Nigeria Stock Market: Shares in electronic records are easier to trade – Bukar

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Kyari Abba BukarMr. Kyari Abba Bukar, is the Managing Director/Chief Executive Officer of the Central Securities Clearing System Limited, CSCS. He succeeded Dr. Onyewuchi Asinobi, the pioneer MD/CEO of the company who retired in March, 2011 . Prior to joining CSCS, Bukar was the MD/CEO of Valucard Nigeria Plc where he engineered the company’s turn-around from a nil-profit-making entity to what could aptly be termed a highly profitable entity before his exit. In this interview with PETER EGWUATU, he spoke on issues affecting the company and Nigerian capital market:

Can you tell the investing public the level of dematerialisation in the stock market?

The CSCS has done nearly 300,000 dematerialisation of share certificate. You know dematerialisation is changing physical share certificate to an electronic record. In terms of percentages, we can say we have done close to between 70 and 75 percent of dematerialisation. There are about 14 to 15 percent of the investors’ share certificates in the capital market that need to be dematerialised.

Shares that are in dematerialised (electronic records) format are easier to sell and buy. It is safe to have your share certificate dematerialised. We will send you an alert for any transaction done in the stock market. This year, we are going to start educating the investing public on the benefit of dematerialisation through campaign. The SEC strongly believes in it and has been doing everything for investors to embrace it.

How has the use of technology impacted on your operation?

Technology is significant and necessary in our operation. Everything we do is driven by technology, so we don’t like to make noise about it. Nevertheless, we are working hard to have a robust technology. We want to adopt Straight True Processing (STP) machine, with no manual intervention. That is one of the key initiatives to a safe custodian. Already, we are partnering with stockbrokers on data exchange.

We have given them security token to work with. All these will boost our technology. We don’t play with technology because it is a key component of our business. Probably, in a year or so, many of the projects that we intend to have would have been kicked started and some may have been concluded.

The obvious among them is the upgrading or change of our system or technology platform so that we can actually be able to support the exchange with some of the initiatives that they have in introducing new products to the market.

Why is CSCS interested in dematerialising share certificate?

The reason for dematerialisation is that it reduces the risk of theft of physical share certificate. It also makes work efficient  through the use of computer and eliminate the risk of loss of share certificate, either as a result of fire or misplacement, among other factors.

Is there any plan in place to diversify your services?

Yes, we are still deliberating. We want to provide Value Added Services to our clients. There are some investors that are sophisticated and we are looking at ways to diversify the portfolio services. We are also articulating areas that CSCS can add more value to its clients.

The Board of CSCS will have to approve the implementation of any new business strategy that would position it as a highly innovative and globally respected clearing, settlement and depository CSD) entity. The new vision of the company is to be the globally respected and leading CSD in Africa and to create value by providing securities depository, clearing, settlement and other services driven by innovative technology and highly skilled work-force.

There is speculation that CSCS is planning to go into share registration business. Is it true or false?

CSCS is a sub-registrar. The CSCS is currently the clearing house for the stock market.  It clears and settles shares transactions in the capital market. The CSCS, which is the clearing house of the Nigerian stock market, has been operating a Central Securities Depository (CSD) for the capital market and digital data storage and retrieval system and related services.

Nevertheless, as part of our diversification strategy, we are still brainstorming on how we can render such service and the Board will have to ratify any management decision we reach. Also, if we must go into share registration, then it must be through a subsidiary. We have to establish a new outfit that will do such business.

Also, we need to seek regulatory approvals before we can do share registration business. Although details of the areas where the CSCS would focus on in addition to its CDS business are still being deliberated upon, there are  many areas the company can go into. It may be too early to say now but share registration business, for instance, is one of them.

How has the CSCS being since you joined it from ValueCard?

CSCS is an interesting one. There is room for improvement. For ValueCard, we found it in a dismal state and we left it in an excellent shape. The advice from my mother had always been: ‘Leave a place better than you found it’ or ‘leave the room better than you found it’. That was exactly what we did with ValuCard and now the opportunity to transform CSCS is also a significant one.

Number one, the entire capital market was undergoing a huge turmoil when I came in. You remember I  took over  from Mr. Emmanuel Ikazoboh, who was the interim head of the Exchange and also chairman of CSCS and was at the tail end of his winding down. The tsunami had hit the capital market and Arunma Oteh was only a little over one year old in SEC when I took over.

What is your reaction on Registrar imposing stock broking firm on investors?

In fact, I was misunderstood on this issue in terms of being quoted that the registrar unilaterally takes decision in the previous publication. What I meant is that it is the responsibility of the registrars to furnish us with details of shareholders account. It is the information that the registrar sent to us that we make use of when crediting the account of shareholders with a stock broking house.

