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| Prof. Ndi Okereke-Onyiuke, Former Director General, Nigeria Stock Exchange. |
• Without Integrity, There Is No Stock Market
• NSE suffered setback because my predecessors abandoned my succession plan
• I Consulted For Over 20 States For Free, Still Work For Global Firms
Celebrated as Madam Integrity during the heyday of her reign as Director General of the Nigeria Stock Exchange, Prof. Ndi Okereke-Onyiuke, who left the exchange in 2010, stood like a colossus pushing the market to commanding heights globally. Her years of professional experience in the New York Stock Exchange were brought to bear on the market, and the NSE recorded an impressive boom. That was when banks fell over themselves in pursuit of enhanced capital from Initial Public Offering (IPOs) and other market derivatives. The bubble was to burst following the global economic crunch of 2008 through 2009; the NSE took the plunge and many Nigerians — even banks with their alleged malpractices — got their fingers burnt. Expectedly, the market was engulfed by an administrative turmoil and a controversial government intervention few months before the September 2010 official retirement of Okereke-Onyiuke. Though globally active and in business since her exit, she had remained quiet, almost invisible, on issues relating to Nigeria’s capital market, until she broke her seeming silence in this exclusive interview with MARCEL MBAMALU, the News Editor of The Guardian.
It’s now six years since you left the NSE as DG.
For some reasons, you have been quiet; and, given the fact that you still do not look tired, one wonders how much water would have passed under the bridge between the time you left and now…
I, Personally, would have loved to continue contributing to the development of the capital market. But, you don’t go to someone’s and say, ‘I want to help you,’ when the person did not ask for your help. I have not been consulted. The Nigerian Stock Exchange is my baby, and anytime I’m called upon to assist in doing anything that would help the development of the NSE or enhance the capital market of Nigeria (not just the stock exchange, but also the companies and banks that are quoted on the stock exchange), I would always help free of charge. I have never ever said anything otherwise; I will do it for free.
The international communities that find me valuable since 2010 have been consulting me. I have been working with them, not as full-time staff but as consultant in a consulting firm in Dallas, Texas. That is why many times, you don’t see me in Nigeria.
I travel to most of the jobs that affect Africa and other parts of the world, including the United States of America. They call on me — regarding anything that affects Africa — either on the phone to come and do the work there because they are a huge consulting firm. Then, I get paid.
Here, all the consulting works that I do is for free and I take pleasure in doing it. I do it for free because we are still developing. I do it for quoted companies, for banks and none of them can ever get up tomorrow and say I took N1 from anybody, any company or even state governments. I consulted free of charge for more than 20 states government that came to me.
I used my brain and my time. I donate it because I want Nigeria to develop. I earn a living from the stock exchange and whatever I was paid was enough to sustain me: I don’t smoke, I don’t drink, it’s just to run my household.
How many of the many decisions, including the Demutualisation policy, you took as DG of the NSE do you regret now?
Honestly, I say none. Everything I did at the NSE was professional because I worked in the New York Stock Exchange. I had advantage and know what works in the stock market.
So, the only thing that would have (positively) exploded our stock market so much so that South Africa would not have been able to match us (and we would have been competing with the New York and the London stock exchanges) is if the Demutualisation policy was seen through (concluded) before I left office.
Why were you not able to conclude the process?
You know that up till now, there is a document I prepared for demutualization. The board of directors accepted it in the conference we attended in South Africa. They had to study it. It was accepted and they said that it should be given Accenture assertion to put an international face to it. I didn’t need any consultant to do my work. I came from the best stock exchange (New York). If I have any problem, I call my colleagues.
It is a bad omen for Nigeria to employ somebody from abroad to come and do a job and then pay huge amount for consultancy. The consultant is only useful when, in your own management, nobody has the knowledge to executive that project.
The document was taken to the Federal Government during the administration of Goodluck Jonathan and that was how the Transformational Agenda of government as a concept was lifted from the Nigerian Stock Exchange. If you borrow something you did not create, you may not be able to execute it; it’s either you call the person that created it to show you or you take something else.
When I came, I told my former boss that the members must be owners listed on the Nigerian Stock Exchange and so you will have value, so that if your stock is not doing well, it will die and your client rather than lose their money, will save it in the Nigerian Stock Exchange for another company to take it over. They are the owners of companies, unlike now that it is not owned by anybody.
