More quoted firms delist as regulators step up enforcement

Regulators in the Nigerian capital market are unrelenting in wielding the ‘big stick’ on erring companies.  In this piece, UTHMAN SALAMI x-rays the impact of this on some listed firms

Regulators in the country have been heavily criticised over their rate of imposition of sanctions on listed companies that run afoul of rules. The financial sector’s regulators have been said to be more culpable in the wielding of the ‘big stick’ at the slightest offence.

Market observers have argued that the incessant imposition of penalties is beginning to adversely impact the health of some listed companies, forcing them to delist. They advised the regulators to adopt the carrot and stick approach instead of just wielding the ‘big stick’ always.

The Central Bank of Nigeria, Corporate Affairs Commission, Financial Reporting Council, and Securities and Exchange Commission had at various times wielded the big stick on the operators over what some had described as a minuscule offence that could have been solved with a reprimand.

For instance, The Nigerian Exchange Limited suspended 17 listed companies from the daily listing of the local bourse in six years over various infractions.

Findings by The PUNCH showed that the listed firms were accused of violating infractions bordering on breach of compliance with regulatory requirements for filing their annual financial reports as mandated by law.

According to data from NGX, the suspension spanned from 2017 to 2022.

Interestingly, market observers who spoke with The PUNCH wondered if the regulators have commercialised fines and sanctions as a means of generating income.

A stockbroker, who does not want his name to be mentioned in print, said the fines from regulators are negatively affecting some quoted firms.

“The regulators are only after the post-listing requirements which involve annual dues and listing fees expected from the quoted companies.

“They (listed companies) could not even execute contracts given to them and yet the NGX was expecting them to come and pay the annual fees,” he told The PUNCH.

“It is better for the regulators, especially the NGX to do monitoring and oversight to understand the health status of each company,” another operator confided in The PUNCH.

The Chairman of CHAMS Group, Demola Aladekomo, raised similar concerns while delivering a lecture at the 11th Annual Conference of the Institute of Capital Market Registrars recently in Lagos.

According to him, the big stick is of no use without the carrot. He urged the regulators to also show up when the companies are doing poorly and facing other challenges.

He said, “We will like to see you (regulators) and ask about the issues.  When we had the issues like the National ID; when the Federal Government was oppressing us; when we were losing $2bn, and when our stocks were performing poorly, we will like to see you and ask about the issues.”

Continuing, he said, “Then when it comes to penalising, they are pretty fast. Yes, penalise and catechise us but where are the carrots you are giving us?” Aladekomo quizzed.

Meanwhile, many operators and other stakeholders have noted that the regulators were more interested in the revenue they raked in from the listed firms than in their oversight functions.

“The non-perusal of the financial reports of the quoted companies is what has led to the woes of these companies,” another operator who craved anonymity told The PUNCH.

He added, “What the Exchange and SEC are interested in is the submission of financial reports as and when due irrespective of what you write inside. After fulfilling these two obligations, you are regarded as compliant.”

He told The PUNCH that if the regulators had gone through the financial reports on a regular basis, they would have discovered anomalies in these filings and taken appropriate actions before they escalated.

“They have not been responsible for their oversight functions,” he concluded.

Regulator argues

On the other hand, the regulators had always argued that they were after the investing public’s interest, noting that part of the reasons they don’t spare any erring company.

One of the top members of staff at the Exchange, who spoke with The PUNCH in confidence, said all the listed companies agreed to submit their accounts at the normal time.

“They fail to submit the account despite the grace of three months. Even if they cannot do this within the time stipulated, they are expected to write to the exchange as to why they will not be able to submit the account.”

He said, “Some of these companies will not write at all and not even inform the public about it. If you are not ready to do this, you should not come to the market. We are protecting the investors and the shareholders.

“If you check the X-Compliance report, we update on the website about companies that are active and not active to guide investors on their investment decision.”

According to him, whenever the Exchange discovered that a company had not been doing well, it wrote to the CAC and SEC to delist it from the market.

“Sanction may be the first step to see whether a company will repent.”

This sentiment of the regulators was shared by a capital market analyst, Wole Sam Adeyeye, who said the regulators were doing so well in protecting the interest of the shareholders.

According to him, “If the regulators do not issue sanction to some firms, they will not know that they are meant to do the needful, hence behaving in whatever way they like. There is nothing the regulators can do than sanction them. And they usually give guidelines for these companies to do the needful. This is not only peculiar to Nigeria but to other countries of the world.”

He told The PUNCH it would be out of place if the regulators began to go through the accounts and personal financing of companies.

“We need to understand that these regulators are meant to regulate the market, to look at the financial performance of all these companies. If your companies are not doing fine, why don’t you post and let the public know your conditions?”

He explained that most companies always want to keep it to themselves while waiting for a time they would do well before filing their reports.

“The responsibility actually rests on the shareholders. This is why they always have the Annual General Meeting.

“If their companies are not doing well, they can change the executive board members and replace them with those who will perform and change the fortune of the company,” he told The PUNCH.


The National Coordinator of the Pragmatic Shareholders’ Association, Mrs Bisi Bakare, advised the regulators to be human. “If they commit any offence, there is nothing wrong in calling them for proper insight rather than just issuing sanctions,” she told The PUNCH.

 “The NGX is even more lenient compared to the Central Bank which doesn’t even issue queries or wait for the response of the companies before just deducting the fines from the companies’ accounts without prior notice.

 She repudiated the claim that the regulators were protecting their interests when the sanctions and fines were directly hurting the investors.

“It makes little sense if regulators are fining the companies N15m and more when these funds are from the investors’ money and not from the private accounts of the directors.

“This is why many foreign investors are discouraged to invest in the country. This is also why many investors are delisting from the stock exchange,” she claimed.

On his part, the President of the Independent Shareholders Association of Nigeria, Dr Anthony Omojola, told The PUNCH that the association had been campaigning against the frivolous rising fines and penalties.

 He said, “The Financial Reporting Council started it. Any little thing that should have been corrected and moving ahead was met with fines. We fought this head-on.”

“Other regulators are doing similar things. We have already told them that it is not every mistake that will need to be sanctioned heavily.”

He told our correspondent that it was the shareholders who were the immediate recipients of these sanctions and fines.

 He said, “It is the shareholders that suffered the brunt of these sanctions. It is not the operators or the managers of these companies that pay the fine, but the investors they claimed to be protecting. We have been shouting against this but it has been falling on deaf ears.

He explained that the association was on the lookout and patiently following the trend while assuring that they may likely take action if the tide was not stemmed.

He revealed that some companies were on the verge of voluntary delisting from the exchange over the issue of incessant fines and sanctions.

He added, “Even some companies have told us they are delisting over these frivolous fines and sanctions. One wants to move over to Ghana, the others want to start all over again because they said the regulator has been on their necks. Look at AMCON today, what exactly have Nigerians gained from it?

 “Last time we complained about the Cash Reserve Ratio at about 27.5 per cent, it is now 32.5 per cent. How can you expect a bank to have 32.5 per cent cash sitting idling in their reserve because you want to ensure that they pay their depositors? That is too much.”

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