Much ado about Capital Markets experience

It is no longer news that Ms. Arunma Oteh – a Vice President of the African Development Bank (ADB) – has been nominated by President Yar’Adua to be the next Director General (DG) of the Securities and Exchange Commission (SEC). A lot has been said of her stellar credentials: former Treasurer of the ADB, graduate of the Harvard Business School, first class graduate of the University of Nigeria, Nsukka (UNN) etc. It is widely expected that she would bring a heightened level of professionalism, exposure and dynamism into a role that has tended to be conducted in the shadows of capital market operators and other regulatory and/or quasi-regulatory bodies.

However, a minor storm has been brewing over her perceived “lack of qualification” for the job with her detractors hinging their arguments on the Investment and Security Act (ISA) 2007, which states that a candidate for DG of the SEC must have 15 years of “capital markets experience”. This requirement – coupled with a tradition of appointing stockbrokers as DGs of the SEC – has made some people assert that the SEC’s top job is “reserved” for stockbrokers. Hence the thinking in some quarters is that Ms. Oteh is not qualified for the job because she has not been practicing as a stockbroker for at least 15 years or at all in her own case. This perceived requirement is preposterous and seems to me like a desperate gambit by people interested in frustrating reforms.

To say that Ms. Otteh lacks 15 years of capital markets experience is to assert that the equity market is the only form of “capital market”, this is of course not a very reasonable stand to take. The capital markets go beyond equities and encompass fixed income, risk management, derivatives, alternative investments etc. A cursory glance at her work history reveals that she has worked in various fixed income capital market roles – since 1992 – within the ADB which culminated in her appointment as Treasurer. The ADB is a frequent issuer of bonds in multiple currencies, it has an asset portfolio in excess of US$10 billion and a multi-billion dollar swap/derivative portfolio for managing its foreign exchange and interest rates risks globally. I am hard pressed to understand the logic in saying that someone who has had the responsibility for managing this extensive enterprise lacks the required experience to serve as our capital markets regulator.

Furthermore, her appointment as DG of the SEC may help bring fixed income investments into the mainstream of the Nigerian investment banking space. The fixed income space in Nigeria has tended to be dominated by bank treasuries and discount houses with very little overlap and cooperation with the (equity centric) investment banks in Nigeria. Appointing another stockbroker – with their associated ingrained predisposition to the equity markets – as DG of the SEC may not augur well for the efforts to diversify and deepen our capital markets. In the next few years, we would need to develop regulatory capacities and infrastructure for the bond market and for risk management and derivative products. Having a person with the experience and exposure of Ms. Oteh as DG of the SEC, will help speed these processes up.

I think it is high time that we get more serious as a country in ensuring that capable hands are at the helm of regulatory institutions such as the Central Bank and the SEC. A narrow and transparently deceitful reading of the eligibility requirements for the SEC DG’s office is definitely not a step in the right direction. Let us concentrate on the candidate’s qualifications, experience, agenda for the office and integrity please!