The only people as at today that we call owners are the seven gentlemen that contributed $7,000 each in 1960 to start the NSE in 1961 and that include people like Bank Anthony, Late Odutola, late Odumegwu Ojukwu and others. The only person that did not contribute was Akintola Williams because he just arrived from England as the first Nigerian accountant.
Chartered Accountants used to be company secretaries. It was Bola Ajibola the first Minister of Justice that created that pot of soup for lawyers. Now, it is only lawyers that act as company secretary and legal adviser. Before, it was chartered accountant that acts as company secretary. So Akintola Williams was invited to be the company secretary of NSE in 1960. The only northerner among them, Alhaji A.S. Bukur, was sent by the government’s Minister of Commerce at that time to go and overlook what ‘these people in the private sector’ were talking about.
Then, Chief Joseph Sanusi, who was working in the Central Bank, was also asked to join them to see if it would be beneficial to government.
The government was afraid of what the big men were doing, and at that time $7,000 was gold and diamond.
Subsequently, a task force was constituted and Odumegwu Ojukwu became the President, Chief Daniyan, who was in NIDB, also became a member. But in the books, I did not see where it was written that he paid the $7,000, even though he was the CEO and founding member.
With that demutualisation, even though those founding members are dead, their children will be there. I insisted they must be included, because if you don’t know your beginning, you will never know your end. Some people criticized me, but I said I had to look for them. When I came on board, I read every document, including the annual reports, and board minutes of NSE from 1960 before it became official in 1961. Even though I was not a member of board, I was attending board meetings because I was like the engine room.
We have strong stock exchange with a large capital base now. I didn’t borrow money for anything I did. I didn’t use any consultant because we are not a profit-making organization; that is the way it was registered. Ordinarily, because government would not want them to start making progress and overshadow it, it insisted that it should be non-profit-making and should not compete with the Central Bank in 1969.
Now, the NSE should have been demutualised because it is non-profit making. Every government wants a Stock Exchange now because it develops the economy. Politicians have seen the value, that it would create wealth for the economy. So, I said it would be quoted on the stock market:
Just like the New York Stock Exchange, the Nigeria Stock Exchange should be quoted on the Nigerian Stock Exchange and it should obey the regulations like every other quoted company. It is impossible to show any sign of favoritism and it would be amendable to all the rules guiding the other quoted companies. That way, you are giving Nigerians the opportunity to become shareholders of their own company; they will also get the Annual Report, and it will become profit making. It would be standardised and controlled because the people that are members would be the general public, companies and individuals.
So, if the Stock Exchange would say that they would charge quoted companies certain amount of money, the fee would be going back to the quoted companies because they are also members of the stock exchange. They can now say that the amount is much and that their company cannot pay as much. Besides, the Stock Exchange would make profit and pay dividends to the shareholders and the Nigerian public.
The only people who cannot be shareholders would be government, because government is supposed to be supervising — a distant supervision, I mean.
During your time as chief executive, the NSE at some point — especially between 2006 and 2008 — became a major channel for portfolio investors. But it was not long before the bubble burst. Would you say that the ugly events leading to the capital market crisis, as it were, could have been avoided?
In the case of Nigeria, government did not make it possible because the bubble burst from the Western world. I saw it coming and I kept telling everybody because our economy depends on importation. We depend on the U.S, UK and other European countries; so, our life was intertwined. We practically imported everything. The problem you talked about first started in the U.S, and two or three years before it got to us I had been warning that it was coming. Nothing was done.
What really were your expectations, in terms of taking proactive and preventive measures?
Yes, our market was bubbling; we were making money and many of our patent companies were being affected in Europe. So it would definitely affect us. The indigenous companies were not affected but the share price movement would affect them because if UAC, John Holt, Guinness, Nigerian Breweries are being affected, there is no way Nigerian companies would not be affected.
The wind had started in the U.S, it got to Europe. The impact on Nigeria could be less, but I did not expect that it would not get to us.
The foreign exchange market would be the first to be affected and then the banks and the quoted companies. So, if there is recession, it goes around everywhere because both the money market and Equity market work hand-in-hand.
