1. markets & money
Stock exchanges need
independent managers
T
he system is more important than the in-
dividual.Thisisthelessonthatsuccessful
societies around the world have learnt.
Judgesshouldbeimpartialandlawsshould
not be written for the benefit of a single
person. The idea is that when you get institutional
integrity right, the rest will follow.
Stockexchangesarenotexemptfromthisprinciple.
Acrosstheworld,exchangeshavegoverningboards;
these governing boards are headed by a chair who
drives the strategic agenda and policy setting for
the exchange. Take Hong Kong, Tokyo, Frankfurt,
São Paulo: their chairmen do not own significant
stakesinanylistedcompanies.Peoplewhochairthe
governing councils of exchanges should not be too
closelyintertwinedwiththestockexchangethrough
significantownershiporapersonalconnectionwith
a company listed on the exchange.
Turn your attention to Africa and that is not the
case. In Kenya, the chairman of the Nairobi Secur-
ities Exchange (NSE) is Edward Njoroge. He served
as the managing director of the Kenya Electricity
Generating Company (KenGen) from March 2003
to June 2013. He was at the NSE and KenGen at the
same time for about five years. He just completed
his seventh year on the board and successfully de-
mutualised and listed the NSE in September 2014.
He was also responsible for the listing of KenGen
on the NSE in May 2006.
The NSE has not strictly violated the principle
that the chairman of the exchange should not be
the owner of a company listed, but is the NSE board
independent? Could Njoroge’s influence be con-
sidered overbearing? Shouldn’t he and the whole
board have stepped down after demutualising the
exchange and listing its shares? There is a risk that
we see a case of old wine in new bottles. To be the
chairmanofanexchangewhenitwasownedbymem-
bers and continue in that role when the company
Jude Fejokwu
Chief executive officer, Thaddeus Investment
opinion
became limited by shares and demutualised does
notsendthenecessarymessageofanewbeginning.
There are problems of board independence else-
where.OneofNjoroge’sfirsttasksafterthedemutu-
alisationinSeptember2014wastheappointmentof
a new chief executive officer (CEO) to replace Peter
Mwangi,whosetenurecametoanendinNovember
2014.Njorogeandtheotherboardmembersselected
Geoffrey Odundo, a non-executive member of the
board, to replace Mwangi. A non-executive director
immediatelyswitchingtoanexecutiveroledoesnot
help board independence.
Njorogehadtheopportunitytogooutsidetohire
anewchiefexecutivebutchosesomeonealreadyon
the board for more than three years. This put more
control in his hands and made the boardroom at-
mospherelessconducivetofreedomofthoughtand
fresh ideas from the outside.
But if there are corporate governance concerns
regarding the NSE, how much is it a problem for
the Nigerian Stock Exchange (NGSE)? The pres-
ident of the NGSE’s national council is Aigboje
Aig-Imoukhuede, who owns a stake in listed com-
panyAccessBank(#25).WhilehewasAccessBank
CEO, he joined the exchange as vice-president and
was officially elected in May 2013. He retired as the
bank’s CEO on 31 December 2013.
Aig-Imoukhuedeisnottheonlypersonwhowears
many hats. In 2014, the NGSE chairman – Aliko
Dangote, who owns a majority stake in three listed
companiesandhasaminoritystakeinafourth–an-
nounced he was resigning from his NGSE position
todevotehistimefullytohisvastbusinessinterests.
Aig-Imoukhuedetookoverthepositionofchairman
from Dangote in July 2014. Dangote remains on the
council in the capacity of an ex-officio member.
Here is where Aig-Imoukhuede’s personal ties to
the bank proved problematic. Two months after he
took over as NGSE chairman, the exchange’s man-
agementapprovedthetechnicalsuspensionofAccess
Bank’ssharesinpreparationforthebanktoraisefresh
equity from existing shareholders. The NGSE man-
agementsaiditwasinreceiptofaletterfromAccess
Chairs of governing boards across the world
do not own significant stakes in listed companies
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the afric a report ●
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oc tober-december 2015

2. markets & money
Bankrequestingthefreezingofitsshareprice,which
it granted swiftly. Access Bank’s board believed that
the technical suspension was in the overall interest
ofthebank’sshareholdersandwouldpreservetheir
value. The technical suspension was intended to be
lifted on 27 January 2015 and normal trading activ-
ities was to resume on 28 January.
DiamondBank(#29)hadjustcompleteditsrights
issue in August 2014. But its share price was not
placedontechnicalsuspensionandthereisnopublic
recordofthebankevenmakingarequesttotheNGSE
management to do so. Why? The Securities and
Exchange Commission (SEC) had years earlier an-
nounced that listed companies would no longer be
able to freeze their share price while raising equity
from new or existing shareholders. Companies had
complied without incident and the NGSE had suc-
cessfullyenforcedthisuntil15September2014when
AccessBankwasgivenpreferentialtreatmentthatit
was, in my opinion, not entitled to. Rules are rules.
TheSEC,throughtheleadershipofArunmaOteh,
swung into action to return order to the Nigerian
marketbyimmediatelyrequestingthatthetechnical
suspensionofAccessBank’ssharesbeliftedasthere
wasnowarrantedbasisfortheaction.Shealsowanted
to find out who among the NGSE management ap-
provedthetechnicalsuspension,knowingthatitwas
not the right thing to do under the circumstances.
Commendation is due to Oteh for rising up in a
timelyfashionandbringingsanityanddecorumback
to the governance of the NGSE. In my opinion, the
management of the NGSE approving the technical
suspension was due to the presence of the owner of
AccessBankonthecouncilandtheinfluencethatthis
gives.IftheownerofAccessBankwasnotheadingthe
NGSE’scouncilatthetime,wouldthefreezingofthe
stock price for eight working days have happened?
The previous president of the council owned
sharesinfourlistedcompanieswhileserving,andthe
current one owns share in one. It is time for change,
andpresidentsshouldnotownanylistedcompanies.
The Nigerian people affected change at the helm
of the country’s affairs on 28 March. The chief pro-
ponent of that change, Muhammadu Buhari, said
he belongs to everybody and he belongs to nobody.
We need another change. Our stock market should
also belong to nobody and belong to everybody.
Who will bell the cat? ●
zebedeefortar
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the afric a report ●
finance special ●
oc tober-december 2015