Customs Street Advisors

This week on Street Talking in NEXT, I argue that the time has come for public companies on the Nigerian Stock Exchange to lay down rules on the extra-company activities of directors, particularly those which involve regulatory responsibility or political involvement.

I have just finished reading a stimulating piece by Femi Awoyemi of ProShare on the potential conflicts of interest Senator Udo Udoma, the City grandee and chairman of the Securities and Exchange Commission (SEC), will be exposed to in his latest appointment as the chairman of UAC. To calm public concerns over any ethical risks he may run, Senator Udoma, who also sits on the boards of Nestlé and Linkage Assurance, has issued a staunch defense on the correctness of his appointment. The last time this subject provoked a passionate debate was over the position of Professor Ndi Okereke-Onyiuke, director-general of the Nigerian Stock Exchange, as chairman of Transnational Corporation, a quoted company. Read More…

In the past year, there have been calls from several quarters for the Nigerian Securities and Exchange Commission (SEC) to carry out an overhaul of the regulations guiding the country’s securities market. In June 2009, the SEC, as part of its response to the challenges of regulating participant relationships on the Nigerian Stock Exchange released a set of proposed draft rules and amendments. Among these, draft rule B4(3) would require securities issuers to provide  investors with earnings guidance. Oddly, there has been little public debate on the draft proposals, while comments, inputs and submissions on the proposals were limited to less than three weeks from the date of publication. This contrasts sharply with the lively exchanges in developed country markets over the utility and costs of earnings guidance. The SEC’s draft proposal is a curious one considering that even in the United States, securities law does not require companies to provide earnings guidance. In this post, we briefly examine the key arguments of both sides of the debate, and proffer suggestions and safeguards Nigerian companies can adopt to limit the risks and meet the demands of makings these types of anticipatory business performance statements.

In his 2000 annual letter to Berkshire Hathaway shareholders, Warren Buffett came down hard on the practice of providing earnings guidance. In his view, the expectations that these projections created were clearly unsustainable, at best, and viciously misleading, at its worst. In addition, it created a perverse incentive for CEOs to manage earnings so that they could always beat the Street.

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