- Capital Market Investors Reject New FRCN Corporate Governance Code
- Says directive is anti-investment, high-handed
Investors in the nation’s capital market have rejected the new, National Code of Corporate Governance, prescribed by the Financial Reporting Council of Nigeria, FRCN, saying it is inimical to further investments, while also being high-handed.
After due considerations of the new regulation, which became effective on October 17th, the investors insisted that the FRCN did not incorporate the inputs made to it in a position paper and the three public hearings before the Code was enacted.
Speaking more on the contentious Code at a press conference yesterday, in Lagos, the National Coordinator, Independent Shareholders Association of Nigeria IISAN), Sunny Nwosu, insisted that its introduction should have been more democratic.
He said: “Yes, we were invited to make our input and we presented a position paper, which we submitted to the Council as well as participated in the three public hearings on the Code. But what we have now is a unilateral decision, and we will not support any legislation that conflicts with the Companies and Allied Matter Act, CAMA.
“As much as we will not support company managers to be reckless, we will also not support overbearing regulators. We will support any corporate governance that will encourage investors, not one that will pull them down. And we say that this FRCN Code, which is made compulsory, will not encourage returns on investment.”
The Financial Reporting Council recently released a set of codes, which it claimed was: “In accordance with Section 50 of the FRCN Act, 2011, which among other things, requires the Directorate of Corporate Governance to develop the principles and practices of Corporate Governance applicable in Nigeria.”
Accordingly, the Council came up with three separate regulations, tagged: the National Code of Corporate Governance, effective 17th October 2016, which stipulated: The Code of Corporate Governance for the Private Sector is mandatory; The Code of Governance for Not-for-Profit entities is “Comply or Justify non-compliance” and the Code of Governance for the Public Sector will not be applicable immediately until an executive directive is secured from the Federal Government of Nigeria. This is due to the fact that the enabling laws that set up most government establishments already carry some form of governance structure that will require an umbrella legislation to unify the different provisions of those laws to synchronise with this Code.
But reacting to specific provisions for the respective Code, ISAN insisted it would have a “suffocating effect on entrepreneurial aspirations and initiatives of Nigerians and persons seeking to establish business in the country.”
Apart from the perceived negative implications of over regulation of Nigeria’s corporate world, the shareholders also maintained that the code contained “noticeable contradictions and conflict with the subsisting CAMA, as amended.”
Elaborating on the stifling effects of the Code, Nwosu blamed it for the inability of the Board of Directors of StanbicIBTC Plc to publish its financial performances since 2015. He pointed out that even the auditors of the bank, KPMG, had even withdrawn its suit against the FRCN due to the stringent penalties against any company challenging its authority in court.
Furthermore, any sanctions or fine imposed on a company, as in the case of STanbicIBTC, which was fine N1billion last year for accounting irregularities, impacts directly on investors’ return, as such will be netted off as part of the operation cost rather than profit.
According to Nwosu, some of the grey areas identified in the Code include the provisions that “companies shall have not less than five directors,” which he said is “unnecessarily expansionary and costly,” particularly for the Micro, Small and Medium Enterprises (MSMEs).
Besides, he noted, the FRCN is flouting its own rule, as it was yet to constitute its own board, saying, that the Council “…must provide leadership in the nation’s corporate world by constituting its board in line with its new corporate governance code.”
Furthermore, he noted that the code “allows executive directors of the companies to be appointed board members of another company or companies.” He also picking holes with the “cool off period” for former chief executives, saying the seven to 10 years ban are too long and should be reduced to at least three years.
Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd
The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.
The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.
The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.
The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.
Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.
The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.
Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins
Oil Prices Recover from 4 Percent Decline as Joe Biden Wins
Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.
This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.
Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.
On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.
“Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”
The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.
“There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.
“Either you’re crimping energy demand or consumption behavior.”
Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020
Revenue of OPEC Members to Drop to 18 Year Low in 2020
The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.
EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.
“If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.
The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.
It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.
It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.
“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”
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