SEC, Gwarzo And The Necessity For Strong National Institutions

SEC, Gwarzo And The Necessity For Strong National Institutions


Post Views: 554 OPINION If there is one lesson Nigeria as a nation must quickly learn from the developments at Nigeria’s Securities & Exchange Com...

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If there is one lesson Nigeria as a nation must quickly learn from the developments at Nigeria’s Securities & Exchange Commission (SEC) and Mounir Haliru Gwarzo, its Director-General, who was suspended from office last year, along with others, it is the need to urgently enshrine good corporate governance practices in government Ministries, Department and Agencies (MDAs).

Corporate Governance today is implemented among companies, especially those listed on the Nigerian Stock Exchange (NSE), while government MDAs are mostly managed by dominant individuals that prevent them from being strong institutions.

Why do I say so?

On Tuesday, June 5, 2018, Gwarzo was arraigned at  the Independent Corrupt Practices and other related offences Commission (ICPC) alongside one of his commissioners, Zakawanu Garuba, on a five-count charge bordering on alleged fraud and abuse of office.

They are accused of breaching public trust by allegedly diverting over N114 million while serving as officials of the commission, for which they pleaded not guilty and were granted bail with a bond of N25 million each, along with two sureties in like sum, who must be civil servants, not below the rank of deputy directors, among others.

In the case before Hussein Baba-Yusuf, adjourned till June 28, Gwarzo was indicted in three of the counts while Garuba faces the last two counts.

Gwarzo appearance before the ICPC as recommended by the Federal Government’s Administrative Panel of Inquiry, for further investigation of the allegation of abuse of office by awarding contracts to Outbound Investments Limited, contrary to the provisions of Sections 57 (12) (b) and 58 (5) of the Public Procurement Act, 2007.

This, it said is in line with “PSR 030402 (in relation to the allegation on Golden Handshake), having breached paragraphs 313 and 316(4) of the Financial Regulations (Government Notice No. 219 of 27th October, 2009) (engaging in extra budgetary expenditure without appropriate approval).”

The report submitted to the Finance Minister, Mrs. Kemi Adeosun, also directed, among others, that Gwarzo refunds the sum of N104,851,154.94, being the severance package, he illegally approved for himself and received.

According to the panel, “holding of the position of the director-general of SEC as well as a director in two private companies (Medusa Investment Limited and Outbound Investments Limited) was in breach of public service rule 030424, public service rule 030402 and Section 6 of the Investment and Securities Act, ISA 2007,” Upshot Reports quoted the report as saying.

Although Gwarzo was directed to step aside until all necessary steps had been taken to improve corporate governance system in the commission, it is instructive that there have been reports seeking to twist the narrative from the very beginning.

This was why the Minister, in a statement by her media aide issued a statement to debunk claims described as mischievous attempts to blackmail Mrs. Adeosun, insisting that Gwarzo was suspended “in line with the Public Service Rules (PSRs), to allow for an unhindered investigation of serious allegations of financial impropriety against him.

She argued that some of the allegations have documented evidence, including “the awards of contracts to companies related to him and members of his family,” for which he was queried by the Ministry on November 3 and responded four days later.”

The responses to the query by the suspended DG was however deemed unsatisfactory, following which further investigation was ordered.

“Based on the evidence from that further work and creditable reports that documents were being unlawfully removed from SEC, as well as consultations with the Economic and Financial Crimes Commission (EFCC), the decision was taken to suspend Gwarzo,” the Minister added.

This, she said, informed the meeting of November 27, 2017, to enable Gwarzo clarify some of his responses to the query issued, which were seen as inconsistent with documentary evidence.

According to the Minister, from then, the embattled SEC boss became aware of the strong likelihood of his suspension and prepared the memo circulated to the media, which he personally delivered “using SEC staff seconded to the office of the Minister, in breach of normal procedures for the receipt of mail.

“The copy of the memo in the possession of the Minister was delivered with a message that any action against Mr. Gwarzo would result in same being leaked to the press. It was this threat of blackmail that strengthened the resolve of the Minister to suspend Mr. Gwarzo and allow the Administrative Panel of Inquiry to proceed with its probe.

For example, also, the Minister described as false the insinuation of an instruction to discontinue with the ongoing Oando forensic audit, recalling that the October 20, 2017 decision to suspend the company’s shares and conduct the audit was approved and endorsed by the Ministry (because the SEC has no board).

She stressed that “for the avoidance of doubt, there was no directive whatsoever to discontinue investigation into Oando and this was reiterated to the current SEC leadership at the formal handover meeting. The fact that the investigation has continued further corroborates that this is the Minister’s position.”

On the issue of the Minister effecting some changes in the management of the SEC, it is well known that it is within her powers so to do, as there is no law or policy that prevents her from such, as and when desirable for effective management of the agency.

One wonders how the removal of Ahmed Zubair as Acting DG and appointment of a replacement to run the affairs of the agency, could in any way affect the forensic audit now being handled by Deloitte, a globally recognized audit firm.

But, back to the main issue, governance at the heart of the matter. If there had been a board duly appointed for the commission, what we today speak about would never have arisen.

SEC Nigeria should command similar attention as was given to the Central Bank of Nigeria (CBN), where deputy governors were promptly nominated, just like members of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) by President Muhammadu Buhari to the Senate for approval. This was again demonstrated in the speed with which new deputy governor was named to replace Adebayo Adelabu, who is billed to disengage from the apex bank on July 15, 2018.

It is important to note as advised by the Administrative Panel of Inquiry that the Federal Government regularly draw attention of public servants to the PSR and FR are ground norms of every government service contract, whether at the federal, state or local government levels.

It is important, as noted also by the panel, that “all Government Extra-Ministerial Departments and Agencies should be made to understand that the PSR and FR are superior to whatever specific legislations and domestic arrangements that guide their operations, except when such issues were not covered by any provision of the PSR.”

While it is important that Gwarzo’s case at the ICPC seen to its logical conclusion without the unnecessary distractions from any of the parties, there is need for the new management to be supported by all stakeholders in the market and indeed the Nigerian economy. This should be by way of dispassionate advice and suggestions on how to make SEC more proactive, transparent and accountable in effectively policing the market in the overall interests of investors.

Above all, the nation’s capital market must be given its due place in the government’s visions like the Economic Recovery & Growth Plan (ERGP) and the Ease of Doing Business. This must begin with appointment of a board and executive management to ensure good corporate governance at a time when the nation’s capital market is in dire need of leadership capable of restoring the much-needed confidence.