Task Before Yuguda

As the capital market community awaits the coming of Lamido Yuguda as the substantive Director General of the Securities and Exchange Commission, Goddy Egene, writes on what the management team must do to regain investor confidence and reposition the market for better performance

Despite the challenges brought by the COVID-19 pandemic, the Nigerian capital market community is gladdened by the decision of President Muhammadu Buhari to appoint a new Director-General of the Securities and Exchange Commission (SEC). SEC, which is the apex regulatory body for the nation’s capital market, has been led by an acting DG, Ms. Mary Uduk, for over two years following the suspension of Mournir Gwarzo.

Although Uduk and her team ensured that the market was well regulated, many stakeholders believe their efforts did not yield the desired results because they were in acting capacity.

This development, they said, affected investors’ patronage of the market in spite of huge opportunities. While some discerning investors took advantage of the opportunities and have been reaping significant benefits, many of they stayed away for fear of loss of their investment due to weak regulatory environment.

However, the appointment of Yuguda as the substantive DG and other commissioners, has been hailed as a positive development that would help to position the market for post-Covid-19 recovery.

The new DG
The new SEC boss, Yuguda, is an economist, banker and investment manager and has over 30 years’ experience in financial services. Yuguda began his career with Central Bank of Nigeria in 1984, after he graduated from the Ahmadu Bello University, Zaria. He was employed as a Senior Supervisor of the Foreign Operations department, which manages Nigeria’s external debt records. He moved to the Banking Supervision Department and had the task of handling bank licensing and prudential regulations in 1985. And in 1988, he was moved to the Debt Conversion Committee Secretariat to manage the Nigerian Debt Conversion Programme together with the pioneer staff in the secretariat.

Yuguda moved back to the Foreign Operations Department in 1992, and soon after became the Senior Manager of the Investment Office. There he was responsible for managing Nigeria’s external debt service, as well as managing the investment of the CBN’s external reserves in a liquid portfolio of cash, fixed-term deposits, and foreign government treasury bills. In 1997, he joined the International Monetary Fund (IMF) in Washington DC, the USA, as an economist in the Africa Department, following a secondment. In this position, Yuguda assessed the economic policies and management of balance of payment support programmes in IMF member countries.

In 2001, he returned to the CBN to lead a team of staff to restructure and diversify the CBN’s growing forex reserve portfolio. Together with this team, a new investment policy was adopted with the introduction of new asset classes, the appointment of a reputable global custodian and asset managers. The incoming SEC boss successfully upgraded the CBN’s in-house fixed-income trading and settlement capabilities and left a state-of-the-art portfolio management system as his legacy.

In 2010, he became Director of the Reserve Management Department and was credited with the strong risk-aware investment culture in the department, and also instilled a disciplined approach to investment evaluation.

He voluntarily retired in 2016 after 32 years at the apex bank. He was appointed to the board of SEC last June as a non-executive commissioner. However, President Buhari last week appointed him the substantive DG of the commission. Yuguda has a Bachelor of Science in Accounting from Ahmadu Bello University, Zaria, having graduated in 1983. He later obtained a Master’s degree in Money, Banking, and Finance from the University of Birmingham, UK, in 1991.

He has attended leadership training at notable business schools like Harvard, INSEAD, IMD, said, Wharton, Haas, and London.
He is a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN), a CFA charter holder, and also holds a Certificate in Financial Asset Management and Engineering from the Swiss Finance Institute, Geneva, Switzerland.

Stakeholders react
From the above, the new SEC boss is a well-qualified financial expert capable of playing the new role, which is very onerous considering the importance of the capital market to the life of the economy of any nation. To stakeholders, what Yuguda needs most is to be a team player, engage all stakeholders and build consensus.

The Chairman, Association of Securities Dealing Houses of Nigeria (ASHON), Chief Onyenwechukwu Ezeagu said: “There is a compelling need for the SEC’s new DG and the management team to engage all stakeholders and build consensus. They should revisit and rejig the capital market master plan and be focused on the mandate to make the Nigerian capital market to be best in class, deep, resilient and capable of inspiring and sustaining confidence among all investors both locally and internationally.”

Also speaking, President, Chartered Institute of Stockbrokers (CIS), Mr. Tunde Amolegbe, said Yuguda is clearly a consummate professional with outstanding pedigree and will be overseeing an industry that has been in transition, essentially, since the global financial crisis in 2008.

“It will be useful for him to engage with relevant stakeholders to come up with suggestions and plausible solutions that can see the industry play its expected critical role in the economic revival of the nation as had happened in other jurisdictions. And with COVID-19 pandemic re-defining the way business is done, the financial market should be more innovative in outlook. We at the CIS are looking forward to working with him and his team to achieve this and other laudable objectives,” Amolegbe said.
In his opinion, a Professor of Finance and Capital Market at the Nasarawa State University, Keffi, Uche Uwaleke, said Yuguda should ensure effective implementation of the master plan.

