would want to participate. A big issue is also the meltdown; it’s once bitten, twice shy for a man who sold his house to buy shares and lost everything. It’s about perception; but those of us that have been into the market all our lives know that the market would swing in the right direction eventually.

There have been several initiatives such as the introduction of e-dividends to solve the challenge of unclaimed dividends aimed at easing the challenges faced by shareholders yet many investors are reportedly not taking advantage of them. What are associations like yours doing to help?

Our association has been on the forefront of educating people on e-transactions, both about CSCS and e-dividends.

The introduction of e-dividends is really working. The situation (with unclaimed dividends) is not as bad as it was a year ago. Every day of capitalism we learn. If you are hooked up to e-transactions, the day of dividend payment, the money will go to your bank. If you are not hooked up, you will have to wait for the e-dividend payment before paying you. Since it is not compulsory to convert to e-dividend, we need to educate people about it.

I can assure you that as far as I and the association are concerned, e-transaction is the best thing to happen to the capital market in this country.

What is the one thing you would change in the capital market if you had your way?

The one thing I will likely to do, frankly speaking, is to change some of the obnoxious penalties; I will like a better understanding. Take for instance, we have embraced IFRS (International Financial Reporting Standards) in this country, but some bigger markets have refused to adopt it. I believe the time given to companies to adopt it should be reasonable. We should not just take advantage of the fact that some companies could not adopt it within one year and start punishing them. We should give a space of, say, two years before penalising companies. I would also like regulators to stop dabbling into the affairs of shareholders; the shareholders demand better respect from regulators and operators because without the seed providers, the company won’t exist.

At what point did you become an investor and what informed your decision?

I became an investor 45 years ago. At the time, I was working in an uncertain area and I saw an advert in a paper advertising the shares of Daily Times. I can’t remember the exact amount I had but it was less than N20. At that time N20 was a very big amount. Thereafter, I saw an advert about the Daily Times AGM and I took permission from work to attend the AGM, where I met the late Babatunde Jose, who I later made my adopted father. I was the youngest shareholder at that occasion; and that was the beginning of the whole thing for me. Eventually, I visited him (Jose) and he brought me into Daily Times, where I started my career as a messenger.

He later discovered that all along, I was using my earnings to buy shares and he wrote a memo to the management saying that every time I apply for a loan it should be granted because I was investing.

 

 

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