Nigeria Shareholders’ Dividend: Lost or Looted?

Share investors and other stakeholders in Nigeria’s stock market have long been claiming that their accrued dividend does not give them the corresponding returns in quest. A lot of such market volatility triggered by the big sell-off in Nigeria stock markets overnight saturation. The market capitalization in the country’s stock market seems not to have achieved significant growth over the years but it still faces supply-side constrains. There is a nonstop echo by the government leaders, ‘Come Sun, Come Rain’; trying to state that there is a constructive and favorable atmosphere for investment in Nigeria. The authorities are either not working together with the relevant people with adequate response, or they are aware of the reasons for the investors stepping away, however still do not want to resolve problems purposefully with the presumption of ‘ostrich attitude’.

Aliko Dangote, the exchange president ranked by Forbes as one of the richest men in Africa, was suspended along with other council members pending the determination of a related court case. The move came after the commission announced plans to prosecute 260 organizations and individuals for alleged price fixing, share price manipulation, fraud and insider trading. The stock market lost 70 percent of its value in 2008-2009 as a result of the global recession and a major banking crisis in Nigeria, the world’s eighth-largest oil exporter. For these reasons, the Nigeria Security & Exchange Commission, which regulates the country’s bourse, had sacked the top leadership of the exchange following accusations of financial mismanagement and poor oversight. Dr.Ndi Okereke-Onyiuke, the director general, was replaced with Emmanuel Ikazoboh pending the appointment of a permanent head.

For the fact that Share-investors had put environment and ethical issues at the heart of their spending decisions at the capital market, even if they have cut back on some higher priced oil and non-financial companies share capital. Whereas low-cost labour force is the vital cause that allures foreign investment, foreign investors have identified strikes, hurtles, incompatible government policy, corruption, bureaucracy, workers’ political involvement as the key stumbling blocks to stock exchange in Nigeria. Stocks Wednesday lost marginally on the bourses for the profit taking selling from the investors Share-holders inflows into Nigeria stock exchange declined by 72% in 2009 and reached US$ 78 million against US$ 280 million in 2000. So, there will be a possible tendency to regulate the finance flow and there will be more restriction for the capital market. The elections and politics of Nigeria come 2011; will be forced to address the issue of vulnerable middle class and poor.

The government of Nigeria, either out of its inadequate understanding of political economy of corruption or under populist compulsions, plunged headlong into a cleansing drive against the menace inside the Nigeria Stock Exchange Office immediately, going mostly after the politicians and businesspeople involve in the share dividend diversion process. The obvious repercussion of its drive was felt in the dramatic slowdown of the economy – investment nosedived, trade and commerce came to a grinding halt, job market shrank and the list could go on. Meanwhile, as the purchasing capacity of the people at large dwindled, the prices of essential commodities steadily climbed. The resultant gap between the cost of living and the real income in Nigeria prompted many to resort to desperate measures. The increase in petty corruption in some the financial sectors could very well be an indication that people in the lower rungs of the Nigeria Stock Exchange in question may have been forced to indulge in corruption to make both their ends meet.

The market sank again early this year after the government approved changes to the Foreign Business Act that would force foreign investors to divest shares if they hold more than 50 per cent of the shares or the voting rights in local companies. Investor sentiment took another blow when eight coordinated banks ripped through the CBN grants , siphoning people’s money and embezzling billions of Naira in dozens .The latest cut was in line with market expectations that the rate would be cut by as much as a half point to help spur the economy. We expect more cuts later this year to bring the rate to 4.0 per cent, because the domestic economy is quite weak and confidence has been shaken.

The Nigeria Security and Exchange commission estimates a capital market inflow during January-December 2004 is slightly lower ($550) than the targeted $600 million, whereas Central Bank Of Nigeria (CBN) expresses the share-buyers inflow during the period was only about $370 million, which is far below than the target. Few of the major causes of such situation is the devastating events on and after the Sanusi Lamido-led CBN commercial Banks scrutiny and indiscriminate loans devastation in the Nigerian financial sector.. But there are many other major factors that are blocking foreign investment in Nigeria. Some crucial ones would be as follows:

Nigeria has a bureaucratic system that is not at all compatible with an investment environment. The concrete implementation of investment related policies are prolonged to obstruct both local and foreign investors. An inefficient and dishonest bureaucratic system is extensively responsible for the absence of share-capital in the country. There are interrelated administrative barriers that result in inferior policy formulation and implementation, competitive drawbacks, poor quality of skills and infrastructure, ineffective institutions, and below average governance dampen prospective share-buyers due to the stock exchange sharp practices.

Although, the political situation in Nigeria was previously vulnerable because of the continuous hostility in the Niger Delta region, which behaved as if it were to pollute the entire investment environment, but the situation is calm today. If Culture and society have become corrupted through sick politics, how do we grow? The bureaucrats and regulatory bodies shouldn’t appear steeped in corruption. For business enterprise, corruption works as taxation or lubrication cost. This corruption would not go up to such an extent if there were appropriate and strong legal and regulatory controls and motivational salary levels. Many companies regard bribery as just one of the costs of doing business (‘Lubrication Cost’) and show these payments as legitimate business expenses.

Recently, the Nigeria Stock Exchange selective categories index lost 14.83 points or 0.56 per cent to close at 2654.84, while the blue chips index, CSE30, shed 11.56 points or 0.34 per cent to close at 3432.30. A stock broker said the market witnessed profit taking selling after previous day’s rise. Turnover on the NSE decreased to N821.06Billion from total of N869.94 billion. The NSE turnover, however, increased to N229.10 billion from N140.71billion.

The Nigeria Stock Exchange needs ‘a professional approach to give investors clean record and movement of their money inside the stock market. I am a shareholder in most of the Nigerian companies for the past 25 years now. The NSE; instead of seeking investment to benefit popular vested interest, they embezzle and misappropriate the public money releasing just a peanut purposely to discourage the shareholders. Most of the share certificates never reach outstanding investors not to talk of their dividends which had in one way or the other got displaced at the cost of the overall interest of the Nigerian shareholders.

The Nigeria government headed by Dr. Goodluck Jonathan is keen to protect the country’s interest and would hopefully start to review the Nigeria Stock Exchange policy. The Grameenphone is an example of good and bad capital investment.

It is clear that share market’s performance is not an isolated incident. The Nigeria Stock

Exchange should reassure investors that the market will continue its growth in the long run on the back of a stable economy. It should also reassure investors that their market fundamentals remain strong and they must maintain our optimistic outlook on the market’s performance over the medium term. The Nigeria Stock Exchange has worked excellent here but it is taking out more public money from the Nigerians than bringing in investment in return to them. Such drainage is not desirable and ‘we must be selective to terms. Nigeria can afford to refuse share-investment now at a time when the volume of dividend from Nigerian is about to drain.