So, we were expecting it, but what made it worse — because I expected it to be minimal — was the second coming of banks to the capital market when banks were asked to increase their capital base to N25 billion. In the banks’ first coming (IPOs), Central Bank Governor, Chukwuma Soludo did exceedingly well. Our banks had capitalized. When they did the first coming to the Stock Exchange to raise money, they met the capitalisation benchmark; 23 of the 25 banks made it. The banks got good money and their eyes were opened. They were impressed with the kind of money they raised and what they eventually had in their vaults, so they went back for more money. I kept warning against it.
Couldn’t you have stopped them; I mean, without your approval as DG, none of the banks or any company could have raised money from the market?
It can’t stop somebody from coming to the market.
Why?
Their shareholders approved their activities (and we could not stop them). We were having a financial regulatory meeting — of the Financial Services Regulatory Coordinating Committee (FSRCC) — and I told the central bank to caution the banks to take it easy. ‘You have come to the market and you raised money that is 10 times more than your capital base. First of all think about how to use that money wisely, see where you will put it to create more wealth, balance out and use it for about three years before thinking of coming to raise more funds. Then, you would have seen areas of expansion they need, if any, to come back to the market.’
But what the banks were doing was unhealthy competition. A small bank would see big banks coming back six months after to raise money and would want to do likewise. But I told them to first consolidate what they already had. There is no economy where all banks can be the same. Use the one you have got to do something meaningful, and then you see areas where you can invest them before you come back. I used to say something: Do not enter a market when there is a rush because you may end up buying rotten eggs. Take your time, study before you enter. First Bank Plc., for instance, can withstand the shake but smaller ones cannot.
I kept advising them. We have rules: You cannot go to the market three times after you have borrowed. They would come to me and say that SEC approved it, and I told SEC that it was not supposed to approve it. But the board of the NSE would caution that we should not be perceived as fighting government.
I used to advise SEC to talk to us before giving such approvals. Before we did anything, we also talked to SEC. That is the purpose of having the Stock Exchange — to touch base with one another.
I also warned the Central Bank about these banks being in hurry and this aspect of giving deposit targets to bank employees. You are making them do things they are not supposed to do. You give targets and you threaten them with sack letter and they are becoming unethical. They are also turning our young ladies to “unwilling prostitutes.” They didn’t go to men on their own because they wanted money for themselves; they wanted to retain their jobs and that is why they went to do a lot of things they did.
I kept talking, but it was the voice of one person and I could not refuse a company that came to me to raise money.
Why not if you were convinced it was unethical?
They (the banks) had met all the criteria and requirements they put out. You cannot say because it will hurt the economy, you will not approve. If you want to drive now, and you have reached the age of driving and you say you want licence after passing the test, I cannot, because I am the licensing officer that knows that you have a little bit of epilepsy, say I do not want to give you a license. I know that you could be on the wheels and the epilepsy could come, but I can’t help giving you what you legitimately deserve. If you insist on having it because you are qualified — after I would have warned that driving is not healthy for you and that I do not want to give you the licence — I would have no other choice than to issue you the licence.
As DG of the NSE, the banks would tell me that, apart from getting permission of their boards, SEC and CBN had approved their coming back to raise more capital.
If you consider that a serious pressure on you, wouldn’t you have raised the alarm or at least challenge it in court?
Yes. But there is no avenue in the books for you to go and argue in court. So all I could use was moral suasion. And I did use a lot of moral suasion. But the banks were praising themselves: ‘We have passed N30 billion capital base,’ and it became an ego trip. They did not even sit down to give us a write-up on how they were going to use the money in a way that would grow the economy. I think the approving agencies were also wrong.
Looking at the Nigerian Stock Exchange as it is today, what would you say is its major challenge?
It is lack of experience basically. Why do you have seniority and experience in the family and even in churches and mosques? A junior pastor, for instance, will learn from the senior ones. There is a learning period.
Before I left the stock exchange, I started announcing my exit in 2008. I told the world at the beginning what we planed to do and what we did the previous year and what we planned to do in the new year. At the end of the year, I would say, ‘this is the result; what we have achieved and what we planned for tomorrow.’
