CORPORATE GOVERNANCE
AND NIGERIA CAPITAL MARKET DEVELOPMENT
Nigeria has become very unpopular
with its spate of economic crises it has experienced in recent times. It has
come to the point that our economy if synonymous with the “human body” would be
hospitalized in the emergency ward. The various steps a medical doctor would
take to resuscitate a patient with a chronic heart disease “not brain” would be
the same step "an economist" would take to revive the Nigerian
economy. Not brain because the brains are there to point us in the right step
to take in developing the economy, it is the heart because the strength and
vigor of pumping the economy with strategic implementation is lacking on an
average scale. The government hands are on the pulse of the economy so it
depends on the way they “play the card that’s how they will be scored”. It is
of utmost joy that I have the opportunity to have the responsibility to
“prescribe” the right "drug" for the ailing Nigerian capital market
and corporate governance system.
Corporate governance is the principles and
values that guide a company in the conduct of its day- to- day business and how
stake holders interrelate with one another. There has been increased interest
in corporate governance practices globally and its clamor has become even louder
given the high profile collapses of a number firms. Corporate governance is
relatively a new concept in Nigeria, and despite all effort by stake holders to
build sound corporate governance practices, Nigeria has almost constantly fared
poorly in this regard. Many factors lead to the increased interest in corporate
governance since poor corporate governance was telling its toll on the economy.
Also noticed was how the lack of an effective corporate governance system in
Nigeria has been exploited by senior management of companies at the expense of
other stakeholders. More staggering is the recently unveiling of bad corporate
governance practices by senior managements of bank. Inadequacy in the
implementation of corporate governance principles in Nigeria; is one of the
problems faced in this sector. As it has often been said implementation has
been a major problem an average Nigerian leader suffers from. They are fond of
building castle in the air or rather building with “pen and paper” and most
rampantly “public speeches”, and lacking the fortitude of implementing these
objectives. If this attitude of “implementation nonchalance” and
"administrative redtapism" is removed from the corporate governance
sector, it will be a welcome development. Other steps include; Regulatory institutions in Nigeria should ensure that
companies apply sound corporate governance practices in their business operation.
governance practices.
The regulator, themselves, should be above board and
should lead by example at all time. They should be firm, fair, equitable and
transparent in their dealing. The regulator should encourage whistle blowing
system in companies. The whistle blowers should always be adequately protected.
Effective internal controls system should be encouraged to be put in place by
corporate organizations. All stakeholders interest should be protected at all
time, and encouraged to participate in the corporate governance process. There
should be regular structured training and attendance of seminars and workshop
for senior management in order to strengthen leadership quality. They should
also encourage efficient process and performance evaluation and reporting to
stakeholders. I believe with these prescriptions, the corporate governance
system should experience tremendous recovery.
The Nigerian capital market has to imbibe a very
good principle and values in order to make remarkable recovery and giant
strides. The capital market is where medium and long term loan instrument are
bought and sold. The financial products or instrument on sale in the market are
stocks and shares company bonds and government bonds. It also had the
involvement of some financial institution among which are; the insurance
companies, mortgage banks, stock exchange market, investment trust and savings
banks. These financial institutions make up almost completely what an economy
should entail. Nigeria security and exchange commission is the apex institution
in the Nigeria capital market and serves as the regulatory authority. A key
division within the capital market is between the primary markets and the
secondary markets. In the primary markets, new stocks or bond issues are sold
to investors while in the secondary markets, existing securities are sold and
bought among investors. The operator of the primary market are the commercial
banks, merchant banks, development banks, mortgage banks, national social
insurance trust fund, insurance, while the operators of the secondary market
are the Nigerian stock exchange and the securities and exchange commission. So
categorically in developing any of these sectors the capital market should be
seen putting on a smiling face and then recovering fast from a “chronic heart
failure”. Due to limited words the insurance in the primary market and the
stock exchange in the secondary market will be discussed.
The fear of the unknown they say makes
man a careful being; after all there is a thin line between precaution and
fear. On the light of this the insurance company came about. The insurance
companies exist based on the fact that the human person and his property are
subject to risk. The average business man is afraid of various degree of risk
ranging from theft, fire and liquidation. The insurance company holds the
responsibility of making the local business people knows the benefits they
(insurance companies) offer. The insurance is a stool for proper and stable
economic activities. Bringing the insurance to a communal level, that is,
making it available for the common business person; can help most Nigerians who
are afraid of investment partake in various principles of insurance. The trust
on the insurance companies should also be increased with various mouth watery
packages that would interest the common man. Another giant stride in the
insurance sector is for the government to make insurance friendly policies that
would generate more insurance company making it competitive like the banking sector.
