N9bn SEC deficit: Worries over likely regulatory compromise

The apex regulatory body of the Nigerian capital market, the Security and Exchange Commission (SEC) has come under heavy scrutiny in the last three years over what members of the National Assembly describe as unsustainable overhead expenditure.

With the latest revelation by SEC that it had recorded a N9 billion deficit in the last three years, there are worries from financial experts and other quarters that there could be a regulatory compromise by the agency if there is no urgent intervention by the federal government.

However, to stay afloat, Daily Trust reports that SEC is planning early retirement for top staff while targeting N1.2bn annual Internally Generated Revenue (IGR).

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In 2020, the Senate Joint Committee on Finance and National Planning queried the Director-General of SEC, Lamido Yuguda, for spending N10.3bn on the annual salary of about 600 staff.

The commission said it recorded a N2.9bn deficit in 2019; N4.3bn in 2020 and N1.7bn as of June 2021.

Only last week, the chairman of the Senate Joint Committee on Finance and National Planning, Adeola Olamilekan expressed concern that the deficit may lead the commission into bankruptcy.

He said: “Your personnel cost, your top profile takes about 70% of total emolument of N9bn, only 30% go to lower cadre.”

Barely three months ago, the SEC DG disclosed to a committee of the House of Representatives that almost 80% of the commission’s cost is staff cost.

“So, we need to find a way of chopping off that cost and I think work is already going on. We are top-heavy; almost 50 per cent of our staff is from senior managers,” he stated.

Among the experts who reacted to the fear of regulatory compromise over the bankruptcy is the Managing Partner/Managing Director of Qeeva Advisory Ltd, Matthew Ogagavworia. He argued that it is wrong and morally reprehensible for SEC to be regarded as a revenue-generating body, noting that what they charge for providing services is a token just to recover some cost of operation.

“Are the senators doing a value for money audit to determine whether they are living up to their mandate to regulate and provide direction for the capital market? These are the questions they should be asking rather than revenue which portrays a clear lack of understanding,” he said.

Another capital market analyst who prefers anonymity said “The bulk of SEC revenue comes from stock purchases. Anytime you buy a stock, some percentage is due to the SEC as income and any time you sell, the Exchange gets those margins.”

The expert said the stocks have been on the negative with poor income for SEC. “It used to be different when foreign direct investors flocked the market. What they make from penalties and applications are very paltry.”

He called on the National Assembly to reconsider some conditional allocations for the apex regulatory body in a difficult time like this to avoid compromise in regulatory oversight.

Meanwhile SEC has unveiled plans to reduce its operating costs in order to boost profitability within two years and early retirement for its top staff.

In a statement by Efe Ebelo, the Head of Corporate Communications at SEC, the agency’s head, Yuguda assured that steps are being taken on the agency’s expenditure to turn its deficit into a surplus of N1.235bn by 2023.

He said SEC has paid N1.5bn into the treasury as of June 2021. “If we go through the Medium-Term Expenditure Framework which we started last year, if we look at 2022 and 2023, you will see that we have worked on our expenditure so that by 2023, the deficit will actually turn into a surplus of N1.235bn and by 2024 we should have N2.5bn surplus.

“We, therefore, need the support of all to engineer the kind of transition we are thinking of at the SEC and that 30 per cent, which is taking most of the staff cost, is part of the set we are targeting for the early retirement programme,” said Yuguda.

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