Oscar Onyema under fire, as lawsuit, investment loss, poor earnings trail NGX Group

Under Oscar Onyema, the Nigerian Exchange Group (NGX) appears to be collapsing like a house of cards, and his 11 years as the company’s CEO are being questioned due to claimed poor financial management and a lack of shareholder value development.

Oscar served as the Chief Executive Officer of the Nigerian Stock Exchange from April 2011 to April 2021 for ten years. However, on March 10, 2021, when the Exchange completed its demutualization and changed its name to the Nigerian Exchange Group, he was promoted to the position of GMD/CEO, which he has held for the past 12 months.

The Nigerian Stock Exchange’s demutualization allowed the general public to own shares in the company that eventually became NGX Group after the exchange was split off to become a subsidiary.

Some shareholders are calling for Oscar, 54, to be put on the chopping block with an axe in hand after managing NSE’s affairs with minimal scrutiny for more than ten years. Oscar has handled the company as a public organisation in less than two years.
Since the Exchange became public in March 2021, the board and management haven’t suggested or provided dividends to its over 400 shareholders, meaning investors in NGX Group haven’t gotten the appropriate return on their investment.

But a year prior, the NGX Group directors gave themselves more than 200.41 million ordinary shares valued at N5.57 billion (when compared to the open listing price; N27.90kobo per share) as part of a deferred bonus plan (DBP) to keep them with the business for a predetermined duration.

Some shareholders are calling for Oscar, 54, to be put on the chopping block with an axe in hand after managing NSE’s affairs with minimal scrutiny for more than ten years. Oscar has handled the company as a public organisation in less than two years.
Since the Exchange became public in March 2021, the board and management haven’t suggested or provided dividends to its over 400 shareholders, meaning investors in NGX Group haven’t gotten the appropriate return on their investment.

But a year prior, the NGX Group directors gave themselves more than 200.41 million ordinary shares valued at N5.57 billion (when compared to the open listing price; N27.90kobo per share) as part of a deferred bonus plan (DBP) to keep them with the business for a predetermined duration.

Investor confidence in NGX Group is declining due to the management’s inability to control expenses, which is why the firm’s share price has dropped to N19.4kobo as of September 2022, a significant decrease from the N27.9kobo price it began listing with.

This indicates that investors in the stock market are shunning the company and diverting their funds to more lucrative equities because they have little or no confidence in the Onyema-led NGX Group, as it means that -30.4% of shareholders’ investments have been wiped off due to low interest for NGX Group shares.

Comparing NGX Group’s performance with the larger stock market, Ripples Nigeria analysis showed that the company was in fact trading in the opposite direction to the former, maintaining a bearish run of -30.4% decline in share value since it listed on October 15, 2021, in contrast to the 19.3% growth recorded by the Nigerian Stock Exchange within same period.

It is understandable why investors are disregarding NGX Group given that the board hasn’t suggested a dividend as previously announced, which is a mechanism for shareholders to obtain value for their investment. Instead, the company is rewarding the directors for modest revenue growth that is burdened by expenses.

Olayinka Olajuwon and Bamidele Ibironke, among other shareholders, have filed lawsuits against Onyema and the NGX Group because the management is attempting to add N15 billion in debt to its financial problems while also trying to resolve its expense dilemma.

NGX management’s upcoming resolutions have shareholders threatening legal action.

In a document dated September 14, 2022,  Olajuwon and Ibironke, representing a class of shareholders of NGX Group, through their solicitors, S.O.&C Legal, demanded that the management halt some resolutions it plans to ask for passage through proxy on September 30, 2022.

Part of the resolutions includes; to raise additional capital of N35 billion, with N15 billion of the amount expected to come from debt, N20 billion from the equity (stock).

The shareholders, through their counsel, are questioning why the management wants to borrow N15 billion when it has unissued shares, from which the sum can be raised. They also argue that NGX Group remains viable, so the loan is unwarranted.

NGX Group’s decision to borrow N15 billion raises eyebrow, as Ripples Nigeria notes that if the company was in dire need of capital, why did the management award itself the 200.41 million ordinary shares, worth N5.57 billion, which is a gift that would be collected in cash at a specified period, and also paid Non-Executive Directors N126 million.