The implication of this is that, when there is more insurance there is
competition and then more individuals will be encouraged almost involuntarily
to go into the production process, which when profits are made, there will be
more savings, thereby creating more funds for the capital market, then the
capital market would channel these funds to those who can put them into long
term production use.
The stock exchange market is a
specialized market where stocks and shares, debentures and government bond
known as securities are traded, it is also an institutional arrangement where
the secondary market of the Nigerian capital market operates. The market arises
as an investment for businessmen. The shares are of limited liability
companies. Government bond is sold by the government to raise finance for
administration. A bond is a legal document which represents a promise to pay
back loans obtained through bond by the government. The stock exchange market
helps to mobilize private and public savings, making them available for
government and business organization. It then boils down to creating good and
conducive environment for industries to thrive in order for there to be more
funds available for the government and business organization, as also applied
to the insurance sector.
Furthermore, in addition to the
facts already stated, the Nigerian currency that is suffering from economic
shock should be taken out of coma by revaluing the naira, and making it more
valuable than it is now. With this act alone foreign investors will be
encouraged. Also Nigerians should be discouraged from investing abroad. Things that
scare investors should be addressed, examples of those things are; power
failure, security breaches, political instability, frequent fluctuation of the
value of the Nigeria currency and non-popularity of the stock exchange in
Nigeria. Also commercial banks should learn to give out loans with low interest
rate to encourage productivity which will lead to more savings. The tax paid by
infants industries should be reduced if possible removed for a certain period
to enable them to get stabilized, and for new ones to be generated. The
government should create industries and companies that are of rare product, and
later put them on sale after their products has been circulated and recognized
by the populace, that is, in the form of “tested and trusted” in order to
remove the fear of running into loss.
In conclusion, I have discussed how
greatly the insurance sector, the stock exchange market and the Commercial
banks can greatly affect the capital market; as stated before, depending on how
the government influences these sectors determines the result they would get.
Nigeria has become very unpopular
with its spate of economic crises it has experienced in recent times. It has
come to the point that our economy if synonymous with the “human body” would be
hospitalized in the emergency ward. The various steps a medical doctor would
take to resuscitate a patient with a chronic heart disease “not brain” would be
the same step "an economist" would take to revive the Nigerian
economy. Not brain because the brains are there to point us in the right step
to take in developing the economy, it is the heart because the strength and
vigor of pumping the economy with strategic implementation is lacking on an
average scale. The government hands are on the pulse of the economy so it
depends on the way they “play the card that’s how they will be scored”. It is
of utmost joy that I have the opportunity to have the responsibility to
“prescribe” the right "drug" for the ailing Nigerian capital market
and corporate governance system.
Corporate governance is the principles and
values that guide a company in the conduct of its day- to- day business and how
stake holders interrelate with one another. There has been increased interest
in corporate governance practices globally and its clamor has become even louder
given the high profile collapses of a number firms. Corporate governance is
relatively a new concept in Nigeria, and despite all effort by stake holders to
build sound corporate governance practices, Nigeria has almost constantly fared
poorly in this regard. Many factors lead to the increased interest in corporate
governance since poor corporate governance was telling its toll on the economy.
Also noticed was how the lack of an effective corporate governance system in
Nigeria has been exploited by senior management of companies at the expense of
other stakeholders. More staggering is the recently unveiling of bad corporate
governance practices by senior managements of bank. Inadequacy in the
implementation of corporate governance principles in Nigeria; is one of the
problems faced in this sector. As it has often been said implementation has
been a major problem an average Nigerian leader suffers from. They are fond of
building castle in the air or rather building with “pen and paper” and most
rampantly “public speeches”, and lacking the fortitude of implementing these
objectives. If this attitude of “implementation nonchalance” and
"administrative redtapism" is removed from the corporate governance
sector, it will be a welcome development. Other steps include; Regulatory institutions in Nigeria should ensure that
companies apply sound corporate governance practices in their business operation.
governance practices.
should lead by example at all time. They should be firm, fair, equitable and
transparent in their dealing. The regulator should encourage whistle blowing
system in companies. The whistle blowers should always be adequately protected.
