Oteh explains that the SEC and government departments have been working together to bring more capital into other sectors of the economy, and to bring companies onto the public markets. Encouraging investment by ordinary Nigerians should increase their sense of ownership over parts of the economy, and allow them to participate more directly in its growth.
“Our approach has been advocacy with other stakeholders. We’ve partnered with the agriculture ministry. In 2012 we hosted an event really to place the agriculture sector as a potential area of opportunity for foreign investors and to showcase that the sector was doing well,” she says. The privatisation and renovation of the national commodity exchange offers an opportunity for agriculture businesses of all sizes to manage their route to market, she adds.
“In the power sector, we’ve been working with the Bureau for Public Enterprise,” Oteh says. “They’ve since started working on the privatisation of the power companies. One of the things that we encouraged was that they plan for these companies to ultimately list on the exchange.”
The sector could also be a source of large-scale listings, Oteh says, deepening and broadening the stock exchange and making it easier for retail and institutional investors to be exposed to the economy’s growth.
The SEC and the Ministry of Industry, Trade and Investment are working with the private equity industry to try to encourage them to use the stock markets as an exit route from their investments. Speaking at the Economist’s Nigeria Summit this March, Okechukwu Enelamah, the CEO of African Capital Alliance, said of the current imbalances in the capital markets’ make-up: “From a private equity standpoint, we see that as an opportunity”, but noted that the relative underdevelopment of the stock market remains a disincentive.
“We also worked hard at making the market more sophisticated,” Oteh adds. “We had a market driven by what the banks did in equities, yet a capital market is much broader than equities. We have been creating the understanding that … you’ve got other instruments, equities, bonds, [exchange traded funds], and that you have non-cash markets, and providing support to the participants so that they can develop their own skills and improve themselves in different areas.”
Perhaps the most far-reaching reform to the equity market has been the renewed focus on corporate governance. The SEC reviewed its code for companies in 2008, using best practices gleaned from studying the South African markets and the US’s Sarbanes-Oxley legislation. The code was voluntary when it was released in 2011, and in 2014 the regulator made it mandatory.
“We also were keen to get the directors of these companies to become more involved in how these companies are being run. What we’ve seen is that there are a lot of passive boards, or rubber stamp boards. What we’re trying to encourage is that the board takes more responsibility for how organisations are run,” Oteh says.
The stock exchange and regulator are trying to leverage new technologies to bring Nigeria’s retail investors and nascent mutual fund industry up to speed with global standards. New capital requirements for trading firms were designed to give them the financial resources to invest in their systems, and prepare for the increasing levels of sophistication in the market.
“We want the BlackRocks and the Fidelity to come to this market,” Oteh says. “And we want the local participants to be competitive.”