So, I used to say that I am training people that would take over from me when I retire in 2010.Stock exchange has no retirement age. I could have gone to 2015, we don’t have a written document that says you should retire when you are 60, but I chose to do so. I talked to my Council; I explained to them why I wanted to retire at 60. I told them that all my life I have worked as a student. I went to school in the U.S, I came out and started working. I was attracted back to Nigeria and I have been working myself to death. My Life is work, I don’t have time for relaxation, I didn’t have time to say I was going for vacation because once I was away, they would call me back two days after. So, I wanted to retire at 60 when I could still climb the staircase of a plane, when I could still enjoy the vacation and really travel for myself. AS DG of the NSE, I would leave the conference room to my hotel, and from the hotel back to the conference room, and then back to the Airport to return to Nigeria.
I have gone to practically every part of the world, including Australia, Switzerland, China, Japan… everywhere. But ask me to show you the pictures of sight scene centres that I took and I cannot — because I was inside conference hall all the time; I never went to see any sight. So, I wanted to retire when I was still strong. The essence of my retirement was for me to really see the world between ages 60 and 70.
I never went on any vacation; anytime I did, they called me back.
It was either the Villa was calling me or the stock exchange staff and the Finance Ministry were calling me. Somebody was always calling me back, and for me, Nigeria was my life; the stock market was my baby and my life.
I said because of that, I am grooming people to take over from me and I did groom them. Besides the middle-level managers, I groomed 11 top-level managers. I sent them to different trainings. My deputy and two other top management staff were willingly going with me. The age difference between my deputy and I, for instance, was just one year. The three were going with me voluntarily. I didn’t ask them to go.
I said, ‘Now here are the next four from the North, the South-East, the South-West and the South-South.’ There was also a woman because I had a deliberate policy of grooming women for leadership. So, I groomed at least four people that could be DG after me.
Stock Exchange grooming is not like that of banks or any other profession. In journalism, you can leave a media house for another and still perform magically, because it is basically the same, but stock exchanges are not the same.
Besides, you would not set up another stock exchange in Nigeria; so where else would you get the experience, if not only in the Nigerian Stock Exchange? If you are a banker, you can leave First Bank and still perform well in Zenith Bank. It is basically the same role; you only need a few hours to know their system of doing and putting things together. You probably need about four hours to understand their own insider system,
But in Nigeria as of now, there is only one Stock Exchange — the NSE. So, the only experience you can ever get is if you had worked in that Stock Exchange or in any other around the world. That is why, when I came from the New York Stock Exchange, I did everything to bring our Stock Exchange up to a world-class status without anybody teaching me, because I have already learnt it.
I had been teaching these four people to succeed my management. I never travelled alone; I would go with two or three of the top-level managers, one or two middle-level managers and a junior staff that I believe ought to grow up to the management cadre. Sometimes, I would call them in groups to suggest who would go with me. That way, you have a balanced organisation, so that when one at the top level goes on leave, the next can cover his absence. That was how I was thought in Business School in New York where I was trained.
Now when I finished my training and preparation, I now presented them to my council, telling them that I now have a succession plan. When you go to Harvard, in New York, the first thing they teach you is that the day you become Chief Executive, that is the day you should start planning your succession. No Chief Executive lasts more than between five and seven years. I told them: ‘I have done 11years. I need to go now. They said, ‘Why do you have to go?’ I said, ‘Let me go, I have trained people and here are the people.’ We went to South Africa for ourselves, the staff. So the council said, let us go on a retreat to South Africa because it was cheaper not that there is anything in there.
So, there was a retreat and we presented the people. As I called on each department, the people I trained would speak on how they were going to run the department. We went with the whole Council and part of the staff, including the four people that I had groomed to take over from me, and I said, ‘out of these four from the top-most management, any of the top two can be the Chief Executive.’ I had also groomed those that are General Managers. So if one of these ones becomes the chief executive, the other one would be the deputy; then, the other ones will be executive directors.
Then, among the general managers, I said, ‘This is the order I ranked them in performance: There are eight of them and so if you like make any of these the general manager.’ So, I had made succession plan that would have lasted for 20 years at the minimum. But the Council was also free to make changes, minor changes. I have done it professionally with no sentiments of where you came from because where I was trained, there was no sentiment for woman or man; a man is equal to woman in brain. It is only the reproductive system that is different. Everything that is in a man’s body is also in a woman’s body and works the same way except the reproductive system. So, I don’t regard women as the weaker sex.