What changes have you effected since you came on board?

A number of changes has taken place and I subscribe to the statements being made both by the SEC DG in the midst of transforming the entire industry and the new CEO of the Exchange, Mr. Oscar Onyema. Both of them are people with lots of pedigree.

These are, essentially, people I would love to associate myself with. So, it was an easy decision on my path to take up the challenge of transforming CSCS. Obviously, and historically speaking, there are a number of things that could have been done with an entity like the CSCS to make it a world-class organisation.

So, when I came in, I, basically, bench-marked all the processes, all the procedures of all the things we were doing, against global standards and principles by getting some consultants outside of this country who are very knowledgeable in that area and they basically benchmarked our processes against global best practices.

That gave us a very honest and candid view of how we are placed vis-à-vis what one could call the past. There are one, two and maybe three of the 23 benchmark areas where we scored better than average but very many of them. We still reached below average in many areas, which basically means that a lot of work is needed to transform CSCS.

In the area of corporate governance, how has the company fared?

We are addressing corporate governance issues. CSCS has now become a Plc rather than a limited liability company. If you are a limited liability company, you can only have a maximum of  50 shareholders and CSCS, even though it was a limited liability company, is, in reality, more than that.

It, technically, had vehicles where some of the shareholders belong to those vehicles. It was like 24 or 25 shareholders belong in those vehicles; and so it was like in reality for the sake of transparency and to have proper governance structure, it became better to transform it into Plc so that one can see all the shareholders that have the ownership of CSCS.

There is also the board decision to bring in independent directors. Internally, internal control, risk management and the re-organisation of the company are going on. In the process, obviously, there would be people that had to go or had to leave and the fact of the matter is that whenever you are transforming an organisation, those kinds of casualties happen. They come as a matter of fact because some might be a mismatch of skills and, in other cases, it might just be redundancy, meaning we may have too many hands doing the same thing and so on and so forth.

There is also a cultural transformation going on. We have a new vision, mission and core values for the company that has been articulated by the rank and file of employees and we are, basically, positioned to continue with that transformation.

How many shares did CSCS clear in 2012?

For year 2012, CSCS cleared and settled transactions valued at N658.72 billion against N634.92 billion year 2011 thereby bringing about a .7 percent increase in cleared and settled transactions in the year under review.

It is interesting to note that since 1997 to 2012, CSCS has cleared and settled transactions worth N16.97 trillion.

For year 2012, the volume of cleared and settled transactions recorded by CSCS stood at 89.18 billion units of shares as against 89.58 billion units of shares in year 2011, thereby bringing about a 0.4 percent decrease in the volume of cleared and settled transactions in the year under review. From 1997 to December 31, 2012, CSCS has cleared and settled a total of 1.65 trillion units of shares.

How many number of shareholders requested for share certificates in 2012?

During the year under review, 21 shareholders requested for share certificates as against 31 shareholders in the previous year thereby bringing about a -32.26% decrease in these requests for the year under review.

Since 1997 to December 31, 2012, only 13,387 shareholders have requested for their share certificates.

There are now over 4.9 million share holders in the CSCS System going by statistics gathered at the end of 2012 in comparison with over 4.88millionshareholders recorded in 2011. These new statistics clearly represent an increase of 1.47% in the number of shareholders who maintain accounts with the CSD.

How many shareholders made use of shares in CSCS Depository as collateral for loan in 2012?

168 shareholders used their shareholding in CSCS depository as collateral to obtain loan facilities from financial institutions in year 2012, thereby resulting in a decrease of 48 percent in comparison with  2011 figures of 324 shareholders .In summary, more than 18,916  shareholders have used their shares as collateral for loan since inception of CSCS till  year-end 2012.

Looking at IST, do you think it is effective enough to allay investors’ fears as against what was seen in the past?

Well, the IST initiative is a very good one. I think there is a debate on how to make it work more effectively because there seems to be conflict with the Federal High Court jurisdiction. Some lawyers will tell you that there is no reason to have a specilaised court; some others will tell you that there is reason for that. But there is a reason for all these for the simple fact that a case in Nigerian court can take ages.

In fact, some people joke that Nigerian court is not for justice, but injustice because of the length of time it takes to get justice. I think the idea of IST was to make sure that there is quick dispensation of justice such that investors that have complaints can will everything resolved immediately. I must also tell you that SEC is also working towards dispute resolution mechanism that will ensure that there is quick resolution of any issue investors may have that is creating problem for them.

Whether IST is made a specilaised court, or it is left the way they is now, or incorporated into the federal High Court system, there is need to have a court that can fast-track investors’ complaints and resolve them very quickly. I think that is what makes IST very relevant.

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