* Funds misappropriated to buy a yacht, 92 Rolex watches
* Stock Exchange fraud still deters investors-SEC
* New rules have aimed to restore confidence in stocks
By Camillus Eboh
ABUJA, May 8 (Reuters) – Nigeria’s stock exchange was at the
heart of a web of fraudulent accounting that saw share price
manipulation, insider trading and millions of dollars misspent
on a yacht and Rolex watches, the regulator has revealed.
In a report filed to a parliamentary hearing on the capital
markets last week, Securities and Exchange Commission (SEC)
Director General Arunma Oteh said abuses leading to a financial
crisis in 2008/09 were still scaring off local investors.
Oteh’s presentation concerned a period when Ndi
Okereke-Onyiuke was its director general. Replacing her was one
of the first things Oteh did when she was appointed SEC head in
2010 in an effort to clean up Nigeria’s capital markets.
Okereke-Onyiuke herself was not accused of any specific
wrongdoing in the regulator’s report.
“The extent and nature of the market abuses carried out
between 2006 and 2008 are primary reasons for the continuation
of the investor apathy that we see today,” Oteh said in the
presentation to the parliamentary committee.
The financial crisis saw shares lose 60 percent from market
peak at the end of March 2008 to the same month a year later.
The central bank had to bail out nine banks for $4 billion.
Oteh told the hearing the SEC investigated alleged fraud
behind the crisis, but it had been unable to publish findings
because of a court injunction brought by Okereke-Onyiuke.
“There were incidences of financial skimming,
misappropriation, false accounting, misrepresentation, and
questionable transactions,” Oteh told the hearing.
The stock exchange bought a yacht for 37 million naira
($235,300) that was meant to be presented as a gift during a
2008 award ceremony, yet there are no records of the receiver.
It also spent 186 million naira on 165 Rolex wrist watches
as gifts for awardees, but only 73 were actually presented.
“The outstanding 92 Rolex watches valued at 99.5 million
naira remain unaccounted for,” Oteh said.
STOCK EXCHANGE FRAUD
Sub-Saharan Africa’s second-biggest economy has been a
darling of frontier markets investors, with a surging economy, a
population of more than 160 million people and a stock market
that has frequently outperformed emerging markets peers.
Weak regulation and impunity for senior officials involved
in fraud have clouded its image, but in this case regulators
made a rare move to take on Nigeria’s powerful vested interests.
When central bank governor Lamido Sanusi bailed out the nine
banks, he sacked the senior management of all but two, and the
former managing director of Oceanic Bank Cecilia Ibru was
sentenced to 18 months jail for a $1.2 billion fraud.
Efforts to clean up Nigeria’s banking sector and capital
markets since have helped restore confidence, including, Oteh
said, new margin trading and corporate governance rules.
Oteh noted that it was the banks dealings in the capital
markets that largely led to their demise.
Nigeria’s banks saw surging balance sheet growth after a
wave of consolidation in 2005, and went on to raise huge amounts
of capital for loans — a good chunk of which went bad.
Abuses included banks borrowing money to buy their own
shares, misusing banking funds to fund fuel import companies
owned by its directors and buying and selling the bank’s own
shares in short term plays to turn a profit.
“As a result of the SEC investigations with respect to the
intervened banks, we instituted legal proceedings … We are
seeking declaratory orders for the illegally gained profits that
were made to be disgorged,” Oteh said.