So, I told them, you are always free to change and also free to bring in new people. Many Nigerian chief executives like to keep things to themselves so that when they leave, the strength of the organisation will go down to show that they were indispensable. But that is a wrong management. In America where I came from, your failure or otherwise is gauged after you would have left the organisation as chief executive. You fail when you don’t prepare a succession plan. If you leave an institution and the institution grows higher, you get the praise, and you are a good manager. That is what I was taught in Harvard Business School, in Baruch College of the City University of New York.
Do you think that abandoning your succession plan affected the NSE and the capital market negatively?
What happened? Why did the whole thing crumble? Now, there is a succession plan with human beings attached to it; the Council approved it; it was made public to stockbrokers. I had already indicated that I was leaving in September, but they said that I was supposed to end up the year. The stockbrokers also came and said that I should not leave in September. According to them, there was a pullout parade for me on December 15, 2010. All the same, I told them that from 2011, I would start enjoying myself.
I prepared these successors because I knew the challenges and they were ready. The Council approved it and went with us to South Africa.
What is the place of integrity in capital market operations?
In the U.S, where I was groomed, integrity is the watchword of the stock market; your word is your bond. If you say that this phone is Samsung, the engine inside must be Samsung; somebody must not come to say it is not Samsung. So, without the person looking, the person will trust you because your word is your bond and that is integrity. And it is the motto of the Nigerian Stock Exchange.
How much of integrity would you say the stock market manifested under your watch, especially against the backdrop of the experience you said you had with the banks?
I will not say I am an angel; it is my training that gave me integrity and I make sure I enforced it in the Nigerian Stock Exchange. There is no staff of mine that would take a kobo from any company that wanted to get quoted on the Nigerian Stock Exchange. No employee would say, ‘this application is difficult; maybe you should bring something, let me see my oga.’ No such thing.
Any Stockbroker that takes money to do work would be punished and the company concerned would have its licence suspended for a minimum two weeks depending on the magnitude of the offence.
So, without integrity, there is no stock market, because if you are a stockbroker you must have integrity. You are in investment because people give you their money to hold and invest for them; they trust you. If you say buy this company, you have the knowledge of that company, the person who is tending to buy relies on you, your integrity and your knowledge. I taught about it; we had lectures on integrity and politeness for our staff. If we hear insinuations, you are sacked.
There was a studio, a production studio on the 9th floor and the gallery for the Press, so they hear every thing going on. The only time I had ever said, ‘clear the gallery,’ was when a decision concerning a stockbroker had not been taken and I wanted his fellow stockbrokers to decide which level of punishment he would get. I would say, ‘clear the gallery for five minutes we are having in-house talk,’ and, from there, we would give sanctions and then call everybody back. Without integrity, there is no stock market.
Are you saying that some of the structures you built have been pulled down?
As I said, the Council approved everything, including the stages of demutualisation. I don’t have to be there for demutualisation to take place, but it has been prepared. You don’t just ask everybody to come and buy shares. There are stages.
Who are the chief promoters? They are the stockbrokers who are members of the Exchange. They must hold the majority share, and I said It would be 30 per cent, which is the majority holding in in any quoted company. There is nobody that would have enough to match your 30 per cent because it spreads all over. So the stock broker would be the majority shareholders and they have an association, they elect officers and members to the council to represent them, six after them, the original shareholders, the seven people that paid 7,000 Pounds in 1960 to start the Stock Exchange, they would among themselves (for those of them that are dead, the children and families are alive) elect a representative on the board.
Founding members should have 10 per cent; banks, 10 per cent — because we don’t want them to swallow the Exchange — and all companies in Nigeria would have 20 per cent maximum. Then Nigerian shareholders would have the majority because the rest is for Nigerian shareholders.
There is no way one individual shareholder can own one per cent, because it is thrown open to all Nigerians (every part of Nigeria) to buy. So, at any given time in the world, there is nobody that can control the Stock Exchange in the world, except the dealing members because they operate the Exchange.
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