Effective internal controls system should be encouraged to be put in place by
corporate organizations. All stakeholders interest should be protected at all
time, and encouraged to participate in the corporate governance process. There
should be regular structured training and attendance of seminars and workshop
for senior management in order to strengthen leadership quality. They should
also encourage efficient process and performance evaluation and reporting to
stakeholders. I believe with these prescriptions, the corporate governance
system should experience tremendous recovery.
The Nigerian capital market has to imbibe a very
good principle and values in order to make remarkable recovery and giant
strides. The capital market is where medium and long term loan instrument are
bought and sold. The financial products or instrument on sale in the market are
stocks and shares company bonds and government bonds. It also had the
involvement of some financial institution among which are; the insurance
companies, mortgage banks, stock exchange market, investment trust and savings
banks. These financial institutions make up almost completely what an economy
should entail. Nigeria security and exchange commission is the apex institution
in the Nigeria capital market and serves as the regulatory authority. A key
division within the capital market is between the primary markets and the
secondary markets. In the primary markets, new stocks or bond issues are sold
to investors while in the secondary markets, existing securities are sold and
bought among investors. The operator of the primary market are the commercial
banks, merchant banks, development banks, mortgage banks, national social
insurance trust fund, insurance, while the operators of the secondary market
are the Nigerian stock exchange and the securities and exchange commission. So
categorically in developing any of these sectors the capital market should be
seen putting on a smiling face and then recovering fast from a “chronic heart
failure”. Due to limited words the insurance in the primary market and the
stock exchange in the secondary market will be discussed.
The fear of the unknown they say makes
man a careful being; after all there is a thin line between precaution and
fear. On the light of this the insurance company came about. The insurance
companies exist based on the fact that the human person and his property are
subject to risk. The average business man is afraid of various degree of risk
ranging from theft, fire and liquidation. The insurance company holds the
responsibility of making the local business people knows the benefits they
(insurance companies) offer. The insurance is a stool for proper and stable
economic activities. Bringing the insurance to a communal level, that is,
making it available for the common business person; can help most Nigerians who
are afraid of investment partake in various principles of insurance. The trust
on the insurance companies should also be increased with various mouth watery
packages that would interest the common man. Another giant stride in the
insurance sector is for the government to make insurance friendly policies that
would generate more insurance company making it competitive like the banking sector.
competition and then more individuals will be encouraged almost involuntarily
to go into the production process, which when profits are made, there will be
more savings, thereby creating more funds for the capital market, then the
capital market would channel these funds to those who can put them into long
term production use.
The stock exchange market is a
specialized market where stocks and shares, debentures and government bond
known as securities are traded, it is also an institutional arrangement where
the secondary market of the Nigerian capital market operates. The market arises
as an investment for businessmen. The shares are of limited liability
companies. Government bond is sold by the government to raise finance for
administration. A bond is a legal document which represents a promise to pay
back loans obtained through bond by the government. The stock exchange market
helps to mobilize private and public savings, making them available for
government and business organization. It then boils down to creating good and
conducive environment for industries to thrive in order for there to be more
funds available for the government and business organization, as also applied
to the insurance sector.
Furthermore, in addition to the
facts already stated, the Nigerian currency that is suffering from economic
shock should be taken out of coma by revaluing the naira, and making it more
valuable than it is now. With this act alone foreign investors will be
encouraged. Also Nigerians should be discouraged from investing abroad. Things that
scare investors should be addressed, examples of those things are; power
failure, security breaches, political instability, frequent fluctuation of the
value of the Nigeria currency and non-popularity of the stock exchange in
Nigeria. Also commercial banks should learn to give out loans with low interest
rate to encourage productivity which will lead to more savings. The tax paid by
infants industries should be reduced if possible removed for a certain period
to enable them to get stabilized, and for new ones to be generated. The
government should create industries and companies that are of rare product, and
later put them on sale after their products has been circulated and recognized
by the populace, that is, in the form of “tested and trusted” in order to
remove the fear of running into loss.
In conclusion, I have discussed how
greatly the insurance sector, the stock exchange market and the Commercial
banks can greatly affect the capital market; as stated before, depending on how
the government influences these sectors determines the result they would get.
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