“History does not repeat itself; man does.” Professor Barbara Tuchmann, Harvard University, USA.
By Dele Sobowale
Transcorp Plc was a conspiracy between former President Obasanjo and a few Nigerian billionaires – virtually all of them silent supporters of the Third Term agenda.
The only vocal advocate of the satanic term elongation was Festus Odimegwu, CON, then Managing Director of Nigerian Breweries Plc – who paid a heavy price for his audacity. Everything about Transcorp at its inception was either shady or illegal. But, Obasanjo rammed them through anyway.
For his part in the conspiracy against the nation and other stakeholders of Transcorp, Obasanjo was awarded 200,000,000 (that is right 200 million) shares at 50 kobo per share. Thus, the ever self-righteous former President benefited to the tune of N100 million, to start with, from the conspiracy. As a sitting Head of State, he placed himself in the unethical and illegal position of selling the nation’s assets to a company in which he had interest. That was pure conflict of interest.
But, that was only the beginning of the scam which impoverished millions of fellow Nigerians – while benefiting the inner caucus of one of Nigeria’s biggest fraud perpetrated using the Nigerian Stock Exchange as an accomplice. The consent of the NSE was easy to obtain because the former Director-General was among the beneficiaries of the swindle. After a lot of questionable concessions were granted to the new company (e.g it had no five years operating results to tender), it was allowed to be listed on the NSE for N7.50 per share. Thus, each of the original shareholders gained N7 per share – for doing nothing.
Obasanjo pocketed N1.4 billion in capital gains for his efforts. Unfortunately, while the promoters (names withheld for now) were smiling to the bank, they were getting set to ruin millions of fellow Nigerians. Let us move fast forward.
I must confess my total support for the idea that when Transcorp was first promoted by Obasanjo who brought in what turned out to be a cabal of multimillionaires who had donated to his re-election campaign in 2003. A world class Nigerian enterprise big enough to compete with global giants was well overdue. We needed/need not one but at least half a dozen. Transcorp was supposed to be only the beginning.
The promotion and propaganda campaign preceding the launching of Transcorp left no doubt that it was bound to be a success. The richest Nigerians and most celebrated Chief Executive Officers, CEOs, were all involved. It could never fail – or so we thought. We were wrong; absolutely wrong.
Soon after the 50 kobo shares were listed on the NSE for N7.50, I was getting ready to invest in it when a friend working in a brokerage firm drew my attention to the fact that many of the promoters – including the largest shareholder – were already selling their shares. They have literally killed fellow Nigerians. With insider knowledge, they already knew that Transcorp would fail.
By the time the Stock Exchange crash of 2008 got underway, Transcorp was leading the disaster and the promoters had sold all their shares at great profit for themselves and colossal loss to other Nigerians. By the time the majority of Transcorp shares were sold to Transcorp Hotels Plc, the security was on the market for 60 kobo per share.
In case you are wondering if this article is about history, then, let me tell you the truth. It is about the NSE and what to expect in 2021. Expect another crash. The reasons are not hard to discover – based on previous experience. Invariably, the NSE every eight to ten years after a prolonged downturn stages a recovery which should be gradual and not too large. But, in 1997/8 and 2008/2009 when we have experienced astonishing growth of Stock Market capital value, it had occurred against an economy in distress. That is always the warning sign. When share prices are reaching new records at a time the economy is in depression, then somebody or some people are manipulating the share prices for their own benefit. The current bull market is not an exception.
In 1997/8 and in 2008/9, one individual leads a cabal of price manipulators who drive up the prices of the shares of their own companies first; instigate a wild bulls rally generally next, and then suddenly start to divest from the companies by selling their shares to gullible buyers who later discover they have been duped. In 1997/8 the divestment started with selling all the shares in a bank which had hitherto been advertised as being highly profitable. The bank failed soon after and was one of the banks which led to the Failed Banks Decree during the Abacha regime. Those old enough and with retentive memory would recollect the era and how many banks were involved. The ever-present individual was in it. He used connections and bribery to escape prosecution.
Mention has already been made about the Transcorp scam and how its failure alone wiped off close to half a trillion from market value. But, he laughed all the way to the bank. That was not all. Companies in the Food and Beverage sector, with which he was associated, were also listed on the Exchange at prices far above 50 kobo per share. In one case, a gimmick was introduced. Investors were paid some dividend up-front. For years thereafter that was all they got while the share prices declined steadily.
It was also during the 2008/9 market catastrophe that one billionaire accused another of manipulating the price of the accuser’s company. After the noisy public dispute, the matter was quietly swept under the capacious rug of the NSE. But, the point had been made. Share prices on the NSE can be influenced by a few individuals with deep pockets for their own profit. Unfortunately, there is always a national huge cost associated with all these. Millions of other investors – including pension funds and insurance companies – are caught holding billions of shares selling at great losses.
Another round of share manipulation started in the second quarter of 2020. one would have thought that the announcement of recession in the third quarter would serve as warning to those allowing themselves to the abattoir. But, my fellow Nigerians are eternally stupid. They repeat the same mistake each and every time. Another round of share price manipulation is on – led by the master of it. The rest of the market will follow his company’s decline once he starts to offload billions of shares on the market. Expect that soon.
Hint: There is a link between the Forbes List of World’s Richest and the artificially high prices of Nigerian securities. Our local champions are losing ground because the naira is also getting devalued – officially and unofficially. Somebody must be made to pay for them not to slide down further in global ranking. Those unfortunate to be buying over-priced securities are the sacrificial lambs for this venture.