The company’s lack of providing justification for seeking more funding, according to the irate shareholders, is another complaint. They further claimed that the NGX Group was abusing shareholders’ rights by requiring investors to use proxies to vote on resolutions while, by law, shareholders are entitled to cast their own ballots.

They charge management with lying by citing COVID-19 regulations as justification for why proxies are favoured at annual general meetings rather than shareholders in person. The government, according to the solicitor, has lifted the COVID-19 provision that prohibited gatherings.

They threaten to take the case to court if the management of NGX Group doesn’t halt the proposed meeting within seven days, starting from the day the letter was dated – the seven days intimation ended on September 21, 2022.

It described the Notice for resolutions as “ill-advised, fraudulent and fraught with illegalities and amounts to egregious abuse of privilege by the board of directors. The Notice is contrary to the Companies and Allied Matters Act (CAMA), Investment and Securities Act and other relevant capital market statutes and regulations. Also, the Notice and resolutions are contrary to the Board Charter of the Company:”

The solicitors also said, “TAKE NOTICE that if within 7 (seven) days of your receipt of this letter, we do not receive your formal withdrawal of the said notice, our Clients shall consider themselves to be at liberty to initiate necessary legal steps to seek redress, including injunctive orders to restrain holding of the meeting and/or set aside all illegal acts of the Company. In the event that this is so, this letter shall represent the requisite pre-action protocol. Do be advised accordingly.”

Read what shareholders told Onyema and his team

• Resolution 8(i) and (ii) in particular are contrary to section 142(2) of the Companies and Allied Matters Act 2020, under which the allotment of any newly issued share in a company is subject to the pre-emptive rights of a shareholder. The section DOES NOT give any power to any board to allot any share otherwise as stated in the section;

• By definition “capital” of a company refers to the total assets of a business or total amount or value of its stock, which in turn is partly a function of a company’s asset worth. It is unthinkable how incurring a debt burden of N15 billion for the company will translate to raising capital for the company that remains a viable, highly regarded entity in the capital market with unissued shares from which to raise capital;

• Section 340 of SEC Regulations provides, among others, that a public company seeking to offer securities by private placement must show evidence of dire need of fresh funds. and shall satisfy the Commission that the private placement remains the only viable alternative…” No evidence has yet been put forward to show compliance with this provision;

• It is now public knowledge that directors of the Company recently paid themselves whopping sums of money under the guise of allowances and other perks of office. Evidently, this would not have been so, if the company was in dire need of funds. Meanwhile, no resolution has been proposed to author ise payment of any dividend to shareholders,

• The unissued shares of the company denote availability of shares for purchase for the purpose of raising capital as is the standard case. However, rather than offer the shares for sale, the board of directors seek to cancel the unissued shares and issue new shares to be distributed in breach of section 142(2) of CAMA;

• The right to appoint a proxy to attend and vote instead of him and the proxy need not be a member of the company… is a personal right that section 242(4) of CAMA guarantees to a shareholder. Therefore, it is illegal and amounts to violation of that right to attempt to choose or foist any proxy (named or unnamed) on any shareholder. By law, that right belongs fully to the shareholder. It is not shared with the company;

• The claim that the Corporate Affairs Commission (CAC), Lagos State Government and Federal Government COVID-1 9 Guidelines are the bases for insisting that shareholders shall only attend by proxy, is palpably false. There is no COVID-19 guideline that justifies insistence on shareholders attending AGM by prox(ies) only, let alone the selected proxies;

• The Company is a PLC. The Guideline issued by the Presidential Steering Committee on COVID-1 9 on 2nd April 2022, provides in relation to public gatherings that: “Limitation on number of persons attending informal and formal festivity events including weddings, conferences, congresses, office parties, seminars, end of year events has been lifted”, and

• Even if (which is not admitted) any CAC guideline permits holding a meeting by proxy, whether or not general, by proxy, such guideline is illegal and CANNOT stand in the face of the clear provisions of CAMA. CAC cannot by regulation remove a right conferred by statute.