Uwaleke said the incoming SEC DG should continue from where his predecessor stopped in the implementation of the master plan.
The Chief Operating Officer, InvestData Limited, Mr. Ambrose Omordion, said the appointment of a substantive DG would boost investor confidence.
Omordion, however, advised Yuguda and SEC board members to solidify plans already put in place to drive transparency and effective regulatory agenda aimed at deepening the market.

He said Yuguda should increase participation of Nigerians in the market to reduce dependency on foreign investors that made the market unstable and volatile.
He noted that the commission should decentralise its investment education programme to attract new entrants to the market and educate those scared to return to the market as a result of past bad experiences in the market.
Mr. Moses Igbrude of Independent Sharesholders Association of Nigeria, said investor protection should be Yuguda’s priority.

According to Igbrude, he should be ready to work with all the stakeholders in the Nigerian capital market, by adopting a collaborative approach in handling investor-related matters.
“The SEC’s major role is to protect investors. That should be his focus, especially this period of the coronavirus pandemic. Yuguda should make economic managers of the country to understand the importance of the capital market to the growth and development of the economy,”
Igbrude explained that proper understanding of the capital market would propel the federal government to formulate policies that would enhance the growth of the market.

“His strategies should be on how to assist companies to improve their performances. The capital market as of today is grossly undervalued. One of his objectives should be how to reverse this trend. The issue of unclaimed dividends in the capital market should be tackled vigorously by him and he should make sure the demutualisation of exchange is complete in a transparent way for the good of the market in particular and Nigerian economy in general,” Igbrude said.

Some operators said as countries begin to open up their economies, post lockdown, the new SEC boss and his team should clean up past messes and ensure that avoid victimisation of companies or players in the market.
Yuguda should make that SEC adopt structures that resolve issues amiably and privately, without eroding shareholder value and confidence.

Importance of continuity
Having been on the board since last year, Yuguda has the advantage of an insider and the opportunity to continue to implement initiatives already planned for 2020 and beyond.
For instance, the commission had said it would continue to implement Risk Based Supervision, to ensure its monitoring effort is more efficient.
“We will upgrade of identity management on investor accounts to include Bank Verification Numbers and verifications against the Nigerian Interbank Settlement Systems Limited (NIBSS) BVN validation portal. SEC will also be moving from transition to Deemed Approval Regime for debt securities. Following the introduction of the checklist regime and upon confirmation of satisfactory compliance, a deemed approval regime will be adopted for issuances of debt securities by which proposed issuances will be deemed approved upon filing of the transaction documents with a duly completed and executed checklist. This is expected to reduce the time within which approval is given to not more than five working days,” SEC noted.

Also as part of its implementation in 2020, the commission had said it would be driving a harmonised regulatory agenda by working with other regulatory agencies to create clear and specific licensing regimes for different FinTech businesses in Nigeria.
The commission will also seek to operationalise the framework for the regulation of Crypto-currencies, Virtual Financial Assets, ICOs and Crowdfunding. According to Uduk, the commission will complete the Capital Market Master Plan Review started last year. We will continue the implementation of the introduction of Capital Market studies into secondary school curriculum. We are presently at the stage of development of Teachers’ guides.

Work has also begun on developing a capital market curriculum for Nigerian Universities, developing content for infusion into general studies (GS) courses across the Universities. SEC will continue to coordinate the Federal Government Work Group assignment on the National Savings Strategy. The commission will drive CIS as the main entry point for retail investors. We will Integrate CIS distribution framework with the capital market Financial Inclusion strategy,” the commission said.

SEC had also pledged to partner with FMAN to implement the CIS roadmap which was designed by the CIS Roadmap Committee set up to conclude the implementation of the five-year Strategic Master Plan and Roadmap to elevate the level of professionalism and operations in the Nigerian fund management industry.
Also, in a bid to foster economic development and deepen the market, a proposed rule is being considered to provide a regulatory framework permitting private companies with the required structure and mechanism in place to raise capital from the public through crowdfunding.

“There is a proposed Rule to enable the commission bring all Nominee Companies under proper regulation and make provision for registration requirements, ownership structure, code of conduct and other matters incidental thereto. There will be an amendment in the margin lending rules geared towards mitigating/tackling market abuse practices by dealers or member companies by restricting the excessive use of credit for purchasing or transacting in securities by dealers or member companies,” SEC said.

While these are laudable plans capable of taking the market to the desired level where it can play its role of economic development, it is believed that SEC can only succeed when it has the requisite technical manpower. Hence, some operators have said Yuguda must look into possibility of empowering the staff of the commission better.
He should encourage staff to go on Sabbatical to other African regulators and the private sector or create a secondment programme for staff to equip themselves and bring such experiences to bear on the commission especially now that there are new issues such as crowdfunding, fintech and Cryptocurrencies among others.