The Nigerian Securities and Exchange Commission (SEC) board placed its director general Arunma Oteh on compulsory leave last month to investigate alleged misuse of funds.
The SEC says Oteh had been asked to step down to allow for an independent investigation into "the sources and uses of funds for the Project 50 event", a celebration organized by the SEC to mark 50 years of capital markets regulation in Nigeria.
Daisy Ekineh, a commissioner in charge of market operations, stepped in as acting director general. However, within four days, Ekineh had also been ousted and the board was in effect dismissed. According to local media reports, finance minister Ngozi Okonjo-Iweala told reporters that the government would refuse to extend the board’s tenure.
The SEC’s director of administration Ibrahim Bolaji Bello took over instead, issuing a statement declaring his intention to "forget about the past" and work quickly to restore investor confidence.
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| The Nigerian Securities and Exchange Commission (SEC) board placed its director general Arunma Oteh on compulsory leave last month to investigate alleged misuse of funds |
Oteh took the reins at the SEC in January 2010 after trading scandals and a crash in which the local equity market lost more than 60% of its value in the late 2000s.
A former African Development Bank treasurer, Oteh had a mandate to clean up the market. Within a year, she had removed Ndi Okereke-Onyiuke, the chief executive of the Nigerian Stock Exchange who was criticized for not doing enough to combat abuses during roughly ten years in charge.
Oteh also brought more than 250 people in front of an independent tribunal inquiring into events surrounding the crash.
Her appointment came as central bank governor Lamido Sanusi was attracting international attention and praise in his efforts to clean up the banking sector. Sanusi’s success in taking on influential figures – such as former Oceanic Bank chief executive Cecilia Ibru – had emboldened the anti-corruption cause.
However, some say there were inevitable barriers to taking on vested interests. Earlier this year, for example, the SEC alleged that banks had engineered inflated prices for their stock before raising fresh capital by creating shell companies to buy up large quantities of their own shares, thereby giving the appearance of higher market demand.
"Regulators were neither sufficiently prepared nor well-positioned to monitor and sustain the explosive growth in the capital markets, thus these illegalities largely occurred unhindered," the SEC’s report states. Market participants, who preferred not to be named, agree that similar practices were common.
The SEC’s analysis was released ahead of a March capital markets committee hearing at the House of Representatives, which was supposed to focus on the causes of the local financial crisis.
However, the hearing became dominated by personal accusations. Oteh publicly clashed with senior figures in Nigerian finance, including Herman Hembe, chairman of the House of Representatives capital markets committee. Before the committee hearing took place, Hembe accused Oteh of billing N850,000 ($5,240) for a single meal and said her administration had paid N42 million for four new cars. The allegations were denied.
However, as the committee met, Oteh accused Hembe of compromising his integrity by asking for money from the SEC ahead of the hearing. Oteh alluded to close connections of members of the house to the old market regime, including that the deputy speaker was Okereke-Onyiuke’s nephew.
The SEC further detailed allegations that Hembe had taken money from the SEC to finance a visit to a conference in Dominican Republic that he failed to attend.
The SEC later issued a strongly worded statement denying charges made by Hembe at the hearing that Oteh had instead made "financial overtures" to him.
Soon after the hearing, Hembe resigned as committee chairman to allow an investigation into the SEC’s allegations, later resulting in an arraignment by the Economic and Financial Crimes Commission.
Euromoney unsuccessfully tried to contact Oteh directly and through her official spokesperson, and also unsuccessfully tried to contact Hembe through his official spokesperson.
Sources with knowledge of the situation say Oteh’s camp believes the most recent allegations, which led to her being placed on leave, were politically motivated. Hembe was also reported to have told the House of Representatives he neither demanded nor took a bribe from Oteh, but rather "fought hard to resist any such temptation".
International investors say the row underlines the challenges Nigeria faces in trying to improve perceptions. Oscar Onyema, the new CEO of the stock exchange, is seen to have prioritized strengthened surveillance. He remains in place, but international investors say they have not seen fundamental changes to the market.
"It’s possible there have been a lot of changes to how the SEC is managed internally to make it a more efficient organization, but not much has been reflected in changes to the way the market operates," says Ayo Salami, chief investment officer at London alternatives group Duet, which has a partial focus on Africa. He points to persistent low standards in disclosure of firms’ financial statements as an example.
Olusegun Obasanjo, Nigeria’s president from 1999 to 2007, made the war on graft a cornerstone of his campaigning. "Fighting corruption is not a one-night affair," he said in an interview. "There are deep-rooted interests, and if you are going to deal with it, you have to deal with it ruthlessly and consistently. If you deal with it today and you then turn a blind eye tomorrow, it will come back with a vengeance."