SEC Promises Effective Regulation of Private Equity Firms

As part of efforts to carry out its investor protection mandate, the Securities and Exchange Commission (SEC) has promised to effectively regulate the private equity/hedge funds space in line with global best practices.

Speaking at a seminar on private equity and venture capital fund registration put together by Henshaw Capital Partner Limited in partnership with the SEC and Agusto & Co. Limited, Deputy Director, Collective Investment Services, SEC, Mrs. Chy Nwude, said changes seen in the global regulatory landscape in private equity funds came about in response to the global financial crisis of 2008.

Nwude, who represented the Director General of the SEC, Ms Arunma Oteh, stated that reforms in the private equity and hedge fund space are based on the belief that the alternative investment industry contributed in no small measure to the global financial crisis.

“The regulators are imposing significant transparency and disclosure obligations on the private equity fund industry to guard against systematic failure as the collapse of a major hedge fund could significantly impact the financial sector,” she said.

Meanwhile, Founder and Chief Executive Officer of Henshaw Capital Partner, Babara James, said Nigeria has the capacity to build a $20 billion private equity industry by 2020.

Babara, who co-chairs the Nigerian Private Equity and Venture Capital Development Committee of the Federal Government, believes that private equity and venture capital could be a catalyst for business growth and job creation in the country.

House Probes UBS, Goldman Sachs’ Management of the NSIA

The House of Representatives Committee on Finance will in the next two weeks carry out an investigative hearing to determine the risks arising from the appointment of UBS and Goldman Sachs to manage the Sovereign Wealth Fund (SWF).

The Nigerian Sovereign Investment Authority (NSIA) employed JP Morgan, as the custodian of the $1 billion SWF while UBS and Goldman Sachs, were appointed by NSIA to manage the fund.

However, since their appointment, members of the House of Representatives have criticised their selection, stating that a conflict of interest could arise because the Managing Director/CEO of NSIA Uche Orji, was once an employee of UBS.

Bringing this to the attention of the House, Minority Leader, Hon. Femi Gbajabiamila, who raised the motion for the probe noted that contrary to the code of conduct in the Fifth Schedule, Part 1 of the 1999 Constitution, both Orji and the initiator of the NSIA, Mr. Olusegun Aganga, the Minister of Industry Trade and Investment, were former employees of UBS and Goldman Sachs, respectively.

Gbajabiamila, who expressed concern over the appointment of foreign financial institutions to manage the NSIA, said it “amounts to entrusting Nigeria’s savings, wealth, economic sovereignty and security in the hands of foreigners.”

He was additionally perturbed that the appointment of the foreign firms preceded the establishment of the governing council, which was established by an Act of the National Assembly, “thus leaving the House in doubt as to the transparency of the process that led to their appointments.”

 

 

Stakeholders Advocate Recognition of IST as Superior Court

Stakeholders in the Nigerian capital market have urged the National Assembly to recognise the Investment and Securities Tribunal (IST) as a superior court of record.

This, they argued, would go a long way in empowering the IST to be better placed in dealing with all sorts of market infractions and restore investor confidence in the market.

The IST is an independent specialised judicial body established under Section 247 of the Investments and Securities Act (ISA) 2007 to interpret and adjudicate on capital market, investments and other related matters. While the IST has the same powers as the High Courts, little recognition is given to the Tribunal in that regard.

Speaking at a stakeholders’ summit organised by the IST in Lagos, the Chairman of the Capital Market Solicitors’ Association of Nigeria (CMSA), Mr. Uche Obi, lamented that despite the clear provisions of Section 274 of ISA, 2007, and Section 315 (4) (b) and 316 (1) of the 1999 Constitution (as amended), some practitioners have continued to question the constitutionality of the tribunal.

Obi, who delivered a keynote address on the theme: “The Nigerian Capital Market: Institutional Framework for Justice Delivery and Development:-IST Perspective,” further advocated an urgent amendment of the ISA to expand the jurisdiction of the IST.

This, according to him, will place the IST in a position to develop a more robust jurisprudence on the capital market, while the Securities and Exchange Commission (SEC) would also stand out very clearly as an impartial regulator in terms of its involvement with dispute settlement as a regulatory tool in the capital market.

In her welcome remarks, Chairman of the IST, Dr. Ngozi Chianakwalam, who also advocated the constitutional recognition of the IST as a superior court, maintained that there was also a dire need to amend the ISA with the view to enhancing the original jurisdiction and providing for an enforcement mechanism of the judgments of the tribunal.

 

 

CJN calls for strict corporate governance code for banks

The Chief Justice of Nigeria, Justice Aloma Mukhtar represented by Justice Mahmud Mohammed at the 13th seminar on banking and allied matters for judges, called on the banking sector regulators to ensure strict compliance with the corporate governance code.

The need to ensure strict regulation became imperative to mitigate the challenges that came with having bigger banks.

She said that since bigger banks had greater liabilities, strict regulation would help to improve confidence in the banking sector as well as safeguard the interest of customers.

The conference, organised by the Chartered Institute of Bankers of Nigeria in collaboration with the National Judicial Institute, had as its theme, “The role of stakeholders in sustainable banking practice in Nigeria.”

The CJN said the theme was very instructive as both the judiciary and all the stakeholders have enormous roles to play in sustaining the banking sector.

She said, “The importance of the banking industry in the creation of a stable and buoyant economy for the nation cannot be overemphasised.

“The implementation of the various financial and economic reform programmes, especially in the banking sector, will definitely lead to increased litigations involving the banks, their customers and the government.

