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A Tale Of Two Companies And Two Regulators

Two companies have been in the news lately in Nigeria for the wrong reasons. MTN, the telecoms giant, faces a record 1.04 trillion naira ($5.2 billion) fine for failing to disconnect 5.1 million unregistered subscribers’ lines as directed by the Nigerian Communications Commission, the industry regulator.

On the other hand, Oando, the energy group, failed to submit its financial statements to the stock market on schedule, ostensibly owing to a 184 billion naira record loss in the 2014 financial year.

While the reaction to the audacious MTN fine has been mixed, criticisms of the Nigerian Stock Exchange, which oversees the stock market, for its reprimand of Oando’s infractions have been unanimous. The NSE gave Oando a slap on the wrist – a six million naira ($30,000) fine – for defying market regulations, just like MTN. The phone company must be wishing it were Oando to be so lucky to escape with such a relatively light sanction.

Of course, we know we’re not here comparing apples with apples. The regulatory authorities are different. Yet, there are some interesting points to consider in this tale of two companies. First, while MTN is struggling with paying up before the November 16 deadline, I don’t suppose Oando will be losing sleep over its own penalty.

Second, MTN’s Chief Executive Officer at the time of the offence has been sacked, taking the blame for what happened under his watch. Many more heads are likely to roll in Nigeria and elsewhere, according to the South African owners of the company. In contrast, it’s all quiet in Oando’s boardroom. Besides some feeble rebuke from the NSE, only a handful of angry shareholders have asked CEO Wale Tinubu to resign for the monumental loss, for treating the regulators, millions of its shareholders, and market operators with contempt.

Third, while MTN has admitted its mistake and apologised, Oando went to the stock exchange to explain away the woeful performance. The obvious culprits, he said, included foreign exchange losses as a result of the devaluation of the naira currency and falling crude oil prices.

Did Oando not say not too long ago that it was not too bothered by the falling oil prices as it had hedged its position to cushion the effect of the price fall? Why were its shareholders not warned about the impending losses as is the normal practice in the market? Who advised the company to deceive the market by hiding its woeful report card – the worst ever recorded by any company listed on the Nigerian bourse? Why did a company whose shares are traded in Nigeria and abroad that should be more conversant with the rules decide to condescend to the level of local companies? Is this not a clear case of poor corporate governance or even a lack of it? So why put stakeholders in the dark when the result would eventually be released? Poor corporate results may affect a company’s share price in the interim but ultimately, it will rebound when investors sense it will eventually turn the corner.

Many investors don’t mind if their shares suffer some temporary setback. What’s paramount on their mind is the future. They are on the lookout for companies with prospects and that are likely to become profitable in the near future. Oando should have known this. It’s a shame that with one embarrassing financial result, it has ruined its reputation. This story is, however, not only about MTN and Oando.

It’s also a tale of two regulators. Whether you agree with NCC or not, it must be commended for its bold action against MTN. It has sent the fear of God into the hearts of Nigerian telecoms operators. I doubt if any company under its watch will dare to fool around with its rules again.

They now know they must behave or be sanctioned. The same can’t be said of the NSE. Despite claiming to “protect investors, ensure transparency and enshrine good governance,” developments in the market over the years suggest it is opaque and weak and slow to act to protect poor investors against powerful and often dubious company executives.

According to Boniface Okezie, who heads one of the shareholders associations in the country, “it’s the shareholders who will suffer the consequences” of Oando’s impunity when the regulator imposes meaningless sanctions. In my 23 years of covering the bourse as a reporter, the last seven years have been the most traumatic for ordinary folks who put their life savings in the market.

Their shares have continued to hemorrhage, losing them more money than the MTN fine. Many investors have lost hope; some have lost their lives.

More and more people are heading for the exit. If the authorities don’t stop pampering listed companies that are flouting its rules, the exchange risks losing its influence. If that happens, the NSE might as well forget its longstanding dream of becoming Africa’s biggest bourse ahead of the Johannesburg Stock Exchange.

The global economic crisis and the banking crisis that soon followed may be partly to blame for the lingering poor showing of the NSE. However, it’s distressing to hear stories of Nigerian CEOs flying around the world in private jets bought with money from unsuspecting investors. It’s well known that some companies have used persuasive marketing strategies to sell shares.

But as soon as the funds come in, they hardly return to give account let alone pay any dividends. If my information is correct, renowned American investor Warren Buffet, despite his stupendous wealth, flies public airlines, drives the same car he’s had for a long time and lives in the same house.

If this sort of modest lifestyle is unacceptable to our executives, they would do well to de-list their companies so that we know that they’re spending their own money. It’s time for our chief executives to clean up their acts or resign. Going forward, the NSE must be tough on infractions to bolster market confidence.




•Paul Okolo is an Abuja-based public affairs analyst.

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