Mary Uduk, acting Director-General, SEC


Shareholders have accused the relatively bigger players in Corporate Nigeria of engaging in sharp practices to the detriment of smaller holders.

According to the complainants, they are increasingly being caught in the quagmire of making little or nothing from their investments due to what they term the spate of increasingly rising poor corporate governance practices.

By the same vein also, they appear then to have lost hope not only in Corporate Nigeria but also in the statutorily denoted regulators who appear to have failed to give them adequate protection from those whom they allegedly see as predators.

In their view, the most recent evidence of their plight came to the fore in the ongoing Oando saga, where they are being reminded once again that they would be the ultimate losers should the Oando crisis persist. At the moment, the energy giant is in a battle for its life after it had been accused by the regulators of allegedly engaging in grave sharp practices.

As has since come to the fore in the public domain, the Securities and Exchange Commission (SEC) after its forensic audit of the company’s operational activities accused Oando of committing a number of serious infractions ranging from false disclosures to market abuses, manipulation of financial statements and internal control failures. Oando’s crisis which has reached a crescendo based on the alleged sharp practices by its board has now resulted into a lingering tussle between SEC and Oando’s board and management with allegations being raised, denied and countered again and again.  In fact, as the crisis continues to escalate, shareholders have come to register as the biggest losers even as the stock takes a hit. But SEC has insisted on doing what it affirms is the right thing and has therefore used the hammer on its board.

Echoes of Cadbury’s challenge

To be fair to SEC, this is not the first time it would be taking on listed players in the nation’s bourse. And one such precedent instance has to do with the confectioner, Cadbury Nigeria Plc.

Whereas the present leadership at Cadbury Nigeria is seen as largely recognizing the importance of adhering to the best governance principles and practices, its missteps over a decade ago appear to yet haunt the firm to some extent.

Experts have not stopped blaming the incident of 2005/2006 when the management of Cadbury Nigeria Plc under the leadership of Bunmi Oni was alleged to have misstated its accounts to make the company look good.  According to the outcome of the proceeding forensic audit, Cadbury Nigeria Plc, manipulated and overstated its financial statement to boost its image as well as push up its stock price. As a result, the company was accused of having inflated its turnover, profit and other performance indices. The manipulation, which was discovered in 2006, the audit found out, had indeed started in 2002 and the major culprits as it turned out were the former Managing Director, Mr Bunmi Oni and former Finance Director of the company, Mr Ayo Kadiri.

This deception which took place between 2002 and 2005 compelled investors to bet on the company’s stock believing that it had good fundamentals. As a result, the Securities and Exchange Commission (SEC) waded into the matter and banned Mr. Bunmi Oni and Mr. Ayo Akadiri, from operating in the nation’s capital market or hold the directorship of any quoted company in Nigeria.

SEC also fined Cadbury for filing financial statements that contained untrue/misleading statements; and trading on its shares was suspended for about three months while it was being investigated. Some other directors of the Company and senior management staff were sacked. But shareholders were again the ones who suffered the most as the company which was in stiff competition with Nestle Nigeria lost its top position in the Beverages industry.

…And Skye Bank

Following the travails that greeted the now defunct Skye Bank, the Economic and Financial Crimes Commission (EFCC) on March 6, 2019, arraigned Tunde Ayeni, a former Chairman, Board of Directors, Skye Bank Plc, before Justice Valentine Ashi of a Federal Capital Territory, FCT High Court, Apo on a four-count charge, bordering on criminal breach of trust to the tune of N4,597,500,000.

Mr Ayeni was arraigned along with Timothy Oguntayo, for allegedly conspiring at different times to fraudulently divert depositors’ funds domiciled at Skye Bank Plc to personal use.

One of the counts reads: “That you, Tunde Ayeni, whilst being the Chairman, Board of Directors of the defunct Skye Bank Plc and Timothy Ajani Oguntayo, while being the Managing Director, MD of the defunct Skye Bank Plc on or about October 16, 2014 at Abuja within the jurisdiction of this Honourable Court, whilst being bankers entrusted with property, to wit: depositors’ funds in the defunct Skye Bank Plc’s Suspense Account, committed criminal breach of trust in respect of the sum of N1,000,000,000 (One Billion Naira) and thereby committed an offence contrary to, and punishable under Section 315 of the Penal Code.”  The Central Bank of Nigeria has since sacked and replaced its board and management while the Asset Management Company of Nigeria is busy searching for core investors for the bank whose name has changed to Polaris. Shareholders are also the bigger losers here, having lost their investments in the bank.

Dunlop was not different

Shortly before the decision to close the Dunlop manufacturing plant in Nigeria, the company had in 2007 approached the nation’s capital market for a whopping N5.5 billion, a public offering and Rights Issue which the management in May of the year claimed recorded 178 per cent success.

The company  had told investors in its prospectus that money raised from the offering was going to be used  to “refinance part of the short-term funding used for the All Steel Radial Truck Tyre (ASRT) expansion project with long term equity and to provide enhanced working capital”.

Specifically, 48 per cent or N2.5 billion of the proceeds was to be used for the part payment of the ASRT loan while the balance of N2.66 billion was to be committed to working capital. Quite surprisingly, after the conclusion of the process, the company did not re-open the factory for any manufacturing business, thereby raising further questions as to the propriety or otherwise of its fund-raising claims.

