Ámbitos / Componentes de la Seguridad Turística según la OMT, OEA

The financial regulatory environment and in particular the stock market regulatory environment in Nigeria have undergone several changes since the inception of the stock market in 1960. Initial trading on the Nigerian stock market was predominantly in government securities due in part to the Nigerian Enterprises Promotion Decree of 1972 and 1977 which allowed for a high level of participation by public enterprises in the stock market. Also within this period pricing of new issues on the Nigerian stock market was not determined by the market but rather was determined by the Securities and Exchange Commission (SEC). Under this system the calculation of the pricing of the new issues was determined entirely subjectively by weighting the book value and the market value of the share. Thus allowing for potential distortion and manipulation of the market particularly in cases of private subscription where company directors with large block of shares may ask for lower valuation of new shares thereby allowing them to make a larger profit at the expense of the company to the determent of smaller shareholders.

4.4.5.1 Current stock market regulations

The Federal Government of Nigeria in 1995 started the process of liberalising the regulation of the market by the abrogation of laws which had been identified as obstacle to the participation of foreign investors in the market. These laws include: The Foreign Exchange (Monitoring and Miscellaneous Provision

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Decree No: 17, 1995; Nigerian Investment Promotion Commission Decree No: 16, 1995; Companies and Allied Matters Decree of 1990 and Securities and Investment Act (ISA) 45 of 199910. The abrogation of these listed laws now allowed for the same rights, privileges and opportunities for investment in securities to all investors in the market whether they are Nigerians or foreigners and consequently boosting confidence in the market.

In addition the creation of a central depository for all the share certificates of quoted securities including new issues which was called “Central Security Clearing System (CSCS)” in April 1997 facilitated the introduction of an automated trading system (ATS). This system improved the speed of trading and also provided an electronic platform for investors to monitor any movements in their stock accounts similarly boosting confidence (NSE 2009).

Since 2007 when the national assembly enacted the Investment and Securities Act (ISA) 2007 which replaced the ISA 45 of 1999 has been the main act which governs the regulations of the stock market. It ‘establishes the Securities and Exchange Commission as the top regulatory authority for the Nigerian Capital market. It also provides guideline for the regulation of the market to ensure the protection of Investors, maintain fair, efficient and transparent market and reduction of systemic Risk; and for related matters’ (the Investments and Securities Act, 2007:9)

The act was enacted to create greater oversight on the market and also correct the inadequacies within the old system where the Nigerian stock market was

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self regulatory and had no clear external organisation in charge of oversight over it. Also it provides legal backing for the creation and trading of new products and securities which include mortgage-backed securities and derivatives. It also imbues powers on SEC to be able to enter and seal up the premises of persons illegally carrying on capital market operations.

It also lays out the exact scope of the powers of the SEC as it relates to its over sight function and one of its key functions as laid out within the act is the protection of investors maintaining a fair and orderly markets in this regard SEC established an Investors Protection Fund (IPF) to compensate investors who due to bankruptcy or negligence of the Nigerian stock exchange dealing member firm suffer losses. In addition it set up a trust scheme to compensate investors whose losses are not covered under the investors’ protection funds administered by securities exchanges to further boost confidence in the market and fulfil its mandate.

4.4.5.2 Dual listings on the Nigerian stock market

The Nigerian stock market encourages and facilitates dual listing by supporting companies listed on other markets to access the Nigerian market through either joint primary or secondary listing on the Nigerian stock market. Similarly it provides support for Nigerian companies seeking listing on other stock markets. This is in line with the view that dual listing has the ability to enhance a company’s trading volume as well as its price to earnings ratio. However there are only a few companies that have taken advantage of this and they include Oando Plc a Nigerian company is listed on both the Nigerian stock exchange

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and the Johannesburg Stock Exchange (South Africa). While the Pinnacle point group limited is an example of a company listed on other market (Johannesburg Stock Exchange) which is listed on the Nigerian stock market.

While Diamond bank Plc, Guaranty Trust Bank (GTB) Plc and Afren Plc are Nigerian companies already listed on the Nigerian stock exchange also listed on the London stock exchange (United Kingdom) With companies like Dangote cement Plc planning similar listing on the London stock exchange. The reasons proffered by the companies for seeking dual listing include increasing the exposure and profile of the company in the intended market as well as to provide access to a larger pool of capital through listings in other markets.

4.4.5.3 Trading volumes on the Nigerian stock market

At the commencement of operations, the NSE started trade with 0.3 million shares worth N1.5 m and the volume and value have continued to grow steadily to 138.07 billion share worth over N2086 billion by 2007 (NSE 2008). The volume of trade/ market activity has steadily increased over the course of the history of the market however there was a more significant increase in the volume of trades starting from 1998 up until 2007 owing in part to the improvements in the quality and quantity of securities available caused by the privatisation programme and increased awareness of the opportunities offered by the market. On analysis it can be seen that the percentage change in the volume of trade on the Nigerian stock market over the study period is over 59 percent although the bulk of the increase has occurred over the last few years. Figures 4.11 and 4.12 below provides a trend of the volume of trades and

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percentage change in the volume of trades on the Nigerian stock market over the study period.

Figure 4.11:Trend of volume of trades on the Nigerian stock market in million of shares

Source: Compiled from NSE data

Figure 4.12: percentage change in the volume of trades on the Nigerian stock market

Source: Compiled from NSE data

4.4.5.4 Market irregularities in the Nigerian stock market

The incidents of Known cases of market irregularities and other forms of illegalities within the Nigerian stock market have been extremely rear up till 2008 when the Nigerian stock market suffered the heaviest loss in its history and crashed. It is arguable that the crash could have been as a result of the global financial crisis however, on investigation it was discovered that there had been several cases of share manipulation, margin loans scandals as well as

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other forms of market abuse by insiders which were more likely culprits of the crash.

The most common form of market abuse identified were cases where market operator through collusion deliberately underpriced the value of new issues of shares causing massive excess demand for the shares with poor chances of actually getting the shares. Due to this practice on the first day of trading of these shares there is normally a big jump in prices allowing the insiders who obtained shares from the initial allocation to make large capital gain.

The market insiders involved in this negative activity as well as other identified illegalities were arrested and have since been charged to court to be prosecuted in line with the provisions of the laws and market regulations as it relates to such activities. However their activities have affected the level of confidence in the market and the level of stock market’s capitalisation has not returned to their earlier highs.