“The Central Bank of Nigeria needs to implement and enforce strict compliance with the corporate governance code, which was set out with the main objectives of mitigating the challenges that came with having bigger banks with greater liabilities, improving public confidence in the banking sector and safeguarding the interest of customers.”

 

Sanusi charges FMDQ to revive the market for commercial papers

Mallam Lamido Sanusi of the Central Bank of Nigeria has called on the board of the Financial Market Dealers Quote to revive the market for commercial papers in Nigeria.

Commercial papers are unsecured promissory notes with a fixed maturity of about nine months. They are usually issued by companies to raise money to meet short-term finance obligations. The notes are backed by the promise of the issuing organization to repay based on the agreed terms.

Speaking at the official launch of the FMDQ PLC, Sanusi said, “The FMDQ should also look at the revival of the Commercial Paper market and its regulation. With FMDQ, a fixed income securities exchange, the registration process is expected to be established to kick-start this segment of the money market which is useful in promoting the culture of companies in the issuance of instruments and securities”.

He also called for the review of the Nigeria Interbank Offered Rate (NIBOR). “The inter-bank interest rate benchmark (NIBOR) definitely remains an area for development. FMDQ is expected to look at this in light of IOSCO’s standards on benchmarks”, he said.

Sanusi said that though the establishment of the FMDQ is commendable and in line with other reform initiatives of the CBN, there is however a huge expectation that the group would further restructure and give depth to the Nigerian Financial Markets.

He said, “The efforts of the Financial Markets Dealers Association (FMDA), a professional body for banks, discount houses and other relevant financial institutions, in fostering financial markets development in Nigeria is commendable and has complemented the efforts of government and regulatory authorities. The launch of the FMDQ OTC PLC is yet another sign of the association’s persistence and quest to play a catalytic role in the development of the Nigerian financial markets.

In recognition of the important role to be played by the FMDQ OTC the CBN provided the necessary support for its formation. The CBN will continue to collaborate with the FMDQ on strategic initiatives that will support Global competitiveness, Operational excellence, Liquidity and Diversity (GOLD) of the market. We are also keen to see that FMDQ upholds the highest standards of market governance.

CBN Classifies Eight Banks as ‘Too Big to Fail’

Headquarters of the Central Bank of Nigeria in...

Headquarters of the Central Bank of Nigeria in Abuja, Nigeria (Photo credit: Wikipedia)

The Central Bank of Nigeria (CBN) has designated First Bank of Nigeria Limited, Guaranty Trust Bank Plc (GTBank), Zenith Bank Plc, United Bank for Africa Plc (UBA), Access Bank Plc, Skye Bank Plc, Ecobank Nigeria and Diamond Bank Plc as “too big to fail”, owing to the fact that their failure could pose a systemic risk to the banking industry and the economy at large.

The eight banks alone account for 75% of the banking sector in terms of earnings, profitability assets, customer deposits and branch networks.

Owing to their size and importance, the CBN has adopted a more robust regulatory regime to check and scrutinise the eight banks, to make sure that they are healthy.

To achieve this objective, the CBN has asked the eight banks to increase their capital base to give them a buffer against internal and exogenous shocks.

The Deputy Governor (Operations), CBN, Mr. Tunde Lemo, who confirmed this development, described the 8 financial institutions as systemically important because of their size. Lemo pointed out that any bank that accounts for 5% of the banking system is systemically important.

“What that means is that we have to take a closer look at them. It doesn’t mean that they are weak, it is just that we have to focus more attention on them because, God forbid, if something happens to any of them, it may affect the entire system,” Lemo said.

When quizzed on the capital base that the  banks are expected to have, the CBN deputy governor said: “It is not that they were asked to raise their capital base, it is just that when an institution is designated as systemically important, it is required to have more capital.”

 

Hydrogen phone chargers to keep Africans connected to power

Reuters reports that African smartphone users will soon have an alternative means to get around the power shortage in the continent – a portable charger that relies on hydrogen fuel cells.

British company Intelligent Energy plans to roll out 1 million of the new chargers by mid-December, mainly in Nigeria and South Africa, after successfully testing them in Nigeria over the last five months, its consumer electronics managing director, Amar Samra, said.

“In emerging markets where the grids are not reliable and people are using (mobile phones) as a primary device, it is mission critical; if you’re out, you’re out,” Samra said in Cape Town.

The chargers are designed to back up the spread of smartphones and tablets across countries where cell phones have already helped to transform lives and businesses.

GSMA, the industry body which represents about 800 of the world’s mobile operators, said in its latest report that smartphones were key to boosting mobile Internet access in sub-Saharan Africa.

“Alternative sources of power are very important, because smartphones and other devices need lots of power and you need to charge up every four hours, so for a businessman it is crucial,” said Melvin Angula, an engineer.

The hydrogen chargers, which fit easily into a handbag, consist of a fuel cell and a non-disposable cartridge that can be detached when exhausted.

Samra said consumers could expect to pay less than $5 dollars to “refuel” a cartridge of the charger.

This would translate to a cost of less than $1 to charge a phone, he said, adding that final costs would ultimately depend on how telecoms companies marketed and sold the product.

Samra said that if bought over the counter, the entire device will cost under $200, although options being considered include $10 a month for a two-year contract or getting it for free.

“We always have problems with cell batteries, so everybody will be keen for portable energy. But, it has to be the right price for it to fly in our markets,” said another businessman Thabo Magagula.

Besides Intelligent Energy, Japan’s Aquafairy has also been developing fuel cell chargers, Samra said.

Other companies, such as Dubai-based developer Solarway, have launched solar-powered kiosks designed for communities that are not linked to a power grid, each capable of charging up to 40 cell phones a day.