The company was, also, alleged to have diverted another $8m (about N928 million) loan it had secured from the EBID which was intended for its primary line-tyre manufacturing- to agro-business whose impact was also not being felt on its financials. The company’s External Communications Manager then, Mr. Abiona Babatunde, had claimed that the management intended to use the loan for expanding its operations in the agricultural sector, and ostensibly to boost operations in rubber planting and production. As at the time of this report, the effects of the investment was yet to be feasible as the company neither produces rubber neither for manufacturing purposes nor for exports.

The Chairman of the company, Mr. Dayo Lawuyi, had told shareholders at the 46th General Meeting in December 2008 that macro-economic environment was no longer conducive for the type of business the company was engaged in and that the company was opting to close down the plants to minimize imminent losses.

“Manufacturing especially in our type of industry which involves the conversion of basic raw materials at its crudest form to manufactured products and where heavy machinery and constant supply of other inputs, e.g. labour, power, gas steam, etc require stability in input provision, cannot be sustained in an atmosphere as currently exists” , he had said.

One of its investors, Mr. Okafor Chekezie, said the management of Dunlop had disappointed its investors. He explained that the company was already in a huge debt of N6.6billion which it owed external creditors before coming to the market to raise N5.5billion to pay off the debt it already owed. Other shareholders who expressed similar views with Chikezie said what happened then was a “big rip-off” as they noted that before Dunlop came for the fund, its balance sheet was no longer good enough to sustain its operations.

Before now, corporate sharp practices almost dominated the business landscape even with those companies which raised huge funds through IPO in quick succession without adequately accounting for the previous funds as stated in their prospectuses.  Shareholders have also not ceased to lick their wounds given the sharp practices of companies that took advantage of the boom time in 2006 and 2008 to raise huge funds from ignorant investors through private placement schemes.

According to analysts, many companies have in the last 12 years raised about N9billion through private placements without listing their shares on the NSE after promising to do so. ”It was the promises to list those shares that attracted many us to put our hard earned monies in those ventures only to be disappointed”,  a spokesperson for one of the shareholder groups also lamented.

Reportedly, over 350 organizations across several sectors of the economy raised funds through private placement offers between 2006 and 2009. Till today, most of those companies are still operational without fulfilling the promises they made that had attracted investors to them when they raised the said funds.

BH investigations revealed that Industrial and General Insurance (IGI), raised N5.80 billion in July 2006. Similarly, Intercontinental Homes, now Trust Bond raised N1.50 billion; while Acorn Petroleum raised N280,000 million. On its part, LBIC raised N1.8 billion in October 2007 through private placement. Shareholders also finger Jubilee-Life Savings and Loans, Energy Company Nigeria Limited, First Capital Trust Limited, and Fidson Healthcare Limited as some more firms that raised funds through private placements without listing.

Investors have also chronicled the many strategies companies have deployed to cheat them over the years.

National Coordinator, Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, told Business Hallmark that shareholders cannot even enumerate the many abuses they have gone through over the years because of sharp practices by companies who know that small shareholders do not have what it takes to challenge their fraud among other unethical practices in such a way as to affect and reduce the value of their investment in the market.

These sharp practices, Okezie said in a telephone interview with Business Hallmark ‘robs us of our dividends and other benefits.’ He explained that they lost hugely during the banking consolidation exercise of 2006 on account of some management mis –demeanors that do not have much to do with minor shareholders.

‘We lost our holdings in Spring Bank, Oceanic Bank, Afribank among others. We think that the regulators and the management of some of these companies are in bed and that is why nobody is punished appropriately for mismanagement. We think that SEC should be able to do more to protect us”, he said.

On his part, Mallam Shehu Mikail said that investors were really not adequately protected from the predators who claim to manage companies on behalf of the many small shareholders who are always at the receiving end when firms fail.

Commenting on the issue, Dr. Afolabi Olowokere  of Finance Derivatives Company Ltd, said the bottom-line was that the corporate governance climate in Nigeria at the moment was not the best yet and that it needs to be strengthened and  improved on.

He however added that whereas Nigeria was still weak in corporate governance, there had also been some improvement on what used to obtain a few years ago when some helmsmen of companies were both Managing Directors and Chairmen at the same time.

”You may not remember that Mr. Felix Ohiwerei was Chairman and MD of Nigerian Breweries Plc. But that practice has since stopped. There are pockets of improvement here and there now. Do you also know that the Nigerian Stock Exchange launched in 2014 a corporate governance rating? In fact, there is more transparency now than was the case a few years ago”   he said.

Returning to the Oando saga, Sunny Nwosu, the former National Coordinator of the Independent Shareholders Association of Nigeria (ISAN) said he will prefer not to talk on OANDO while the matter is already in court.

However, he said there is no market in the world that you will not find infractions if you undertake forensic audits to investigate them. He also linked some of the crisis in the Nigerian business corporate governance environment to the over-hanging political climate.

‘It is difficult to run businesses as ethically as it should when you have the kind of politicians that we have in Nigeria. But we need to do a lot of work to create an environment that is void of corrupt practice or at least minimize it.

For the business player, Jimoh Ibrahim, there is a pre-eminent challenge of economic misalignment given the disconnect between the formal national economy growth patterns and those being expected from corporate players. He explains:

‘If I appoint you as an MD/CEO of a company and you’re growing at 8% and your country is growing at 1.5%, I must query you, because it does not add up. What are you doing to achieve such growth? Are you doing money laundering? How can you grow 20 times more than your country? That is not true, it means you’re doing something illegal otherwise your whole country, an oil producing country can’t be growing at 3%, and you’re growing at 60%. So, we cannot grow above our country.’

Within this climate therefore, where would the much-needed succor for the beleaguered small shareholders come from? Meanwhile the elephants continue with their ding-dong games at Oando while small shareholders groan.


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