Capital market burdened by infrastructure deficit

e-Dividend, DCS challenged by supportive infrastructure

The Nigerian capital market has continued to suffer from debilitating market infrastructure for its newly conceptualized programmes to effectively take off.
The infrastructure lack explains why some investors in the market have been denied itheir dividend payments, others cannot dematerialise their shares, inability to effectively register for electronic dividend (e-Dividend) payment and also direct cash settlement (DCS), among other challenges.

While many stakeholders have argued that the Nigerian market has become purely elitist where ordinary citizens cannot effectively participate, others argued that the introduction of new products in the market is not always matched with infrastructural developments, which places high premium on the expected recovery of the market via increased investor confidence.

Among other issues, while local investors continued to be challenged over registering for e-Dividend, the Diasporas investors grapple with problems regarding registering for e-dividend and BVN.

It was also discovered that judicial infrastructure, technological challenge, power, policy and communication had also been a major issue militating against the implementation of sound market development policies, thereby frustrating growth.

However, in the face of dearth of market supportive infrastructure, heavy fines are placed on market operators challenged by infrastructure lack or failure to meet expected post- listing rule or market regulatory requirement.

For instance, The Daily Times Nigeria found that market operators that fail to forward client’s DCS form to CSCS 24 hours after receipt will be liable to N250, 000.00 fine. “This is irrespective of the challenge of infrastructures to support such speedy process.”

The negative impact of weak infrastructural base of the market, Daily Times findings reveals is impacting the entire scope of the market, Regulators, Operators, and investors’ service delivery, market hearsay and confidence of investors.

For instance , just as SEC had delisted over 50 per cent of its operators, the total number of 527 operators in its register, have not fully complied with regulatory requirement on data updating, a development necessitated by infrastructure deficit.
List of market operators on SEC‘s website as at September 17th, 2017, the commission had 527 market operators on its data base, out of which 421 of them have fully and partly complied with the rule requiring data updating with the SEC accounting for 75 per cent, while 25 per cent others may also be delisted if deadline granted for compliance by the commission expires.

Some of the capital market operators include solicitors, estate survey and values, estate valuers, and reporting accountants. Others are broker dealers, broker dealer trustees, corporate sub broker, trustees, registrars, and rating agencies. They also include, fund portfolio managers, receiving banks, custodians, FNDQ OTC dealer, Securities Lending Agents, private equity fund managers amongst others.

The data updating compliance level, revealed by the DG SEC, Mounir Gwarzo at the recent post capital market Committee Meeting (CMC) in Lagos, showed that lack of supportive environment has slowed compliance level of more than 25 per cent operators.

He said,“The 421 operators are the ones, we have their information, and we need to give them more time because most of the deficient areas are not that major. To ensure that all the operators have easy access to update their date warranted the SEC to ensure that the exercise takes place in Lagos.”

“We will still give them more time because what they have not been able to provide are not that very serious, but some others that have not been able to provide the vital information, we have already delisted them.”

For those ones that over a period of one or two years, have not been able to update their data, , for those ones we have cancelled their registration, but those who have submitted their information, but not as accurate as it should be, we are ready to give them more time” Gwarzo said.

The Daily Times findings reveals that many investors in the Nigerian market still have the burden of irregular signature, which has frustrated them form reaping form their investments, even as the market has provisions for biometrics capture and other means of identification.

A retail investor told Daily Times on condition of anonymity that he abandoned claiming his dividend warrants, because he was turned back by registrars’ because his signature was adjudged to match the one in his data with the registrar.

The retail investor revealed that he , usually use his thumb prints in most of his forms while buying public offers, but was surprised that the registrar didn’t ask for his thumb print which , cannot be faked.

At a recent investor’s clinic organized by the Nigerian Stock Exchange, it was revealed by participants at the forum that, bank confirmation cost has continued to rage , non- data preservation to match investment , inaccurate completion of forms, among other challenges have continued to plague the market.

Further findings show that, while many Nigerians are still battling with the problem of registering for BVN, dividend e-dividend payment is based on and for one to receive such payment, his shares must be dematerialized. All of which are fraught with challenges.

Mr. Wale Olurin, a stakeholders in the capital market, at a recent investor clinic, said emphasized that he problem of dematerialization has continued to stream he said “Registrars still reject applications forms for dematerialization because there are outstanding certificates to verify” a trend he said , is inimical to market development.
Another stakeholder, Mr. Ike Okechukwu, while enumerating challenges of the market said that in the course of revalidating share certificates for dematerialization and e-dividend, most registrars’ continue to make it impossible for shareholders to claim their investments.

This they do by requesting for indemnity form, and so go extra mile to ask for insurance, “he said, adding: “ Is there any reason registrars should nullify shareholders indemnity form and demand for insurance?”

Another stakeholders, Onyinye Uzo, said that just as the capital market regulators have been calling shareholders to bring their share certificates for dematerialization, yet more forms for demat’ are returned by registrar because of irregular signature.

She also pointed that there has also been no consideration for Diaspora investors who fill their forms and travel bank, after which the forms are returned as not properly filled.
Director, Market Operations SEC, Henry Adekunle Roland, acknowledging infrastructure e challenge of the market recently at the NSE, saying that extension of deadline for commencement with Direct Cash Settlement (DCS) was because of identified gap in supportive infrastructure.

“The earlier proposed September 2017 deadline, we realized that the infrastructure that would actually make it possible for us to actualize the deadline wasn’t on ground’ Adekunle Roland said.

According to him, “This will become effective immediately we provide the infrastructure, information dissemination and other factors; we have taken the deadline forward to January 2018.”

Bonny Amadi