Market Intelligence

Political risks of zero allocation to SEC

by Editor

April 15, 2013 | 1:58 pm
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Are members of the federal legislature working at cross-purposes with government’s avowed determination to retool the economy? The question is germane in the face of the decision of the National Assembly to starve the Securities and Exchange Commission (SEC) of funds.

This seems to have further soured the relationship between the legislature and the executive. How this plays out at the end of the day will have a telling implication for the nation’s fragile economy.

The genesis

Following the resignation of Musa Al-Faki as director-general of SEC on the heels of a financial scandal involving the commission in the sale of AP stock in May 2009, Arunma Oteh was appointed in January 2010 to succeed him.

Oteh appeared before members of the bi-cameral legislature who approved her appointment. The approval was on the basis of the high profile positions she was said to have held. For instance, she was vice president, African Development Bank. At the time of the approval, she was adjudged fit and the right person for the job.

The SEC boss was to draw the ire of the legislators when she alleged that the chairman of the House Committee on Capital Market and Other Financial Institutions, Herman Hembe, demanded some bribe from her which she claimed she bluntly refused. The committee subsequently indicted Oteh, saying she lacked the requisite qualifications to hold such a position and should be sacked.

Oteh was also accused of wasteful expenditure and going contrary to due process in her manner of appointments.

In a twist of events, however, Hembe was investigated and was forced to step down from his position in the committee.

The Nigerian public believes the lawmaker did not tell the whole truth about what transpired between his committee and Oteh.

For bringing the lawmakers to a public opprobrium, the House of Representatives drew a line against the SEC director-general by adopting the sack recommendation by the Hembe-led committee. The House also got the Senate to buy into the recommendation.

Fuel for the fire

What appears to have riled the lawmakers most is the refusal of President Goodluck Jonathan to accede to the sack recommendation on Oteh whereas he bought wholesale those concerning Bolanle Onagoruwa, former director general of the Bureau of Public Enterprises (BPE); and Harold Demuren, former director-general of the Nigerian Civil Aviation Authority (NCAA). The two directors-general have, in the past months, been relieved of their plum jobs.

The Presidency believes that the recommendation for Oteh’s sack was ill-motivated, smacks of witch-hunt and has nothing to do with competence. Even the operators in the stock market can attest to this.

Jonathan also strongly believes that sacking Oteh on the prompting of the legislators would reduce him to the status of a “silly dove” without heart.

A joke taken too far

In their determination to achieve their aim by every means possible, the National Assembly bluntly refused to approve any allocation for SEC in the 2013 budget. They did not stop there. They also came up with an impossible clause to ensure that the President does not advance funds to SEC through the back door.

Returning the budget document to the National Assembly, Jonathan requested for immediate amendment to, among other vexatious clauses, that of Section10, of the 2013 Appropriation Act.

He asked the lawmakers to amend the section 10 which reads: “All revenue however described, including all fees, fines, grants, budgetary provisions and all internally generated revenue shall not be spent by the Security and Exchange Commission for re-current or capital purposes or for any other matters, nor liabilities thereon incurred except with prior Appropriation and Approval by the National assembly.”

The President observed that “the import of clause 10 is tantamount to shutting down the business of the commission with a potential negative impact on the capital market.”

The federal lawmakers have stuck to their guns, questioning the rationale behind the half-hearted implementation of their recommendation in relation to sack of some directors-general.

While the impasse persists

The hard stance by the National Assembly has continued to draw flaks. It is believed that Oteh’s travails may be the handiwork of some powerful elements in the House trying to please some interests in the nation’s capital market.

Analysts believe that rather than dissipate energy trying to evict Oteh from the commission, the federal lawmakers should show more interest in finding out from the director-general the measures she is putting in place to ensure that the market does not return to the terrible experience of yesteryear.

“The legislature is acting ultravires by saying it cannot fund government agency just because members don’t like the face of the person at the helm of affairs”, an analyst who craved anonymity told BusinessDay.

According to another observer, “The legislators should stop at the point where they recommended that the woman should be sacked. If the President accedes to that, it is ok, if not, they should take the fight to the Presidency not to the woman. It is lawlessness at its peak. Her travail is simply because she exposed their corruption”.

“Is it possible to say because you don’t like the face of a state governor you won’t give him the necessary allocation for his state” the observer wondered.

Implications for the economy

-The action of the National Assembly is capable of setting a dangerous precedent locally and across the globe. This is because it would have passed a wrong message that personal considerations must override that of the entire country.

-It will also lower the estimation of the National Assembly in the eyes of right-thinking members of society.

-Confidence in the capital market will nosedive since, by the insistence of the lawmakers, what determines the choice of the head of the regulator is not competence but the mood of the National Assembly.

-The controversy may constitute a huge distraction for Oteh and his team.

-The unnecessary face-off may open avenues for elements who do not mean well for the market in particular, and the country in general, to ensure there’s a hiccup in the system to justify their abysmal tenure at the capital market.

-The fight will make nonsense of democratic system in place, while hoisting the flag of totalitarian and gangster republic.

The Lagos Chamber of Commerce and Industry (LCCI) fears that zero allocation to SEC could reduce the recent gains of recovery and stability in the capital market and send wrong signals about the nation’s democratic process, especially the preservation of the tenets and values of separation of powers.

What to do

President Jonathan has taken the right step by returning the document to the National Assembly to do the needful. If this does not work eventually, he should take up the funding of the operations of SEC from his security votes and from slush funds floating around. There is the need to maintain the separation of powers as enshrined in the Nigerian Constitution.

by Editor

April 15, 2013 | 1:58 pm
  |     |     |   Start Conversation

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